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The European Court of Justice (ECJ) ruled on the jurisdiction in respect of an action brought in France by a trustee in bankruptcy appointed by a court in the UK seeking a declaration in relation to property within France. The ECJ ruled that the action derived directly from the main insolvency proceedings and was ‘closely connected’ to those proceedings on the basis that the action arose by virtue of UK bankruptcy law and was brought as part of the trustee’s general duties. Therefore, the UK had exclusive jurisdiction in respect of the trustee’s action. Although the UK courts had authorised the trustee to bring an action in France, this did not amount to conferring international jurisdiction on the French courts. Written by Alan Bennett, partner and head of Restructuring and Insolvency at Ashfords LLP.
Tiger and Others (Judicial cooperation in civil matters—Insolvency proceedings—Judgment)  EUECJ C-493/18 (04 December 2019)
The ECJ’s reasoning regarding whether the action fell within Art 3(1) of Council Regulation (EC) No 1346/2000 on Insolvency Proceedings (Insolvency Regulation) (the Insolvency Regulation) focused on the fact that the action being brought was based on UK insolvency law, notwithstanding that the property was situated in another Member State. Any similar actions brought by an office-holder under the Insolvency Act 1986—or under similar laws in other Member States—are therefore likely to be considered to fall within Art 3(1) of the Insolvency Regulation. The effect would be to make the actions subject to the exclusive jurisdiction of the Member State in which the insolvency proceedings were opened, regardless of the location of the property.
It is also possible to apply the principles in the decision by analogy to the equivalent provisions in (Recast) Regulation (EU) 2015/848 on insolvency proceedings.
In August 2008, a German company, Wirecard, obtained a freezing order from the UK court over the assets of a Netherlands national, UB. At the time, UB owned an apartment and property complex in France. Later that month, UB and his sister, VA, signed an acknowledgment of a debt of €500,000 owed by UB to VA. UB subsequently mortgaged the apartment and property complex in favour of VA. In March 2010, UB sold the properties to the company, Tiger, of which VA owned 90% of shares, for the sums €395,000 and €780,000.
In July 2011, following the bankruptcy of UB, WZ was appointed as trustee in bankruptcy and in November, was authorised by Croydon County Court to bring an action before the French courts to register the bankruptcy order and to obtain a ruling that the sale and mortgage of the properties were transactions at an undervalue or for no consideration under UK bankruptcy law.
WZ subsequently brought proceedings against UB, VA and Tiger before the French courts seeking a declaration that the sales and mortgage were ineffective as against the bankruptcy estate. In November 2013, the French courts ruled in favour of WZ and this declaration was upheld by the French Court of Appeal in May 2016.
UB, VA and Tiger appealed to the French Court of Cassation on the basis that the UK courts had exclusive jurisdiction to deal with the action brought by WZ by virtue of Art 3(1) of the Insolvency Regulation (1346/2000), and as such the French courts should not have made the ruling. WZ argued that the UK court’s authorisation to bring an action in France conferred international jurisdiction on the French courts in accordance with Art 25(1) of the Insolvency Regulation. The Court of Cassation sought clarification on whether the action brought by WZ formed part of the main proceedings and the relationship between Art 3 and Art 25 of the Insolvency Regulation when determining whether a court has international jurisdiction to hear and determine disputes in the main proceedings.
There were two main issues for the ECJ to decide. Firstly, whether Art 3(1) of the Insolvency Regulation should be interpreted as meaning that an action brought by a trustee in bankruptcy who was appointed by a court of the Member State in which the insolvency proceedings were opened, seeking a declaration regarding immoveable property situated in another Member State, falls within the exclusive jurisdiction of the first Member State. Secondly, whether Art 25(1) of the Insolvency Regulation should be interpreted as meaning that a judgment by a court within the Member State in which insolvency proceedings were opened authorising a trustee in bankruptcy to bring an action in another Member State, can have the effect of conferring international jurisdiction on the courts of that other Member State.
The ECJ first considered whether Art 3(1) of the Insolvency Regulation meant that the trustee’s action fell within the UK’s courts exclusive jurisdiction. The ECJ decided that the action brought by WZ had its legal basis in the UK rules specific to insolvency proceedings, rather than from ordinary rules of civil and commercial law, and that WZ had brought the action as part of their general duty as trustee in bankruptcy in managing and liquidating the assets of the bankruptcy estate. It was therefore clear that the action derived directly from the main proceedings and was closely connected to them and that pursuant to Art 3(1) of the Insolvency Regulation, the action fell within the exclusive jurisdiction of the courts of the UK, being the Member State in which the trustee had been appointed.
The court then considered WZ’s argument that Art 25 of the Insolvency Regulation applied to confer international jurisdiction on another Member State by virtue of an authorisation from the Member State with exclusive jurisdiction. In particular, WZ argued that the second paragraph of Art 25(1) of the Insolvency Regulation indicated that a court in a different Member State could have jurisdiction; however, the court ruled that this paragraph merely referred to the possibility of another court within the same Member State determining actions deriving from the main proceedings. It was made clear that Art 25 of the Insolvency Regulation was a system to allow for the easy recognition and enforcement of judgments in different Member States and was not a mechanism to confer international jurisdiction on another Member State.
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