2015-11-doc16 Allignment Brussels I and Insolvency Regulation

On 16 September 2015 the Federal Supreme Court of Germany had to decide about its international jurisdiction (ex Article 3(1) EIR) in a cross-border insolvency case between the Netherlands and Germany. The plaintiff in this case is the court-appointed liquidator of the assets of LG GmbH (‘the debtor’), who ran a chicken mästerei (fattening farm) until its petition for insolvency in March 2006 at the District court of Bielefeld, Germany. A broiler production contract was carried out in such a way that the debtor obtained from the Netherlands ‘one-day’ old chickens and related food items, reared and fed the chickens and then delivered them to a slaughterhouse (X) in the Netherlands. The course of business was laid down in a Dutch language ‘integration contract broiler’ of May 2005 between the debtor and the Dutch slaughterhouse. Art. 7 of the contract determined (in my translation; Wess.): ‘The purchase price for the delivered broilers is based on the ruling for delivery-time acceptance conditions of the slaughterhouse. … The purchase price fixed in this way will be paid for delivery of slaughter chickens from feed suppliers on behalf of the slaughterhouse to the fatteners. The amount payable will be at least 14 days after delivery of broiler chicks to the bank or giro account of LG. The slaughterhouse has at any time the right to charge LG payable purchase price with bills for delivered food that has to be paid to the feed suppliers, and bills of breeding operation for the delivered day-old chicks.’
Moreover, Article 14 of the contract contains the following clause: ‘Any dispute arising from this contract, the court in ‘s-Hertogenbosch is authorized in accordance with the normal procedural rules.’
The plaintiff claimed from the defendant the purchase price in the amount of € 222,650.73 plus interest for broilers, which have been delivered in February and March 2006 to X. In that regard, however, X questioned the payment obligation in dispute, but also raised its claims arising from the supply of food, claims from the supply of day-old chicks and for a loan of over € 50,000. His claim for sett-off, the plaintiff protests, is in accordance with § 96 para. 1 no. 3 German Insolvency Act (InsO) invalid.
The Bielefeld court decides – based on the objection of the defendant – that it has no international jurisdiction and dismisses the plaintiffs claim. The appeal against that judgment by the plaintiff was rejected by the Court of Appeal of Hamm on 4 December 2014. The Federal Supreme Court of Germany, in its decision of 16 September 2015, decides the following: The international jurisdiction of German courts for a purchase price action – in this case a price action on behalf of third parties – of a German court appointed insolvency practitioner for an insolvent debtor, subject to German insolvency proceedings, concerning a contract concluded prior to the commencement of insolvency proceedings with a supplier established in other EU Member State is not determined according to Art. 3(1) EIR, but according to the provisions of the Brussels I Regulation, if the alternative way of payment, via sett-off in accordance with § 96 para. 1 no. 3 InsO, looks ineffective.
I think the judgment is in line with CJEU 4 September 2014, C-157/13 (Nickel & Goeldner), in which the European court decided that Article 1 of the Brussels I Regulation must be interpreted as meaning that an action for the payment of a debt based on the provision of carriage services taken by the insolvency administrator of an insolvent undertaking in the course of insolvency proceedings opened in one Member State and taken against a service recipient established in another Member State comes under the concept of ‘civil and commercial matters’ within the meaning of that provision. In this category also falls such an action, regardless of the fact that a counterclaim based on a provision in an act on insolvency law may be possible.

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