Recently, the Netherlands Supreme Court approached the Court of Justice of the European Union (CJEU) for anwers to preliminary questions in a case regarding NK, a Dutch insolvency practitioner (IP) appointed in two proceedings, versus BNP Paribas Fortis NV.
The IP is appointed in insolvency proceedings concerning an insolvent bailiff, as well as in proceedings concerning the bailiff's office, X, organised as a private limited company, which is insolvent too. The insolvency practitioner is asking Fortis Bank to pay an amount that represents a sum that the bailiff – also former director and sole shareholder of the company – had transferred from a Belgian bank account of X before the commencement of the insolvency proceedings (after the bailiff had transferred the amount from their Dutch account to a Belgian payment account).
The IP believes that the bank acted unlawfully towards the joint creditors of X and its former director by taking part in the withdrawals without any concern and without complying with its legal obligations. As a result, the creditors in the two insolvencies have suffered damage.
For such a situation, since 1983, Dutch case law has created its own claim with its own name: the claim for compensation that an IP, acting on the basis of the instruction given to him in Article 68 of the Dutch Bankruptcy Act, can bring on behalf of the joint creditors of an insolvent estate against a third party who unlawfully acts against the creditors – so called a Peeters / Gatzen claim.
The Dutch Supreme court on 8 September 2017, concerned itself with the nature of this type of claim: is it an “insolvency” claim in which case the Insolvency Regulation applies, or is it a “general civil law” claim, in which case the Brussels I Regulation applies. The answer to this question is decisive for which court (a Dutch or a Belgian court) has international jurisdiction over the case.
The Dutch Supreme Court first discussed the mutual dependency of the Insolvency Regulation and the Brussels I Regulation. It considered that both legal instruments must be interpreted in such a way that overlaps between the legal rules laid down therein and any legal vacuums are avoided.
Secondly, the court found that claims excluded from Brussels I under Article 1(2)(b) of the Regulation because they concern “…. bankruptcy, proceedings relating to the winding-up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings”, fall within the scope of the Insolvency Regulation. Conversely, claims that fall outside the scope of the Insolvency Regulation fall within the scope of Brussels I. The court refered to the CJEU decision of 4 September 2014, Nickel & Goeldner Spedition v Kintra UAB.
Thirdly, the court said the scope of the Brussels I Regulation should be broadly applied, because the EU legislature has opted for a broad interpretation of the concept of “civil and commercial matters” in Article 1(1) of the Brussels I Regulation. This does not, however, apply to the Insolvency Regulation: only claims arising directly from insolvency proceedings and closely related thereto are outside the scope of the Brussels I Regulation.
The legal basis of the claim is, according to the CJEU, the decisive criterion: it must be ascertained whether the law or the obligation on which the claim is based follow from common rules of civil and commercial law, or from specific deviating rules for insolvency proceedings.
In the case at hand, the Peeters / Gatzen claim was instituted by the Dutch IP and relates to the creditors’ right to claim and the liability of the third party against the creditors. The Dutch Supreme Court saw the claim as an aquarelle painting with different colours, because this right of action and liability derive from the common rules of civil law, namely the rules regarding tort. However, the (exclusive) power of the appointed IP to institute legal proceedings for the benefit of the joint creditors arises directly from specific rules in the Dutch Bankruptcy Act. Furthermore, the claim belongs to the joint creditors, but is made effective via the IP. It is not equal to the sum of the claims in tort of the individual creditors.
Moreover, the proceeds of the claim fall into the insolvent estate, because the proceeds serve to restore the interests of the joint creditors.
Given these mixed characteristics, the Supreme Court found there may be reasonable doubt as to whether the Peeters / Gatzen claim is one that arises directly from specific rules for insolvency proceedings, and therefore falls outside the scope of the Brussels I Regulation.
From three other requests that the Supreme Court filed with the CJEU, I note only the question whether, in case the earlier question is answered in the affirmative and the claim concerned is covered by the Insolvency Regulation, that claim then would be governed by the law of the member state where the insolvency proceedings were opened under Article 4(1) of the Insolvency Regulation, both as regards the power of the liquidator to bring the claim and as regards the substantive law applicable to that claim.
Answers to queries on the mutual relation between the two instruments are a rather common feature in practice, as – after centre of main interests (COMI) controversies – the relationship between the Insolvency Regulation and the Brussels I Regulation is the second largest source for litigation.
A case decided on 28 February 2018 by the First Instance Court of Oost-Brabant in the Netherlands, serves as a demonstration. PlanB4you, a Dutch incorporated company, had been subject to insolvency liquidation proceedings since 15 March 2016. Its management was not complicated. The director (X) managed the company, and his daughter (defendant in the case) managed the finances of PlanB4you. Both X as a person, PlanB4you as a company and the Belgian company Create Commerce BVBA were sentenced by criminal convictions of the Amsterdam District Court on 4 May 2016 for moneylaundering and fraud in connection with a so-called Ponzi scheme. The Belgian Public Prosecutor’s Office imposed criminal charges on Belgian bank accounts belonging to Commplus, a subsidiary of Create Commerce BVBA, totaling €547,153.51 and of the daughter totaling € 82,401.26. Both were prosecuted for money laundering in Belgium. However, they were acquitted on appeal.
One of the claims of the appointed IP was a Peeters / Gatzen claim. The first instance court refered to the Dutch Supreme Court’s preliminary questions to the CJEU in connection with the international jurisdiction to hear a Peeters / Gatzen claim and the applicable law to it. In this case, however, the first instance court saw no reason to wait for the CJEU’s replies to the preliminary questions, because the court considered itself competent to hear the IP’s claims since Dutch law applied in any case.
The first instance court hypothised two scenarios: (i) if the Luxembourg judges decide that the Insolvency Regulation is fully or partially applicable to a Peeters / Gatzen claim, then it is decisive that the insolvency proceedings of PlanB4you have been opened in the Netherlands.
The Dutch court is then competent to hear the Peeters / Gatzen claim against Belgian-seated Commplus and the daughter on the basis of Article 3(1) of the Insolvency Regulation, and on the basis of Article 4(2) of that same Regulation, Dutch law applies.
However (ii), if the CJEU comes to the conclusion that the Insolvency Regulation is not fully applicable, the international jurisdiction and the applicable law must be assessed against the European rules for a wrongful act. Then it will be the court of the place where the harmful event occurred that has jurisdiction over obligations arising from unlawful acts, pursuant to Article 4(1) of the Rome II Regulation.
In this case, the unlawful act put forward by the IP means that Commplus and the daugther have disadvantaged the joint creditors of PlanB4you in their means of redress by participating in the removal of the Dutch assets of PlanB4you, as a result of which the creditors no longer can lay their hands on these assets. The court determined that this alleged unlawful act was committed in the Netherlands, so that the Dutch court has jurisdiction anyway, and the damage also occurred in the Netherlands, so Dutch law was applicable.
I have never heard anyone say that matters of cross-border insolvency law are simple.
Dutch Supreme Court decision of 8 September 2017, ECLI:NL:2017:2269
Nickel & Goeldner Spedition v Kintra UAB, C-157/13, ECLI: EU: C: 2014: 2145, NJ 2015/89, at 21
First Instance Court of Oost-Brabant decision of 28 February 2018, ECLI:NL:RBOBR:2018:880
This is a slightly adapted version of a regular column Bob Wessels is writing for Global Restructuring Review (GRR) on the topic of cross-border restructuring and insolvency in a European context. GRR is a subscription-only publication, but here is a link to the full piece, which appeared in GRR April 2018. See http://globalrestructuringreview.com