Last year, a pension fund in the Netherlands (“Stichting Pensioenfonds Metaal en Techniek”) petitioned the Dutch court of Gelderland to open insolvency proceedings for HeatWeed Technologies, a company incorporated under Swedish law with its registered office in Ströstad, Sweden. On 1 November, the court opened the insolvency proceedings – but 14 days later, it annulled its judgment after hearing opposition from a Swedish insolvency practitioner. HeatWeed had already been declared bankrupt in Sweden and he had been appointed as IP to oversee HeatWeed’s affairs. In its annulment decision, the Dutch court ruled that the pension fund, as applicant in the Dutch proceedings, had not conducted sufficient investigation into HeatWeed’s possible insolvency and should therefore bear the costs of the proceedings. Subsequently, the court ordered the pension fund to pay these costs.
In appeal. The pension fund appealed against the court’s decision. After withdrawing its appeal against the substantial matter (i.e. HeatWeed’s insolvency in Sweden), the pension fund maintained its appeal against the decision on costs. The Court of Appeal of Arnhem-Leeuwarden reasoned that it was right that the pension fund, as the unsuccessful party, had been ordered to pay the IP’s legal costs, since the decision opening HeatWeed’s insolvency proceedings in the Netherlands was quashed after the Swedish IP’s objection. Superfluously (i.e. making “obiter” comments), the court then dedicated a number of paragraphs of the cost order to the relevant provisions in the recast European Insolvency Regulation (EIR 2015), especially Article 28.
Text book approach. Article 28 of the EIR 2015 (on “Publication in another Member State”) provides: “The insolvency practitioner or the debtor in possession shall request that notice of the judgment opening insolvency proceedings and, where appropriate, the decision appointing the insolvency practitioner be published in any other Member State where an establishment of the debtor is located, or any other Member State they deem it necessary.”
The court explained that Article 15(3) of the Dutch Bankruptcy Act allows courts to charge the costs of opening insolvency proceedings to a debtor where its insolvency is annulled, after which the debtor is no longer in a state of insolvency. But the court considered that there were different circumstance at hand here, as HeatWeed had already been declared insolvent in Sweden and the provision did not allow for insolvency costs to be charged to the Swedish IP or HeatWeed’s board. It also noted, however, that the provision did not constitute a reason to refrain from making an order against the fund to pay the costs.
The pension fund argued that it did not know and could not have known that HeatWeed had been declared bankrupt in Sweden, because it was not apparent from the Trade Register in the Netherlands.
But the court disagreed: because HeatWeed’s registered office is located in Sweden, it is assumed under Article 3(1) of the EIR 2015 that HeatWeed’s center of main interests (COMI) would also be located in Sweden, and the pension fund had not demonstrated that the COMI was nevertheless located in the Netherlands.
Hard lesson. The Court of Appeal denied arguments from the fund that there was a legal obligation to record company insolvencies in another EU Member State in the Trade Register of the Netherlands Chamber of Commerce, or an obligation to deregister from that register.
Assuming that HeatWeed still had an establishment in the Netherlands at the time of the opening of its insolvency proceedings in Sweden, the court decided that the Swedish IP, on the basis of EIR 2015 Articles 28 and 29 (“Registration in public registers in other Member States”) and in combination with several provisions of the Dutch Bankruptcy Act, was obliged to request the publication of the main insolvency proceedings, whereupon the clerk (“griffier”) of the District Court of The Hague would immediately publish the information referred to in Article 28 EIR 2015 in the Dutch Government Gazette.
This information should also be listed in the Dutch central insolvency register, but not in the Trade Register of the Chamber of Commerce, the court concluded. In the fund’s case, it had failed to show it consulted the Government Gazette or the central insolvency register prior to filing the bankruptcy petition, nor that the information contained therein was incorrect.
In cross-border insolvency law there is no room for ignorance (see my contribution to GRR of August 2022) or unacquainted-ness with the interplay between the rules of the EIR 2015 and domestic rules realising the goals of provisions of this Regulation in detailed national rules.
The independent pan-European thinktank CERIL made several recommendations to improve the realisation of the EIR 2015 and its compatibility with national procedural rules in a 2018 study. Article 28 and Article 29 of the EIR 2015 leave the process of publication and registration to different procedures provided for in the respective EU member state.
In Finland’s insolvency legislation, for example, several sections have been included to remind the IP that he or she should take care to ensure the publication in other members as the EIR 2015 requires. In Germany, the legislation sets out which courts are competent to publish in accordance with Article 28 EIR 2015. Such publications are respectively done in the Finnish and the German language. Foreign insolvency practitioners may be required to provide for official translations.
In the Netherlands, at the request of a foreign IP, the clerk of the District Court in The Hague immediately notifies the information as required in Article 28 EIR 2015. The data must be provided to the clerk in Dutch, English, German or French, the current languages for registration in the Trade Register in the Netherlands.
In 2018, several other legislators (in Italy and France for example) did do not see a need for national specification.
The – for some, superfluous – lesson to be learned: check your national legislation first before filing for the opening of an insolvency proceeding! In the case at hand, the Court of Appeal declared the pension fund’s appeal inadmissible and ordered the fund to pay the Swedish IP’s legal costs.
References
Hof Arnhem-Leeuwarden 27 december 2022, ECLI:NL:GHARL:2022:11175 (Pensioenfonds Metaal en Techniek v HeatWeed Technologies AB)
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 and the column appeared in GRR early February 2023. See globalrestructuringreview.com