- Proposal for a directive harmonizing certain aspects of insolvency law has been published on 07/12/2022 on the European Commission’s website, currently Proposal is discussed within the EC, after submitting certain statements of organizations involved in legislative process.
2. Articles 4 – 12 of the Proposal cover a few ways and manners of dealing with avoidance actions. First and foremost, the Proposal for a Directive provides in Article 5 that national law that already is in force, can be more harsh for debtors.
3. Look-back period should be in our opinion left to be regulated on a national level, but with the longest possible period set for the EU Member States, so as ensure legal certainty. It would be unacceptable is the same action perfected in one country by the company from one group (holding) can be treated as voidable, while in other not, with only this difference that we speak about different EU Member State. In our view, this is not contrary to the Article 5 of the Proposal. In some Member States look-back period is longer than in others, but leaving only at a national level the highest period can be contrary to the protection of economy as well as to the issue of competition within legislation and legal framework.
4. This issue is even more important with regard to the multinational holdings and groups of companies, more and more common on the European market. For the reason of clarity and due to the fact that on European market there are (as signalized above) more and more multinational companies, or groups of companies, related entities have their definition – as proposed in Article 2 (q) – should be the same in every EU Member State. Such a definition is broad enough to cover most typical situations, while it stays also not too broad to cover almost any situation when economic cooperation between companies takes place. Similar definitions is already in force in many EU Member States, thus implementing these provisions should not be a problem at all.
5. To improve efficiency of the proceedings related to avoidance actions, it is recommended to allow the bankruptcy court, which usually assesses the question whether a particular transaction is voidable ex lege or not, to confirm the avoidance of the transaction. This possibility could lead to lowering the efforts and costs of the interested parties, because the avoidance will be confirmed by the bankruptcy court, rather than other courts after the usually lengthy proceedings.
6. It is also important to address the issue of the governing law. In our opinion, the governing law should be the one of the country of the court declaring bankruptcy. This should be analysed in the context of a recent CJEU case No C-337/17 (Feniks), relating to applicable law. According to this ruling, there is an exemption from the rule that actio pauliana is governed by the law of the state where the proceedings were opened.
7. The facts of the case concerned a contract for the sale of immovable property concluded between Azteca and a debtor of Feniks. The contract between these parties was allegedly detrimental to the rights of Feniks. For this reason, Feniks was able to bring an actio pauliana claim against Azteca which was the last entity in the transaction chain.
8. More deeply, Coliseum 2101 sp. z o.o. (‘Coliseum’), established in Poland. Polish company Coliseum 2101 sp. z o.o., acting as a general contractor, concluded with Feniks, also established in Poland, acting as an investor, a contract concerning the performance of construction works as part of an immovable property investment project located in Gdańsk (Poland). For the purpose of fulfilling the contract, Coliseum concluded a number of subcontracts. As Coliseum had not been able to meet its obligations in respect of some of its subcontractors. According to Polish law, Feniks was required to pay a sum of money to them on account of the provisions in the Civil Code on the joint and several liability of the investor and thus became a creditor of Coliseum for a total sum of 1 396 495,48 Polish zloty (PLN) (approximately EUR 336 174). Pursuant to agreements concluded on 30 and 31 January 2012 in Szczecin (Poland). Later on, Coliseum sold to Azteca, established in Alcora (Spain), immovable property located in Szczecin for a sum of PLN 6 079 275 (approximately EUR 1 463 445), in partial fulfilment of prior claims by Azteca. The latter was nevertheless still required to pay to Coliseum the sum of PLN 1 091 413,70 (approximately EUR 262 732). According to the information provided by Feniks, on the date on which the sale was concluded, 30 January 2012, the President of the management body of Coliseum was also the representative of Horkios Gestion SA, established in Alcora, the latter being the only member of the management body of Azteca. Coliseum being insolvent, on 11 July 2016 Feniks brought an action, based on Article 527 et seq. of the Civil Code, against Azteca before the Sąd Okręgowy w Szczecinie (Szczecin Regional Court, Poland), the referring court, seeking a declaration that the contract of sale referred to above is ineffective in relation to it, because of the fact that it was concluded by his debtor in fraud of the creditor’s rights. In establishing the jurisdiction of the court, Feniks relied on Article 7(1)(a) of Regulation No 1215/2012, providing for matters related to the contract. Azteca raised an objection alleging that Polish courts lack jurisdiction. It stated that the international jurisdiction of a court to hear and determine an action seeking to have a legal act declared ineffective should be established according to the general rule laid down in Article 4(1) of Regulation No 1215/2012, in favour of the Spanish courts. Furthermore it claimed that such an action would not be qualified as ‘matters relating to a contract’ within the meaning of Article 7(1)(a) of the same regulation. In analysing this plea of lack of international jurisdiction, the referring court describes the main features of the actio pauliana in Polish law, as can be seen in the provisions of the Civil Code. The CJEU concluded that an actio pauliana, whereby the person entitled to a debt arising under a contract requests that an act by which his debtor has transferred an asset to a third party and which is allegedly detrimental to his rights be declared ineffective in relation to the creditor, is covered by the rule of international jurisdiction provided for in Article 7(1)(a) of Regulation (EU) No 1215/2012
9. We believe that also Polish legislation and commented judgement will inspire the European legislator and will be reflected in the final version of the Directive.
Authors: Paweł Kuglarz; Mateusz Kaliński, LL.M.; Tatara & Partners