On 4 December 2014, the Court of Justice of the European Union (the "ECJ") answered a preliminary question from the Landgericht Darmstadt in the case H. vs. H.K. (Case C-295/13). The ECJ held that if insolvency proceedings have been opened, the court where these insolvency proceedings are pending will also have jurisdiction over an actio pauliana, even in a case where the defendant is domiciled in a non-Member State.
Facts and Legal Issue
On 1 November 2009, GT was declared insolvent by the Landgericht Darmstadt. However, already in July 2009, GT had ensured that monies were transferred to its subsidiaries. The liquidator considered these transfers fraudulent, and brought an actio pauliana under German law against the managing director of GT. The managing director, who is domiciled in Switzerland, contested the actio pauliana, claiming that the Landgericht Darmstadt did not have jurisdiction over the matter.
First, the managing director argued that the actio pauliana is predominantly a contractual claim, rather than a claim in the framework of a bankruptcy. Hence, the action should fall within the scope of the Convention of 30 October 2007 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the "Lugano II Convention") and not within the scope of Regulation 1346/2000 of 29 May 2000 on insolvency proceedings (the "Insolvency Regulation"). Pursuant to Article 5 of the Lugano II Convention, the actio pauliana should be brought before Swiss courts, and not before the Landgericht Darmstadt.
Second, the managing director argued that even if the actio pauliana is predominantly a bankruptcy matter falling within the scope of the Insolvency Regulation, then still the Landgericht Darmstadt lacks jurisdiction. This is because the actio pauliana is brought against a Swiss citizen and Switzerland is not a party to the EU or the Insolvency Regulation. Switzerland is only a party to the Lugano II Convention, pursuant to which Swiss courts would be competent.
The Landgericht Darmstadt decided to stay the proceedings and put a request to the ECJ.
In its reply, the ECJ first held that the actio pauliana is predominantly an insolvency law matter. According to the ECJ, this is because the action cannot be initiated unless there is an "actual insolvency of the debtor", and the action "derogates from the common rules of civil and commercial law, specifically because of the insolvency of the debtor company". Hence, the ECJ found that the actio pauliana falls within the scope of the Insolvency Regulation, which determines the competent court.
Second, and in keeping with earlier case-law, the ECJ found that under the Insolvency Regulation, the court which opened the insolvency proceedings has jurisdiction also in the case where a defendant is established in a non-member state. Moreover, the ECJ pointed out that as the actio pauliana falls under the Insolvency Regulation, it cannot fall under the Lugano II Convention, as these are mutually exclusive. Consequently, the Lugano II Convention could not limit the competence of the Landgericht Darmstadt in this case.
In sum, the ECJ held that the court which has been seized to rule on insolvency proceedings is also competent to rule on an actio pauliana, even if the defendant is domiciled in a non-Member State.
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