An important clarification on insolvency procedures in the European context for the recovery of debts from a foreign state came with the judgment of the European Court of 16 July 2020C-253/19. The sentence affects the interests of those who circulate within the EU space for work reasons and is of considerable importance because more and more the parties use this tool to manage situations of over-indebtedness and to obtain an injunction from the Court identified for competence. As is known, the international debt recovery procedures within the EU are set out in the EU Regulation 2015/848. The EU Court of Justice intervened clarifying the jurisdiction criterion for the attribution of European transnational insolvency proceedings, relating to natural persons.
Debt recovery abroad. Here’s where to appeal.
The case concerns a UK couple who had turned to the Court of Appeal of Guimarães (Portugal), to open insolvency proceedings against their debtor. Following the rules laid down by the Regulation according to which “the courts of the Member State in whose territory the debtor’s center of main interests is located”, the spouses had turned to the Court of Portugal. However, the Court, following the rule that states “before opening the insolvency proceedings the competent court should check ex officio whether the debtor’s center of main interests or the dependency of the latter are actually located within his jurisdiction”, remitted the judgment to the EU Court of Justice.
The English couple had submitted the application to the Portuguese judge because they believed that the jurisdiction for the recovery of the debt was of Portugal. In fact, in Portugal the transactions had been carried out and the contracts that had caused the insolvency situation were signed and it is also the place where the debtor’s only real estate was located. According to the regulation, in fact, the habitual residence criterion could be exceeded if most of the assets affected by the insolvency procedure are located outside the Member State in which the habitual residence is located. The Portuguese court had rejected the application precisely because it had placed the center of the couple’s main interests in the United Kingdom, since that was the place of the couple’s habitual residence as established by Article 3 , no. 1, paragraph 4 of regulation 2015/848.
Confirming the English jurisdiction, the EU Court of Justice therefore established that the jurisdiction to decide lies with the judge of the country of habitual residence where the main center of interests of the natural person is presumed to be located, in this case in the United Kingdom. According to the EU Court, habitual residence cannot be overcome by the fact that the only asset to be put into liquidation is located in another member country and that the transactions and contracts that caused the insolvency situation have been carried out in that country.
Below is an extract of the sentence that you can find at the link Sentence of the European Court of 16 July 2020C-253/19.
“in fact, if it is true that the location of the debtor’s assets constitutes one of the objective and verifiable criteria by third parties to be taken into consideration in determining the place where the debtor habitually manages his interests, this presumption can only be refuted at the end of an overall assessment of all these criteria. It follows that the fact that the only real estate owned by a physical person who does not carry out an independent business or professional activity is located outside the Member State of his habitual residence, is not in itself sufficient to refute this presumption”.
It should be noted, in fact, that the ruling that clarifies the jurisdiction criteria for insolvency proceedings abroad and within the European Union countries, only concern those between individuals, excluding those for which companies and businesses are concerned. Finally, the EU Regulation makes it possible to resolve the conflicts of competence that have arisen between the jurisdictions of the Member States on the national rules to be applied for the management of cross-border Community insolvency procedures and provides for the recognition of the sentences of the various courts in matters of insolvency.