Law

Budapest

Classification of liability in tort against the members of a committee of creditors

By Dr Attila Kovács, Kovács Réti Szegheõ Attorneys at Law

A recent judgment, case C-649/16 of the Court of Justice of the European Union (‘the Court’) highlighted the polemics relating to the international jurisdiction and the liability of the creditors in bankruptcy matters.

The referring court asked whether Article 1(2) (b) of Regulation N°1215/2012 must be interpreted so that it applies to an action for liability in tort brought against the members of a committee of creditors because of their conduct in voting (rejecting) on a restructuring plan in bankruptcy proceedings, and that such an action is therefore excluded from the subject matter of that regulation and has to fall within the scope of Regulation N°1346/2000.

First of all, the Court held that these regulations must be interpreted in such a way as to avoid any legal vacuum. As long as the civil and commercial matters of Regulation N°1215/2012 were intended to be interpreted by the European legislation in a broad way, the scope of Regulation N°1346/2000 should not be given a broad interpretation.

In order to decide whether an action is subject to civil and commercial or to bankruptcy regulation, it must be determined whether the right or obligation which forms the basis of the action has its source in the ordinary rules of civil and commercial law or in the derogating rules specific to insolvency proceedings. The Court stated that in order to analyse the liability in tort of the creditors in the present case, the extent of the committee’s obligations and the compatibility of the rejection with those obligations in the insolvency proceedings had to be taken into consideration. An action which could derive directly from insolvency proceedings or which is closely connected with them shall fall within the scope of Regulation N°1346/2000 and the petition for liability in tort brought against the members of a committee of creditors must be submitted to the court of the insolvent company where it was incorporated.

The Regulation N° 2015/848 determines expressis verbis in Recital 7 that bankruptcy proceedings, judicial arrangements etc. are excluded from the scope of Regulation N°1215/2012, and even Annex A of the Regulation on Insolvency Proceedings enumerates the procedures which fall in its scope. According to recitals 10 and 15, the scope of the Regulation N°1346/2000 is extended to proceedings which promote the rescue of economically viable but distressed businesses and to proceedings which proved for the restructuring of a debtor at a stage where there is only a likelihood of insolvency, and finally to proceedings governed merely under the law of some Member States, which are opened and conducted for a certain period of time on an interim or provisional basis before a court issues an ordering an insolvency proceeding.

Generally speaking, if the present action was interpreted under the Regulation N°2015/848, no request for a preliminary ruling would have been submitted to the Court, given the fact that both the provisions of recitals and the list of Annex A specify the proceedings subject to the Regulation N°1346/2000.


Dr. Attila Kovács

Dr. Attila Kovács

Kovács Réti Szegheõ Attorneys at Law, Budapest, Hungary
T: +361 275 27 85
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Kovács Réti Szegheő Attorneys at Law, established in 1992, is one of the oldest independent Hungarian law firms. It is active in Hungarian, English, German and Italian and operates over a wide spectrum within the fields of civil and business law, for both domestic and international clients. Kovács Réti Szegheő Attorneys at Law has gained immersive experience in the fields of corporate law, mergers and acquisitions, construction law, real estate law, securities law, bankruptcy law, labour and employment, competition law and intellectual property law.

Attorney-at-law and senior lawyer, Dr. Attila Kovács graduated in 1996. After gaining professional experience in Hungarian and German law offices, he became a member of Kovács Réti Szegheő, and has been a Managing Partner since 2004. He speaks Hungarian, English and German and his primary areas of practice are bankruptcy law, real estate law and corporate law.
 


Published: Autumn 2018 l Photo: ©zgphotography - stock.adobe.com

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