Avoidance proceedings – whose jurisdiction is it anyway?

The ECJ has held that under the EU Insolvency Regulation 2000, jurisdiction to hear avoidance action claims is exclusive to the courts of the "main insolvency proceeding"

Under the EU Insolvency Regulation 2015/848 (which applies to proceedings opened after 26 June 2017), Art.6 allows an avoidance action (or other action deriving directly from the insolvency proceedings and closely linked with them) to be brought in the courts of the member state where a defendant is domiciled (or if there are multiple defendants then in the courts of the member state where any of them is domiciled). However, this flexibility only applies if the insolvency action is related to a civil and commercial action against the same defendant for which those local courts already have jurisdiction (under the Brussels Regulation).

There was no equivalent to Art.6 in the original EU Insolvency Regulation 2000. 

In Wiemer & Trachte GmbH v Tadzher (Case C-296/17), the ECJ held that only the courts where main insolvency proceedings were opened could have jurisdiction to hear an insolvency clawback action against a defendant whose registered office (or habitual residence) was in another member state. So, in this case, the liquidator of a company in main insolvency proceedings (liquidation) in Germany could not proceed in the Bulgarian courts with an action for repayment of monies against a director of the company who was resident in Bulgaria. The Bulgarian courts lacked jurisdiction to hear the case in the main proceedings. The reasoning is largely premised on the idea that concentrating all actions directly related to insolvency before the courts of the member state with jurisdiction to open insolvency proceedings (the so-called vis attractiva concursus principle if you like your Latin) is consistent with the objective of improving the effectiveness and efficiency of insolvency proceedings having cross border effects. It also avoids incentives to forum shop (i.e. transferring assets or judicial proceedings from one member state to another). Both are key objectives in the European Insolvency Regulation. Allowing a liquidator in main proceedings to bring a clawback action in the courts of another member state would undermine those objectives, the ECJ held.

The position, as noted above, under the EU Insolvency Regulation 2015 is more nuanced – although on the facts, the result would not necessarily have been any different (because Art.6 of the EIR 2015 depends on there being a civil and commercial action before the local courts which is related to the insolvency action).