Romanian jurisprudence
The debtor was a joint-stock company incorporated in Italy, having a branch registered in Romania. The debtor had commenced restructuring proceedings in Italy. In the meantime, a group of Romanian creditors requested the commencement of insolvency proceedings in Romania before the Bucharest Tribunal. The Romanian representative of the debtor claimed that the procedure did not qualify as an insolvency procedure on the basis that it did not require court confirmation, per se. Even if the restructuring plan was not confirmed by an Italian court, the procedure was still in progress and covered by the EIR Recast.
By civil sentence no. 3516 of June 6, 2019, the Bucharest Tribunal, The Seventh Civil Section held that the applications of Romanian creditors to open the secondary insolvency proceedings of the debtor registered in Italy, with a branch in Romania, are admissible, having opened restructuring proceeding in Italy, requests based on the provisions of Article 3 para 2 of the Regulation (EU) 2015/848. To assert its jurisdiction, the court needed to determine whether the centre of main interests (the “COMI”) of the debtor, pursuant to article 3(1) of the EIR recast, a concept also used in articles 2(b) was in Romania, or at least whether the debtor had an establishment there under article 2(10) of the EIR Recast.
To determine the COMI and the establishment of the debtor, the court summarized case law in the EU regarding the presumption of COMI and factors to be considered to rebut that presumption. The court also looked at the concept of COMI as used in the context of UNCITRAL Model Law on cross-border insolvency (MLCBI). The court referred at the relevant case law, objectives criteria for the application of the COMI test listed in the para. 147 of the Guide to Enactment and Interpretation of the UNCITRAL Model Law on Cross-Border Insolvency. Even where the foreign judgment does not specify whether the proceeding open to the debtor is a main or secondary proceeding, it shall be automatically recognised under the terms of Article 19 and Article 31 of the EIR Recast. It concluded that the COMI of the debtor was in Italy.
To resolve the exception of the inadmissibility of applications for the opening of secondary insolvency proceedings, it was necessary to analyze whether the "concordato preventivo" restructuring proceeding before the Italian court was an insolvency proceeding, respectively a main insolvency proceeding that would allow the opening of a secondary insolvency proceedings in Romania pursuant to art. 3 paragraph (2) of Regulation (EU) 2015/848. Another aspect of the analysis was whether the debtor who opened a branch in Bucharest has a headquarters in Romania, in the sense of art. 2 point 10 of the European Regulation. To qualify as an ‘establishment’, it must be demonstrated that the debtor has a ‘place of business’ in Romania in which it carries out non-transitional economic activity with human resources and goods and services. Evidence of an establishment can include that the debtor has representatives in Romania that pay and conclude contracts with local creditors. Whether or not an economic activity is ‘transitional’ depends on the duration, frequency and nature of the economic activity. Activities such as the accrual and payment of debts in Romania would not be considered transitional if they have the character of a consistent business activity corresponding to the nature and type of activity that a debtor carries on generally. Interaction with third parties is also required to prove an establishment in a jurisdiction under the EIR Recast. Further, the activities of the corporate debtor must have a perceptible effect on the local market and be publicly known with internal administration being insufficient. It must also be verified whether the debtor has regularly managed and conducted business relations with creditors, local and otherwise and finally the establishment must be ascertainable to third parties as being an established business in the jurisdiction. Based on these characteristics, it was clear in the instant case that there was an establishment in Romania and as the procedure in the main proceedings was included in Annex A of the EIR Recast, the creditors in Romania should have been recognised as having the right to open secondary proceedings in Romania.
The debtor was an insurance company registered in New Zealand that had entered insolvency proceedings following a judgement of the High Court of New Zealand. The provisional foreign representative appointed by the High Court sought recognition of the proceedings in Romania as foreign main proceedings and suspension of all legal actions concerning the debtor pending before the court in Romania under chapter II of title III of Law No. 85/2014 enacting MLCBI in Romania. The application had been rejected by the court of first instance on 25 May 2018.
On appeal, the request was opposed by an interested party for three procedural reasons as follows: (a) on the basis that insurance companies were excluded from the scope of the recognition procedure under article 274 para. 2 of Law No. 85/2014 (enacting article 1(2) MLCBI); (b) on the basis that there was not yet a final judgment confirming the commencement of insolvency proceedings in New Zealand; and (c) due to issues of absence of reciprocity between Romania and New Zealand concerning the recognition of proceedings. By civil decision no. 2269/15.11.2018 delivered by the Bucharest Court of Appeal the judgment of the court of first instance became final, by dismissing the appeal as unfounded.
The main issue under consideration concerned the interpretation of national law, as the different legal regime of insurance companies from EU Member States and non-EU Member States was adopted from the perspective of recognition of foreign proceedings. The court found that the Romanian legislator’s intention was to exclude insurance companies from the application of the general rules on the recognition of insolvency proceedings carried out in non-EU third countries. What the court found is that there are currently no regulations allowing the recognition in Romania of insolvency proceedings of insurance companies pending in non-EU countries.
Observations:
The main law governing insolvency proceedings in Romania is Law No 85/2014 on pre-insolvency and insolvency proceedings (Insolvency Code), in force since 28 June 2014, which represents the unification of legislation on international insolvency proceedings. Title III, Cross-Border Insolvency, takes over, in an improved form, the provisions of Law No 637/2002 applicable to legal relations with states outside the European Union. Law No 637/2002, in Title I, Relations with foreign states in general, adapted the provisions of the UNCITRAL Model Law on cross-border insolvency developed by UNCITRAL (1997).
Title III of the Law No 85/2014 contains regulations of private international law for insolvency, indicating the rules for determining the applicable law, procedural rules, and norms on the conditions under which national authorities may grant or request assistance in cross-border insolvency. For cases with elements of foreignness in relation to non-EU Member States, Article 276 of the Law 85/2014 regulates the jurisdiction of Romanian court to exercise prerogatives for the recognition of foreign proceedings and the fulfilment of cooperation obligations with foreign courts.
The case raises issues in recognition of foreign insolvency proceedings, at least from following perspectives.
A first question is whether the exclusion of insurance companies from non-EU countries from the benefit of recognition of foreign proceedings, based on the idea of special protection, i.e., a public policy of protection of a relevant field, is or is not in line with the principles of the UNCITRAL Model Law adopted in Romanian law.
Another issue is whether it is possible to analyse in the proceeding for recognition by the Romanian court the effects that foreign representative wishes to undertake and obtain on the Romanian territory, whether they concern the execution of assets, or the suspension of legal actions brought against Romanian subsidiaries/branches, i.e., what are the limits of judicial control.
In the case registered in 2019 before the Bucharest Tribunal, Civil Section VII, an application was made for recognition in Romania of insolvency proceedings, as main proceedings, for a company with its registered office in Switzerland.
The application was rejected by the Bucharest Tribunal on 01.10.2019. The Bucharest Court of Appeal, Civil Section V, dismissed the appeal of the applicant on the decision handed down on 21.05.2020. Both Courts established the non-existence of a legal regulatory framework between Romania and Switzerland for reciprocity in terms of the effects of foreign judgments, condition provided in Article 289 para. 1 lit. e of Law no. 85/2014.
The issue examined by the courts concerned the interpretation of national law, Art. 289 para. (1) of Law no. 85/2014 on pre-insolvency and insolvency proceedings enacting MLCBI - UNCITRAL Model Law on cross-border insolvency (1997) in Romania, regarding the cumulative conditions to be met for the recognition of foreign insolvency proceedings, in particular the existence of reciprocity regarding the effects of foreign judgments between Romania and the state of the court that pronounced the judgment. The case is relevant by analysing the admissibility of "de facto reciprocity" as a basis for recognition of foreign insolvency proceedings when reciprocity of effects has not been recognised or established by law, other treaties, conventions, or any other form of international, bi - or multilateral agreement to which Romania is a party.
By the petition filed in 2018 before the Cluj Tribunal, the plaintiff, a company with COMI and main insolvency proceedings in France, as well as secondary insolvency proceedings in Italy, filed through the insolvency practitioner appointed in Italy, against the defendant - a company registered in Romania, a claim action for payment of a sum of money due under the purchase contract concluded between the two companies in 2014.
By judgment delivered on 25.04.2018, the Cluj Specialised Tribunal admitted the plea of lack of representative capacity raised by the defendant, annulled the action of the plaintiff as being brought by a person without representative capacity.
The Tribunal held that
the plaintiff is subject to two insolvency proceedings under the conditions
governed by EC Regulation No 1346/2000 on insolvency proceedings, namely main
insolvency proceedings pending in France and secondary insolvency proceedings
opened in Italy.
In the secondary
insolvency proceedings, the judge authorised and empowered the insolvency practitioner
within these proceedings to bring an action in Romania for the recovery of
commercial claim against the defendant.
The Tribunal applied Article
3 paragraph 2 in conjunction with Article 27, final thesis, and Article 2 lit. (g) (3)
of Regulation (EC) No 1346/2000, establishing that the pursuit of the claim which is the
subject-matter of the action belongs to the main insolvency proceedings opened
in France by the Grenoble Tribunal, so that the insolvency practitioner
appointed in these proceedings had the right to represent the debtor and to mandate
the signatories of the petition to bring the action.
The Tribunal also held
the pre-eminence of the provisions of the EU Regulation over Italian, French
and Romanian domestic law (CJEU, Judgment of 10 October 1973 in Variola, Judgment
of 13 July 1972 against Italy, Judgment of 9 April 1978 in Simmenthal).
In the light of the
provisions of Article 209 para. (1), Art. 210 para. (1) of the Romanian Civil
Code (similar provisions Art. 18-19 of the Italian Civil Code), the Tribunal
found that neither the attorney-at-law nor the principal have the legal
capacity to represent the debtor in the bringing of the action.
By decision rendered on 05.11.2018, the Court of Appeal Cluj, Civil Section II, rejected as unfounded the appeal filed by the plaintiff.
The Court of Appeal found
that, in analysing the mandate granted to the plaintiff's contractual
representative in the promotion of the pending claim, the Tribunal did not deny
the existence of the debtor's insolvency proceedings or the judgments opening
the insolvency proceedings, or the recognition of the two proceedings and the
judgments rendered, but questioned the extent and limits that the insolvency
practitioner of the secondary proceedings has over the assets of the insolvent
company.
The Court held that
Article 27 of Regulation (EC) No 1346/2000 regarding the recognition of
insolvency proceedings of the debtor had been correctly applied. It was established
that the application for the claim may be made only by the insolvency practitioner
appointed in the main proceedings by the Grenoble Tribunal, in the light of the
final sentence of Article 2(g) and Article 3 paragraph 1 and 2 of Regulation No
1346/2000, according to which the Member State in which the assets are located
means: in the case of claims, the Member State in whose territory the debtor
has his centre of main interests, as determined in Article 3(2).
In conjunction with
those rules, it was held that The Cluj Tribunal correctly established that the
main insolvency proceedings opened in France by the Grenoble District Court had
the legal power to pursue the claim which is the subject-matter of the
application.
The Court observed
that the first instance did not disregard the effects of the judgment given in
the plaintiff’s secondary insolvency proceedings, nor did it deny that those
proceedings would be governed by Italian law, but merely established that the
signatory to the application was not the legal representative of the applicant
for that type of action, having regard to the provisions of Regulation EC No
1346/2000 and the subject-matter of the application.
The Romanian High Court of Cassation and Justice, Second Civil Section, by decision no. 1178 of 26.06.2020, admitted the appeal filed by the plaintiff, ordered the annulment of the contested decision and the referral of the case for a new trial to the same court of appeal.
The Supreme Court found
a breach of Article 16(1) and Article 25(1) of Regulation (EC) No 1346/2000,
holding that the two courts had disregarded the judgment by which the judge in
the secondary insolvency proceedings (Italy) authorised the insolvency
practitioner appointed in those proceedings to bring a legal action for the
recovery of debts owed by the defendant.
It was held by the
Supreme Court that the question of the mandate of the practitioner in the
secondary proceedings to act in Romanian court is distinct from the question of
the territorial scope of the effects of the second insolvency proceedings.
Thus, the lack of standing had to be analysed as a matter of priority, without
any decision being given on the effects of the opening of the second insolvency
proceedings, the proceedings for the pursuit of the claim and, furthermore, on
the impact of Article 3 paragraph (2) and art. 27 final
sentence of the Regulation (EC) No 1346/2000.
This is because it is not possible to disregard the judgment by which the judge in the secondary insolvency proceedings (which are taking place in Italy at the Court of Verona) authorised the practitioner appointed in those proceedings to bring a legal action for the recovery of debts owed by the defendant. As the judgment of the Italian court has not been set aside, it cannot be indirectly censured by the Romanian court, since it is recognised in all the other Member States as soon as it takes effect in the State in which it was given, without further formalities.
In the application filed to Brasov Tribunal, the Romanian creditor requested on 05.10.2021 the opening of secondary insolvency proceedings of a company having a main insolvency proceeding in Italy and a registered office, an electronic components assembly factory, in Romania.
The debtor, through the practitioner
appointed in the main insolvency proceedings, requested the rejection of the
application, on the grounds that a liquidation plan for the company had been
formulated in the main proceedings, according to which a public sale procedure
had been initiated for the business carried on in Italy and for the debtor's
assets in Romania. On 12.12.2022, the Italian court ordered that the
liquidation plan should include the undertaking provided for in Article 36 of
EU Regulation 845/2015, a suspensive condition provided for in the irrevocable
purchase offer received in the main bankruptcy proceedings.
By the civil judgment of
24.05.2023, Brasov Tribunal rejected the request for the opening of secondary
insolvency proceedings.
The application was analysed in
relation to Articles 34, 36 and 38(2) of EU Regulation 2015/848.
The court found that the civil
judgment of 05.07.2022 issued by the Court of Udine declared the debtor company
bankrupt. Furthermore, the debtor has been established and has been operating
continuously in Romania since 2008, with a registered office in Rasnov, where
it has had an electronic components assembly unit.
Although the insolvency practitioner
in the main insolvency proceedings has given an undertaking in accordance with
Article 36 of EU Regulation 848/2015, this undertaking does not limit the
right of the Romanian creditor to request an examination of the appropriateness
of opening secondary insolvency proceedings in Romania. The wording used by
the European legislator allows the insolvency judge to decide whether to admit
the request for the opening of secondary proceedings, depending on the effects
of the undertaking on the rights of Romanian creditors.
The court held that in the addendum to
the liquidation programme filed in the Italian bankruptcy case, it was included
un undertaking given in relation to the irrevocable purchase offer received
from a third company for the assets inventoried at the factory in Romania. For the approval of the commitment under Article 36 of the Regulation,
the Romanian creditors were notified, and the undertaking was published in
the Insolvency Proceedings Bulletin. At the creditors' meeting of
15.03.2023, the undertaking was voted in favour by creditors representing
96.25% of the claims with voting rights, including the creditor applying
for the opening of secondary proceedings.
As the practitioner appointed in the main bankruptcy proceedings has given an undertaking pursuant to Article 36 of EU Regulation 848/2015, and the undertaking was approved by the known Romanian creditors, in compliance with the procedure regulated in Romania, in view of the provisions of Articles 36 and 38(2) of EU Regulation 848/2015, the court found that the conditions for the opening of the secondary insolvency proceedings of the debtor are not met, as the undertaking given adequately protects the general interests of the Romanian creditors.
By the application for recognition of foreign judgments (exequator), the petitioner-creditor requested on 29.12.2022 the recognition in Romania of its claim, declared and accepted in the German insolvency proceedings concerning the assets of the debtor - natural person (dental services rendered for debtor in Germany).
The Tribunal Sibiu, by judgment of
13.06.2022, rejected the request for recognition of the document proving
the creditor's claim in the German insolvency proceedings. It was held by the Tribunal
that the debtor is subject to insolvency proceedings pending in Germany, in
which the creditor is registered with the claim. The document submitted by the
creditor merely has the value of a court registry certificate attesting its
entry in the schedule of claims, so that the requirements of Articles 19 and
20 are not satisfied and the provisions of Article 32 of Regulation (EU)
2015/848 on insolvency proceedings are not applicable.
The Court of Appeal of Alba Iulia, by
decision of 05.10.2023, rejected as unfounded the appeal filed by the
petitioner-creditor.
The Court of Appeal found that the document attesting the recognition of the claim and the inclusion of the creditor in the table of claims in German insolvency proceedings against the debtor does not constitute a judgment within the meaning of Article 19 para. 1, Art. 20 and Art. 32 para. 2 of Regulation (EU) 2015/848 on insolvency proceedings. It follows from the wording of Article 201 of the German Insolvency Code, relied on by the appellant, that creditors are permitted to enforce their claims individually only after the end of the insolvency proceedings. The appellant has not provided evidence of the termination of the insolvency proceedings, but only of their suspension, which has different legal effects regarding the extract from the creditors' table submitted for recognition. Since the document submitted does not meet the condition of being a judgment, the Court held that it was not necessary to verify whether the document had been communicated to the debtor, whether it had been contested and whether the debtor had participated in the insolvency proceedings before the German court.
The debtor was a company registered in Russian Federation that had
entered insolvency proceedings following a judgement of the Russian Arbitration
Court. In the case
registered in 2019 before the Bucharest Tribunal, Civil Section VII, the foreign representative appointed by the Arbitration
Court sought recognition of the proceedings in Romania as foreign insolvency
main proceedings. He stated that the debtor company owned on the Romanian
territory a maritime ship, and the recognition of the insolvency proceedings would
be followed by executory measures, through applications aimed at protecting
the debtor’s patrimony, to which the provisions of Law 85/2014 are entitled. The application had been
rejected by the Bucharest Tribunal on 04.07.2019.
The appeal declared by the foreign representative of the insolvent debtor had been
approved. By decision pronounced on 17.12.2020 the Bucharest
Court of Appeal admitted the application, ordered the recognition, on
the Romanian territory of the insolvency proceedings according to judgments of
Russian Arbitration Courts.
The issues examined by the courts concerned the
interpretation of national law, Art. 289 para. (1) of
Law no. 85/2014 on pre-insolvency and insolvency proceedings
enacting MLCBI - UNCITRAL Model Law on cross-border insolvency
(1997) in Romania, regarding the cumulative conditions to be met for
the recognition of foreign insolvency proceedings, in particular the existence
of reciprocity regarding the effects of foreign judgments between Romania
and the state of the court that pronounced the judgment.
Some of the Court
of Appeal arguments:
- The applicability
of art. 274 para.1 of law 85/2014, where assistance is requested in
Romania by a foreign representative, as defined in art. 5 pt.56 of law no.
85/2014, the recognition of a foreign insolvency decision.
- The condition of
reciprocity is fulfilled: The Romanian – Russian bilateral Treaty on the
provision of legal aid in civil cases, family, and criminal cases of
03.04.1958. Article 46 of the Treaty governs the reciprocity of the
recognition of judgments regardless of their executable nature or not.
- Proof of foreign law: the notion of „ civil matter” from
art. 46 of the Treaty is used in a broad sense; an address issued by the
Consulate General of the Russian Federation is an appropriate way to
prove a question of law, namely that in Russian law the notion of
„civil cause” also covers causes from entrepreneurial and other
economic activities.
- As long as the
1958 Treaty was not repealed, it was not amended, at the request of the
Romanian State, but also provides for the recognition of judgments given
in civil cases, without particulars derogations, it follows that it
applies to all judgments which have been given in cases which are of a
civil nature at that time, including judgments given in disputes with
professionals. As disputes with professionals in insolvency
proceedings, are civil litigation in both Romanian and Russian laws,
it results that the Treaty also applies to insolvency judgments, being
fully covered by the art. 46 of the Treaty.
- Foreign insolvency court and judgment: the examination of bankruptcy cases falls in Russian Federation within the jurisdiction of the arbitral tribunals; the Supreme Court of the Russian Federation has recognized the reciprocity of the Treaty with Romania in the matter of insolvency disputes falling within its competence. According to art. 1 of the Federal Constitutional Law of 28 / 04.1995 FKZ, the arbitral tribunals are federal courts and are part of the judiciary of the Russian Federation; the powers of state arbitral tribunals are strictly delimited from those of private arbitration courts, the judgments handed down by state arbitral tribunals are court decisions, pronounced by judges, not arbitral awards, handed down by arbitrators.
On the Bucharest Tribunal, the company with COMI and insolvency proceedings in the Russian Federation, filed through the insolvency practitioner appointed in the foreign proceedings a request for unilateral denunciation of a security deposit contract. It affirmed that, according to Article 274(1)(a) of Law No 85/2014, Chapter II is applicable, as assistance is requested in Romania by a foreign representative in connection with foreign insolvency proceedings, and the application was justified by Article 295 of Law No 85 /2014: "Upon recognition of a foreign proceeding, the foreign representative has standing to initiate actions meant to render ineffective the debtor’s acts detrimental to its creditors that are available to the Romanian representative and, as appropriate, actions for voidance or nullity according to this law".
The Sixth Civil Division and the Seventh Civil Division of the Bucharest
Tribunal declined each other's jurisdiction, resulting a negative conflict of
jurisdiction.
By judgment handed down on 03.12.2021, the Bucharest Court of Appeal,
Civil Section V, solved the negative conflict of jurisdiction that arose at the level of the Bucharest Tribunal between Civil Section
VI, specialised in disputes with professionals, and Civil Section VII,
specialised in resolving insolvency disputes, and established jurisdiction to the case in favour of the Bucharest Tribunal, Civil Section VI.
The Court of Appeal held that the claimant company, which is
under insolvency proceedings in the Russian Federation, filed on the
rights conferred by Article 295 of Law No. 85/2014, but the
application based on the provisions of Article 123 of Law 85/2014, respectively
Article 1276 of the Civil Code does not concern matters related to insolvency proceedings, is
not a request for the administration, reorganisation or liquidation of the
assets of the applicant in insolvency, so it is not within the competence of
the syndic judge, in view of the provisions of Article 276, Article 40
para. (1), Article 41 para. (1) of Law no. 85/2014.
Comment
Article 123 of Law 85/2014 regulates the situation of ongoing contracts in insolvency
proceedings. The new Civil Code, in Articles 1276-1277, enshrines for the first time
in our legislation the right of unilateral termination of contracts.
Article 276 of Law 85/2014 regulates the competence of Romanian courts relating to recognition of foreign proceedings and cooperation with foreign courts.
By the Judgment of 9 July 2021 Constanta Tribunal -
Second Civil Section suspended the continuation of creditor's action for claims against the debtor with insolvency proceedings in Russian Federation until the resolution
of the insolvency case pending before the State Arbitration Court of the
Russian Federation. The tribunal applied Article 292(1) of the Law 85/2014.
The applicant, a UK-based creditor, appealed against
the judgment, arguing that it is
a secured creditor with a preferential claim and that the provisions of Article
292(2) of the Law no. 85/2014, according to which "At the request of a
creditor holding a preferential claim, according to this law, the court may remove
the suspension referred to in para. (1), under the conditions provided for by
Romanian law", are applicable.
The appeal filed by the claimant against the decision
of 09.07.2021 was rejected as unfounded on 22.04.2022 by the Court of Appeal of
Constanța, Second Civil,
Insolvency and Litigation with Professionals and Companies Section.
The Court of Appeal held, in essence, that the suspension of the continuation
of the action for claims (moratorium) is based on the provisions of Article
292(1) of Law No 85/2014, as a result of the recognition in Romanian of the
foreign insolvency proceedings opened against the defendant, ordered by a
judgment of the Court of Appeal Bucharest-Vth Civil Section.
It was found that the provisions of Article 292(1) of Law 85/2014,
according to which “Upon recognition of a foreign proceeding that is a
foreign main proceeding, commencement of the following actions or applications,
judicial or extrajudicial is stayed and if already commenced, they are lawfully
suspended: individual actions or individual proceedings concerning the debtor’s
assets, rights and obligations; acts, operations, and any other individual
execution actions against the debtor’s assets” were correctly applied,
since Art. 292 (2) of Law 85/2014 does not regulate a situation of exception to
the rule enshrined in Art. 292 (1), but provides for a procedure subsequent to
the delivery of a judgment suspending the proceedings, in which a creditor
benefiting from a cause of preference, i.e. a lien, mortgage or pledge, may
request the lifting of the suspension.
Comment
Article 292(1) and (2) of Law 85/2014 transposes into Romanian law the provisions of Article 20 of the UNCITRAL Model Law on Cross-Border Insolvency (1997).
Through the application registered at
the Constanța Tribunal in 2022, the foreign representative of the company with headquarters and
ongoing insolvency proceedings in the Russian Federation, formulated under art.
292 para. 1 of Law no. 85/2014 request for the termination of the guarantee
deposit contract concluded by the debtor in favour of a foreign creditor. Through the contract a guarantee deposit was recorded for the purpose of lifting the
insurance seizure instituted on the ship belonging to the bankrupt debtor,
ordered by Constanta Tribunal as an insurance measure at the request of the creditor foreigner. It explained that the substantive
litigation with the creditor, which legitimized the establishment of the
seizure, was solved on 04.08.2020 with Decision of the Court of
Maritime Commercial Arbitration in the UK, in accordance with the Terms of the
LMAA 2017 (UK).
By the Civil Sentence pronounced on
13.10.2022, the Constanța Tribunal admitted the application, found that the effects of the
guarantee deposit contract concluded between the depositor and the plaintiff
depositor were terminated, ordered the return of the deposit to the plaintiff.
The Court noted that the insolvency
procedure from the Russian Federation was recognized in Romania on 17.12.2020 by the Bucharest Court of Appeal's decision. From the perspective of Article 292(1)(a) and (b) of Law 85/2014 the Tribunal found that, from the date of recognition of foreign insolvency proceedings, the exercise of the creditor's right to dispose of the deposit is prevented from any individual
enforcement measures. On the other hand, the judicial administrator of the debtor in insolvency capitalized on the rights provided by art. 296 of the law, he notified the depositary the unequivocal will to unilaterally terminate the Contract,
which allows the admission of the application.
Comment
Art. 296 of the Law no. 85/2014 stipulates that from
the date of recognition of the foreign proceedings, the foreign representative
has procedural capacity to intervene in any individual request or action,
judicial or extrajudicial, in which the debtor is a party, to the extent that
they are fulfilled, and the other conditions provided by Romanian law.
With the application registered on
29.01.2020 at Bucharest Tribunal, the foreign creditor requested, against the debtor with COMI and
insolvency proceedings in the Russian Federation, the recognition in Romania of
two arbitral judgments rendered between the parties in the UK. The applicant
justified the request for the execution of a 2019 security deposit agreement,
based on which the seizure instituted on the vessel belonging to the debtor was
approved. By civil sentence of 07.07.2020
Bucharest Tribunal –Civil V Section admitted the application, ordered the
recognition in Romania of the Arbitration Decision of 24.10.2019 and of the Arbitration Decision of
28.11.2019 of the UK Court of Commercial Maritime Arbitration. An appeal was lodged against that
judgment, alleging, among other matters, the following. · As regards the legal provisions
applicable to the arbitration agreement. The appellant affirmed that, according
to English law the arbitration clause was no longer valid, whereas it had been
expressly denounced by the judicial liquidator of the Russian debtor, because
of bankruptcy proceedings. ·
The inoperability of the arbitration clause as established by Art. II (3)
of the New York Convention 1958. The appellant considered that the dispute could no longer be settled
by arbitration, taking in consideration art. II and art. IV of the New York
Convention of June 10, 1958. ·
The violation
of the principles governing cross-border insolvency through a recognition of
arbitral decisions is likely to violate the public order of Romanian private
international law. The appellant affirmed that,
verifying the regularity of the arbitration agreement, the recognition court
must verify both the fulfilment of the conditions established by art. II-1 of
the New York Convention 1958, as well as the provisions of the Romanian law in
this regard, respectively Art. 1.112 Code of Civil Procedure "Arbitrability
of the dispute", as well as the incidence of Law 85/2014 on insolvency
proceedings, in this case, the provisions of art. 75 of Law 85/2014. Romanian
law reserves disputes between the plaintiff and the debtor in the exclusive
jurisdiction of the insolvency court, so the arbitrability of the dispute
resolved by the 2 arbitral decisions cannot be accepted from the perspective of
Romanian law. If the creditor obtain the claim established in arbitral
decisions, this would affect the insolvency proceedings pending in the Russian
Federation by reducing the debtor's assets for distribution to the other
creditors. By the civil decision on 27.09.2023
the Bucharest Court of Appeal, Section V of Civil, rejected the appeal as
unfounded.
The appellate Court, among other arguments, stated the following. ·
The
analysed application is not an action regarding the assets, rights, and
obligations of the debtor, according to Article 292(1) of Law no.85/2014, but a
formality prior to such action. ·
The
validity of the Arbitration Clause has been the subject of detailed
consideration of the arbitrator in the arbitration case settled by final and
enforceable judgments, so that infringement of the conditions laid down in Art.
IV (1) related to Art. II the New York Convention of 1958, or of Art. 1129(b)
Civil Procedural Code, regarding the applicable law or the misappreciation and
interpretation of the validity of the arbitration clause from the lex fori
perspective, cannot be reanalysed. ·
Regarding
the violation of the public order of Romanian private international law,
respectively the violation of art. 1125 Proc. civ. code and related provisions
of the 1958 New York Convention, the Court noted that the decision opening the
insolvency proceedings in the Russian Federation was definitively recognized in
Romania by the Civil Decision of 17.12.2020. However, the simple statement
of the opening of insolvency proceedings against the debtor cannot determine
the non-arbitrable nature of the dispute in the absence of certain evidence.
In addition, the determination of the arbitrability of the dispute in relation
to the opening of insolvency proceedings against the appellant-defendant was
within the competence of the arbitrator and should have been invoked before the
Arbitration Court at the time of the settlement of the cases. Such defences
formulated or reiterated in an action that strictly concerns the recognition in
Romania of already final arbitral decision which entered into res judicata
authority, are aspects that exceed the limits of the evaluation in the case and
cannot be the subject of the Romanian court's analysis, on the contrary,
violating the fundamental principles that govern the civil process.
The company, having its head office in Romania, insolvency proceedings opened by the Bucharest Tribunal on 19.01.2022, and a branch in the Hashemite Kingdom of Jordan, filed in the Hashemite Kingdom of Jordan an application, through its insolvency practitioners appointed in the Romanian proceedings, for recognition of these proceedings as main insolvency proceedings. The stated purpose was to trigger the steps regulated under local law, based on the company's insolvency in Romania, in order to recover its debts.
The Court of First Instance, Economic Section of Aman, by decision issued on 13.09.2022, admitted the request, ordered the recognition of the decision of Bucharest Tribunal, Romania, which ordered the opening of insolvency proceedings against the company.
The judge held the application of the provisions of Article 116 of the Insolvency Law No. 21/2018 on the competence of Jordanian courts to recognize international insolvency judgments and to cooperate with foreign courts and other competent bodies, subject to reciprocity. The court found that the requirements set out in Article 121 of the local law regarding the evidence that the company's representatives must submit, including a statement of all foreign proceedings, any proceedings under the local law relating to the claim, known to the insolvency practitioner, were met. It has been held that foreign insolvency proceedings take place in the country where the debtor's centre of interests is located. As regards the reciprocity condition, the court found from the documents submitted, legal opinion and court decisions, that "Romania recognises the judgments of the Jordanian courts and treats them in the same way".
The case calls for some observations. The UNCITRAL Model Law on Cross-Border Insolvency (1997) has been adopted into national laws by both Romania (2002) and Jordan, officially the Hashemite Kingdom of Jordan (2018). However, both countries have additionally provided for reciprocity regarding the effects of foreign judgments. The judgement under review did not mention the existence of a bi-multilateral conventional framework between Romania and Jordan applicable to the recognition of the effects of judgments rendered in insolvency matters. The judge found that the condition of reciprocity was met in relation to the judgments submitted by Romanian practitioners, which leads to the incidence of de facto reciprocity as a basis for recognition of the Romanian insolvency proceedings.
The decision in Romanian is available here.
The company with its head office in Romania has been in bankruptcy proceedings before the Constanta Tribunal since 2017. The Romanian creditor, whose claim has been mentioned in the claims table, has applied for recognition in Switzerland of the Romanian bankruptcy proceedings.
The Zürich Tribunal, the Bankruptcy Court, ordered by a decision pronounced on 30.09. 2022, recognition in Switzerland of the decision of the Constanta Tribunal, Romania, opening bankruptcy proceedings against the debtor, a company with its registered office in Romania; the publication of the Romanian bankruptcy decision, together with the request for notification of claims, in the Swiss Official Commercial Gazette and the Cantonal Gazette, the bankruptcy court subsequently deciding on the request for waiver of the ancillary bankruptcy proceedings.
The Swiss Court held the applicability of Article 166 para. 1 "Recognition of foreign bankruptcy and composition agreements in Switzerland" (Swiss Private International Law Act - PILA - IPRG), according to which a foreign bankruptcy judgment is recognised at the request of a creditor in bankruptcy proceedings, if the judgment is enforceable in the State where it was given (lit. a), if there are no grounds for refusal within the meaning of Art. 27 IPRG (lit. b) and if the judgment was given in the State of head office of the debtor (lit. c point 1). The creditor in bankruptcy proceedings may exercise his right without any further authorisation, the foreign insolvency administrator does not have priority. He can only be refused the right to make an application if it is obvious that it has no bankruptcy claim.
The Court found that in the case there were met the requirements laid down in Article 29(2) para. 1, lit. a, b, c, IPRG, concerning the submission of a certified copy of the foreign bankruptcy judgment (letter a), enforceable in the State where the main bankruptcy proceedings were conducted (letter b), as well as a document showing that the debtor in bankruptcy was duly summoned and in time to exercise his rights of defence (letter c). Recognition of a foreign bankruptcy judgment generally, but not necessarily, requires the conduct of an ancillary bankruptcy proceeding in respect of the debtor's assets located in Switzerland (Art. 170 IPRG). The following were found by the Court: the bankrupt debtor has, inter alia, a claim against a company with its registered office in Switzerland; the applicant's status as a creditor is sufficiently credibly proven by the final schedule (table) of claims drawn up in the Romanian bankruptcy proceedings; at the time of the opening of the bankruptcy proceedings, the bankrupt debtor had its registered office in Romania, which means that the Constanta Tribunal had jurisdiction to open the bankruptcy proceedings, and the judgment sought to be recognised is enforceable. The court ordered the publication in Switzerland of the bankruptcy judgment pronounced in Romania, together with the request for notification of claims, before deciding on the proceedings to be followed for the recovery of the claims held by the Romanian company in bankruptcy against its debtor, established in Switzerland.
The case allows for some observations.
The UNCITRAL Model Law on Cross-Border Insolvency - MLCBI (1997) has been adopted into national law only by Romania (2002), not by Switzerland. The regulations of international law applicable in Switzerland in the matter of recognition of foreign bankruptcy proceedings, which have, however, considered international doctrine, including the MLCBI, in their revision, are not fundamentally different from the provisions of Article 287 of the Romanian Law no. 85/2014 on pre-insolvency and insolvency proceedings. The Swiss legislation extends the category of persons entitled to bring such proceedings before Swiss courts, by recognising the standing of creditors of the bankrupt company "without any additional authorisation” and does not regulate the condition of reciprocity regarding the effects of foreign judgments between Switzerland and the State of the court which issued the judgment, as provided for in Article 289(e) of Romanian Law No 85/2014.
The judgment is relevant for practitioners as possible evidence of the fulfilment of the "de facto" reciprocity requirement to obtain recognition in Romania of Swiss insolvency proceedings, an important step to promote and develop cooperation between Swiss / Romanian courts and practitioners in the field of cross- insolvency.
An overview of the Romanian legislation and practice on avoidance actions, some views as regards the solutions recommended in the UNCITRAL Legislative Guide on Insolvency Law (Recommendations 87-99) and the World Bank Principles for Effective Insolvency and Creditor/Debtor Regimes (Principle C11), at the UNCITRAL-World Bank Group Judicial Capacity-Building Initiative on International Best Practices in the Area of Insolvency Law, on 27th and 28th October 2021
For information about the Project, see:
For my PowerPoint presentation and details about Romanian law and practice, see:
Romanian jurisprudence on insolvency law is for the
first time published in the Case
Law on UNCITRAL Texts (CLOUT)
You can find the
Romanian decisions here:
https://www.uncitral.org/clout/clout/data/rou/clout_case_2066.html
https://www.uncitral.org/clout/clout/data/rou/clout_case_2065.html
For the UNCITRAL abstract of the cases, see A/CN.9/SER.C/ABSTRACTS/224.
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