In the case at hand (Com. 7 févr. 2018, FS-P+I, n° 17-10.056), insolvency proceedings were opened in 2012 in Romania against Izoplac, its headquarters being in Romania. In 2014, Izoplac was placed under judicial liquidation in France upon the request of a creditor. The court set the insolvency date and the Public Prosecutor petitioned for a ban on managing against the manager for failing to file for insolvency within 45 days.On appeal, the court confirmed the decision, specifying that as the centre of the debtor’s main interests was in France, the French proceedings were the main insolvency proceedings, and sanctioned the manager with a ban on managing a company.
The manager challenged this decision, claiming that since insolvency proceedings had previously been opened in Romania, he was not required to file for insolvency in France.
The French Supreme Court overturned the appeal decision holding that “given the opening date of the company’s insolvency proceedings by the Romanian court having jurisdiction over its headquarters, the judicial liquidation proceedings opened in France could only be secondary proceedings (…) the res judicata attached to the decision within the domestic legal order, is not such, in accordance with the Union’s law, as to set aside the secondary nature of these proceedings (…)”.
This ruling was given under the former Insolvency Regulation (1346/2000). The French Supreme Court strictly applied article 3 of the former Insolvency Regulation. The second proceedings opened in France not being the main proceedings, the Court concluded that the manager was not required to file for insolvency in France and thus could not be sanctioned for doing it belatedly.
The Recast Insolvency Regulation may change the situation since its Recital 47 seems to open up the possibility for the jurisdiction of the member state where secondary proceedings have been opened to sanction the debtor’s managers for breach of their obligations, so long as the member states have jurisdiction to address such disputes under their national law.
In addition, the Recast Insolvency Regulation sets out the requirement for the Court to specify whether the opened proceedings are to be considered as main, secondary or territorial (art. 4§1), which may render irrelevant the debate settled by the French Supreme court. However, the Courts do not always comply with this rule.
Lastly, it should be noted that, though the Recast Insolvency Regulation only targets the procedural aspects of cross-border insolvency proceedings, the European Commission is currently working on a draft directive aiming to standardize the substantive Insolvency laws of member states.
Authored by Romain de Menoville and Pierre Jean Martinez Chenard