Tuesday, 11 November 2014

Opening of secondary insolvency proceedings in Greece

Cases involving the application of the EC Insolvency Regulation [1346/2000] are published rather rarely in Greece. In a recent judgment, the Athens 1st Instance court ordered the opening of secondary proceedings, following an application made by an Austrian administrator in bankruptcy. Beyond its self-evident importance, the judgment is worthy of presentation, because it sets limits to attempts made, in order to impede the foreign judgment’s recognition in Greece [Athens 1st Instance Court (Chamber) 32/2014, Business and Company Law 2014, pp. 686 et seq.].


The facts:. The applicants are two Austrian liquidators, appointed by the Vienna Commercial Court, which on June 20, 2013 declared the opening of insolvency proceedings in regards to a limited company with its seat in Wals, Salzburg. The first applicant was appointed as the main administrator, whereas the second one as a special administrator for the company’s foreign branches. The applicants requested the opening of secondary proceedings in Greece, since the Austrian company had a branch in Neo Psychiko, Attica district, since 1997. There were two interventions filed in favor, and two against the request of the liquidators. The latter were filed by a Greek construction company, and by transport and customs clearance enterprises. The grounds for dismissal put forward were as follows:
a.      The Austrian company was taken over by a Spanish company in 2006; hence, its actual administration was exercised on Spanish territory, not the company’s registered office. The Vienna commercial court failed to examine its international jurisdiction pursuant to Art. 3.1 Insolvency Regulation [centre of a debtor’s main interests].
b.      The Austrian judgment was not registered in the Greek registry of bankruptcies before July 22, 2013, whereas the Greek branch continued to engage in commercial activities.
According to the above, the intervenors asked the court to dismiss the application pursuant to Art. 26 Insolvency Regulation: the foreign judgment’s recognition would violate Greek public policy, because it was rendered by a court lacking international jurisdiction, and its effects would infringe creditors, who engaged in business transactions with the branch in good faith after the 20th of June 2013.  

The ruling: The court dismissed the intervention on the following grounds:
a.      Pursuant to Art. 17 Insolvency Regulation, the effects of the proceedings referred to in Article 3.2 may not be challenged in other Member States. Implementing the latter provision to the case at hand, leads to the conclusion that the Greek court isn’t allowed to examine the foreign court’s international jurisdiction de novo.
b.      The fact that the Austrian company was taken over by a Spanish company does not rebut the presumption set by the Regulation, namely that the center of main interests is the place of the company’s registered office, which is still Vienna, Austria.
c.       A violation of domestic public policy is not proven; the secondary proceedings will focus on the Greek branch and its potential assets, and all its creditors will be able to make use of their established rights pursuant to the Greek Insolvency Code [Article 17].
d.      The fact that the Austrian judgment was registered at the Athens Bankruptcy registry no earlier than July 22, 2013, does not give rise to a different approach. It is true that Articles 21 and 22 Insolvency Regulation provide for the liquidator’s right to publish a notice of the judgment in any other Member State; still, the latter does not set a requirement for the judgment’s automatic recognition according to Article 16 Insolvency Regulation.
In light of the above, the court ordered the opening of secondary proceedings in Greece. 

Comments: The decision received positive comments in the legal press [see Michalopoulos, Business and Company Law 2014, pp. 691 et seq.]. It follows the path opened by the Thessaloniki CoA. However, mention needs to be made to an earlier decision of the Thessaloniki 1st Instance court [Nr. 13544/2012, unreported; the decision is briefly presented in: Anthimos, Foreign Judgments & Arbitral Awards (2014), p. 85, note 430 (in Greek)], which dismissed an application for the recognition of a German judgment, by virtue of which the applicant was declared bankrupt by a Dortmund court of law. The court’s reasoning was strongly influenced by the doctrine followed under Art. 780 Code of Civil Procedure [this provision regulates the recognition of foreign decisions rendered in voluntary proceedings]: As long as a foreign decision is not under dispute, automatic or incidental recognition is possible. Therefore, special proceedings for the foreign decision’s recognition are unnecessary; consequently, the application was dismissed.