The Insolvency Regulation (case-law)

SCI Senior Home – article 5 Regulation 1346/2000

In its judgment of today (read here), the Court of Justice interpreted article 5 of Regulation 1346/2000. Pursuant to this article, the opening of insolvency proceedings shall not affect the rights in rem of creditors or third parties in respect of tangible or intangible, moveable or immoveable assets – both specific assets and collections of indefinite assets as a whole which change from time to time – belonging to the debtor which are situated within the territory of another Member State at the time of the opening of proceedings. This rule constitutes an important exception to the principled universality of insolvency proceedings opened under the Insolvency Regulation.

The Court had to decide whether security created by virtue of a provision of national law, by which the real property of a person owing real property taxes is, by operation of law, to be subject to a public charge and that property owner must accept enforcement of the instrument recording that tax debt against that property, constitutes a ‘right in rem’ for the purposes of that article. The Court held that such security indeed constitutes a ‘right in rem’ for the purposes article 5 of Regulation 1346/2000. The Court considers that an interpretation of Article 5 of Regulation No 1346/2000 to the effect that the exception which it makes provision for covers solely rights in rem created in the context of commercial or credit transactions would lead to unfavourable treatment of the owners of rights in rem granted in the context of transactions other than commercial transactions (read: public creditors).

Article 5 of Regulation 1346/2000 is replaced by Article 8 of Regulation 2015/848. It can reasonably be expected that the same interpretation applies to the latter article.

Author: Arie Van Hoe

Lawyer (NautaDutilh), voluntary scientific collaborator (University of Antwerp)

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