Vol 2 (2005) - Issue 3

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A Teleological Application of the EC Insolvency Regulation:European Commission v AMI Semiconductor Belgium

While all eyes have been on the European Court of Justice (‘ECJ’) deciding the Eurofood case in due course, the ECJ has recently rendered its very first decision concerning the operation of Council Regulation (EC) 1346/2000 on Insolvency Proceedings (‘the Insolvency Regulation’) in European Commission v AMI Semiconductor Belgium. This ECJ decision concerns principally Articles 4(2)(f), 16 and 17 of the Insolvency Regulation. In summary, the ECJ held that the principles laid down in the Insolvency Regulation apply with equal force to proceedings brought before the Community courts (as opposed to national courts), despite the fact that the Insolvency Regulation contains no reference to the Community courts.

The facts and decision

For the purposes of this commentary, the material facts are as follows. On 8 June 1998, the European Community, represented by the Commission, entered into a contract with a number of companies (‘the defendants’) incorporated in various Member States in the context of Esprit Project No. 26927 ‘Electronic Commerce Fulfilment Service for the Electronics Industry (ECFS/E)’ (‘the project’).The purpose of the project was essentially to establish and put on the market an internet-based trading platform for electronic components.
The contract contained the following arbitration clause: ‘The Court of First Instance of the European Communities, and in the case of appeal, the Court of Justice of the European Communities shall have exclusive jurisdiction in any dispute between the Commission and the contractors concerning the validity, application and interpretation of this contract.’
In December 1999, having concluded that the services provided by the defendants were defective, the Commission terminated the project prematurely. On 21 December 1999, the Commission demanded reimbursement of the sums advanced by it to the defendants under the contract. On 12 August 2002, since no payment had been received by the Commission, it commenced proceedings against the defendants before the Court of First Instance. The action was then forwarded to the ECJ.
Meantime, one Austrian defendant and one German defendant had gone into Austrian and German insolvency proceedings on 25 July 2002 and 19 July 2002 respectively. Thus, the question for the ECJ was whether the action against these two insolvent defendants could proceed in light of the Insolvency Regulation. It was common ground that, under the relevant Austrian and German insolvency provisions, an action of the kind brought by the Commission would have been held to be inadmissible if brought against those companies before national courts.
The arguments of the parties centred on the proper interpretation of Articles 4(2)(f), 16 and 17 of the Insolvency Regulation. Article 4(2)(f) provides that lex fori concursus shall determine ‘the effects of the insolvency proceedings on proceedings brought by individual creditors, with the exception of lawsuits pending’. Article 16(1) provides that ‘[a]ny judgment opening insolvency proceedings handed down by a court of a Member State ... shall be recognized in all the other Member States ...’ Article 17(1) provides that ‘[a]ny judgment opening insolvency proceedings handed down by a court of a Member State ... shall be recognized in all the other Member States ...’ In other words, the combined effect of Articles16 and 17 is that the opening of insolvency proceedings in a Member State is to be recognized in all the other Member States and is to produce the effects attributed thereto by the lex fori concursus.
The Commission argued that the proceedings it launched should not be stayed under the Insolvency Regulation because the Insolvency Regulation only concerned the effects of insolvency proceedings in the Member States.