Vol 11 (2014) - Issue 2

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LBI hf v Kepler Capital Markets SA [2013] EUECJ C-85/12

Introduction
On 24 October 2013, the European Court of Justice ('ECJ') handed down its judgment in LBI hf v Kepler Capital Markets SA and Frédéric Giraux [2013] EUECJ C-85/12. This followed a request for a preliminary ruling from the French Cour de Cassation on the interpretation of Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit institutions ('the Directive'). Two questions were considered, firstly whether moratorium measures taken in respect to LBI hf ('Landsbanki') under Icelandic legislation constituted reorganisation measures or winding-up proceedings taken by administrative or judicial authorities under the Directive, and secondly whether the retrospective effect of Icelandic legislation was precluded from having effect under the Directive. As will be noted in due course, the ECJ’s ruling conflicts with a decision of the English High Court.

Background and relevant legislation
On 10 November 2008, Mr Giraux served two provisional attachment orders in France on Kepler Capital Markets SA in order to guarantee payment of his claim against Landsbanki. Three days later, the Icelandic parliament enacted an amendment to article 98 of Icelandic Law1 No 161/2002 to enable moratoria to be implemented to prohibit commencement of proceedings against financial institutions and to suspend any pending proceedings. On 5 December 2008, the Reykjavik District Court in Iceland granted Landsbanki such a moratorium (which was extended on a number of occasions until 5 December 2010).
Just 5 months later, due to apparent constitutional concerns, the moratoria provisions were repealed by Law No 44/2009 of 15 April 2009. This was accompanied by transitional provisions that continued existing moratoria and applied to such institutions the provisions of Law No 161/2002 on the liquidation of financial institutions 'as if the institution had been placed in winding-up proceedings by a judicial decision on the date on which [Law No 44/2009] entered into force'. The transitional provisions also provided that 'On the expiry of that authorisation [of the moratorium], the undertaking shall automatically be regarded as being the subject of winding-up proceedings in accordance with general rules, without any specific judicial decision …'.
Landsbanki applied to the Tribunal de Grande Instance in Paris to lift the two attachment orders on the basis that Law No 44/2009 made applicable article 138 of the Law No 21/1991 which annuls attachment orders against a company’s assets within the 6 months preceding a court’s declaration of insolvency. However, Landsbanki’s application was dismissed in June 2009 on the basis that the provisions of Law No 44/2009 were not applicable in France because they did not constitute reorganisation measures or winding-up measures taken by 'administrative or judicial authorities' within the meaning of the Directive.
The Directive provides that the administrative and judicial authorities of a credit institution’s home state shall alone be empowered to decide on the implementation of any reorganisation measure (article 3), or the opening of winding-up proceedings (article 9), including in respect to any branch established in a host state within the European Economic Area ('EEA'). Such decisions are effective throughout the EEA without further formality, and must be applied in accordance with the laws of the home state (unless provided otherwise in the Directive) even where the host state’s laws do not provide for the reorganisation measures in question. Article 32 provides that the effects of reorganisation measures or winding-up proceedings on a pending lawsuit concerning an asset or a right of which the credit institution has been divested shall be governed solely by the law of the state in which the lawsuit is pending.