Vol 11 (2014) - Issue 5

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Schmid v Hertel

Introduction
The First Chamber of the Court of Justice of the EU (the 'Court of Justice') handed down, on 14 January 2014, its decision in the case of Ralph Schmid (acting as liquidator of the assets of Aletta Zimmermann) v Lilly Hertel (Case C-328/12).
The decision sheds critical light on the scope of the Council Regulation (EC) No. 1346/2000 (the 'Insolvency Regulation'), in particular by holding that Article 3(1) of the Insolvency Regulation means that the Court of a Member State within whose territory insolvency proceedings have been opened has jurisdiction to hear and determine an action to set aside a transaction (or 'actio pauliana') that has been brought against a person who does not reside within a Member State (in this case, in Switzerland).

Background
Mr Schmid was appointed in 2007 as the 'liquidator' of the assets of Aletta Zimmermann. Insolvency proceedings were opened in Germany against Ms Zimmerman on 4 May 2007: these were main proceedings for the purposes of Articles 3(1) and 27 of the Insolvency Regulation; there were no secondary proceedings opened in another Member State nor any element of the case involving any Member State other than Germany.
Mr Schmid issued proceedings in the German Courts against Ms Hertel, the latter being resident in Switzerland, to set aside a transaction that had been entered into between Ms Zimmermann and Ms Hertel and, thereby, to recover EUR 8,015.08 (plus interest) for the insolvent estate from Ms Hertel. Mr Schmid’s action was dismissed as inadmissible by the lower German Courts, both at first instance and on appeal, on the ground that the German Courts did not have international jurisdiction.
Mr Schmid appealed the decision of the lower Courts to the German Federal Court of Justice on a point of law. The German Federal Court stayed the proceedings, concluding that the outcome of the dispute depended on the interpretation of Article 3(1) of the Insolvency Regulation, and requested a preliminary ruling under Article 267 TFEU on the following question:
'Do the courts of the Member State within the territory of which insolvency proceedings regarding the debtor’s assets have been opened have jurisdiction to decide an action to set a transaction aside by virtue of insolvency that is brought against a person whose place of residence or registered office is not within the territory of a Member State?'

Decision of the Court of Justice
It fell to the Court of Justice to determine the scope of Article 3(1) which provides as follows:
'The courts of the Member State within which the territory of which the centre of a debtor’s main interests is situated shall have jurisdiction to open insolvency proceedings. In the case of a company or legal person, the place of the registered office shall be presumed to be the centre of its main interests in the absence of proof to the contrary.'
The Court of Justice, agreeing with the Opinion of Advocate General Sharpston (delivered on 10 September 2013), held that Article 3(1) must be construed as meaning that the Court of a Member State within whose territory insolvency proceedings have been opened has jurisdiction to hear and determine an action to set aside a transaction that has been brought against a person who does not reside within a Member State.