Vol 8 (2011) - Issue 3

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Practical Problems in Applying Regulation 1346/2000

Introduction

The global crisis has led to the initiation in recent years of a number of Regulation 1346/20001 insolvency proceedings against Polish registered entities; that in turn has led to a number of recent practical and legal problems in applying the Regulation and in the interpretation and application of local EU Member state insolvency law.

This article will provide comments on the recent (May 2010) Polish Supreme Court resolution on the application of domestic law on the basis of the Regulation – the bankruptcy and recovery law in force in Poland, hereinafter 'BRL', and the right of creditors to initiate secondary proceedings.

The topic goes well beyond the application of country specific regulations, and will be of broader interest to insolvency law practitioners.



Application of national law

In the recent European Court of Justice, 'ECJ', ruling of C-444/07 on the insolvency of the Polish limited liability company MG Probud Gdynia sp. z o.o., the ECJ announced that pursuant to the opening of the main insolvency proceedings in one EU Member State the competent authorities of another EU Member State, where secondary insolvency proceedings have not been initiated, are – as a rule – obliged to recognise and enforce every judicial decision in the main insolvency proceedings and that the authorities do not have authority to order enforcement against the assets of the debtor – involved in the main insolvency proceedings – situated in that other EU Member State, if the legislation of the state of the main insolvency proceedings does not allow such enforcement. The ECJ concluded that the law of the EU Member State where the main insolvency proceedings have been initiated regulates not only the opening of the insolvency proceedings, but also the course and termination of them. That does not seem to be a novel conclusion, but merely recognition of the principles that stem directly from the Regulation.

The application of Regulation 1346/2000 under the Polish Supreme Court ruling

The resolution of the Polish Supreme Court, which is presented hereinafter, is on the application of art 29 (b) of the Regulation, and on that basis the relevant provisions of the BRL, as local law.

Background to the resolution of the Supreme Court

In 2008, Belvedere S.A a French registered company and six of its Polish registered affiliated companies were in financial difficulties (all subsidiaries guaranteed the debt of Belvedere S.A.) which led to all initiating the French protective procedure – procedure de sauvegarde. The COMI of each was, to no surprise, found to be in France. The justification for the petition for the sauvegarde procedure was, apparently, the intention of some of the Belvedere S.A. bond holders to claims satisfaction before the maturity of the bonds.

During the proceedings, reorganisation plans (plan de sauvegarde) for Belvedere S.A and each Polish subsidiary in the main insolvency proceedings were accepted, in the autumn of 2009.

Nonetheless, The Bank of New York Mellon registered in the USA, 'BONY', a creditor of the Belvedere group, filed in the District Court in Rzeszów, Poland, petitions to open secondary insolvency proceedings against each of the six affiliates, including the Polish registered company Polmos Łan´cut S.A., one of the six Polish subsidiaries of Belvedere S.A.. The case of Polmos Łan´cut S.A. was the reason the Polish Supreme Court adopted the resolution.

The Supreme Court resolution

The Polish Supreme Court (file number: III CZP 115/09) issued on 20 January 2010 a resolution, in answer to the question of law referred to it by the court of appeal in Rzeszów, on the issue of creditor rights to initiate secondary insolvency proceedings.