Protection against German insolvency voidance law

Insolvency voidance against foreign creditors

Compared to other countries, Germany has the toughest rules for insolvency voidance. Due to continually expanding international markets, the number of insolvency voidance cases is expected to increase abroad. Foreign creditors are often horribly surprised when they are flagged by a German insolvency administrator for repayment of payments they have painstakingly received.

Help from the Court of Justice of the European Union (CJEU)

The CJEU has strengthened the rights of foreign creditors with regard to Art. 16 EuInsVO by judgment of 22.4.2021, C-73/ 20. According to this the German insolvency administrator can indeed sue before a German court. But the law of the state in which the creditor is domiciled can be applicable. This insolvency voidance law is almost always better for the creditor. This applies to the statute of limitations (e.g. Austria) or the general claim requirements. The transferability of the case law of the CJEU to non-EU countries has not yet been finally discussed.

Advice for action

For the affected creditor it is worthwhile to check the relevant court location and applicable law according to the requirements of the German and European courts. A creditor wishing to avoid an insolvency voidance may consider in advance whether to agree with the debtor that the law of its country will apply. International insolvency voidance is a classic case of cross-border cooperation between law firms.

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