Cass. com., 5 Feb. 2025, No. 23-12.588
In a recent decision, the Court of Cassation reiterated that when a debtor is subject to an insolvency proceeding in a Member State of the European Union, a French court cannot ignore the effects of these proceedings and continue to examine a claim for payment.
This judgement constitutes an application of Regulation (EU) 2015/848 on insolvency proceedings and its implications for legal recovery proceedings in other European Union countries, particularly in France.
A cross-border dispute between France and Portugal,
Carmo Branco, a Portuguese distributor of Bourjois brand products, purchased its goods from HFC Prestige International Operations Switzerland (formerly Coty Geneva) and distributed these products under contract with Coty France.
A commercial dispute was initiated in France, with Coty France and HFC claiming payment from Carmo Branco of unpaid invoices totalling 156,934.16 euros.
On 21 January 2019, the Paris Commercial Court ordered the Portuguese company to pay these sums. The latter appealed this decision.
Insolvency proceedings in Portugal
During the proceedings, the Portuguese court (Commercial Court of Sintra) opened insolvency proceedings against Carmo Branco and appointed an insolvency administrator.
The Paris Court of Appeal upheld the conviction of the Portuguese company despite the insolvency proceedings.
The Court of Cassation sanctions the Court of Appeal for not taking into account the effects in France of the insolvency proceedings in Portugal.
The Court of Cassation recalls that, according to Article 18 of Regulation (EU) 2015/848: the effects of insolvency proceedings on a court proceeding in a Member State shall be governed solely by the law of that State.
‘The effects of insolvency proceedings on a pending lawsuit or arbitration proceedings concerning an asset or a right which forms part of a debtor’s insolvency estate shall be governed solely by the law of the Member State in which the lawsuit is pending or in which the arbitral tribunal has its seat.’
The Court of Cassation then points out that, under French law, the judgement to insolvency proceedings interrupts or prohibits any legal action brought by a creditor whose claim predates the opening of such proceedings.
If proceedings are already in progress, they are suspended until the claim is declared. They may then resume, but only to establish and fix the amount of the claim, under the supervision of the court-appointed administrator or the commissioner.
When a company is in receivership or liquidation, a creditor cannot initiate recovery action. He must simply declare his claim.
If the procedure has already been initiated, he can continue the court proceeding but only to have the amount of his claim fixed. Questions relating to payment will then be settled by the court-appointed administrator or liquidator.
A European insolvency proceeding will have the same effect as a French proceeding on legal proceedings brought in France.
The Paris Court of Appeal should have stayed the proceedings because of the bankruptcy proceedings opened in Portugal, but it did not do so. However, it could not sentence Carmo Branco without a prior declaration of the claim in the Portuguese insolvency proceeding.
This decision emphasises the obligation for national judges to take into account the interactions between European procedures.
Regulation (EU) 2015/848 aims precisely to prevent creditors from individually pursuing their actions in another country, bypassing the insolvency declared in the debtor’s home state.
A comparison with another recent decision commented on in another article (Court of Cassation, First Civil Chamber, 6 November 2024, Appeal No. 22-16.580, 22-19.327 and 23-15.649 ) illustrates the practical benefits of this European Regulation (EU) 2015/848.
For countries outside the European Union, such as India in the November 2024 decision, it was necessary to apply for the enforcement order of the liquidation judgement in order for it to be enforceable in France.
European liquidation decisions, on the other hand, have direct effect in France without the need for prior formalities. The collective proceedings can therefore have direct effects in other countries of the European Union, particularly with regard to recovery procedures carried out by creditors.
A winding-up decision in Portugal will therefore have the same procedural consequences in France as if the insolvency proceedings had been opened in France.
By Olivier Vibert, Lawyer, Paris,
KBESTAN business law firm in Evreux and Paris
French Law . BLOG 