Doing cross-border business with those in financial difficulties is often a perilous business. In Vinyls Italia SpA (in liquidation) -v- Mediterranea di Navigazione SpA (C-54/16)  1 WLR 543 (see here) , I was the English barrister who gave expert evidence on matters of English law to the Tribunale Ordinario di Venezia (District Court, Venice, Italy) that came before the CJEU. The issue was whether or not English law, which governed a Shelltime 4 charterparty, could provide a “safe harbour” under Art. 13 of the Insolvency Regulation (1346/2000) (“detrimental acts”) to defeat a “claw-back” claim made by the administrator of an Italian company, which was made under Italian law seeking to recover payments of hire pursuant to Art. 4 (2)(m) of the Insolvency Regulation. Art 4(2) (m) provided that “…The law of the State of the opening of [insolvency] proceedings shall determine the conditions… shall determine in particular (m) the rules relating to the voidness, voidability or unenforceability of legal acts detrimental to all the creditors” .
Under Article 13 of the Insolvency Regulation (1346/200), Art. 4(2)(m) did not apply where the person who benefited from an act detrimental to all the creditors provides proof that the act is subject to the law of a Member State other than the State within the territory of which insolvency proceedings are opened and that that law does not allow any means of challenging that act in the relevant case. Hence my role in confirming that that indeed was the position under English law in relation to the transactions in question.
The Venice court raised questions about the relationship between the Rome I Regulation (593/2008) on choice of law in contractual obligations and the Insolvency Regulation. Unfortunately, because of technical difficulties (i.e. the Rome I Regulation was not in force at the time of the contract, and the Venice court did not have jurisdiction to refer equivalent questions under the provisions of the Rome Convention 1980 to the CJEU), the Court’s answers to the questions in Vinyls Italia had to be framed by reference to the Insolvency Regulation itself, which, in a number of ways, was unsatisfactory.
Happily, on 22 April 2021, the CJEU in Oeltrans Befrachtungsgesellschaft (C-73/20) (see here) has clarified the relationship between the Rome I Regulation (593/2008) and the Insolvency Regulation, holding that the law applicable to a contract under the Rome I Regulation also governs the payment made by a third party in performance of a contracting party’s contractual payment obligation, where, in insolvency proceedings, that payment is challenged as an act detrimental to all the creditors. Although expressed in relation to the original Insolvency Regulation, this ruling will be applied to the equivalent provisions in the Insolvency (Recast) Regulation (2015/848), namely Articles 7 (2)(m) and 16 respectively.
All very helpful when the contract in question is governed by the “law of a Member State other than the State within the territory of which insolvency proceedings are opened”. Post-Brexit, in relation to English law contracts, this “safe-harbour” defence will no longer be available in the future to cases like Vinyls Italia. I’ve always regarded the loss of this defence as one of the more damaging aspects of the UK’s withdrawal from the EU private international rules on matters relating to insolvency.