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EARN success story in cross-border insolvency case

The long-standing cooperation within the European Accounts Receivables Network (EARN) initiated by PASCHEN Rechtsanwälte continues to pay off, most recently in a case in which a medium-sized company represented by PASCHEN requested assistance in an insolvency case in Spain. Michael Schmidt, head of the relevant practice group at PASCHEN, immediately contacted the Spanish EARN partner Medina Cuadros Abogados to assert retention of title rights for goods and machinery delivered to Spain in the amount of approximately €400,000. As Luis Sánchez Pérez, the colleague responsible at Medina Cuadros Abogados, confirmed directly, retention of title rights in Spain require registration, so the case initially looked unlikely to succeed. However, our Spanish colleagues quickly discovered that two of the machines in question were being used in Portugal by a subsidiary of the Spanish insolvent debtor. This is where our Portuguese EARN partner Christina Dein, Dein Advogados came into play. Under Portuguese law, agreed retention of title rights are valid even without registration.

Retention of title in cross-border insolvency cases

This enabled the German company to invoke Article 10 of Regulation (EU) 2015/848, which reads as follows:

Article 10(1)  ‘The opening of insolvency proceedings against the buyer of an item shall not affect the rights of the seller under a reservation of title if, at the time of the opening of the proceedings, the item is located in the territory of a Member State other than that in which the proceedings were opened.’

Enforcement of retention of title by EARN network partner

In order to enforce the rights of the client concerned against the Spanish insolvency administrator, a further expert opinion was required from PASCHEN, which explained the effective inclusion of the retention of title in the purchase agreement with the Spanish insolvency debtor and the legal consequences of the retention of title under German law. The Portuguese colleague from Dein Advogados clarified in an expert opinion that the retention of title was therefore also to be observed under Portuguese law and that the German supplier remained the owner of the machines that had been transferred there. On this basis, lawyer Luis Sánchez Pérez from MedinaCuadros applied to the Spanish insolvency court for the release of the two machines. The insolvency administrator had no further objections, and the insolvency court finally released the two machines for collection by the German supplier. The two machines have since been successfully recovered. Their sale significantly reduced the damage suffered by the client.

This example clearly demonstrates how valuable it is to be able to work with such a well-coordinated team as the members of the EARN network, even in cases involving multiple jurisdictions.