Court Of Justice Of European Union Provides Guidance Regarding Applicable Law In Proceedings Against Insolvent Debtors

On 6 June 2018, the Court of Justice of the European Union (the "ECJ") handed down a judgment concerning the interpretation of Council Regulation No 1346/2000 of 29 May 2000 on insolvency proceedings (the "Insolvency Regulation") (ECJ, 6 June 2018, case C-250/17, Virgílio Tarragó da Silveira v. Massa Insolvente da Espírito Santo Financial Group SA).

The judgment was delivered in response to a request for a preliminary ruling from the Supremo Tribunal de Justiça (Supreme Court of Portugal, the "Court") in proceedings between Virgílio Tarragó da Silveira and the bankrupt estate of Espírito Santo Financial Group SA ("Espirito Santo"). Mr. Tarragó da Silveira claimed payment of a sum due in remuneration for services provided to Espírito Santo before the latter's insolvency as well as payment for damages for the loss suffered due to the non-performance of a contract for the provision of services.

The claim was initially brought on 25 July 2008 before the Tribunal de Comarca de Lisboa (Commercial Court of Lisbon, Portugal). During those proceedings, Espírito Santo was, however, declared insolvent by the tribunal d'arrondissement de Luxembourg (District Court of Luxembourg).

Article 15 of the Insolvency Regulation provides that the effects of insolvency proceedings on a pending lawsuit concerning an asset or a right of which the debtor has been divested are solely governed by the law of the Member State in which that lawsuit is pending. While the Insolvency Regulation has been repealed by Regulation 2015/848 of 20 May 2015 on insolvency proceedings (the "New Insolvency Regulation"), the content of Article 15 has been transposed in Article 18 of the New Insolvency Regulation and remains materially unchanged.

Mr. Tarragó da Silveira argued that the effects of the insolvency proceedings on the Portuguese proceedings were not governed by Article 15 (which would designate Portuguese law as the applicable law and result in the termination of the proceedings brought by Mr. Tarrago da Silveira). He maintained that the scope of the provision was limited to lawsuits concerning a specific asset or right. As a result, a lawsuit concerning an obligation of a monetary nature, such as his claim, would not fall within the scope of that provision. He further contended that in accordance with the general rule on conflict of laws under...