Bankruptcy of the purchaser and
enforceability of retention of title
vis-à-vis its receivership
International Insolvency Law Conference
Nottingham Law School
15 September 2010
Francesco Dialti, LL.M. (Finance)
Avvocato, Milan
ECJ judgment C-292/08 (I)
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Does an action by the seller against
the purchaser, based on retention of
title, fall within the scope of Regulation
44/2001 if (i) insolvency proceedings
are opened against the purchaser and
(ii) the relevant asset is in the Member
State of the opening of the
proceedings, at the time of the
opening?
Avv. Francesco Dialti
ECJ judgment C-292/08 (II)
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Agreement for the sale of machines between a
German company (seller) and a Dutch company
(purchaser)
German company retains retention of title on the
machines
Dutch company is declared subject to insolvency
proceedings
Upon request of the German company, a German
Court grants protective measures in respect of the
machines
A Dutch judge declares the decree of the German
Court enforceable
The receivership of the Dutch company appeals such
decision
Avv. Francesco Dialti
ECJ judgment C-292/08 (III)
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Reference for ruling: if the asset is in the Member State of the
opening of the proceedings, is the claim of the seller based on
retention of title a claim which relates to bankruptcy or winding-up
of the insolvent company, within the meaning of article 1(2)(b) of
Regulation 44/2001?
Article 1(2)(b) of Regulation 44/2001 expressly excludes from the
scope of such regulation “bankruptcy, proceedings relating to the
winding-up of insolvent companies or other legal persons, judicial
arrangements, compositions and analogous proceedings”
Gourdain c. Nadler (Case 133/78): in order for decisions relating to
bankruptcy and winding-up to be excluded from the scope of the
Brussels Convention, they must (i) derive directly from the
bankruptcy or winding-up and (ii) be closely connected with the
proceedings
Based on such case law, the ECJ has stated that an action based
on retention of title does not fall outside the scope of Regulation
44/2001. As a consequence, German Courts have jurisdiction in the
case submitted to the ECJ.
Avv. Francesco Dialti
Retention of title in
Regulation 1346/200
Article 7
Reservation of title
1. The opening of insolvency proceedings against the purchaser of an asset
shall not affect the seller's rights based on a reservation of title where at the
time of the opening of proceedings the asset is situated within the territory of
a Member State other than the State of opening of proceedings.
2. The opening of insolvency proceedings against the seller of an asset, after
delivery of the asset, shall not constitute grounds for rescinding or
terminating the sale and shall not prevent the purchaser from acquiring title
where at the time of the opening of proceedings the asset sold is situated
within the territory of a Member State other than the State of the opening of
proceedings.
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Insolvency of the purchaser is regulated at paragraph 1. Clearly, such
paragraph was not applicable to the case referred to the ECJ
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Authors have underlined that article 7(1) is rather unclear. In particular, query
which law would be applicable to retention of title in case of insolvency
proceedings
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The issue is even more complicated in the absence of a common regulation
of retention of title at EU level
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Avv. Francesco Dialti
Aspects which are of relevance
in case of retention of title
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Contractual aspects, relating to the internal
relationship between the parties to the sale
agreement (e.g., seller’s right to terminate
the sale if the price is not paid)
Aspects relating to the protection of third
parties (sub-purchasers, creditors and
receivership of the purchaser)
The issue has become even more complex,
due to the increasing development of
international trade
Avv. Francesco Dialti
Enforceability of retention of
title vis-à-vis the receivership
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Let’s assume that a German Court issues a
ruling stating that the assets belong to the
German seller. Would such ruling be
enforceable vis-à-vis the receivership of the
purchaser?
The issue was, apparently, not relevant in
the case submitted to the ECJ
On the contrary, it would be very relevant,
had the purchaser been an Italian company
Avv. Francesco Dialti
Enforceability of retention of
title vis-à-vis the receivership –
Italy (I)
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Some European countries (including
Italy) provide limits to enforceability of
retention of title. Such limits result in
publicity formalities aiming at (i)
avoiding collusions between the seller
and the purchaser to the detriment of
the purchaser’s creditors and
receivership and (ii) protecting bona
fide sub-purchaser of the assets.
Avv. Francesco Dialti
Enforceability of retention of
title vis-à-vis the receivership –
Italy (II)
Italian Civil Code (article 1524)
In order to be enforceable vis-à-vis third party creditors and the
receivership of the purchaser, retention of title needs to be documented
in writing with date certain at law (data certa, which is obtained, e.g., by
way of notarisation)
In case of machines, retention of title also needs to be transcribed at
the office of the clerk with the court in whose jurisdiction the machines
are located, in order to be enforceable vis-à-vis third party subpurchasers
Italian legislation implementing Directive 2000/35
Retention of title, previously agreed upon in writing, is effective against
third party creditors if:
(i)
retention of title is confirmed in the individual sale invoices relating to
successive supplies of goods;
(ii)
such invoices bear a date certain at law (data certa) prior to any
enforcement by third parties; and
(iii)
such invoices have been regularly recorded in the accounting entries
Avv. Francesco Dialti
Italy: conflict of laws on
retention of title (I)
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No specific international private law provision on
retention of title in the Italian legal system
Prevailing view of Authors
law applicable to the relationship between seller and
purchaser: lex contractus
law applicable to enforceability of retention of title: lex
rei sitae
in case of transfer of assets from one State to another:
only the publicity requirements provided for by the
State of destination of the goods (importing State)
should be met
Avv. Francesco Dialti
Italy: conflict of laws on
retention of title (II)
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(i)
(ii)
Case law
no recent case law
case law dated 1970s: Italian provisions on retention
of title are (i) public policy rules or (ii) overriding
mandatory provisions
Rationale for that:
rules on enforceability aim at protecting third parties
(creditors and receivership of the purchaser, bona
fide sub-purchasers)
retention of title is an exception to the principle of
free transferability of goods
Avv. Francesco Dialti
Italy: conflict of laws on
retention of title (III)
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Based on view of Authors and case
law: there are strong grounds to
believe that an Italian receiver might
oppose to a foreign judgment in
favour of a seller based on retention
of title if the requisites prescribed by
article 1524 of the Italian Civil Code
are not met, claiming that such
judgment violates Italian public policy
Avv. Francesco Dialti
Some practical advice when dealing with an
Italian purchaser and foreign seller wants to
retain title
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The sale agreement should be provided with date
certain at law (data certa)
In case of sale of machines: need to register title
with the office of the clerk where the machine is
located, in order to make title enforceable vis-à-vis
sub-purchasers. To effect such registration, it is
necessary that the sale agreement is notarised
In case of sale of registered movable goods (cars,
ships, airplanes): need to register title with the
relevant register
Based on old case law: strong doubts that
“prolonged retention of title” clauses would be
recognised under Italian law
Avv. Francesco Dialti
Thank you
Francesco Dialti, LL.M. (Finance)
Avvocato, Milan
francesco.dialti@hoganlovells.com
Avv. Francesco Dialti