The exceptionality of the judgment which the Court of Justice issued in October is borne out by the fact that the Court had previously held that only provisions of general jurisdiction resulting from the provision should be applied in cases of a Paulian action Article 4(1) Regulation (EU) 1215/2012. This opens a new door for creditors to assert their rights towards unreliable debtors.
Judgment of the Court of Justice of the European Union 4 October 2018 on C-337/17 provides that the Paulian action by which the creditor in respect of a claim arising out of the contract is deemed to have been unsuccessful in relation to him or her, which involves the disposal by his or her debtor of an asset to a person third – falls within the scope of the international jurisdiction base established in Article 7(1) lit. A) Regulation (EU) 1215/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.
Exception to the general rule
The position expressed in that judgment is an exception to the general rule laid down in Article 4(1) Regulation (EU) 1215/2012, which provides that, subject to the provisions of this Regulation, persons residing in the territory of a Member State may be sued, irrespective of their nationality, before the courts of that Member State. This was a disadvantage for the creditor, as bringing proceedings before a court of another Member State entailed costs, the need to know the proceedings before the court of that State and the language.
The solution currently adopted by the Court of Justice of the European Union, in the light of previous case law, is a bow to creditors who have been injured by the actions of an unreliable debtor. It is a condition that an action should be brought to safeguard his interests in the performance of obligations arising solely from the contract (and not, for example, from unlawful acts).
The defendant, when acquiring any asset belonging to the debtor, will be able to foresee that the proceedings in the event of a case brought against a Paulian complaint will be brought before a court other than that in which he is established as a company
Court on the part of the injured creditor
The judgment given by the Court of Justice of the European Union relates to a case between Feniks sp. z o.o. and Azteca Products & Services SL having a property sale contract concluded between Azteca and the debtor of Feniks – Coliseum 2101 Sp. z o.o., because according to Feniks sp. z o.o., the agreement was made against it.
The facts on which the action is based were as follows:
Coliseum 2101 Sp. z o. o. with its registered office in Poland, concluded – as a general contractor – a contract for construction works with Feniks, also with its registered office in Poland – as an investor – as part of an investment project related to the real estate located in Gdańsk (Poland). In order to implement this agreement, Coliseum concluded a number of contracts with subcontractors.
Since Coliseum did not regulate its obligations to part of the subcontractors, Feniks repaid Coliseum’s debt to its subcontractors due to the joint liability of the investor as regulated in the Civil Code and became a creditor of the Coliseum for the total amount 1,396,495.48 PLN (Polish zlotys) (about 336,174 EUR).
On the basis of contracts concluded on days 30 and 31 January 2012 In Szczecin (Poland), Coliseum sold to Azteca based in Alcora (Spain) the property located in Szczecin for the amount 6,079,275 PLN (approximately 1,463,445 EUR), Having made a partial deduction with the earlier claims of Azteca.
However, Azteca was obliged to pay the amount to Coliseum 1,091,413.7 PLN (approximately 262,732 EUR).
Feniks indicated that on the date of the conclusion of the sale agreement, this is 30 January 2012, The President of the Board of Coliseum was also a representative of Horkios Gestion SA based in Alcora, which was the sole member of the Management Board of Azteca. This led to a lack of assets in Coliseum’s assets on the day 11 July 2016
According to Article 527(1) a civil code when, as a result of a legal act of the debtor with the detriment of creditors, a person third has obtained a property benefit, each creditor may demand that this act be regarded as ineffective in relation to him if the debtor acted with the awareness of injury to the creditors and the person third She knew this or could have known it with due care.
Feniks sp. z o.o. with its registered office in Poland brought an action against the company Azteca with its registered office in Alcora (Spain) before the District Court in Szczecin for recognition of the unsuccessful sale of real estate in relation to it due to a legal act with the injured creditor.
Determination of jurisdiction to deal with a Paulian complaint
Feniks sp. z o.o. determined the jurisdiction of the Szczecin District Court, citing Article 7(1) point (a) Regulation (EU) 1215/2012, who provides that: a person who is resident in the territory of a Member State may be sued in another Member State in matters relating to the contract before the courts of the place where the undertaking is carried out.
Azteca raised a plea of lack of jurisdiction by referring to the general principle affected by the Article 4(1) Regulation (EU) 1215/2012, which provides that, subject to the provisions of this Regulation, persons residing in the territory of a Member State may be sued, irrespective of their nationality, before the courts of that Member State.
In the context of the present case, the Court has accepted that, under the concept of residence, the seat of the company must also be understood.
The Court has made it clear that ‘the Paulic complaint, if it is based on a claim resulting from obligations undertaken through the conclusion of an agreement, falls within the scope of the term ‘contract cases’ [..]. It is therefore necessary that the jurisdiction based on the merger of the defendant’s place of residence or seat be supplemented by the jurisdiction provided for by Article 7(1) point (a) Regulation (EU) 1215/2012, which corresponds to the structure, by basing the relationship between the creditor and the debtor on the contract they have concluded, both the legal certainty and predictability of the rules on jurisdiction and the objective of proper administration of justice.’
With regard to the above, it should be pointed out that the Court of Justice has taken firm stand in its ruling on the part of the creditor demanding the protection of his rights and the damage suffered by the actions of the debtor.
In the light of this ruling, it should be stressed that it will now be more difficult to escape an unreliable debtor with assets to another Member State. Furthermore, the defendant, when acquiring any asset belonging to the debtor, will be able to foresee that proceedings in the event of a case brought against a Paulian complaint will be brought before a court other than that in which he is established as a company.