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Avoidance of transactions in insolvency proceedings: First results of legal reform

09.06.2020

In recent years, the German Federal Court of Justice’s judicature on the so-called pre-emptive action of wilfully disadvantageous transactions according to sect. 133 of the German Insolvency Act (InsO) was completely out of hand. Granting generous payment terms to buyers who are – often just temporarily – in a tense financial situation, increasingly became an incalculable risk for their creditors.

The insolvency law experts at PASCHEN are confronted with this issue every day. Representing the interests of the Federal Association for Credit Management (BvCM), PASCHEN had therefore been campaigning for a reform of the rules on avoidance of transactions in insolvency law since 2013. Those efforts were finally successful in spring 2017: the corresponding reform law came into force on 5 April 2017.

For all insolvency proceedings opened after this date, the following amendments to the previous legal situation apply:

• The period of appeal for coverage transactions (payment for goods and services provided) is reduced from ten to four years
• In these cases, the knowledge is no longer linked to the “imminent” but to the “occurred” insolvency if so-called congruent coverage existed. This is the case if the manner of payment corresponds to the agreements originally made.
• If the creditor has granted the debtor accommodations for payment/deferment of payment it is assumed that he was not aware of a possible bankruptcy – in such cases, the insolvency administrator must provide (counter-)evidence that the creditor was aware of this fact.
• So-called cash transactions (the short period between performance and consideration) are only voidable if the creditor has established that his debtor has acted unfairly.
• In terms of wages, the period for the provision of cash transactions was approved for up to three months.
• Interest is to be paid only after default (not from the opening of insolvency proceedings).

The rules on default interest also apply to proceedings opened before the entry of the reform law into force, but only in respect of the period after 5 April 2017. Since then, the situation has frequently arisen that interest is subject to different rules over time. Thus, it is possible that a rescission claim may first be subject to interest, followed by an interest-free period and then – after the preconditions for default have been met – interest may accrue again.

The first decisions of the Federal Court of Justice (BGH) after the new rules came into force gave reason for hope that the BGH understood the legislator’s clear mandate to interpret the right of rescission in a more creditor-friendly manner and that it will also make this clear in its coming decisions, even though all the cases which are pending at present have to be decided under old law.

In June 2017, BGH’s IXth Civil Senate has decided the mere fact that a creditor successfully enforces an undisputed claim does not mean that the creditor was aware of the insolvency or suspension of payments (of the debtor) if they did not know any other concrete facts about the insolvency or financial situation of his debtor apart from this claim and the successful steps taken by them to enforce (BGH, decision of 22 June 2017, file no.: IX ZR 111/14). Only one month later, the same senate found the mere fact that the debtor of a minor claim against the bailiff agreed to conclude a payment agreement did not mean that the creditor had necessarily had to conclude that the debtor had suspended payments (BGH, decision of 6 July 2017, file no.: IX ZR 178/16).

In June 2018, Prof. Godehard Kayser, chairman of the senate responsible for avoidance of transactions in insolvency proceedings, in an article published in the trade journal ZIP (ZIP 2018, p. 1153 ff.) titling “Konsequenzen des neuen Anfechtungsrechts für die Rechtsprechung des BGH – Viel Lärm um nichts?“ gave an interim account of the reform from his point of view. As expected, in his opinion the legislator, which (against the background of the separation of powers) had not previously consulted the judges, did not do particularly well in assessing the legal implementation.

At the same time, however, Kayser expressly speaks of the “legal policy objective of the proposed legislation, namely to significantly reduce the volume of disputes by a legally secure regulation” (loc. cit. p. 1161). Despite all the criticism of the implementation, he even compliments the legislative initiative when he states that the legislator was not blind to the fact that the previous legal situation had led to “tradesmen and small traders being faced with completely oversized claims or complaints practically without any case-related substance and being urged to conclude settlements”. This dubious business would become considerably more difficult and this was a “very welcome effect of the new regulation” (loc. cit., p. 1154).

In addition to numerous legal technical deficiencies, Kayser shows in his essay that the result would not have changed anything in the jurisdiction of his senate. At the same time, however, he refers to the judgment in the so-called “beverage trade case” which was given after the reform and which proves that the critics who consider the jurisdiction of his senate to be too harsh are wrong (loc. cit., p. 1157). In this judgment, the BGH had clarified that so-called cash transactions were only not excluded from the pre-emptive action of wilfully disadvantageous transactions if the creditor concerned had known that the debtor was constantly accumulating further losses (see BGH of 4 May 2017, file no.: IX ZR 285/16, ZIP 2017, 1232).

As the examples quoted above also show, something has changed in the judges’.

This finding is also confirmed by a decision of the Aachen Regional Court in June of last year. The decision pronounced on 19 June 2018 (file no.: 9 O 16/18) is the first published decision of a regional court under the new law. In it, the court clarifies, on the one hand, that payment agreements expressly made in the course of enforcement also benefit from the creditor-friendly burden of proof provisions under the new law. On the other hand, it is correctly stated there that the knowledge of the party opposing avoidance of the insolvency of the debtor “(…) may not be based on the guarantee of payment relief or on the request of the debtor typically underlying this guarantee (…)”.

As Prof. Kayser, who will retire from his position as Chairman of the IX Senate this autumn due to age, recently announced at a specialist event, the first decision of the Federal Court of Justice on the effect of a payment agreement in the light of the reformed § 133 InsO is now actually also pending. The date of pronouncement in the proceedings conducted in Karlsruhe under file number IX ZR 18/19 is the 7 May 2020. We are at least as eager as you are and will of course keep you informed.