Filing claims in foreign insolvency proceedings

When the EU Insolvency Regulation applies and when national law takes precedence

The Regulation applies where the main proceedings have been opened in a Member State, with the exception of Denmark. For a German creditor, this means that if the debtor is insolvent in France, Bulgaria, Poland or another bound state, the uniform rules on lodging claims, recognition and security interests apply.

If, on the other hand, the debtor is based outside the EU – for example, in Switzerland, the United Kingdom or a third country – the EU Insolvency Regulation does not apply. In such cases, the international insolvency law of the relevant country determines whether and how a foreign creditor can lodge a claim. These procedures are subject to their own time limits and formal requirements, which should be clarified at an early stage.

Within the European Union, the opening of insolvency proceedings offers a practical advantage: it is automatically recognised in Germany. The German creditor does not first need to have the opening of proceedings verified, but can rely on the decision in force in the state where proceedings were opened and lodge their claim there.

Filing claims: deadline, form and language

Every foreign creditor has the right to lodge their claim in writing. The Regulation provides a standard form for this purpose, the header of which bears the title ‘Lodging of claims’ in all the official languages of the Union. The form requires details of the creditor, the amount of the claim, the basis and date on which it arose, and whether a preferential right, security interest or retention of title is being asserted. Supporting documents must be attached.

The deadline for lodging claims is governed by the law of the State in which the proceedings are opened. To ensure that foreign creditors are not caught unawares, the Regulation provides that every known creditor from another Member State must be individually notified of the opening of proceedings and the applicable deadlines. However, anyone relying solely on this notification loses valuable control over the timetable and runs the risk of missing important deadlines. Anyone who learns of their customer’s financial difficulties should therefore check the opening of proceedings themselves in the insolvency register of the relevant state and proceed with filing their claim, rather than waiting for post.

There is a practical concession regarding language. The claim may be filed in an official language of the country in which the creditor is based. However, the administrator may require a translation into the language of the proceedings, and the description ‘claim’ must be stated in an official language of the country where the proceedings were opened. A clear translation from the outset avoids queries and wasted time.

The compilation of supporting documents is crucial for subsequent enforcement. The claim should be accompanied by invoices, order confirmations, delivery notes and relevant correspondence setting out the basis and amount of the claim. The law of the state of opening governs the verification and determination procedure, in which a disputed claim may, if necessary, be enforced through the courts.

Cross-border security interests: retention of title and rights in rem

For the supplier, retention of title is often the most important security measure. The Regulation expressly protects the supplier across borders. If, at the time of the opening of proceedings, the goods supplied subject to retention of title are located in a Member State other than the State in which the proceedings were opened, the opening of proceedings does not affect the seller’s rights arising from the retention of title.

Similarly, the Regulation protects third parties’ rights in rem in respect of goods located in a Member State other than the State of commencement at the time of commencement, such as liens or security ownership. These rights are not affected by the commencement of proceedings and may be enforced in accordance with the law of the place where the goods are situated.

In practice, this means that anyone supplying goods subject to retention of title should set out the agreement in writing in a verifiable manner and document where the goods were located at the relevant time. An extended or expanded retention of title, as recognised under German law, is not always recognised to the same extent abroad. The scope of the security in the destination country should therefore be clarified before the first delivery and not only when a crisis arises.

Ultimately, the share depends on the value of the estate and the number of claims with priority. Public creditors, employees and secured creditors are given preferential treatment in many legal systems, meaning that often only a small residual amount remains for ordinary insolvency claims. Anyone holding a security interest should consistently assert it, rather than relying on the general distribution ratio.

Order of priority and equal treatment of creditors

Whether a lodged claim is satisfied, and to what extent, is determined not by the Regulation but by the law of the state in which the insolvency proceedings were opened. It determines which claims are preferential, how subordinated claims are treated and what proportion is allocated to ordinary insolvency claims. These rules on priority vary considerably from country to country.

German creditors are entitled to the principle of equal treatment. They must not be treated less favourably than a domestic creditor of the same ranking class. Discrimination solely on the grounds of having a foreign registered office is impermissible. This does not alter the fact that the creditor operates within a foreign ranking system, the categories of which cannot be derived from German law.

In practice, this means classifying the claim correctly from the outset. Anyone wishing to claim preferential treatment or security in rem must expressly assert this in the claim form and provide evidence to support it. Security provided at a later stage is rarely taken into account in ongoing proceedings.

Set-off and special scenarios

Where there are reciprocal claims between a creditor and a debtor, set-off may significantly improve the creditor’s position. The Regulation permits the creditor to set off claims if this is permitted under the law applicable to the insolvent debtor’s claim, even if the law of the state in which insolvency proceedings have been opened would preclude it. This rule may determine whether a claim remains fully enforceable or can only be lodged as a claim in the insolvency proceedings.

It should also be noted that the opening of the main proceedings suspends the continuation of individual enforcement proceedings. A German creditor who is still enforcing a judgment against the debtor must suspend enforcement upon the opening of the main proceedings and instead lodge their claim in the proceedings.

If, in addition to the main proceedings, secondary proceedings have been opened in a country where the debtor maintains a branch, the creditor may lodge their claim in both sets of proceedings. This is particularly advisable where local assets in which the creditor has a specific interest are being realised in the secondary proceedings.

In proceedings relating to Bulgaria or other South-Eastern European countries, it is advisable to clarify the local language of the proceedings and the identity of the administrator at an early stage. Time limits there are governed by national law, and filing a claim in German without a translation may lead to queries and delays. Having the key documents translated at an early stage pays off.

Practical guidance for German creditors

As soon as there is a suspicion of insolvency, the order in which steps are taken is crucial. Firstly, you must check the insolvency register of the relevant country to see if proceedings have been opened and identify the appointed administrator. You must then compile a list of outstanding claims, including invoices, delivery notes and documentation of any security interests.

The claim must then be lodged within the prescribed time limit using the standard form, either in the language of the proceedings or with a translation, expressly asserting any retention of title, security in rem or priority. At the same time, it must be checked whether goods supplied under retention of title are still in the debtor’s possession and can be reclaimed.

If the debtor is based outside the EU, the relevant national law applies. In such cases, it must be clarified in advance whether foreign creditors are permitted to participate at all, what time limits apply and whether a German judgement will be recognised in the proceedings. In both cases, an early and properly organised filing increases the chance of realising at least a meaningful share of the value or a secured position from an outstanding invoice.