Original scientific paper
Presumptions for recognition of the foreign decision on instituting bankruptcy/insolvency proceedings according to croatian law
Jasnica Garašić
Abstract
Presumptions required by Croatian law for recognition of the foreign decision on instituting bankruptcy/insolvency proceedings (Art. 311 BA) are in conformity with contemporary tendencies in international insolvency law.
Although Croatian law speaks about bankruptcy proceedings, it in fact refers to “insolvency” proceedings because bankruptcy proceedings according to Croatian law are not limited to liquidation of property of the bankruptcy debtor, but they in themselves contain possibilities of financial reorganization. The concept of “bankruptcy proceedings” in the recognition of foreign proceedings should be interpreted functionally, and the basis for such interpretation has already been given by Croatian law in Art.311, para.1, no.1 and Art. 335 BA. In principle, Croatian law provides for traditional liquidation proceedings, compulsory settlement proceedings, but also various reorganizational or bankruptcy proceedings. Unfortunately, Croatian law does not mention the possibility of recognizing decisions from the so-called previous proceedings.
Indirect international jurisdiction in Croatian law derives from provisions on direct international jurisdiction (Art. 311, para. 1, item 1 of the BA). The criterion for determination of international jurisdiction for instituting main bankruptcy/insolvency proceedings is “the centre of business activity” of the debtor (Art. 301, para. 1 BA). This primarily refers to the place, i.e. country in which business activities of the debtor take place and in which the largest part of his property is, and consequently, as a rule, the largest number of his creditors.The fact where the administration and management of the activities of the debtor take place is not of crucial importance by itself. Namely, the term “business activity” is broader than the term “administrative activity”. The term “centre of main interest” of the debtor in the EU Regulation on insolvency proceedings (Art. 3, para. 1, EU Reg. Ins.) and in the UNCITRAL Model Law on cross-border insolvency (Art. 2, para. b) ML) should be interpreted in the same way, as well as the term “Mittelpunkt einer selbständigen wirtschaftlichen Tätigkeit” of the debtor in German law (Art. 3, para. 1, line 2 InsO). The criterion for determination of international jurisdiction for instituting special (particular or secondary) bankruptcy/insolvency proceedings is primarily a domestic “business unit without the character of legal person” or in other words, the domestic branch of the debtor (Art. 302, para. 1 BA). But, exceptionally, in cases precisely provided by the law, international jurisdiction for instituting special bankruptcy/insolvency proceedings is also possible on the grounds of the debtor’s property itself, if it is necessary for the fulfillment of additional, protective, supportive or auxiliary function of special bankruptcy/insolvency proceedings (Art. 302, para. 2 BA).
The foreign decision on instituting bankruptcy/insolvency proceedings must also be enforceable according to the law of the country in which it has been made (Art. 311, para. 1, item 2 BA), which stems from the nature of recognition itself. It does not need to be final (Art. 311, para. 3 BA).
In addition, recognition of the foreign decision on instituting bankruptcy/insolvency proceedings must not be in collision with the ordre public of the Republic of Croatia (Art. 311, para. 1, item 3 and para. 3 BA). But the application of the ordre public clause must be restrained and reduced to the utmost necessity.
Croatian law does not provide for reciprocity as a presumption for recognition of the foreign decision on instituting bankruptcy/insolvency proceedings, and thus in this respect it is also in compliance with contemporary tendencies in international insolvency law.
Due to significant deficiencies and possible legal problems caused by the system of automatic (ex lege) recognition of foreign decisions on instituting insolvency proceedings, the Croatian legislator has decided on the solution according to which presumptions for recognition of foreign decisions on instituting bankruptcy/insolvency proceedings are as a rule examined in special formal proceedings. The Croatian legislator has regulated these proceedings relatively in detail (Articles 308-317 BA), taking especially into account the need for speed and efficiency of the process. In order to prevent misuse on the part of the debtor and some of his creditors, special provisions ensure the protection of the debtor’s domestic property in the period between the day of instituting foreign bankruptcy/insolvency proceedings and the day of submission of application for its recognition in Croatia, and during the course of recognition proceedings (Articles 312, 320-323 BA). However, for the situations in which there would not be many creditors and plenty of the debtor’s property in Croatia, and in which the conduct of special recognition proceedings would be economically unjustifiable, the legislator has still provided for the possibility of incidental recognition of the foreign decision on instituting bankruptcy/insolvency proceedings, but only with the effect in the proceedings in which this foreign decision has been recognized (Art. 317 BA).
Keywords
bankruptcy/insolvency proceedings; foreign decision on instituting bankruptcy/insolvency proceedings; main bankruptcy/insolvency proceedings; special bankruptcy/insolvency proceedings; presumptions for recognition of the foreign decision on instituting ba
Hrčak ID:
5122
URI
Publication date:
20.4.2006.
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