Both the First Energy Solutions and PG&E bankruptcies have seen proceedings regarding power purchase and similar agreements (PPAs) that raise this question.

Background

Contracts often contain provisions that enable a party to terminate or modify the contract based on the other party's bankruptcy filing, insolvency or deteriorating financial condition. In general, the Bankruptcy Code renders these types of provisions (sometimes referred to as "ipso facto" clauses) ineffective. Specifically, under section 365(e)(1) of the Bankruptcy Code (emphasis added):

After months of speculation, it is now official : PG&E (both the parent, PG&E Corporation, and its subsidiary, Pacific Gas & Electric Company), having faced extraordinary challenges relating to catastrophic wildfires in 2017 and 2018, has announced that a voluntary bankruptcy filing “is appropriate, necessary and in the best interests of all stakeholders, including wildfire claimants, PG&E’s other creditors and shareholders, and is ultimately the only viable option to restore PG&E’s financial stability to fund ongoing operations and provide safe service to customers.” As

Merit Management Group, LP v. FTI Consulting, Inc., No. 16-784 (2018)

Judgment of the Supreme Court, Chamber One, Number 134/2016, 04 March

Supreme Court Judgment dated 10 March 2016 (STS 151/2016)

The judgment of the Supreme Court analyses the objective scope of extension of the liability for obligations and debts for which, as appropriate, the director of a company should be liable and, more specifically, the scope of "the corporate obligations subsequent to the occurrence of the legal ground for dissolution".

A ruling by the Supreme Court in Spain says Spanish banks that held deposits for property that was never built are to be held to account. Around 100,000 people in the UK are thought to have paid big sums towards such properties in Spain but these were lost when several developers went bust in the wake of 2008’s financial crisis. Estimates for how much British buyers could claim are around £4bn.

The Provincial Court of Zaragoza has ruled on an appeal lodged by the General Treasury of Social Security against a Mercantile Court decision approving a liquidation plan that considered the transfer of the insolvent company as a productive unit and exonerated the buyer from social security debts.

The legal issue to consider was whether the magistrate of the Mercantile Court had the power to declare the buyer of an insolvent company exempt from paying the social security debts acquired prior to said transfer, as it did.

ECJ, Sixth Chamber, Judgment of 28 January 2015.

The judgment resolves the prejudicial question submitted by a Mercantile Court concerning the maintenance of workers’ rights in the event of the transfer of companies or part of them, and branches of business.

One of the blocks of Royal Decree-Law 1/2015, dated 27 February (hereinafter, the “RDL”) envisages the implementation of urgent measures  to reduce the financial burden, introducing amendments mainly in the Insolvency Act, in Royal Decree-Law 6/2012, dated 9 March, concerning urgent measures to protect mortgage debtors without resources, and in Law 1/2013, dated 14 May, concerning measures to strengthen the protection of mortgage debtors, the restructuring of debt and low-income lease.

The Royal Decree-Law 1/2015 dated February 27, 2015 (the “RDL”) seeks to implement urgent measures to, among other things, reduce individual debtors’ financial burden.