We summarise the background and outcomes of Case C-73/20 – Oeltrans, an important ruling for liquidators faced with the avoidance of a third party payment and a conflict of laws.

The facts

The UK's withdrawal from the European Union has created uncertainty around insolvency law. Let's look at how things have changed in the wake of Brexit, and what that means for current and future German insolvency proceedings.

What is the state of play post-transition period?

According to German law, managing directors of limited liability companies are personally liable for payments made despite insolvency. Directors may even be liable when third parties make payments to the insolvent company's current account that has a negative balance because such payment will constitute a payment by the insolvent company to the bank

The economic fallout from the COVID-19 pandemic will leave in its wake a significant increase in commercial chapter 11 filings. Many of these cases will feature extensive litigation involving breach of contract claims, business interruption insurance disputes, and common law causes of action based on novel interpretations of long-standing legal doctrines such as force majeure.

U.S. Bankruptcy Judge Dennis Montali recently ruled in the Chapter 11 case of Pacific Gas & Electric (“PG&E”) that the Federal Energy Regulatory Commission (“FERC”) has no jurisdiction to interfere with the ability of a bankrupt power utility company to reject power purchase agreements (“PPAs”).

Background

According to German law, managing directors of limited liability companies are personally liable for payments that have been made despite insolvency. This can lead to widespread liability.

The Supreme Court this week resolved a long-standing open issue regarding the treatment of trademark license rights in bankruptcy proceedings. The Court ruled in favor of Mission Products, a licensee under a trademark license agreement that had been rejected in the chapter 11 case of Tempnology, the debtor-licensor, determining that the rejection constituted a breach of the agreement but did not rescind it.

Few issues in bankruptcy create as much contention as disputes regarding the right of setoff. This was recently highlighted by a decision in the chapter 11 case of Orexigen Therapeutics in the District of Delaware.

The judicial power of the United States is vested in courts created under Article III of the Constitution. However, Congress created the current bankruptcy court system over 40 years ago pursuant to Article I of the Constitution rather than under Article III.

Southeastern Grocers (operator of the Winn-Dixie, Bi Lo and Harvey’s supermarket chains) recently completed a successful restructuring of its balance sheet through a “prepackaged” chapter 11 case in the District of Delaware. As part of the deal with the holders of its unsecured bonds, the company agreed that under the plan of reorganization it would pay in cash the fees and expenses of the trustee for the indenture under which the unsecured bonds were issued.