GERMANY Law and Practice Contributed by: Michael Josenhans, Anouschka Zagorski and Christina Banz, Freshfields
In all other cases, the foreign judgment must be both final and binding. According to Section 328 of the ZPO, a foreign judgment will be acknowledged in Ger- many if no grounds for rejection (delineated in Section 328 (1) of the ZPO) are applicable. The party seeking recognition bears the responsibility of proving that the elements required for recognition are present. 6.4 A Foreign Lender’s Ability to Enforce Its Rights A foreign lender can generally enforce its rights in the same way as a domestic lender. The German Insolvency Code ( Insolvenzordnung – InsO) contains the statutory framework for the initia- tion, process and termination of insolvency proceed- ings. The court order opening insolvency proceedings cus- tomarily imposes an automatic stay on any enforce- ment actions by unsecured creditors against the com- pany. Unsecured creditors can only enforce their rights within the legal framework of insolvency proceedings – ie, substantially filing their claims to the insolvency table with the insolvency officeholder to receive the insolvency dividend (pro rata payment). In practice, the court often imposes such a stay even prior to the formal commencement of insolvency proceedings in so-called preliminary insolvency proceedings. 7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes The InsO does not impose an automatic stay on the enforcement by third parties/certain (secured) credi- tors. Generally speaking, the following rules apply. • Third parties who can demonstrate that they have ownership (title) in an asset or similar rights in rem or other absolute rights which, therefore, are not part of the insolvency estate (segregation right, Aussonderungsrecht ) have a claim for restitution of the relevant asset – eg, suppliers with (simple) reservation of title rights ( einfacher Eigentumsvor- behalt ). • Creditors with security interests in assets forming part of the insolvency estate have a right to sepa-
rate satisfaction ( Absonderungsrecht ) – ie, they may seek preferential satisfaction of their claims from the proceeds of the liquidation of the relevant asset. The InsO provides for specific rules regard- ing the responsibility for and processing of the enforcement of such security interests. 7.2 Waterfall of Payments The proceeds realised by the insolvency officeholder (note the exceptions under 7.1 Impact of Insolvency Processes ) will generally be distributed to the credi- tors pursuant to the following waterfall: • costs of insolvency proceedings and so-called administrative claims ( Masseverbindlichkeiten ) – ie, specifically including claims arising from transac- tions executed by the insolvency officeholder after the commencement of insolvency proceedings; • unsecured claims ( Insolvenzforderungen ) pari passu; and • subordinated claims ( nachrangige Insolvenzforder- ungen ) – eg, interest accruing after the commence- ment of insolvency proceedings or claims of share- holders holding more than 10% of the registered share capital. 7.3 Length of Insolvency Process and Recoveries The sale of a company on a going-concern basis out of insolvency (asset deal) is typically consummated within three to six months. The completion of the pro- ceedings for corporate insolvencies – including any litigation, admission of claims, distribution of the insol- vency estate, etc – can take several years depending on the size of the company and/or the complexity of the matter. If the insolvent company implements an insolvency plan, the timeframe also varies from a few months to several years. The amount of insolvency dividends distributed in German insolvency proceedings varies significantly. Further, the rights of segregation and rights to sepa- rate satisfaction are usually not included in insolvency statistics in Germany. These depend on the value of the collateral in each individual case. For insolvency proceedings commenced in 2011 and concluded by the end of 2018, the average dividend of unsecured
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