LIECHTENSTEIN Law and Practice Contributed by: Bernhard Rankl, Nicolai Binkert and Alexander Appel, Schurti Partners Attorneys at Law Ltd
The rights to immunity may be, generally speaking, waived under Liechtenstein law. 6.3 Foreign Court Judgments Liechtenstein has neither entered into bilateral trea- ties nor joined multilateral treaties with other countries (except bilateral treaties with the Republic of Austria and Switzerland and a multilateral treaty limited to the subject matter of child support) regarding the mutual acknowledgement and enforcement of foreign judg- ments. Judgments of foreign courts (except Austrian and Swiss judgments and child support judgments) are, therefore, not enforceable in Liechtenstein with- out instituting summary proceedings to validate for- eign judgments. However, such summary proceed- ings will, if persistently defended by the opposing party, not avoid a full re-litigation on the merits. As a consequence, judgments of a non-Liechtenstein, non-Swiss, and non-Austrian court will not be directly enforceable against a company in Liechtenstein. However, Liechtenstein is a party to the New York Convention (the Convention on the Recognition and Enforcement of Foreign Arbitral Awards), and arbitral awards from foreign arbitral tribunals are therefore rec- ognised and enforceable in Liechtenstein in accord- ance with the terms and conditions of this convention. 6.4 A Foreign Lender’s Ability to Enforce Its Rights When it comes to security interests in real estate located in Liechtenstein, according to the Liechten- stein Real Estate Transfer Act ( Grundverkehrsgesetz ), the transfer of ownership and similar rights requires a legitimate interest of the acquirer in obtaining the property. The transfer of property must also be approved in advance by the Office of Justice ( Amt für Justiz ). Without such approval, the underlying contract is null and void by law. As the declared goal of the Liechtenstein Land Transfer Act is to ensure that the land remains with the local people and businesses (which is reflected in the catalogue of legitimate inter- est), the market as well as the pool of potential, eligible acquirers in an enforcement scenario is limited. In the context of regulated companies (eg, banks, investment companies, insurance companies), any intended disposal of shares in such companies
(therefore also the enforcement of security interests) exceeding certain thresholds have to be notified to and approved by the Liechtenstein FMA.
7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes
With the commencement of insolvency proceedings, the debtor is deprived of its control over the insol- vency estate, the insolvency administrator takes over the day-to-day management of the company, and all outstanding obligations of such debtor become due. This means that any loan granted to such company becomes due and payable by operation of law without the need for acceleration or termination of the loan agreement. Further, any power of attorney granted to a lender (eg, voting proxies, powers of attorney to facilitate the enforcement of collateral) will auto- matically lapse upon the opening of the insolvency proceedings. In relation to assets that are subject to in rem rights of the lender, Liechtenstein insolvency law foresees a right of separation ( Absonderungsrecht ). With such a separation right, the lender is not entitled to the asset itself, but rather to preferential treatment in relation to the proceeds from the sale of that asset. The asset is sold by the insolvency administrator and the proceeds are handed over to the lender up to the amount of the secured claim. Any excess amount is returned to the insolvency estate. This applies to in rem rights where the full title is transferred to the lender (eg, security assignments) as well as collateral granting a limited in rem right (eg, pledges). Rights in personam (eg, guarantees, sureties and oth- er joint liabilities) are not “insolvency proof” and do not benefit from any preferential treatment, meaning that creditors with security in personam rank pari passu with the other unsecured creditors of the debtor. As an EEA member state, Liechtenstein has trans- posed the EU Financial Collateral Directive (2002/47/ EC) into national law, ensuring that close-out net- ting agreements, when linked to financial collateral arrangements, remain effective even in the event of insolvency proceedings. This means that financial col-
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