CELEX: 62015CJ0195
Reference for a preliminary ruling
Area of freedom, security and justice
Judicial cooperation in civil matters
Insolvency proceedings
Regulation (EC) No 1346/2000
Article 5
Notion de ‘third parties’ rights in rem’
Public charge against immovable property to ensure payment of real property tax

This request for a preliminary ruling concerns the interpretation of Article 5 of Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings (
OJ 2000 L 160, p. 1
).
The request has been made in proceedings between SCI Senior Home, in administration, represented by Mr Pierre Mulhaupt acting as court appointed administrator, and Gemeinde Wedemark (Wedemark local authority, Germany) and Hannoversche Volksbank eG, concerning the compulsory sale of a property owned by Senior Home.
Legal context
EU law
Recitals 24 and 25 of Regulation No 1346/2000 state:
‘(24)
Automatic recognition of insolvency proceedings to which the law of the opening State normally applies may interfere with the rules under which transactions are carried out in other Member States. To protect legitimate expectations and the certainty of transactions in Member States other than that in which proceedings are opened, provisions should be made for a number of exceptions to the general rule.
(25)
There is a particular need for a special reference diverging from the law of the opening State in the case of rights
in rem
, since these are of considerable importance for the granting of credit. The basis, validity and extent of such a right
in rem
should therefore normally be determined according to the
lex situs
and not be affected by the opening of insolvency proceedings. The proprietor of the right
in rem
should therefore be able to continue to assert his right to segregation or separate settlement of the collateral security. Where assets are subject to rights
in rem
under the
lex situs
in one Member State but the main proceedings are being carried out in another Member State, the liquidator in the main proceedings should be able to request the opening of secondary proceedings in the jurisdiction where the rights
in rem
arise if the debtor has an establishment there. If a secondary proceeding is not opened, the surplus on sale of the asset covered by rights
in rem
must be paid to the liquidator in the main proceedings.’
Article 4 of Regulation No 1346/2000, headed ‘Law applicable’, provides:
‘1.   Save as otherwise provided in this Regulation, the law applicable to insolvency proceedings and their effects shall be that of the Member State within the territory of which such proceedings are opened, hereafter referred to as the “State of the opening of proceedings”.
2.   The law of the State of the opening of proceedings shall determine the conditions for the opening of those proceedings, their conduct and their closure. It shall determine in particular:
...
(f)
the effects of the insolvency proceedings on proceedings brought by individual creditors, with the exception of lawsuits pending;
...
(i)
the rules governing the distribution of proceeds from the realisation of assets, the ranking of claims and the rights of creditors who have obtained partial satisfaction after the opening of insolvency proceedings by virtue of a right
in rem
or through a set-off;
...’
Article 5 of Regulation No 1346/2000, entitled ‘Third parties’ rights
in rem
’, provides:
‘1.   The opening of insolvency proceedings shall not affect the rights
in rem
of creditors or third parties in respect of tangible or intangible, movable or immovable assets — both specific assets and collections of indefinite assets as a whole which change from time to time — belonging to the debtor which are situated within the territory of another Member State at the time of the opening of proceedings.
2.   The rights referred to in paragraph 1 shall, in particular, mean:
(a)
the right to dispose of assets or have them disposed of and to obtain satisfaction from the proceeds of or income from those assets, in particular by virtue of a lien or a mortgage;
(b)
the exclusive right to have a claim met, in particular a right guaranteed by a lien in respect of the claim or by assignment of the claim by way of a guarantee;
(c)
the right to demand the assets from, and/or to require restitution by, anyone having possession or use of them contrary to the wishes of the party so entitled;
(d)
a right
in rem
to the beneficial use of assets.
3.   The right, recorded in a public register and enforceable against third parties, under which a right
in rem
within the meaning of paragraph 1 may be obtained, shall be considered a right
in rem
.
...’
Under Article 39 of Regulation No 1346/2000, entitled ‘Right to lodge claims’:
‘Any creditor who has his habitual residence, domicile or registered office in a Member State other than the State of the opening of proceedings, including the tax authorities and social security authorities of Member States, shall have the right to lodge claims in the insolvency proceedings in writing.’
German law
Paragraph 12 of Grundsteuergesetz (Law on real property tax, ‘GrStG’), entitled ‘Security
in rem
’ is worded as follows:
‘The real property tax is a public charge on the taxable property.’
The first sentence of Paragraph 77(2) of the Abgabenordnung (Tax Code, ‘AO’) provides:
‘The owner of real property shall accept enforcement against the property of a tax that is a public charge on real property.’
Paragraph 10(1) of Zwangsversteigerungsgesetz (Law on compulsory sale by public auction) provides that:
‘A right to satisfaction of the debt out of the proceeds of sale of the real property is granted according to the following order of priority:
…
3.
claims to payment of public charges on the real property for amounts outstanding from the last four years; recurring payments, in particular real property tax, interest, supplements or payments on regularly recurring dates enjoy this right to a prior claim only in respect of current amounts and arrears from the last two years.
…’
The facts in the main proceedings and the question referred for a preliminary ruling
Senior Home, a real estate company under French law, is the owner of real property located in Wedemark (Germany). By decision of 6 May 2013, it was put into court-supervised administration by the tribunal de grande instance de Mulhouse (Regional Court, Mulhouse, France).
On 15 May 2013 the Wedemark local authority applied for the compulsory sale of that property by public auction in order to recover arrears of real property tax for the period from 1 October 2012 to 30 June 2013 in the sum of EUR 7471.19, certifying that it was an enforceable tax debt.
By decision of 21 May 2013, the Amtsgericht Burgwedel (District Court, Burgwedel, Germany) ordered the compulsory sale of that property. The action brought against that decision by Senior Home was dismissed. After its appeal before the Landgericht Hannover (Regional Court, Hannover, Germany) was dismissed, Senior Home, represented by Mr Mulhaupt acting as court-appointed administrator, brought an action before the Bundesgerichtshof (Federal Court of Justice, Germany) for an order, first, that the decision of the Amtsgericht Burgwedel (District Court, Burgwedel, Germany) ordering the compulsory sale by auction of the property be set aside and, secondly, that the entry relating to that sale be removed from the land register.
The referring court states that, in accordance with Article 4 of Regulation No 1346/2000, the insolvency proceedings brought against Senior Home are governed by French law. Under French law, the opening of the court-supervised administration procedure essentially precludes the compulsory sale at issue in the main proceedings. On the other hand, under Article 5(1) of Regulation No 1346/2000, the opening of insolvency proceedings does not affect the rights
in rem
of creditors or third parties in respect of assets belonging to a debtor which are situated within the territory of another Member State.
The referring court observes that, under German law, debts due in respect of real property taxes are, in accordance with Paragraph 12 of the GrStG, public charges on real property which are rights
in rem
, and the owner of the encumbered real property must accept enforcement of the instrument recording those debts against that property, pursuant to the first sentence of Paragraph 77(2) of the AO. However, that court is unsure whether the issue of the existence or otherwise of a right
in rem
, for the purposes of applying Article 5(1) of that regulation, must be assessed in accordance with German law, or whether, on the contrary, the notion of a ‘right
in rem
’ should be interpreted independently.
In those circumstances, the Bundesgerichtshof (Federal Court of Justice) stayed the proceedings and referred the following question to the Court for a preliminary ruling:
‘Does the term “right
in rem
” in Article 5(1) of Regulation No 1346/2000 include a national rule such as that contained in Paragraph 12 of the [GrStG] in conjunction with the first sentence of Paragraph 77(2) of the [AO], pursuant to which real property tax debts are by operation of law a public charge on real property, and the property owner must accept enforcement against the property in that respect?’
The question referred for a preliminary ruling
By its question, the referring court asks, in essence, whether Article 5 of Regulation No 1346/2000 must be interpreted to the effect that security created by virtue of a provision of national law, such as that at issue in the main proceedings, by which the real property of a person owing real property taxes is, by operation of law, to be subject to a public charge and that property owner must accept enforcement, against that property, of the instrument recording that tax debt, constitutes a ‘right
in rem
’ for the purposes of that article.
In that regard, it must be recalled, in the first place, that that regulation, as the Advocate General explained in points 21 to 23 of his Opinion, is based on a so-called ‘attenuated universality’ model, according to which, first, the law applicable to the main insolvency proceedings and its effects is that of the Member State within the territory of which those proceedings were opened, albeit that, secondly, that regulation lays down a number of exceptions to that rule. Article 5(1) of that regulation lays down one of those exceptions.
More specifically, as regards Article 5(1) of Regulation No 1346/2000, which stipulates that the opening of insolvency proceedings has no effect on the right
in rem
of a creditor or a third party over the debtor’s assets which are located at the time the proceedings were opened in the territory of another Member State, it is clear from the case-law of the Court that the basis, validity and extent of such a right
in rem
must normally be determined according to the law of the place where the asset concerned is situated. As a consequence, Article 5(1) of that regulation, by derogating from the rule of the law of the Member State of the opening of the proceedings, allows the law of the Member State on whose territory the asset concerned is situated to be applied to the right
in rem
of a creditor or a third party in respect of certain assets belonging to the debtor (see, to that effect, judgments of 5 July 2012, ERSTE Bank Hungary,
C‑527/10
,
EU:C:2012:417
, paragraphs
to
, and of 16 April 2015, Lutz,
C‑557/13
,
EU:C:2015:227
, paragraph
).
Consequently, as regards the case in the main proceedings, the issue of the qualification of the right concerned as a right ‘
in rem
’ for the purposes of applying Article 5(1) of that regulation is to be examined having regard to national law, in the present case German law.
In that respect, it is clear from the decision to refer that the charges at issue in the main proceedings are rights which may be enforced
in rem
, since the owner of the encumbered property must accept enforcement of the instrument recording that tax debt against that property. In any event, it is a matter for the referring court to find and assess the facts in the case before it and to interpret and apply national law (judgment of 8 June 2016, Hünnebeck,
C‑479/14
,
EU:C:2016:412
, paragraph
) in order to determine whether the real property tax debt at issue in the main proceedings may be regarded as a right
in rem
under German law.
In the second place, it must be pointed out that, whilst Article 5(2) and (3) of Regulation No 1346/2000 does not define the notion of a ‘right
in rem
’, it does, however, explain, through a number of examples of rights described in that regulation as ‘
in rem
’, the scope and therefore the limits of the protection afforded by that provision to the privileges, guarantees or other rights under the national law of the Member States of the creditors of an insolvent debtor.
As the Advocate General stated, in essence, in points 43 and 44 of his Opinion, in order not to render ineffective the limitation on the scope of Article 5 of that regulation to rights ‘
in rem
’, the Court considers that the rights regarded as ‘
in rem
’ by the national legislation at issue must satisfy certain criteria in order to fall within that article.
In the present case, with regard to a right such as the one at issue in the main proceedings, it must be held that that right, without prejudice to the determination to be made by the referring court, satisfies the criteria listed in Article 5(2) of Regulation No 1346/2000, in that, first, it is a charge which directly and immediately encumbers taxed real property and, secondly, the owner of the real property must accept enforcement against that property, pursuant to the first sentence of Paragraph 77(2) of the AO. Furthermore, as the Advocate General stated in point 49 of his Opinion, during insolvency proceedings the tax authorities have the status of a preferential creditor on the basis of the charge over the property at issue in the main proceedings.
In the third place, that conclusion is not undermined by the fact, noted by the Commission in its observations, that Article 5 must be interpreted strictly, since it is an exception to the general rule laid down in Article 4 of that regulation, so that it covers only rights
in rem
granted in the context of commercial transactions.
Although in accordance with settled case-law a derogation must be interpreted strictly, it is nonetheless appropriate to ensure that the exception is not deprived of its effectiveness (see, to that effect, judgment of 13 December 2012, BLV Wohn- und Gewerbebau,
C‑395/11
,
EU:C:2012:799
, paragraph
and the case-law cited).
Furthermore, neither the wording of the provisions of Regulation No 1346/2000 nor its objectives make it possible to interpret Article 5 of that regulation to the effect that it does not cover rights
in rem
granted outside the context of a commercial transaction.
As regards the wording of the provisions at issue, it must be pointed out that Article 5 contains nothing that could limit the scope of that article on the basis of the origin of the right
in rem
concerned or the nature, whether governed by public or private law, of the debt guaranteed by that right in rem.
As regards the objectives of that provision, it is clear from recital 24 of Regulation No 1346/2000 that the exceptions to the general rule for determining the applicable law, laid down in Article 4 of that regulation, seek to ‘protect legitimate expectations and the certainty of transactions in Member States other than that in which proceedings are opened’, and, in that respect, the commercial nature of the rights or debts concerned are irrelevant.
In addition, it cannot be inferred from recital 25 of Regulation No 1346/2000, which states that there is a ‘particular’ need for a special reference diverging from the law of the opening State in the case of rights
in rem
, since these are of considerable importance for the granting of credit, that that exception covers only guarantees
in rem
in the context of commercial or credit contracts. On the contrary, it appears that a limitation on the scope of Article 5 of that regulation on the basis of the commercial origin of the right
in rem
concerned would be contrary to the objective, expressly stated in recital 24 of that regulation, of protecting legitimate expectations and the certainty of transactions.
In any event, the Court considers that an interpretation of Article 5 of Regulation No 1346/2000 to the effect that the exception which it makes provision for covers solely rights
in rem
created in the context of commercial or credit transactions would lead to unfavourable treatment of the owners of rights
in rem
granted in the context of transactions other than commercial transactions.
As the Advocate stated, in essence, in points 64 to 67 of his Opinion, Regulation No 1346/2000 is based on the principle of equal treatment of creditors and on the principle that its provisions must be applied irrespective of the nature — commercial or otherwise — of the debts guaranteed by the rights
in rem
. Thus, as regards the possibility for creditors to lodge claims in the insolvency proceedings in writing, Article 39 of that regulation excludes any discrimination by the tax authorities and the social security authorities of Member States, other than the State within the territory of which the proceedings were opened.
In those circumstances, the answer to the question referred is that Article 5 of Regulation No 1346/2000 must be interpreted to the effect that security created by virtue of a provision of national law, such as that at issue in the main proceedings, by which the real property of a person owing real property taxes is, by operation of law, to be subject to a public charge and that property owner must accept enforcement of the instrument recording that tax debt against that property, constitutes a ‘right
in rem
’ for the purposes of that article.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Fifth Chamber) hereby rules:

Article 5 of Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings must be interpreted to the effect that security created by virtue of a provision of national law, such as that at issue in the main proceedings, by which the real property of a person owing real property taxes is, by operation of law, to be subject to a public charge and that property owner must accept enforcement of the decision recording that tax debt against that property, constitutes a ‘right
in rem
’ for the purposes of that article.

[Signatures]
(
*1
)	Language of the case: German.