The jurisdiction over the avoidance actions against foreign subjects

Written by Morena Pirollo

An interesting question is whether Italian Courts have jurisdiction over the avoidance action brought by the official receiver of an Italian insolvency procedure against a subject who has no residence, dwelling place or domicile within the territory of the Republic of Italy and has not appointed any procurator pursuant to art. 77 of the Italian Civil Procedure Code.

In the Italian system, Law no. 218 of May 31, 1995 provides rules of international private law, determining  the area of Italian jurisdiction and setting the criteria to identify the law applicable to the relationships which have aspects of non-involvement in the Italian System.

Pursuant to article 3, paragraph 2, of Law no. 218 of 1995:

The jurisdiction [of the Italian Judge] also exists pursuant to the criteria established by Sections 2, 3 and 4 of Title II of the Convention on jurisdiction and enforcement of judgments in civil and commercial matters and protocol, signed in Brussels on 27 September 1968 as implemented by the law of 21 June 1971 n. 804 and subsequent modifications and additions in force for Italy, even when the defendant is not domiciled in a Contracting State, with regards to one of the matters included in the scope of application of the Convention. Respect to the other matters the jurisdiction exists also pursuant to the criteria established for venue, determined having regard to the territory“.

For this purpose, the Convention of Brussels excludes from its scope of application “bankruptcy proceedings, composition with creditors and the other similar procedures“.

This formulation was interpreted extensively by Italian case law, who affirms that it concerns also the actions arising from a bankruptcy proceeding, as the claw-back action (See Court of Cassation, decision no. 1369/1990; Court of Turin, decision of May 13, 1989, in Fall. 1990, o. 52; Court of Milan, decision of January 30, 1989, in Fall. 1989, 1132; Court of Milan, decision of July 22, 1996).

Therefore, with reference to the insolvency proceedings (and to the actions arising from it), the jurisdiction of the Italian Judge shall be determined according to the criteria established for the venue, having regard to the territory (and so, by articles 20 of the Italian Civil Procedure Code and, in the case of an ordinary bankruptcy procedure, 24 of Italian Bankruptcy Law).

In particular, with specific reference to the avoidance action, the venue shall be determined having regard to the place where the company has been declared bankrupt; therefore, the jurisdiction is exercised by the Judge who declared the bankruptcy of the company, both pursuant to art. 20 of Italian Civil Procedure Code (“In actions concerning rights deriving from obligations, the judge of the place where the obligation under dispute has been undertaken or should be fulfilled shall also be the proper venue”) and to art. 24 of Italian Bankruptcy Law, which gives the judge the venue for deciding all the cases arising from the bankruptcy (“The court that declared the bankruptcy has jurisdiction over all the actions arising from it, irrespective of their value“).

In other words, Italian courts deem to have jurisdiction with respect to all and any claw-back action where the bankruptcy proceeding is an Italian one.

The jurisdiction of the Italian Courts over a claw-back proceeding introduced by the official receiver of an Italian bankruptcy procedure against a foreign subject has been affirmed by the Court of Cassation, inter alia, in the following decisions:

  • Court of Cassation sitting en banc, decision no. 10954 of December 9, 1996;
  • Court of Cassation sitting en banc, decision no. 584 of August 10, 1999;
  • Court of Cassation sitting en banc, decision no. 8745 of June 26, 2001;
  • Court of Cassation sitting en banc, decision no. 17912 of December 13, 2002;
  • Court of Cassation, decision no. 17706 of August 4, 2006;
  • Court of Cassation sitting en banc, decision no. 2692 of February 7, 2007.

The above mentioned interpretation is shared also by prevailing scholars (See CATALOZZI, Giurisdizione e legge applicabile nelle revocatorie fallimentari transnazionali, in Fall. 2007, 6, 629; A. LUPONE, L’insolvenza transnazionale, Padova, 1995, 207 ss.; R. LUZZATTO, Art. 3, in Commentario del nuovo diritto internazionale italiano, Padova 1996, 31; M. FABIANI, La comunitarizzazione della revocatoria transnazionale come tentativo di abbandono dei criteri di collegamento fondati sull’approccio dogmatico, in Fall., 2004, 375; RAGO, Manuale della revocatoria fallimentare, Padova 2007, 318).

A problematic question may arise, with regard to jurisdiction, when the contract subject to revocation provides a foreign jurisdiction clause.          .

In said case, the Italian Court of Cassation repeatedly confirmed that such a clause may not be invoked against the trustee in bankruptcy when he brings an action typically connected to the essence of the bankruptcy proceeding, having application the art. 24 of Italian Bankruptcy Law, pursuant to Law no. 218/1995.

Picture Copyright: <a href=’http://www.123rf.com/profile_olegdudko’>olegdudko / 123RF Stock Photo</a>

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