Civil Law And Cross-Border Insolvency Asset Tracing Claims In Europe

1. Introduction

Cross-border insolvency asset tracing claims arise when assets belonging to an insolvent debtor are located, transferred, concealed, or dissipated across different European jurisdictions and an insolvency practitioner, creditor, trustee, or liquidator attempts to identify, recover, freeze, or realise those assets.

Typical situations include:

a company transferring money to another EU Member State before insolvency;

assets being placed in a foreign subsidiary;

property being transferred to related companies;

bank accounts being maintained abroad;

fraudulent payments made shortly before insolvency;

assets being moved through several jurisdictions;

transactions designed to prejudice creditors;

a debtor transferring its registered office shortly before insolvency;

beneficial ownership being concealed behind corporate structures; and

insolvency assets being mixed with third-party property.

The central legal problem is:

Which insolvency estate has the right to the asset, which court has jurisdiction, which law governs the transaction, and how can the asset be recovered across borders?

EU insolvency law attempts to solve this through jurisdiction, recognition, cooperation, applicable-law rules and cross-border enforcement. The CJEU has repeatedly emphasised the importance of the debtor's centre of main interests (COMI) and mutual recognition between Member States. (InfoCuria)

2. Meaning of Asset Tracing in Insolvency

Asset tracing is the process of determining:

What assets existed?

Who legally owned them?

Where are they now?

Were they transferred?

Who received them?

Was the transfer legitimate?

Can the transaction be reversed?

Which insolvency estate is entitled to recover the asset?

Example

Suppose:

German Company A

↓ transfers €10 million

Dutch Subsidiary B

↓ transfers €7 million

Luxembourg investment account

↓ transfers funds

Swiss bank account

A liquidator may need to trace the entire chain.

The claim may involve:

insolvency law;

corporate law;

property law;

restitution;

unjust enrichment;

fraudulent-transfer rules;

banking law;

private international law.

3. Why Cross-Border Insolvency Asset Tracing Is Difficult

Asset tracing becomes complicated because the relevant elements may be located in different countries.

Therefore, several legal questions arise simultaneously.

Main questions

Jurisdiction → Applicable law → Recognition → Evidence → Asset identification → Recovery → Enforcement

4. EU Insolvency Framework

The principal modern EU framework is Regulation (EU) 2015/848 on insolvency proceedings.

Its central concepts include:

main insolvency proceedings;

secondary proceedings;

COMI;

establishment;

recognition of insolvency proceedings;

recognition of insolvency practitioners;

applicable law;

cooperation between courts and insolvency practitioners.

The system is designed around mutual trust and recognition.

5. Main Insolvency Proceedings

The court of the Member State where the debtor's centre of main interests is located generally has jurisdiction to open main insolvency proceedings.

The main proceeding is intended to have broad effects across participating Member States.

The CJEU has explained that main insolvency proceedings have universal effects over assets within the territorial scope of the EU insolvency regime, subject to the Regulation's rules concerning secondary proceedings and particular categories of assets. (InfoCuria)

This is crucial for asset tracing because a liquidator does not necessarily have to start a completely separate insolvency proceeding in every country where assets are discovered.

6. Centre of Main Interests — COMI

COMI is one of the most important concepts.

For a company, there is generally a presumption that its registered office is its COMI.

However, that presumption can be rebutted where objective and ascertainable circumstances show that the company's actual administration of interests is elsewhere.

The CJEU emphasises that COMI must be assessed using objective factors that are ascertainable by third parties, particularly creditors. (curia)

7. Case 1 — Eurofood IFSC Ltd

Case C-341/04, Eurofood IFSC Ltd v Bondi

CJEU, 2 May 2006

This is one of the foundational European insolvency cases.

Eurofood was an Irish company and a subsidiary of the Parmalat group.

The dispute concerned whether insolvency proceedings should be opened in:

Ireland; or

Italy.

The CJEU held that the registered office creates an important presumption concerning COMI, and that this presumption can only be displaced by objective factors ascertainable by third parties.

The Court also emphasised mutual recognition of insolvency proceedings between Member States. (InfoCuria)

Importance for asset tracing

Eurofood establishes the foundation for determining:

which Member State controls the main insolvency;

which insolvency practitioner has authority;

which court has jurisdiction;

whether another Member State should recognise the proceeding.

Principle

Determine COMI first; then determine the principal insolvency jurisdiction and cross-border authority.

8. Case 2 — Interedil Srl

Case C-396/09, Interedil Srl v Fallimento Interedil Srl

CJEU, 20 October 2011

Interedil concerned the determination of COMI and the transfer of a company's registered office.

The CJEU examined whether a registered office in one Member State necessarily established jurisdiction when the company's actual economic activity and administration were located elsewhere.

The Court reinforced the importance of objective and ascertainable circumstances when determining COMI. It also considered the concept of an establishment, which is relevant to secondary proceedings. (InfoCuria)

Importance

For asset tracing, Interedil matters where a debtor has:

moved its registered office;

maintained property abroad;

operated through foreign establishments;

attempted to restructure its European presence shortly before insolvency.

Principle

A formal registered office does not necessarily tell the complete story of where insolvency should be administered.

9. Case 3 — Schmid v Hertel

Case C-328/12, Schmid v Hertel

CJEU, 16 January 2014

This case concerned an action brought by a German insolvency liquidator against a defendant residing in a third country.

The question was whether the insolvency court of the Member State where the debtor had its COMI could exercise jurisdiction over an insolvency-related avoidance action against that foreign defendant.

The CJEU recognised the jurisdictional connection between the insolvency proceedings and actions closely connected with those proceedings. (InfoCuria)

Importance for asset tracing

This is particularly relevant when:

the debtor's assets have moved outside the EU;

the recipient of a transaction is located in another country;

a liquidator needs to challenge a transaction;

the defendant is not located in the insolvency forum.

Principle

Insolvency-related avoidance litigation can remain closely connected to the court administering the insolvency, even when the defendant is outside the EU framework.

10. Case 4 — Vinyls Italia

Case C-54/16, Vinyls Italia SpA v Mediterranea di Navigazione SpA

CJEU, 8 June 2017

Vinyls Italia concerned transactions potentially detrimental to creditors and the relationship between:

the law governing the transaction; and

the law governing insolvency avoidance.

The case involved a transaction governed by Italian law but occurring in the context of insolvency proceedings.

The CJEU interpreted the rules concerning acts detrimental to creditors and the circumstances in which a transaction could be challenged under the insolvency law of the opening State despite another Member State's law being relevant to the transaction. (InfoCuria)

Importance for asset tracing

Suppose a debtor transfers an asset shortly before insolvency.

The liquidator must ask:

Was the transaction valid under the ordinary contract law?

and separately:

Can the transaction nevertheless be challenged because it prejudiced the insolvency estate?

Vinyls Italia demonstrates why these questions must be analysed separately.

11. Case 5 — MG Probud

Case C-444/07, MG Probud Gdynia

CJEU, 21 January 2010

MG Probud concerned Polish insolvency proceedings and their effects in another Member State.

The CJEU reaffirmed the significance of the main insolvency proceeding and the powers of the insolvency practitioner in other Member States.

The main proceedings produce universal effects across participating Member States, subject to the Regulation's limitations. (InfoCuria)

Importance

For asset tracing, this means that the insolvency practitioner may not have to treat foreign EU assets as completely outside the insolvency estate merely because they are physically located abroad.

Principle

Physical location of an asset in another Member State does not automatically place that asset outside the reach of the main insolvency proceedings.

12. Case 6 — Seagon v Deko Marty Belgium

Case C-339/07, Seagon v Deko Marty Belgium NV

CJEU, 12 February 2009

This is a major case concerning insolvency-related avoidance actions.

The issue was whether the court opening insolvency proceedings also had jurisdiction over an avoidance action brought by the insolvency administrator against a defendant domiciled in another Member State.

The CJEU held that actions deriving directly from insolvency proceedings and closely connected with them fall within the insolvency jurisdiction framework.

Importance for asset tracing

This is highly relevant where a liquidator discovers:

suspicious transfers;

preferential payments;

undervalue transactions;

transfers to related companies;

pre-insolvency asset movements.

The insolvency practitioner may need to bring an action to recover those assets.

Principle

Avoidance actions closely connected with insolvency are part of the insolvency framework rather than ordinary commercial litigation.

13. Case 7 — Staubitz-Schreiber

Case C-1/04, Staubitz-Schreiber

CJEU, 17 January 2006

The debtor moved her centre of interests after an application for insolvency proceedings had already been made.

The CJEU held that jurisdiction should not simply shift because the debtor moves after the insolvency process has been initiated.

Importance for asset tracing

This prevents strategic jurisdictional manipulation.

Without such a rule, a debtor might attempt:

Insolvency application

↓

Move residence/office

↓

Move assets

↓

Attempt to change jurisdiction

The European insolvency system seeks to prevent such manipulation.

14. Case 8 — Rastelli Davide and C.

Case C-191/10, Rastelli Davide e C. Snc

CJEU, 15 December 2011

The case concerned insolvency proceedings involving a company and an individual connected with that company.

The CJEU stressed that insolvency jurisdiction must be based upon the Regulation's specific connecting factors rather than simply extending insolvency proceedings to another person because of a commercial or corporate relationship.

Importance

Asset tracing often involves:

directors;

shareholders;

parent companies;

subsidiaries;

associated persons.

A liquidator cannot automatically treat every connected person as part of the same insolvency estate.

There must be a proper legal basis for extending proceedings or bringing claims.

15. What Is an Insolvency Asset-Tracing Claim?

An asset-tracing claim can generally involve several different legal causes of action.

A. Recovery of property

The claimant says:

“This asset belongs to the insolvency estate.”

B. Avoidance

The claimant says:

“This transaction should be set aside because it prejudiced creditors.”

C. Restitution

The claimant says:

“The recipient must return what it improperly received.”

D. Unjust enrichment

The claimant says:

“The recipient has been enriched at the expense of the estate without sufficient legal justification.”

E. Fraudulent transfer

The claimant alleges that the transaction was designed to defeat creditors.

16. Asset Tracing Through Corporate Structures

A particularly difficult situation occurs when the debtor uses several companies.

Example:

Parent Company

↓

Subsidiary A

↓

Subsidiary B

↓

Foreign SPV

↓

Foreign bank account

The liquidator must determine whether:

the asset belongs to the debtor;

the asset belongs to another legal entity;

the transaction was genuine;

the subsidiary is separate;

the transaction can be avoided;

the corporate structure was used to conceal assets.

Important principle

Separate legal personality cannot simply be ignored because companies belong to the same group.

Eurofood is particularly important because the CJEU treated separate corporate entities as distinct debtors for the purposes of determining insolvency jurisdiction. (curia)

17. Beneficial Ownership

Tracing may become harder where the registered owner is not the economic beneficiary.

For example:

Company A → nominee → trust → investment vehicle → ultimate owner

A liquidator may need to establish:

legal ownership;

beneficial ownership;

control;

source of funds;

destination of funds.

This may require evidence from several jurisdictions.

18. Bank Accounts

Foreign bank accounts are common targets of insolvency asset tracing.

A liquidator may seek:

account statements;

transaction records;

payment instructions;

beneficial-owner information;

evidence of transfers;

freezing measures;

recovery orders.

The legal procedure depends on the jurisdiction and applicable EU instruments.

19. Asset Tracing and Avoidance

A suspicious transaction shortly before insolvency may be challenged.

Common examples include:

Preferential payment

One creditor receives unusual payment shortly before insolvency.

Transaction at undervalue

An asset worth €10 million is sold for €2 million.

Related-party transfer

A debtor transfers property to a director's family company.

Fraudulent transfer

Assets are transferred specifically to prevent creditors from recovering them.

20. Applicable Law

A major issue is determining which law governs the transaction.

Consider:

French debtor

↓

sells property

↓

to Italian company

↓

under German contract law

↓

before insolvency in France.

The court may have to distinguish:

law governing the insolvency;

law governing the contract;

law governing property rights;

law governing avoidance;

law governing third-party rights.

Vinyls Italia demonstrates the importance of this distinction. (InfoCuria)

21. Secondary Insolvency Proceedings

Where a debtor has an establishment in another Member State, secondary proceedings may potentially be opened there.

This is relevant where assets and operations exist outside the COMI State.

The EU system therefore attempts to balance:

universal insolvency administration

with

local protection of assets and creditors.

22. Recognition of Foreign Insolvency Proceedings

Mutual recognition is fundamental.

Once qualifying insolvency proceedings are opened in one Member State, other participating Member States generally recognise their effects according to the EU insolvency framework.

Eurofood emphasised the role of mutual trust and recognition between Member States. (InfoCuria)

This facilitates asset tracing because a foreign liquidator's authority does not necessarily need to be recreated from the beginning in every EU jurisdiction.

23. Evidence in Asset Tracing

A cross-border tracing claim may require:

accounting records;

bank statements;

invoices;

contracts;

corporate registers;

emails;

payment records;

tax records;

property registers;

digital-wallet records;

blockchain transactions;

beneficial ownership records.

Digital evidence

Modern insolvency tracing increasingly involves:

cryptocurrency;

electronic banking;

cloud accounting;

ERP systems;

digital invoices;

electronic communications.

24. Cryptocurrency and Digital Assets

Suppose a debtor converts:

€5 million

into:

Bitcoin → stablecoin → foreign exchange account → offshore wallet.

The liquidator may need to trace:

original source of funds;

wallet address;

exchange account;

subsequent transfers;

beneficial controller;

remaining balance.

The legal characterization of crypto-assets may vary between jurisdictions, so property law, insolvency law and financial regulation may intersect.

25. Freezing and Preservation

Asset tracing becomes ineffective if assets disappear before judgment.

Therefore, procedural law may permit measures such as:

freezing orders;

preservation orders;

interim injunctions;

seizure;

disclosure orders;

preservation of electronic evidence.

The precise remedy depends on the relevant national procedural framework and the applicable EU instruments.

26. Fraudulent Concealment

An especially serious situation occurs where the debtor deliberately hides assets.

Example:

Debtor

→ transfers property to related company

→ related company transfers it to another jurisdiction

→ second company transfers proceeds to an offshore account.

The liquidator may attempt to reconstruct the transaction chain.

The key principle is:

Tracing follows the legal and factual chain of transactions; it does not automatically create ownership where the underlying substantive law does not provide it.

27. Third-Party Rights

A major defence is that the asset belongs to a genuine third party.

For example:

A debtor holds €2 million in a bank account as trustee for another person.

The liquidator cannot automatically treat the entire €2 million as estate property.

The court may need to determine:

legal ownership;

beneficial ownership;

trust/fiduciary rights;

security interests;

proprietary claims.

28. Directors and Officers

Directors may become defendants where they:

transferred assets improperly;

caused unlawful payments;

concealed property;

participated in fraudulent transactions;

diverted corporate opportunities.

But corporate insolvency does not automatically make directors personally liable for all company debts.

Personal liability requires an appropriate legal basis.

29. Parent Companies and Group Companies

A parent company may be involved in asset movements involving a subsidiary.

However:

Parent ≠ subsidiary

and

group relationship ≠ automatic ownership of subsidiary assets.

Eurofood is important because the CJEU stressed that each debtor constituting a distinct legal entity is subject to its own insolvency jurisdiction. (curia)

30. Cross-Border Asset Tracing and Limitation

Claims may become time-barred.

The liquidator therefore needs to establish:

when the transaction occurred;

when insolvency began;

when the fraud was discovered;

when the limitation period started;

whether concealment affects limitation;

whether special insolvency limitation rules apply.

National insolvency laws can differ significantly.

31. Asset Tracing vs Asset Recovery

These are related but different.

Asset tracing

Where is the asset?

Asset identification

Who owns the asset?

Asset recovery

How can the asset legally be returned?

Enforcement

How can the judgment or order actually be implemented?

Therefore:

Tracing is not the same as recovery.

Finding €5 million in a foreign account does not automatically mean the insolvency estate can immediately take it.

32. Civil Liability Dimension

Although insolvency proceedings are collective proceedings, individual civil claims may arise against:

directors;

shareholders;

transferees;

banks;

counterparties;

related companies;

professional advisers.

The precise cause of action depends upon the applicable national law.

Possible claims include:

restitution;

damages;

unjust enrichment;

fraudulent transfer;

breach of fiduciary duty;

tort/delict;

contractual claims.

33. Cross-Border Enforcement

After obtaining a judgment or order, the claimant may still have to enforce it in another country.

Important considerations include:

recognition;

enforceability;

location of assets;

third-party rights;

public policy;

procedural requirements;

competing insolvency proceedings.

The EU insolvency framework is specifically designed to reduce conflicts between Member States and facilitate recognition.

34. Key Case-Law Table

35. Six Core Cases to Memorise

For an examination answer requiring at least six authorities, use:

1. Eurofood — C-341/04

COMI + recognition.

2. Interedil — C-396/09

COMI + establishment + relocation.

3. Seagon — C-339/07

Avoidance actions connected with insolvency.

4. MG Probud — C-444/07

Universal effects of main proceedings.

5. Schmid — C-328/12

Insolvency-related claim against foreign defendant.

6. Vinyls Italia — C-54/16

Applicable law and avoidance of detrimental transactions.

These six together cover the core architecture of cross-border insolvency asset tracing. (InfoCuria)

36. Exam Formula

Remember:

Insolvency

↓

COMI

↓

Main Proceedings

↓

Recognition

↓

Foreign Assets

↓

Trace Ownership

↓

Identify Transfer

↓

Determine Applicable Law

↓

Avoidance / Restitution

↓

Foreign Defendant

↓

Recovery

↓

Enforcement

37. Short Revision Notes

Meaning

Cross-border insolvency asset tracing is the identification and recovery of assets belonging to an insolvent estate where those assets, transactions, recipients or evidence are located in different jurisdictions.

Main problems

hidden assets;

foreign bank accounts;

related-party transfers;

corporate structures;

fraudulent transfers;

cryptocurrency;

competing ownership claims;

foreign defendants;

jurisdiction;

applicable law;

limitation;

enforcement.

Most important concepts

COMI + establishment + recognition + universal effect + avoidance + applicable law + recovery.

Most important cases

Eurofood → Interedil → Seagon → MG Probud → Schmid → Vinyls Italia.

Conclusion

Cross-border insolvency asset tracing in Europe is built around the principle that insolvency should not become ineffective merely because a debtor's assets have been moved across borders. The EU framework therefore connects the insolvency proceeding to the debtor's COMI, gives substantial importance to recognition and cooperation, and provides mechanisms for dealing with transactions that prejudice creditors.

The leading authorities establish different parts of this structure: Eurofood and Interedil explain COMI and jurisdiction; MG Probud demonstrates the cross-border effects of main proceedings; Seagon and Schmid address insolvency-related recovery litigation; and Vinyls Italia demonstrates the importance of determining which law governs potentially avoidable transactions. (InfoCuria)

The easiest formula for an exam is:

COMI → Jurisdiction → Recognition → Asset Location → Ownership → Transaction → Applicable Law → Avoidance → Recovery → Enforcement.