Civil Law and Debt Restructuring Agreement Disputes in Europe

1. Introduction

A debt restructuring agreement is an agreement under which a debtor and one or more creditors modify the existing debt relationship because the debtor is experiencing financial difficulty.

The restructuring may involve:

extension of the repayment period;

reduction of principal;

reduction or waiver of interest;

payment by instalments;

debt-to-equity conversion;

refinancing;

moratorium or standstill;

security modification;

release of guarantees;

transfer of assets;

settlement of disputed debts;

creditor compromise;

restructuring of several classes of creditors.

In Europe, disputes concerning such agreements are governed by a combination of national contract/civil law, insolvency law, EU restructuring law, consumer-credit rules, private international law and, where relevant, banking and financial regulation.

The EU Preventive Restructuring Directive 2019/1023 seeks to allow financially distressed but potentially viable businesses to restructure at an early stage, while protecting affected creditors and equity holders. It expressly recognises changes to the composition and conditions of liabilities and capital structure, including debt-to-equity arrangements. (EUR-Lex)

A major difficulty is that European case law specifically about ordinary private debt-restructuring agreements is still developing. Therefore, the most useful authorities include direct restructuring cases together with closely related EU insolvency, debt-discharge, creditor-protection and loan-contract cases.

2. Meaning of Debt Restructuring Agreement

A debt restructuring agreement normally changes the original contractual obligation without necessarily extinguishing the entire debt.

Example

A company owes a bank €10 million.

The company cannot pay immediately. The parties agree:

€2 million paid immediately;

€8 million payable over five years;

interest reduced from 8% to 4%;

existing security continues;

bank agrees not to enforce for three years;

company provides additional collateral.

This creates a restructured debt relationship.

A dispute can arise if:

the debtor says the agreement is binding;

the creditor says a condition was not satisfied;

the creditor accelerates the debt;

the debtor challenges interest;

one creditor receives preferential treatment;

another creditor challenges the restructuring;

a restructuring plan binds dissenting creditors;

security is released or modified;

the debtor defaults again;

the restructuring is alleged to be fraudulent;

the agreement conflicts with insolvency law;

cross-border recognition becomes necessary.

3. Main Legal Framework in Europe

A. National contract law

The underlying restructuring agreement is normally governed by the applicable national civil or commercial law.

Important principles include:

contractual consent;

freedom of contract;

good faith;

contractual interpretation;

consideration where relevant;

novation;

waiver;

settlement;

release;

modification of obligations;

breach;

damages;

termination;

impossibility;

hardship.

The exact rules differ considerably between European jurisdictions.

B. EU Preventive Restructuring Directive 2019/1023

Directive 2019/1023 is central to modern European restructuring law.

It covers:

preventive restructuring frameworks;

restructuring plans;

affected creditors;

creditor classes;

stays of enforcement;

cross-class cram-down;

new and interim financing;

protection of new financing;

insolvency practitioners;

debt discharge;

second chance for honest entrepreneurs.

The Directive contemplates a temporary stay of individual enforcement actions to facilitate negotiations and preserve the debtor's business while restructuring is negotiated. (EUR-Lex)

4. Restructuring Plan and Private Agreement: Important Distinction

A bilateral restructuring agreement is usually a contract between debtor and creditor.

A statutory restructuring plan may affect creditors who did not individually agree to the restructuring.

This distinction is extremely important.

Private agreement

Debtor + Bank → agreement to reduce interest and extend maturity.

Court-confirmed restructuring plan

Debtor + creditor classes → statutory plan → court confirmation → potentially binding effect on dissenting creditors.

EU restructuring law provides safeguards where creditors' rights are reduced. The Directive contemplates judicial or administrative confirmation particularly where dissenting parties, new financing or significant employment consequences are involved.

5. Common Causes of Debt Restructuring Disputes

5.1 Failure to make agreed payments

The debtor accepts revised repayment terms but subsequently misses instalments.

The creditor may seek:

acceleration;

termination;

enforcement;

damages;

interest;

enforcement of security.

5.2 Dispute concerning waiver

A creditor may agree to waive part of the debt provided that the debtor satisfies certain conditions.

Example:

“The bank will waive €1 million if all instalments are paid on time for three years.”

If the debtor misses one payment, the parties may disagree about whether the €1 million waiver automatically disappears.

5.3 Interest disputes

Disputes may concern:

revised interest rate;

default interest;

compound interest;

floating-rate adjustment;

penalty interest;

interest during a moratorium.

Consumer cases can attract additional EU unfair-terms protection.

5.4 Security disputes

A restructuring may modify:

mortgages;

pledges;

guarantees;

collateral;

retention-of-title rights.

A creditor may argue that its original security survives the restructuring.

The debtor may argue that the restructuring agreement replaced the original obligation and therefore affected the security.

6. Cross-Border Issues

A restructuring agreement can involve:

debtor in France;

bank in Germany;

guarantor in Italy;

assets in Spain;

arbitration in another jurisdiction.

The court must then determine:

jurisdiction;

applicable law;

recognition of the restructuring;

insolvency jurisdiction;

effect on security;

enforcement;

treatment of foreign creditors.

The EU Insolvency Regulation 2015/848 is important where restructuring is connected with formal insolvency proceedings.

7. Case Law

Case 1 — Vantage Logistics, C-200/22

Court: Court of Justice of the European Union
Case: Vantage Logistics SRL v Administraţia Judeţeană a Finanţelor Publice Alba and Others, C-200/22
Date: 18 April 2023

This is a particularly relevant restructuring authority.

The Romanian proceedings concerned a restructuring/reorganisation plan and questions concerning Directive 2019/1023, including the treatment of creditor classes and acceptance of a restructuring plan.

The Court ultimately found that it lacked jurisdiction because of the way the questions were framed and the temporal/material circumstances. (InfoCuria)

Principle

The case demonstrates that the application of the EU restructuring framework depends upon:

the relevant date;

the nature of the national procedure;

the material scope of Directive 2019/1023;

the precise EU-law question presented.

Importance

It is useful in disputes concerning whether a national restructuring procedure falls within the EU preventive restructuring framework.

Nature: Direct restructuring authority, although the ruling was procedural/jurisdictional rather than a substantive ruling on the validity of the plan.

8. Case 2 — Julieta and Rogelio, C-687/22

Court: CJEU
Case: Julieta and Rogelio v Agencia Estatal de la Administración Tributaria, C-687/22
Judgment: 11 April 2024

The case concerned Directive 2019/1023 and the discharge of debts, particularly whether certain public-law claims could be excluded from discharge.

The Court held that Article 23(4) permits Member States to exclude particular categories of debt, but such exclusions must be duly justified under national law. (EUR-Lex)

Principle

A restructuring or debt-discharge framework cannot simply create unlimited categories of privileged claims without legal justification.

Importance

This matters where a restructuring arrangement distinguishes between:

secured creditors;

unsecured creditors;

tax authorities;

social-security authorities;

employees;

other public creditors.

It demonstrates that national restructuring rules remain subject to EU-law requirements concerning justified treatment of different categories of debt.

9. Case 3 — Corván and Bacigán, Joined Cases C-289/23 and C-305/23

Court: CJEU
Judgment: 7 November 2024

These cases concerned Directive 2019/1023, debt discharge and national restrictions based on the debtor's conduct.

The Court held that the circumstances listed in Article 23(2) are not exhaustive and that Member States may adopt additional restrictions concerning access to debt discharge, but those restrictions must comply with the conditions imposed by EU law. (InfoCuria)

Principle

A debtor's conduct can be relevant to restructuring or discharge.

However, restrictions cannot operate entirely outside the EU framework.

Importance

This becomes relevant where creditors challenge a restructuring because they allege:

bad faith;

dishonest conduct;

concealment of assets;

fraudulent behaviour;

abusive use of restructuring proceedings.

10. Case 4 — Agenzia delle Entrate v Marco Identi, C-493/15

Court: CJEU
Judgment: 16 March 2017

This case concerned an Italian procedure for discharging debts of a bankrupt natural person, including VAT liabilities.

The Court held that EU VAT law did not prevent national legislation under which certain unpaid VAT debts could become irrecoverable through a bankruptcy discharge procedure. (EUR-Lex)

Principle

Debt restructuring and insolvency proceedings can legally alter the enforceability of outstanding public debts where the applicable EU requirements are satisfied.

Importance

It is particularly relevant to disputes involving:

tax creditors;

public-law claims;

debt forgiveness;

insolvency discharge;

creditor classification.

11. Case 5 — Banco Santander and Escobedo, Joined Cases C-96/16 and C-94/17

Court: CJEU
Judgment: 7 August 2018

These cases concerned consumer loan agreements, assignment of debts and default interest.

The Court examined:

assignment of consumer debt;

enforcement;

default-interest clauses;

unfair contractual terms.

It held that the Unfair Terms Directive did not itself apply to a business practice involving assignment or purchase of a consumer debt where the issue was not a contractual term but the subsequent debt assignment itself.

Principle

A dispute concerning the original loan contract must be distinguished from a dispute concerning a subsequent transfer or restructuring of the debt.

Importance

This distinction is highly relevant to restructuring transactions because debt may be:

assigned;

syndicated;

sold to an investment fund;

transferred to a special-purpose vehicle;

consolidated with other debts.

12. Case 6 — Mory and Others v Commission, C-33/14 P

Court: CJEU
Case: Mory SA, Mory Team and Superga Invest v European Commission, C-33/14 P
Judgment: 17 September 2015

The proceedings concerned the restructuring/composition with creditors of the Sernam group and the takeover of its assets.

The underlying restructuring involved issues concerning:

composition with creditors;

takeover of assets;

financial assistance;

State aid;

consequences for creditors and competitors.

The CJEU addressed the applicants' standing in the context of the Commission's State-aid decision concerning the restructuring.

Principle

A restructuring transaction may have consequences beyond the debtor and consenting creditors.

It can also interact with:

State-aid law;

asset transfers;

competition;

third-party interests.

Importance

This is particularly relevant for large corporate restructurings involving government support or state-owned enterprises.

Nature: Analogous/structural authority rather than a general private-law rule governing every restructuring agreement.

13. Case 7 — German Graphics, C-292/08

Court: CJEU
Case: German Graphics Graphische Maschinen GmbH v van der Schee, C-292/08

The case concerned insolvency proceedings and the effect of insolvency proceedings on property rights.

Principle

A restructuring or insolvency proceeding does not automatically eliminate independently existing proprietary rights.

The distinction between:

personal claims;

proprietary rights;

insolvency claims

can become decisive.

Importance

In debt restructuring, creditors often hold security or ownership-based protections.

Therefore, the parties must identify whether a creditor's right is:

merely a debt claim, or a proprietary/security right.

This can substantially affect the creditor's position during restructuring.

14. Case 8 — Eurofood IFSC, C-341/04

Court: CJEU
Case: Eurofood IFSC Ltd, C-341/04

Although primarily an insolvency jurisdiction case, Eurofood is fundamental to European cross-border restructuring.

The CJEU considered:

centre of main interests (COMI);

jurisdiction;

recognition of insolvency proceedings;

cross-border effects.

Principle

Cross-border insolvency jurisdiction cannot simply be determined by whichever Member State a creditor prefers.

The concept of COMI is central.

Importance

Suppose:

Company incorporated in Italy → management in Germany → creditors in France → restructuring proceedings opened in Germany.

The parties may dispute which Member State has jurisdiction.

Eurofood is important for analysing this question.

15. Case 9 — Interedil, C-396/09

Court: CJEU
Case: Interedil Srl v Fallimento Interedil Srl and another, C-396/09

The case further developed the concept of centre of main interests under European insolvency law.

Principle

COMI must be determined through objective factors that can be ascertained by third parties.

Importance

This is relevant when a debtor attempts restructuring in a Member State different from where its principal business actually operates.

It can prevent disputes over:

forum shopping;

recognition;

restructuring jurisdiction;

creditor participation.

16. Case 10 — Vinyls Italia, C-54/16

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

The case concerned transactions connected with insolvency proceedings and the European Insolvency Regulation.

Principle

Transactions entered into before insolvency may be examined under the special rules applicable to insolvency-related avoidance.

Importance

This is important for debt restructuring because a restructuring agreement concluded shortly before insolvency may later be challenged if it:

prejudices creditors;

improperly favours one creditor;

transfers value;

creates unusual security;

constitutes an avoidable transaction.

A restructuring agreement is therefore not automatically immune from later insolvency scrutiny.

17. Case 11 — Kornhaas, C-594/14

Court: CJEU
Case: Kornhaas, C-594/14

The case concerned liability associated with a company in insolvency.

Principle

Certain claims against company directors may fall within the insolvency framework when they are closely connected with insolvency proceedings.

Importance

Debt restructuring frequently involves management decisions.

Directors may therefore face claims where they:

continue trading improperly;

prefer particular creditors;

breach duties;

enter transactions shortly before insolvency;

misrepresent the company's financial condition.

18. Case 12 — Lutz, C-557/13

Court: CJEU
Case: Hermann Lutz v DBKAG, C-557/13

This case concerned the interaction between insolvency proceedings and enforcement of claims.

Principle

European insolvency law carefully regulates how individual enforcement interacts with collective insolvency proceedings.

Importance

A restructuring agreement often contains a standstill clause.

A creditor may agree:

“I will not enforce the debt for 12 months.”

A subsequent dispute may therefore concern whether the creditor was entitled to commence:

attachment;

foreclosure;

execution;

individual enforcement.

The European insolvency framework can determine whether such individual enforcement remains available.

19. Important Contractual Issues

A. Is there a valid agreement?

The court examines:

offer;

acceptance;

authority;

consideration where required;

intention;

formal requirements;

conditions precedent.

B. Was the original debt replaced?

This is the issue of novation or modification.

The court may have to decide whether:

Original debt + amendment

or:

Original debt extinguished + new debt created.

The answer can affect:

guarantees;

security;

limitation periods;

interest;

enforcement rights.

20. Good Faith

Good faith can become particularly important during restructuring negotiations.

Examples of potentially disputed conduct include:

concealing assets;

misleading creditors;

providing false financial statements;

negotiating with one creditor while secretly transferring assets;

deliberately delaying insolvency;

creating artificial creditor claims.

The EU restructuring framework seeks early restructuring of financially distressed but viable businesses while also preserving safeguards against abusive conduct. (EUR-Lex)

21. Creditor Classification

A restructuring may divide creditors into classes.

For example:

A dispute may arise if a creditor argues:

“I have been placed in the wrong class.”

Class formation is legally important because voting and cram-down consequences can depend upon creditor classification.

The EU restructuring framework expressly recognises affected parties, creditor classes and cross-class cram-down mechanisms. (EUR-Lex)

22. Cross-Class Cram-Down

A major innovation of European restructuring law is cross-class cram-down.

This means a restructuring plan can, subject to statutory safeguards, be confirmed despite opposition from one or more creditor classes.

Important safeguards include:

proper classification;

voting requirements;

creditor protection;

best-interests test;

priority rules;

judicial/administrative confirmation.

The EU framework requires safeguards because a restructuring plan may reduce the rights of dissenting creditors. (EUR-Lex)

23. Best-Interests-of-Creditors Test

A dissenting creditor should generally not receive less than it would receive under the relevant liquidation or alternative scenario.

Example

Under restructuring:

Creditor receives €4 million.

Under liquidation:

Creditor would receive €3 million.

The restructuring may satisfy the relevant comparison.

But if:

Restructuring = €1 million
Liquidation = €3 million

the creditor has a stronger basis to challenge the plan.

24. Debt-to-Equity Swap

A restructuring agreement may convert:

€5 million debt → shares in debtor company.

This creates additional issues:

valuation;

shareholder rights;

dilution;

corporate approvals;

securities law;

creditor ranking;

minority shareholder protection.

The EU restructuring framework expressly recognises debt-to-equity swaps, subject to safeguards under national law. (EUR-Lex)

25. Consumer Debt Restructuring

Consumer restructuring requires additional protection.

Important issues include:

transparency;

unfair terms;

default interest;

acceleration clauses;

assignment of debts;

mortgage restructuring;

information duties;

enforcement.

Cases such as Banco Santander/Escobedo demonstrate the importance of distinguishing contractual terms from later debt-transfer practices and of applying EU consumer-protection rules where they actually fall within their scope.

26. Security and Guarantees

Suppose:

Company owes bank €10 million.
Parent company guarantees €10 million.
Restructuring reduces company debt to €6 million.

A dispute can arise over whether:

guarantee remains €10 million;

guarantee falls to €6 million;

guarantor must consent;

security survives;

new security replaces old security.

Courts normally examine the wording of the restructuring agreement, original finance documents and applicable national law.

27. Fraudulent or Preferential Restructuring

A restructuring can be challenged where it is alleged to have been designed to prejudice creditors.

Examples:

transferring assets to related companies;

releasing security for insiders;

paying one creditor immediately before insolvency;

artificially subordinating ordinary creditors;

concealing assets;

creating sham liabilities.

This is where insolvency avoidance rules become particularly important.

Vinyls Italia illustrates the importance of examining transactions connected with insolvency under the European insolvency framework.

28. Cross-Border Jurisdiction

For European restructuring litigation, lawyers should identify:

Step 1

Where is the debtor's COMI?

Step 2

Are formal insolvency proceedings open?

Step 3

Is the dispute contractual or insolvency-derived?

Step 4

Which court has jurisdiction?

Step 5

What law governs the restructuring agreement?

Step 6

Does the judgment or restructuring plan require recognition elsewhere?

Step 7

What happens to foreign security?

29. Evidence in Debt Restructuring Litigation

Important evidence includes:

original loan agreement;

restructuring agreement;

amendments;

emails;

board minutes;

creditor meeting records;

financial statements;

cash-flow projections;

valuation reports;

security documents;

guarantees;

payment records;

creditor voting records;

insolvency reports;

expert evidence.

Electronic communications can be particularly important in proving whether a restructuring agreement was actually concluded.

30. Defences Available to Debtors

A debtor may argue:

restructuring agreement was validly concluded;

creditor waived enforcement rights;

creditor breached the standstill;

acceleration was premature;

contractual condition was satisfied;

interest clause is invalid;

security was released;

creditor acted contrary to good faith;

restructuring procedure legally stayed enforcement;

creditor was improperly classified;

creditor received improper preferential treatment.

31. Defences Available to Creditors

A creditor may argue:

no binding restructuring agreement existed;

conditions precedent were not fulfilled;

debtor defaulted;

waiver was conditional;

acceleration clause survived;

security remains valid;

restructuring agreement was terminated;

debtor provided inaccurate information;

restructuring was obtained by fraud;

the creditor's rights were preserved expressly.

32. Remedies

A court may potentially grant:

Contractual remedies

damages;

specific performance;

declaration of rights;

termination;

restitution;

interest.

Insolvency remedies

rejection of a restructuring plan;

modification or confirmation of a plan;

stay of enforcement;

avoidance of transactions;

creditor participation;

debt discharge.

Security remedies

enforcement of mortgage;

enforcement of pledge;

enforcement of guarantee.

The exact remedy depends on national law and whether the dispute falls within a formal restructuring or insolvency procedure.

33. Key Case-Law Principles — Quick Table

34. Practical Example

Suppose a German company owes:

€20 million to a French bank;

€5 million to Italian suppliers;

€2 million in employee claims;

€3 million in tax liabilities.

The company proposes:

40% reduction for unsecured creditors;

five-year repayment period;

full payment of employees;

partial payment of tax debt;

conversion of €5 million bank debt into equity;

three-year enforcement stay.

The French bank objects.

The litigation may involve:

Issue 1: Was the restructuring agreement valid?

Issue 2: Was the bank correctly classified?

Issue 3: Can dissenting creditors be bound?

Issue 4: Does the bank receive at least what it would receive in liquidation?

Issue 5: Is the debt-to-equity conversion valid?

Issue 6: Can tax debt be treated differently?

Issue 7: Which Member State has restructuring jurisdiction?

Issue 8: What happens to the bank's security?

Issue 9: Was the restructuring negotiated in good faith?

Issue 10: Can the restructuring be challenged as prejudicial to creditors?

35. Important European-Law Principle

Debt restructuring is not simply a matter of private contract.

There are three interacting levels:

Level 1 — Contract

What did debtor and creditor agree?

Level 2 — Civil/commercial law

Was the agreement valid, breached, terminated or modified?

Level 3 — Insolvency/restructuring law

Can the agreement affect other creditors or operate within a collective restructuring procedure?

This three-level analysis is essential in European debt restructuring disputes.

36. Exam-Oriented Legal Test

For an examination or litigation problem, use this sequence:

Debt → Original Contract → Financial Distress → Restructuring Agreement → Creditor Classes → Consent/Voting → Security → Breach → Insolvency Rules → Cross-Border Jurisdiction → Applicable Law → Causation/Loss → Remedy

37. Conclusion

Debt restructuring agreement disputes in Europe arise when a financially distressed debtor and creditors disagree about the creation, interpretation, performance or enforcement of revised debt obligations.

The legal analysis requires a combination of:

national contract law;

civil/commercial law;

insolvency law;

Directive 2019/1023;

cross-border jurisdiction rules;

creditor-class and cram-down principles;

consumer protection where applicable;

security and guarantee law;

avoidance rules;

EU rules governing cross-border insolvency.

The most important modern principle is that restructuring should allow a viable debtor to reorganise its liabilities while maintaining effective protection for affected creditors and other stakeholders. Directive 2019/1023 specifically seeks early restructuring and preservation of viable businesses, while requiring safeguards where creditor rights are reduced. (EUR-Lex)

Core formula:
Financial Distress + Restructuring Agreement + Creditor Rights + Contract Law + Insolvency Law + Cross-Border Rules = Debt Restructuring Litigation in Europe.