CJEU confirms position on cross-border insolvency clawback claims

Dr Attila Bangha-Szabo, insolvency law expert at Pinsent Masons, was commenting following a recent decision by the CJEU that has drawn a line under a long-standing debate over cross-border clawback rights in Germany.

The dispute centres around an Austrian engineering company that was a shareholder in a German limited liability company (GmbH) based in Schwerin. The Austrian parent company granted several loans to the German GmbH in 2015, one of which was secured by assignment.

In 2015 and 2016, before insolvency proceedings were initiated in Germany, the German company repaid parts of the loan and the resulting interest to the Austrian company. Insolvency proceedings were opened against the German company on 1 October 2016.

After the Austrian shareholder filed its outstanding claims as creditor in the insolvency proceedings, the German insolvency administrator demanded that these payments were repaid – or clawed back – and said the claims were subordinated under German law and could not be registered in the schedule of claims.

Under German insolvency law, shareholder loans are statutorily subordinated. Germany’s Insolvency Code also provides that court-appointed insolvency administrators can exercise a clawback claim provided that repayments towards the shareholder loan have been made within a 12-month period before the insolvency proceedings were filed.

However, the dispute challenged whether these German provisions were applicable in this case, given that the loan was granted by an Austrian company  and the original loan agreement contains a provision stating that the agreement is subject to Austrian law. The resulting question was whether domestic legislation in Germany should take priority in case involving insolvency proceedings related to a cross-border shareholder loan, or whether such a dispute governed by non-German law might be protected against a German clawback claim under the "safe haven" rule of article 16 of the European Insolvency Regulation, which is applied throughout the EU.

The Austrian company appealed against decisions by lower courts in Germany that dismissed its claims and upheld the insolvency administrator's claim. In February 2025, the German Federal Court of Justice (BGH) referred the issue to the CJEU to ultimately decide on the case.

The CJEU’s judgment, which was handed down on 19 March, clarified that article 16 does not allow a shareholder who has received repayments on a loan to prevent a court-appointed administrator from launching insolvency proceedings. In this sense, the ruling confirms the BGH’s earlier view that clawback claims related to shareholder loans apply regardless of the law that governs the underlying loan agreement.

Commenting on the European court’s decision, Bangha-Szabo, said: “It is standard procedure for German insolvency administrators to check whether the insolvent subsidiary has made any repayments to its shareholder within the one year look back period. The judgment of the CJEU confirms that the German clawback claims apply regardless of where the lender is domiciled and regardless of whether the loan agreement is governed by foreign law."

He said the judgment will likely lead to more cross-border clawback actions initiated by German insolvency administrators against international shareholders. "The risk to international investors is further exacerbated,” he said, “by the extensive German case law that any form of financial support by the parent may be considered a shareholder loan." 

Following the ruling, he said businesses that invest in Germany will need to familiarise themselves with the German legal position regarding shareholder loans and their relative exposure to potential clawback claims under German insolvency law that may become applicable in the event that a German subsidiary becomes insolvent.

He added that businesses should review their funding arrangements with German subsidiaries and reassess their parent companies' exposure in the event of an insolvency of the German subsidiary.