Legal Alert – Supreme Court Ruling KKO:2013:16 on Lodgement of Claim in a Bankruptcy by a Foreign Entity And The Council Regulation (Ec) No 1346/2000 On Insolvency Proceedings
The Finnish Supreme Court has recently rendered a precedent concerning lodgement of claim in a Finnish bankruptcy and the requirements for the invitation to lodge claims stipulated in the Council regulation on insolvency proceedings (No 1346/2000). An administrator of a Finnish bankruptcy estate had provided a Swedish creditor, who happened to be the parent company of the bankrupted Finnish company, with a notification to lodge claims in the Finnish bankruptcy. The notification was in Swedish but it was not issued in accordance with Article 42 of the Council regulation No 1346/2000, which required a specific form to be used bearing the heading “Invitation to lodge a claim. Time limits to be observed” in all the official languages of the European Union institutions. The Swedish creditor had not lodged a claim in the Finnish bankruptcy. It had, however, provided the Finnish bankruptcy estate with a written account on its receivables few months before the actual lodgement day was determined. The question was whether or not the confirmed disbursement list had to be rectified and adjusted and the Swedish creditors claim to be included in the disbursement list due to an alleged error in the proceedings. The Supreme Court found that there had not been such an error in the proceedings that there would be a need to rectify the confirmed disbursement list.
In a Finnish bankruptcy the creditors will receive a distributive portion from the bankruptcy estates assets according to a disbursement list drafted by the administrator and confirmed by a court. Creditors must lodge their claims in order to get the claim included and considered in the disbursement list. Therefore it is crucial firstly to lodge a claim and secondly to make sure it is correctly considered in the disbursement list. Chapter 13, section 16(2) of the Finnish Bankruptcy Act, however, provides a loophole and stipulates that a confirmed disbursement list can be rectified and amended if a claim has been omitted from consideration owing to an error, neglect or some other comparable reason not attributable to the creditor.
In the case at hand, the Swedish creditor claimed that it could not have lodged its claim due to an error by the administrator, because the administrator had not provided the Swedish creditor with a correct form in accordance with Article 42 of the Council regulation on insolvency proceedings. It also claimed that the account on its receivables it had delivered to the administrator some months before the lodgement day should have been regarded as its lodgement of claims.
The Supreme Court first rejected the Swedish creditors account on its receivables as a lodgement of claims. The court reasoned that a lodgement of claims is an expression of intent to receive payment from the bankruptcy estate in which the receivable and its grounds must be sufficiently presented with supporting documents. As the Swedish creditors account on its receivables was not sufficiently detailed and it did not contain any supporting documentation nor any expression of intent to receive payment from the bankruptcy estate, the Supreme Court reasoned that the account was not a lodgement of claim but it was only intended to serve the purpose of solving the financial position of the bankruptcy estate.
Then the Supreme Court evaluated whether or not the administrator’s actions had been erroneous related to the sending of invitation to lodge claims to the Swedish creditor. The Supreme Court found that the administrator had not indeed used the form stipulated in Article 42 of the Council regulation, and this had been an error. The administrator had instead provided the Swedish creditor with a letter informing of the need to lodge a claim. The letter had been in Swedish and it had contained the same information as the form as per Articles 40 and 42 of the Council regulation.
The Supreme Court reasoned that the administrator’s actions had not affected the Swedish creditors rights and opportunities to participate and lodge its claims in the Finnish bankruptcy despite the fact that the invitation to lodge a claim was formally wrong. The Swedish creditor had received correct information in the language it understood and it had had all the opportunities to lodge its claim. Therefore the Court found that the administrator’s error not to use the specific form had not violated the Swedish creditor’s rights and there was no need to rectify or amend the confirmed disbursement list as the Swedish creditor’s claim had not been omitted from consideration owing to an error, neglect or some other comparable reason not attributable to the creditor. Accordingly the Swedish creditor’s claim, amounting to several million euros, was completely dismissed.
This Supreme Court’s precedent emphasises especially foreign creditors’ obligation to monitor documents provided by the administrator during Finnish bankruptcy proceedings. Creditors should not regard them without due care but they should obtain sufficient and accurate information from a Finnish lawyer if anything is unclear about the documents. Otherwise, as was the situation in the case at hand, creditors may suffer severe losses.