Clifford Chance
Courts accept transferability of restitution claims resulting from clawback (ILO article 29-07-2011)
28 February 2012
In insolvency proceedings, the creditors' main interest is in having the insolvency administrator maximise the insolvency estate and then distribute the proceeds among the creditors. Under German insolvency law, the insolvency estate is protected from any influence other than the administrator's as soon as insolvency proceedings have been opened. However, the debtor might have disposed of some of its assets before the opening of proceedings. If this was done to the disadvantage of certain creditors, in certain cases (eg, gratuitous benefits or wilful disadvantage) the Insolvency Act renders
the relevant transactions contestable. If the insolvency administrator chooses to contest such transactions, the legal consequence will be a claim for restitution against the recipient of the debtor's assets. Yet even if successful, the administrator may not want to maintain the claim, but rather sell it to a third party. As opposed to the costly pursuit of a court decision, this would benefit the insolvency estate with regard to both time and money. However, further to a decision of the Court of the German Empire in 1893 the prevailing view in the German courts and among legal scholars has been that the transfer of such claims for restitution is not permissible. It has traditionally been argued that the
purpose of these claims is to restore the debtor's assets, which means that anything transferred by the debtor in violation of insolvency laws would still be considered as part of the insolvency estate. The claim would therefore be personally connected to the insolvency estate and the person of the insolvency administrator, leading to a prohibition of its assignment under the general rules of German civil law.
