Navigating the Post-Brexit Restructuring Maze: A Deep Dive into the Frankfurt Court's Decision
Facing a financial storm? Cross-border restructurings have become increasingly complex since Brexit. The recent Frankfurt am Main Regional Court's interim decision regarding Aggregate's Part 26A Plan is a prime example. This ruling has significant implications for businesses and financial institutions. Let's explore the details.
The Core Issue: Unraveling the Frankfurt Court's Stance
On August 22, 2025, the Frankfurt court made a pivotal provisional decision. It declined to recognize Aggregate's English Part 26A restructuring plan under German law. This decision highlights the challenges of implementing English restructuring plans in continental Europe.
The Aggregate Case: A Closer Look
Aggregate, a German real estate group, aimed to restructure €1 billion in secured debt using an English Part 26A restructuring plan. This plan, approved by English courts in March 2024, extended the maturity of €775 million in senior secured debt and addressed €245 million in subordinated debt. To leverage the English restructuring regime, Aggregate moved its center of main interests (COMI) to England – a complex move. However, when a senior creditor sought to enforce its rights in Germany, the Frankfurt court was asked to recognize the English plan. The court's response? A firm rejection, at least for the time being.
Three Paths to Recognition: The Legal Analysis
The Frankfurt court examined three potential avenues for recognizing the English plan:
- Section 343 German Insolvency Code (InsO): This provision allows for automatic recognition of foreign insolvency proceedings. The court ruled that this applies only to foreign proceedings that include all creditors. Aggregate's plan didn't qualify, as it only involved creditors under the senior loan agreement.
- Section 328 German Code of Civil Procedure (ZPO): This route requires reciprocal recognition of German judgments in England. The court determined that reciprocity was a question of fact, and the evidence provided by Aggregate wasn't admissible at this stage.
- Recast Brussels Regulation: The defendants argued for recognition under the Brussels Convention of 1968. The court rejected this, stating the Convention was replaced by the Brussels I Regulation and didn't automatically revive after Brexit.
The Rule in Gibbs: A Persistent Hurdle
The rule in Gibbs, a principle of English law, states that the law governing a contract determines the discharge of debt under foreign bankruptcy law. This rule, reaffirmed by the English Court of Appeal in Bakhshiyeva v Sberbank of Russia & Ors [2018] EWCA Civ 2802, presents a significant obstacle to the cross-border effectiveness of foreign restructuring plans. The Frankfurt court's decision may cast doubt on whether reciprocity between English and German courts is guaranteed from a German perspective.
Implications for Cross-Border Restructuring
- Increased Legal Uncertainty: The potential lack of recognition for English plans in Germany (and possibly other EU jurisdictions) increases the risk of inconsistent outcomes without parallel proceedings.
- Cost and Complexity: Shifting COMI to England to access Part 26A is costly and doesn't guarantee recognition elsewhere.
- Strategic Planning: Parties must carefully assess the likelihood of recognition in all relevant jurisdictions before pursuing an English law plan. Alternative restructuring frameworks, such as Germany’s StaRUG or the Dutch WHOA, may offer more predictable outcomes.
- Broader EU Impact: The decision may influence courts in other EU member states, potentially leading to a more fragmented landscape for cross-border restructurings post-Brexit.
Conclusion: A Call for a Multi-Jurisdictional Approach
The Aggregate decision highlights the challenges of cross-border restructurings in Europe, especially after Brexit and the enduring influence of the rule in Gibbs. While the English scheme and Part 26A plan remain valuable tools, their cross-border effectiveness is no longer guaranteed. Practitioners must adopt a holistic, multi-jurisdictional approach, considering all available restructuring regimes and the likelihood of recognition in each relevant forum.
But here's where it gets controversial...
Could this decision signal a shift away from the English scheme? The ruling suggests that the English restructuring plans may not be as readily accepted in Germany as previously thought.
And this is the part most people miss...
What are the alternatives? Parties might consider other restructuring frameworks, such as Germany's StaRUG or the Dutch WHOA, which may offer more predictable outcomes.
What do you think? Do you agree with the Frankfurt court's decision? Share your thoughts on the future of cross-border restructurings in the comments below.
