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Insolvency proceedings of a German citizen declared in Latvia

By a judgment of the Riga District Court on July 21, 2020, the insolvency proceedings of a German citizen in Latvia were declared. The Court, evaluating the provisions of Regulation No. 2015/848 of the European Parliament and of the Council (Insolvency Regulation), concluded that the center of the debtor’s main interests is located in the Republic of Latvia.

Thus, Latvian court recognized the jurisdiction to hear debtor’s application for insolvency proceedings in Latvia and the debtor’s insolvency proceedings were declared in Latvia. The insolvency proceedings application was prepared for the debtor, as well as all the necessary legal assistance was provided to the debtor by legal experts of the law firm LUMOS.

Provisions of the Insolvency Regulation

Regulation No. 2015/848 of the European Parliament and of the Council entered into force on 26 June 2017, thus the provisions of the Regulation are applied to cross-border insolvency proceedings relatively recently. Article 3 of the Insolvency Regulation contains presumptions which the court should follow in determining whether a person has his center of main interests in the Member State concerned.

In the case of a natural person pursuing an independent business or professional activity, the main center of interests shall be the principal place of business of that natural person, unless there is evidence to the contrary. That presumption shall apply only if the natural person’s principal place of business has not been transferred to another Member State within three months before the opening of insolvency proceedings.

In the case of any other natural person, the principal center of interests shall be the habitual residence of that natural person, unless there is evidence to the contrary. This presumption shall apply only if the habitual residence has not been transferred to another Member State during the six months preceding the application for the opening of insolvency proceedings.

The case law recognizes that certain formal activities, such as the registration of a residence address in a Member State and registration as a taxable person, are not sufficient to establish a center of main interests. Therefore, in order to prove the location of the center of main interests in Latvia in accordance with the provisions of the Insolvency Regulation, a person most often needs qualified legal assistance and support not only in the preparation of the insolvency proceedings application, but at all stages of the proceedings, which include:

  • transfer of permanent residence or place of business;
  • gathering evidence and preparing an application for court proceedings;
  • preparation of the necessary documentation and provision of answers to the insolvency administrator appointed by the court;
  • preparation and submission of the necessary documents to the court for further progress of the insolvency proceedings after its announcement;
  • protection of personal interests in cases when creditors try to terminate the insolvency proceedings.

Statistics on cross – border insolvency proceedings

Information on all insolvency proceedings in the Republic of Latvia is publicly available in the insolvency register database, which is maintained by the Register of Enterprises of the Republic of Latvia.

According to the insolvency register entries, in accordance with the provisions of the Insolvency Regulation, a total of 36 cross-border insolvency proceedings have been declared in Latvia, i.e. proceedings in which the debtor is a citizen of another EU country with creditors or property in another EU Member State. Most of these proceedings, or 21 insolvency proceedings, have been declared by German and Austrian citizens.

LUMOS customer insolvency proceedings

Out of 21 German and Austrian citizens currently undergoing insolvency proceedings in Latvia, one in four is a client of the law firm LUMOS – the law office has prepared applications for insolvency proceedings and conducts insolvency proceedings in 5 cases out of all mentioned court proceedings. Another person who has been successfully declared insolvent has been provided with legal assistance by the LUMOS law office before the insolvency proceedings were declared. Since 2019, when the submission of cross-border insolvency proceedings in Latvia in accordance with the new Insolvency Regulation has begun, none of the client applications prepared by LUMOS for declaring insolvency proceedings have been rejected.

The head of the sworn law office LUMOS is a sworn advocate and insolvency process administrator Aleksandrs Locans, who has a long-term practical experience in conducting insolvency proceedings. On December 3, 2019, an article by Aleksandrs Locans entitled “Determination of the Center of Main Interests in Cross-Border Insolvency Proceedings of Natural Persons” was published on the cover of the magazine “Jurista Vards”.

This publication has greatly contributed to a correct understanding of the identification of the main center of interest in cross-border insolvency proceedings. The said article deals with problems of application of law in situations when a citizen of another European Union country permanently resides or conducts business in Latvia and files for insolvency proceedings in Latvia, when all or most of the creditors are in another EU member state.

The team of the law firm LUMOS manages and provides clients with legal services in Latvian, Russian, English and German, specializing in Latvian commercial and insolvency law issues, as well as the application of European Union law. In the course of insolvency proceedings, the LUMOS office cooperates with German and Austrian law firms, providing the client with all the necessary support to achieve a successful result.



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