What objections could you raise to recognition of the Austrian proceeding as a main proceeding and how would the Austrian court likely rule on your objections?

ABC Co. has manufacturing plants in Germany and Austria and has its corporate headquarters in France. Until January 1, 2018, ABC had its registered office in France. On January 1, 2018, ABC terminated its registration in France and moved its registered office to Austria. Main St. Bank has a mortgage on the manufacturing plant that is valid under German law. The mortgage is in default and Main St. Bank has commenced foreclosure proceedings in Germany. On February 1, 2018, ABC commenced an insolvency proceeding in Austria. In connection with that proceeding, ABC asserted that its center of main interest was in Austria and, as a result, the Austrian proceeding was a main proceeding.

QUESTION 2(A) – You represent Main St. Bank. What objections could you raise to recognition of the Austrian proceeding as a main proceeding and how would the Austrian court likely rule on your objections? On March 1, 2018, prior to a ruling by the Austrian court on the objection to the treatment of the Austrian proceeding as a main proceeding, Main St. Bank files an insolvency proceeding against ABC in France and asserts that the French proceeding is the main proceeding. On March 15, 2018, the French court rules that the French proceeding is the main proceeding. On March 30, 2018 the Austrian court rules that the Austrian proceeding is a main proceeding.

QUESTION 2(B) – Which court’s ruling controls and why? Assume the French proceeding was not filed and the Austrian proceeding is the main proceeding. Austrian insolvency law provides for a stay of all proceedings to collect debt, including on account of secured claims. ABC seeks enforcement of the stay against Main St. Bank to stop the foreclosure on the plant in Germany.

QUESTION 2(C) – You represent Main St. Bank. What objections could you raise to enforcement of the stay to stop the foreclosure on the plant in Germany and how would the Austrian court likely rule on your objections? Assume the French proceeding was not filed and the Austrian proceeding is the main proceeding. ABC has personal property assets in Germany in addition to the plant that is subject to the Main St. Bank mortgage. Assume that German insolvency law would allocate the German personal property more favorably to Main St. Bank than Austrian law.

QUESTION 2(D) – You represent Main St. Bank. What action would you recommend to your client to maximize its share of the personal property located in Germany?

Solution: