Key takeaway
The judgment of the Frankfurt court has created additional uncertainty as to whether English restructuring plans can be recognized in Germany. However, we believe that there are a number of viable arguments that can still be made that English restructuring plans can, at least in certain circumstances, be recognized and given effect in Germany. The present judgment in the Aggregate case was delivered on an interim basis and without the benefit of expert evidence, and it is certainly possible that the judgment will be overturned on later appeals.
Background
Aggregate is an international (albeit predominantly German-focused) real estate investment group, with most of its holding companies incorporated in Luxembourg. In 2023 and 2024, Aggregate sought to restructure liabilities associated with a particular real estate project in Berlin (Project Fürst), one of the largest development sites in Europe, which was suffering from cost overruns largely deriving from challenging macroeconomic factors such as higher interest rates, inflation and issues in the supply chain.
Amongst other things, Aggregate proposed to (a) extend the maturity of approximately EUR775 million of senior debt by two years (to November 2025); (b) write off a substantial portion of its tier 2 and junior debt (approximately EUR250m in total); and (c) facilitate the injection of EUR190m of new super senior funding (with elevation rights for participating existing creditors in respect of a portion of their old debts).
Despite the German nexus of the real estate asset, the debts being German law-governed, and the relevant holding company, Project Lietzenburger Straße HoldCo S.a r.l. (“HoldCo”), being constituted under the laws of Luxembourg, Aggregate elected to try to deliver the restructuring via an English restructuring plan—made possible via shifting the COMI of HoldCo to England. The English restructuring plan was ultimately sanctioned by the English High Court on March 7, 2024, despite significant opposition in court from certain tier 2 and junior creditors.
Recognition of the English restructuring plan in Germany
An opposing lender under one of the compromised senior facility agreements (the SFA) brought an action before the regional court (Landgericht) of Frankfurt, essentially challenging the extension of maturity of such facility pursuant to the restructuring plan and seeking repayment of the amounts owed to it by the plan company (as guarantor under the SFA) and a subsidiary of the plan company (as borrower under the SFA) (together, the “Defendants”) on the basis that the restructuring plan was not recognizable in Germany.
On August 22, 2025, the Frankfurt regional court (Landgericht) declined to recognize the effect of the English restructuring plan and ruled that the relevant claims of the lender under the SFA are indeed due and payable by the Defendants. The Frankfurt court examined three potential routes for recognition under German law and noted the following:
- Recognition under international insolvency law is not available as an English restructuring plan does not constitute “collective insolvency proceedings” within the meaning of sec. 1 of the German Insolvency Code (i.e., did not include the full body of a debtor’s creditors within the scope of proceedings—a company is generally able to choose the constituencies of creditors it wishes to include within the scope of an English restructuring plan).
- Recognition under German civil procedural law is not available as the court would need to be satisfied that the relevant foreign courts (in this case, those of England and Wales) would enforce and give reciprocal treatment to the orders of the German courts (this is a question of fact rather than law, and in first instance proceedings such as these no expert evidence as to reciprocal recognition is admissible, meaning such could not be proven at this stage of proceedings).
- Recognition under international treaty (for example, the 1968 Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters) is not available as the relevant treaty is superseded by the Brussels-I Regulation (Regulation (EU) 1215/2012) which is not available to English judgments post Brexit.
It is, however, important to note that this decision of the Frankfurt court was made in a so-called summary procedure (Urkundenprozess) and constitutes an interim judgment in first instance (Vorbehaltsurteil). In such summary procedures (Urkundenprozessen), a claimant solely relies on documentary evidence—hearing witnesses or submitting formal expert evidence is not permitted at this stage. For example, in the case at hand Aggregate offered formal expert opinions as evidence on the criteria of reciprocity, which was denied. After such an interim judgment, the unsuccessful party may either request a subsequent first instance hearing at which the additional evidence can be submitted (Nachverfahren) or directly appeal to higher courts. We understand that Aggregate intends to appeal the interim judgment.
If Aggregate is again unsuccessful at the subsequent first instance hearing (or chooses to skip subsequent proceedings), it may seek to appeal to the Higher Regional Court of Frankfurt, and thereafter possibly to the German Federal Court.
Consequences of the interim judgment
As it stands and unless and until a contrary decision is received on appeal, this interim decision creates a certain degree of ambiguity as to the possibility of the recognition and enforcement of English restructuring plans (and potentially also English schemes of arrangement) in Germany, at least to the extent the relevant restructuring proceedings seek to compromise German law-governed debt. This may of course in turn then create difficulties for plan companies seeking to propose a plan or scheme with a German connection to convince the English courts that there is a realistic prospect of such plan/scheme being recognized in Germany and can therefore be given full effect. For example, the 2023 Adler restructuring plan involved a German-headquartered group with German law-governed bonds and whose key assets were located in Germany – whilst the Alder restructuring plan was subsequently overturned by the English Court of Appeal on other grounds, the likelihood of recognition of that restructuring plan in Germany was not seriously challenged. In future cases involving a Germany connection, challenging creditors may seek to highlight the Frankfurt court’s decision as a reason why an English court should refuse to sanction an English restructuring plan or scheme of arrangement.
There has been considerable debate in the German legal and academic world as to the possibility of recognizing English proceedings in Germany, particularly when German law-governed debt was involved, although these questions have not yet been considered by the German Federal Court. We consider some of the arguments around potential routes to recognition in Germany below:
International insolvency law
In 2012, the German Federal Court noted that recognition under the German Insolvency Code was only available for “collective” foreign insolvency proceedings (followed in the present interim judgment). However, in 2021, the StaRUG was introduced in Germany as a partially collective pre-insolvency proceeding, albeit is treated as an insolvency proceeding under the European Insolvency Regulation (Regulation (EU) 2015/848) (EIR).
Additionally, since 2017, the EIR term “collective proceedings” has been explicitly defined as proceedings that include “all or a significant part of a debtor’s creditors.” As such, it may be possible to argue that, further to these developments in European and German restructuring law, the decision from the German Federal Court from 2012 is outdated and the German Insolvency Code may now reflect a broader understanding of the term “collective proceedings” in line with the EIR definition. The Frankfurt court did not consider these developments in its reasoning.
German civil procedural law
It is not clear whether the necessary “reciprocity” under German procedural law (as noted above) could be established with the English courts due to the so-called “Rule in Gibbs,” which essentially provides that a debt governed by English law cannot be discharged or affected by a foreign insolvency proceeding unless the creditor consents to submit to the relevant foreign jurisdiction. As such an English court would not, for example, recognize the effects of a German StaRUG that sought to compromise English law-governed debts.
Appellant German courts will have to assess the question whether the Rule in Gibbs provides a sufficient obstacle for recognition of German StaRUGs in England such that reciprocity may be questioned. The appellate courts will have to assess whether an “in principle” mutual recognition is sufficient, e.g., based on treaties between the UK and Germany.
Treaties between Germany and the UK
The Frankfurt court did not in their interim judgment consider whether bilateral treaties between Germany and the UK (such as the bilateral treaty between Germany and the UK on the recognition and enforcement of judgments in civil matters from 1960 (the 1960 Treaty) or multilateral conventions such as the 2019 Hague Judgments Convention (the “Hague Convention”)) could provide a basis for recognition between both jurisdictions and reciprocity for recognition of English restructuring plans.
However, this point has not been considered (at least post-Brexit) by the German courts, and the 1960 treaty as well as the Hague Convention both exclude insolvency and similar proceedings from its scope, which could potentially exclude English restructuring plans. For example, in Re Gategroup Guarantee Limited [2021] EWHC 304 (Ch), the English High Court found that a restructuring plan was an “insolvency proceeding” for the purposes of the 2007 Lugano Convention (and was therefore excluded from the scope of that convention), and a similar interpretation may apply to the 1960 Treaty.
