Provisional text
OPINION OF ADVOCATE GENERAL
RICHARD DE LA TOUR
delivered on 16 May 2024 (1)
Joined Cases C‑289/23 [Corván] and C‑305/23 [Bacigán] (i)
Agencia Estatal de la Administración Tributaria
v
A.
(Request for a preliminary ruling from the Juzgado de lo Mercantil no 1 de Alicante (Commercial Court No 1, Alicante, Spain))
and
S.E.I.
v
Agencia Estatal de la Administración Tributaria
(Request for a preliminary ruling from the Juzgado de lo Mercantil no 10 de Barcelona (Commercial Court No 10, Barcelona, Spain))
(Reference for a preliminary ruling – Directive (EU) 2019/1023 – Procedures concerning restructuring, insolvency and discharge of debt – Application for discharge of debt – Natural person who has become insolvent – Conditions of access to the discharge of debt – Claims covered by public law – Discharge ceiling)
I. Introduction
1. The requests for a preliminary ruling concern the interpretation of Article 23(2) and (4) of Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) 2017/1132 (Directive on restructuring and insolvency). (2)
2. The requests have been made in proceedings between natural persons who have become insolvent (‘the debtors’) and the Agencia Estatal de Administración Tributaria (State Tax Agency, Spain; ‘the AEAT’) concerning an application for discharge of debt made by the debtors during the insolvency proceedings relating to them. The AEAT objected to the applications for discharge of debt on the ground of the debtor’s bad faith (Case C‑289/23) or dishonesty (C‑305/23), stating that claims governed by public law were not dischargeable.
3. The present case provides the Court of Justice with an opportunity to clarify the scope of the discretion available to Member States when transposing Article 23(1), (2) and (4) of Directive 2019/1023, which provides that Member States must, respectively, lay down provisions denying or restricting access to discharge of debt in the case of the debtor’s dishonesty or bad faith, may deny or restrict such access because of certain aspects of the debtor’s conduct and may exclude certain specific categories of debt from the full debt discharge mechanism.
4. As requested by the Court, I will focus my analysis on part (d) of the second question in Case C‑289/23 which, in essence, concerns the scope of the discretion available to the Member States when transposing Directive 2019/1023 and, in particular, the possibility of circumscribing the discharge of debt relating to claims governed by public law within limits which are not connected with the actual amount of the debt.
5. In the present Opinion, at the conclusion of my analysis, I will propose that the Court’s reply to the Juzgado de lo Mercantil no 1 de Alicante (Commercial Court No 1, Alicante, Spain), the referring court in the present case, should be that the Member States may provide for a restriction of the discharge of debt, for specific categories of debt, in the form of a ceiling beyond which the discharge does not take place, provided that such limitation is duly justified.
II. Legal framework
A. European Union law
6. Article 23 of Directive 2019/1023, entitled ‘Derogations’, reads as follows:
‘1. By way of derogation from Articles 20 to 22, Member States shall maintain or introduce provisions denying or restricting access to discharge of debt, revoking the benefit of such discharge or providing for longer periods for obtaining a full discharge of debt or longer disqualification periods, where the insolvent entrepreneur acted dishonestly or in bad faith under national law towards creditors or other stakeholders when becoming indebted, during the insolvency proceedings or during the payment of the debt, without prejudice to national rules on burden of proof.
2. By way of derogation from Articles 20 to 22, Member States may maintain or introduce provisions denying or restricting access to discharge of debt, revoking the benefit of discharge or providing for longer periods for obtaining a full discharge of debt or longer disqualification periods in certain well-defined circumstances and where such derogations are duly justified, such as where:
(a) the insolvent entrepreneur has substantially violated obligations under a repayment plan or any other legal obligation aimed at safeguarding the interests of creditors, including the obligation to maximise returns to creditors;
(b) the insolvent entrepreneur has failed to comply with information or cooperation obligations under Union and national law;
(c) there are abusive applications for a discharge of debt;
(d) there is a further application for a discharge within a certain period after the insolvent entrepreneur was granted a full discharge of debt or was denied a full discharge of debt due to a serious violation of information or cooperation obligations;
(e) the cost of the procedure leading to the discharge of debt is not covered; or
(f) a derogation is necessary to guarantee the balance between the rights of the debtor and the rights of one or more creditors.
…
4. Member States may exclude specific categories of debt from discharge of debt, or restrict access to discharge of debt or lay down a longer discharge period where such exclusions, restrictions or longer periods are duly justified, such as in the case of:
(a) secured debts;
(b) debts arising from or in connection with criminal penalties;
(c) debts arising from tortious liability;
(d) debts regarding maintenance obligations arising from a family relationship, parentage, marriage or affinity;
(e) debts incurred after the application for or opening of the procedure leading to a discharge of debt; and
(f) debts arising from the obligation to pay the cost of the procedure leading to a discharge of debt.
…’
B. Spanish law
7. The law applicable rationae temporis to the disputes in the main proceedings is the Real Decreto Legislativo 1/2020 por el que se aprueba el texto refundido de la Ley Concursal (Royal Legislative Decree 1/2020 adopting the consolidated text of the Law on Insolvency) (3) of 5 May 2020, as amended by Ley 16/2022 de reforma del texto refundido de la Ley Concursal aprobado por el Real Decreto Legislativo 1/2020, de 5 de mayo, para la transposición de la [Directiva 2019/1023] (Law 16/2022 amending the consolidated text of the Insolvency Law approved by Royal Legislative Decree 1/2020 of 5 May 2020 for the transposition of [Directive 2019/1023]), (4) of 5 September 2022 (‘the TRLC’).
8. The preamble to that law states:
‘…
Where the insolvent debtor is a natural person, the insolvency procedure is intended to identify debtors of good faith and offer them a partial discharge of their debt, thereby enabling them to benefit from a second chance and preventing them from falling into the black economy or living in the margins.
…
One of the most radical changes in the new legislation is that, instead of subordinating discharge to the settlement of a certain type of debt (as provided for in Article 487(2) of the [TRLC before those changes]), a merit-based discharge system is adopted in which any debtor, whether or not he or she is an entrepreneur, provided that the debtor fulfils the requirement of good faith on which that institution is based, can have access to full discharge of his or her debts, except for those which, exceptionally and owing to their special nature, are regarded as not being legally dischargeable. The option, already accepted by the Spanish legislature in 2015, to grant a discharge to any debtor who is a natural person of good faith, whether or not that person is an entrepreneur, is maintained.
…
The debtor’s good faith remains the cornerstone of the discharge system. In accordance with the recommendations of international bodies, a legislative delimitation of good faith is established, by reference to certain objective types of conduct which are exhaustively listed (numerus clausus), without having recourse to vague or insufficiently specific patterns of behaviour, or those which place an impossible burden of proof on the debtor …
…
The discharge of debt shall apply to all claims under insolvency proceedings and claims against assets. Exceptions shall be based, in certain cases, on the particular importance attached to them being paid in a just and cohesive society based on the rule of law (such as maintenance debts, debts arising from claims governed by public law, debts arising from criminal offences or debts arising from tortious liability). Thus, the discharge of debt in respect of claims governed by public law is subject to certain limits and can only take place at the time of the initial discharge of debt, and not at the time of subsequent discharges …
…’
9. Article 486 of the TRLC provides:
‘A debtor who is a natural person, whether or not he or she is an entrepreneur, may apply for the discharge of unpaid debts under the terms and conditions laid down in this law, provided that that person is a debtor of good faith:
(1) by submitting to a payment plan without prior liquidation of assets, in accordance with the debt discharge system referred to in subsection 1 of Section 3 below; or
(2) by liquidating assets, in which case the discharge will be subject to the system provided for in subsection 2 of Section 3 below, if the cause of the closure of the insolvency proceedings is the conclusion of the asset liquidation phase or its insufficiency to meet the claims against those assets.’
10. Article 489 of the TRLC reads as follows:
‘1. The discharge of debt shall apply to all unpaid claims, with the exception of the following:
…
(5) Debts arising from claims governed by public law. However, debts for which the management of recovery falls within the competence of the [AEAT] may be discharged up to the maximum amount of EUR 10 000 per debtor; for the first EUR 5 000 of debt, a full discharge will be given and, from that amount and above, the discharge shall be 50% of the debt up to the maximum indicated. Similarly, social security debts may be discharged in respect of the same amount and under the same conditions. The amount discharged, up to the abovementioned ceiling, shall be applied in reverse order to the order of priority legally established by this law and, within each class, in accordance with seniority;
…
3. A claim under public law may be discharged up to the amount laid down in the second sentence of paragraph 1(5), but only at the time of the initial discharge of debt and no amount may benefit from a discharge at the time of subsequent discharges which the same debtor may obtain.’
III. The facts of the cases in the main proceedings and the questions referred for a preliminary ruling
A. Case C‑289/23
11. On 7 July 2022, A. filed an application for a declaration of insolvency and declared debts in the amount of EUR 537 787.69. After the referring court declared, on 26 July 2022, that debtor’s insolvency and terminated the insolvency proceedings on the ground of insufficiency of assets, that debtor applied for a full discharge of debts on 28 September 2022. On 19 October 2022, that court declared admissible the AEAT’s objection to the discharge of debts on the ground that a number of claims governed by public law remained outstanding.
12. The AEAT submits, first, before the referring court that the reason for refusing access to the discharge of debts was the existence, for less than 10 years, of a final decision extending liability for a total of EUR 114 408.09 of tax debts and penalties payable by the company of which the debtor had been director, and that, therefore, the debtor did not act in good faith. It adds, second, that some of the claims are governed by public law and are therefore excluded from the discharge of debt.
13. That court has doubts as to the manner in which the Spanish legislature transposed Directive 2019/1023, in the first place, regarding the concept of ‘good faith’, which is a condition for access to the discharge of debt and which is objectively defined (in particular, not having liability extended in the 10 years preceding the application for discharge), and, in the second place, regarding the exclusion of claims under public law.
14. On the latter point, the referring court states that, under Spanish law, claims governed by public law for which the management of recovery falls within the competence of the AEAT and of the Tesoreria General de la Seguridad Social (Geneal Social Security Treasury, Spain) may be partly discharged. In the case of such claims, the discharge is limited to EUR 10 000 per debtor, it being made clear that, for the first EUR 5 000, a full discharge will be given and that, from that amount and above, the discharge will be 50% of the debt up to the maximum amount of EUR 10 000. The amount discharged is applied in reverse order to the order of priority legally established and, within each category of debt, in accordance with seniority.
15. The referring court has doubts, in particular, about the lack of proportionality of the discharge of debt authorised by the law in relation to the total amount of the liabilities, which is likely to render the discharge ineffective.
16. In those circumstances, the Juzgado de lo Mercantil no 1 de Alicante (Commercial Court No 1, Alicante) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1) (a) Must Article 23(2) of [Directive 2019/2023] be interpreted as precluding national legislation which prevents access to discharge of debt as provided for in point 2 of Article 487(1) of the [TRLC], in so far as that limitation was not included in the legislation in force prior to the transposition of the directive conferring the entitlement to discharge of debt and was introduced ex novo by the legislature? In particular, may the national legislature, when transposing the directive, establish more stringent restrictions on access to discharge of debt than those laid down in the previous legislation, especially where that limitation does not correspond to any of the circumstances listed in Article 23(2) of [that] directive?
(b) If the Court’s answer to the previous question is in the negative, must Article 23(2) of [Directive 2019/1023] be interpreted as precluding national legislation which prevents access to discharge of debt [“]where, in the 10 years preceding the application for a discharge, [the debtor] has been penalised by [a] final administrative decision for very serious tax offences, for social security offences or for labour offences, or where, in the same period, a final decision to enforce secondary liability has been handed down against the debtor, unless, on the date on which the application for a discharge is made, he or she has met his or her liability in full[”] (point 2 of Article 487(1) of the TRLC), in so far as that ground for preventing access to discharge of debt alters the rules on the classification of insolvency claims?
(c) If the Court’s answer to the previous question is in the negative, must Article 23(2) of [Directive 2019/1023] be interpreted as precluding national legislation which prevents access to discharge of debt as provided for in point 2 of Article 487(1) of the TRLC [“]where […] a final decision to enforce secondary liability has been handed down against the debtor, unless, on the date on which the application for a discharge is made, he or she has met his or her liability in full[”], in so far as that circumstance is not such as to establish bad faith on the part of the debtor? Is it relevant in that regard that the insolvency was not found to be fault based?
(d) If the Court’s answer to the previous question is in the negative, must Article 23(2) of [Directive 2019/1023] be interpreted as precluding national legislation which prevents access to discharge of debt as provided for in point 2 of Article 487(1) of the TRLC where decisions on offences or on enforcement of secondary liability have been handed down or issued in the 10 years preceding the application for discharge, without taking account of the date of the event giving rise to liability or the possible delay in the adoption of the decision to enforce secondary liability?
(e) If the Court’s answer to the previous questions is in the negative, must Article 23(2) of [Directive 2019/1023] be interpreted as precluding national legislation which prevents access to discharge of debt as provided for in point 2 of Article 487(1) of the TRLC in so far as the national legislature did not state proper reasons for that limitation?
(2) (a) Must Article 23(4) of [Directive 2019/1023] be interpreted as precluding a provision such as that laid down in point 2 of Article 487(1) of the TRLC establishing grounds preventing access to discharge of debt which are not included in the list set out in Article 23(4)? In particular, must the list of grounds in Article 23(4) be interpreted as a numerus clausus or, by contrast, is it a numerus apertus?
(b) In so far as the list is a numerus apertus and it is open to the national legislature to establish exceptions other than those provided for in the directive, does Article 23(4) of [Directive 2019/1023] preclude national legislation which lays down a general rule that claims governed by public law are excluded from discharge except in very limited circumstances and for very limited amounts, irrespective of the nature and circumstances of specific debts governed by public law? In particular, is it relevant in the present case that the previous legislation, as interpreted by the Tribunal Supremo (Supreme Court, Spain) in its case-law, allowed the discharge of public claims to some extent and that the transposing provisions restricted the scope of discharge?
(c) If the Court’s answer to the previous question is in the negative, must Article 23(4) of [Directive 2019/1023] be interpreted as precluding a national provision such as that laid down in point 5 of Article 489(1) of the TRLC which lays down a general rule that public claims are excluded from discharge (subject to certain exceptions considered in the next question), in so far as it treats public creditors more favourably than other creditors?
(d) In particular, and in connection with the previous question, is it relevant that the legislation makes some provision for the discharge of public claims, but only for certain debts and within specific limits which are unrelated to the actual amount of the debt?
(e) Finally, must Article 23(4) of Directive [2019/1023] be interpreted as precluding a provision such as that laid down in point 5 of Article 489(1) of the TRLC, in so far as [the exclusion of] discharge [of claims governed by public law] is justified by [“]the particular importance of meeting those claims in achieving a fair and mutually supportive society founded on the rule of law[”], and refers generally to public claims without taking account of the specific nature of the claim? In particular, is it relevant in that regard that the generic justification is used for the debts listed in Article 23(4) of the directive and for circumstances or debts which do not appear in those lists?’
B. Case C‑305/23 (as a reminder)
17. In judicial liquidation proceedings which resulted, in particular, in the sale of his home, S.E.I., a natural person, applied for a discharge of debts as well as proposing a plan to clear the debts which, in his view, could not be discharged. The AEAT objected to that application on the grounds that S.E.I., during the 10 years preceding the application for discharge, had been penalised by a final administrative decision (fine of EUR 504.99) for very serious tax offences and that the penalty had not been imposed at the time of the application for a discharge.
18. In those circumstances, the Juzgado de lo Mercantil no 10 de Barcelona (Commercial Court No 10, Barcelona, Spain) decided to stay the proceedings and to refer a series of questions to the Court of Justice which are not relevant to the matters considered in this Opinion.
19. By decision of the President of the Court of 21 June 2023, Cases C‑289/23 and C‑305/23 were joined for the purposes of the written and oral procedures and of the judgment.
20. S.E.I., the Spanish Government and the European Commission submitted written observations.
IV. Analysis
21. As requested by the Court, my analysis will be focused on part (d) of the second question of Case C‑289/23, by which the referring court seeks to ascertain, in essence, whether the discretion of the Member States when transposing Directive 2019/1023 allows them to circumscribe the discharge of claims governed by public law within limits which are not connected with the actual amount of the debt.
22. This case, beyond the question of the type of category of debt that cannot be subject to a discharge of debt which was recently settled by the Court, (5) raises the question of the quantitative extent of the exclusion from that discharge.
23. The referring court’s question shows that it has doubts about the method involving a double threshold of EUR 5 000 and 10 000 adopted by the Spanish legislature for the discharge of tax or social security debt without taking into account the total amount of the tax or social security debt in question.
24. In its observations, the Commission is entirely of the same opinion, stating that, although that limitation is going in the right direction, it is not certain that it is sufficient to comply with Article 23(4) of Directive 2019/1023. It adopts the referring court’s argument in favour of compliance with the principle of proportionality with regard to the total amount of the debt in implementing the exclusion from discharge of debt.
25. By way of reminder, that directive obliges the Member States to ensure that insolvent entrepreneurs have access to at least one procedure that can lead to a full discharge of debt. (6) That article does not require the Member States to ensure that the debt of insolvent entrepreneurs is fully discharged.
26. Moreover, Article 23 of Directive 2019/1023 lists a certain number of situations which may lead to denial or restriction of access to discharge of debt, to provision for longer periods for obtaining a discharge of debt or longer disqualification periods, either because the debtor acted dishonestly or in bad faith (paragraph 1), or because of other aspects of the debtor’s conduct (paragraph 2), or because of the nature of the debt concerned (paragraph 4) or because of the entrepreneur’s profession (paragraph 5).
27. However, the Court has ruled that Article 23(4) of Directive 2019/1023 must be interpreted as meaning that the list of specific categories of debt set out therein is not exhaustive and that the Member States have the power to exclude specific categories of debt other than those listed in that provision from discharge of debt in duly justified cases. (7)
28. Therefore, the Member States may add specific categories of debt to the six categories referred to in that Article 23(4).
29. The same holds true for Article 23(2) of Directive 2019/1023, which lays down a list of six types of conduct which may, inter alia, have an effect on discharge of debt. The Member States may also add to that list.
30. Therefore, the number of derogations from discharge of debt can be high, since the Member States have a broad discretion in the matter in order to take account of their legal systems, given the impact that such rules can have.
31. The Court has stated that the EU legislature expressly made the exercise of the power thus granted in Article 23(4) of Directive 2019/1023 subject to the condition that such exclusions be ‘duly justified’. It has added that, when the national legislature adopts such derogations, the reasons for those derogations must derive from national law or from the procedure which led to them and that those reasons must pursue a legitimate public interest. (8)
32. Consequently, the broad discretion which the Member States have to add specific categories of debt is circumscribed by those two requirements, namely the existence of a justification in national law and the pursuit of a legitimate public interest.
33. Moreover, the wording of Article 23(4) of Directive 2019/1023 indicates that, for specific categories of debt, the Member States may provide for an exclusion from discharge of debt, restrict access to discharge of debt or lay down a longer discharge period where such exclusions, restrictions or longer periods are duly justified.
34. Thus, the EU legislature not only allows total exclusion from discharge of debt, but also makes no reference to a particular means of restricting access to discharge (ceiling, proportion, thresholds with variations in proportion) where the exclusion is only partial, which confirms once again the broad discretion left to the Member States and the lack of harmonisation in the matter.
35. It would, in any event, be paradoxical to limit the discretion of the Member States more in the case of restrictions than for exclusion.
36. Consequently, although a restriction on discharge of debt which is proportionate to the total amount of the debt is conceivable, there is nothing to prevent recourse to a ceiling on the discharge of debt, provided that one or other method is duly justified. A maximum limit on discharge of debt may encourage a more rapid response from an entrepreneur faced with an increasing amount of debt. That entrepreneur will know that, beyond that threshold, without a response on his or her part, the discharge will not take place.
37. The only reference to proportion is in Article 20(2) of Directive 2019/1023, in the case where a discharge of debt is conditional on a partial repayment of debt by the entrepreneur. In that case, the repayment obligation must be based on the individual situation of the entrepreneur and, in particular, be proportionate to the entrepreneur’s disposable income and assets during the discharge period, and take into account the equitable interest of creditors.
38. I do not think that that reference to a proportion between the entrepreneur’s partial repayment and his or her disposable income and assets in that very specific case is sufficient to constitute an obligation on the Member States where they are considering restrictions on discharge of debt.
39. The application, by the Member States, of the principle of proportionality when transposing Directive 2019/1023 does not necessitate use of a discharge of debt proportionate to the liabilities instead, for example, of a maximum limit on discharge of debt. On the other hand, that principle requires those States to use proportionate means to achieve the aim pursued by that directive, namely the existence of a procedure that can lead to the full discharge of the insolvent entrepreneur’s debt. It is therefore for each Member State to assess, on the basis of its insolvency law, property security law, matrimonial property regimes and tax law, how that procedure can be integrated into an overall system, bearing in mind that the directive itself does not ignore the balance between the rights of the debtor and the rights of one or more creditors. (9)
40. Nonetheless, in so far as Directive 2019/1023 does not harmonise exclusions from discharge of debts and the modalities of such exclusions, it is for each Member State to establish them provided, however, that the rules relating to them are not less favourable than those governing similar domestic situations (principle of equivalence) and that they do not make it excessively difficult or impossible in practice to exercise the rights conferred by EU law (principle of effectiveness). (10)
41. It seems to me that that directive is a directive seeking a minimum level of harmonisation, the objective of which is the introduction in each Member State of a procedure for the full or partial discharge of debt with respect to which the modalities of restricting that discharge are largely left to the discretion of the Member States, provided that such restrictions, in accordance with the principle of effectiveness, are duly justified and derive from national law or from the procedure which led to them.
42. I therefore propose that the answer to part (d) of the second question referred for a preliminary ruling in Case C‑289/23 should be that Article 23(4) of Directive 2019/1023 must be interpreted as meaning that the restriction of discharge of debt, for a specific category of debt, by establishing a ceiling beyond which no discharge will take place, is possible provided that such restriction is duly justified under national law or under the procedure which led to it.
V. Conclusion
43. In the light of all of the foregoing considerations, I propose that the Court should answer part (d) of the second question referred for a preliminary ruling by the Juzgado de lo Mercantil no 1 de Alicante (Commercial Court No 1, Alicante, Spain) in Case C‑289/23 as follows:
Article 23(4) of Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) 2017/1132 (Directive on restructuring and insolvency)
must be interpreted as meaning that the restriction of discharge of debt, for a specific category of debt, by establishing a ceiling beyond which no discharge will take place, is possible provided that such restriction is duly justified under national law or under the procedure which led to it.