[1] In a case where a creditor of a company, for which a reorganization proceeding was commenced in a foreign country, exercises or realizes his/her right to property within the Republic of Korea, whether the company is subject to prohibition or restriction due to its original effect (negative)

[2] The elements required to determine "a judicial claim may be filed under the Civil Procedure Act" which is deemed within the Republic of Korea pursuant to Article 4 (3) of the former Company Reorganization Act

[3] In cases where a company, for which reorganization proceedings are commenced in a foreign country, holds a claim against a reorganization creditor in the Republic of Korea with a court in the Republic of Korea, whether the effect of prohibition and restriction of set-off under the Foreign Bankruptcy Act in offsetting the claim against the reorganization claim with multiple claims (negative)

[1] Article 4 (2) of the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005) explicitly provides that the effect of reorganization proceedings commenced in a foreign country shall be subject to the so-called "the so-called "definite principle" as to the effect of reorganization proceedings commenced in that foreign country. Thus, separate from whether an administrator of a reorganization company, who has been appointed after the commencement of reorganization proceedings in a foreign country, may acquire the right to manage and dispose of the assets of the reorganization company in the Republic of Korea pursuant to the laws of that country, the reorganization company shall prohibit and restrict the exercise of individual creditors' rights, etc., and shall take special measures under the bankruptcy procedure to preserve and recover the reorganization company or the bankrupt foundation's property, such as changing the rights of creditors and shareholders, and the original effect of foreign reorganization proceedings granted to maintain and reconstruct the business through the reorganization plan shall not affect the assets within the Republic of Korea. Accordingly, the effect of the reorganization proceedings commenced in a foreign country shall not be prohibited or restricted by its original effect.

[2] Article 4 (3) of the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005) provides that "a claim that can be filed in court under the Civil Procedure Act shall be deemed to be located in the Republic of Korea." In this context, in order for a claim to be filed in court pursuant to the Civil Procedure Act, the international jurisdiction shall be recognized in the court of the Republic of Korea with respect to the lawsuit which is the subject matter of lawsuit, and in such case, the original effect of foreign reorganization proceedings shall not extend to such claim pursuant to Article 4 (2) of the same Act.

[3] Even if a foreign bankruptcy law has commenced a reorganization proceeding in a foreign country, and a creditor of the company is participating in the reorganization proceeding in that foreign country, if the company's claim can be filed with a Korean court in the Republic of Korea, the company's creditor shall not be subject to the effect of prohibition and restriction of set-off as provided by the foreign bankruptcy law if the creditor of the company can set off the company's claim against himself/herself with the passive claim.

[1] Article 4 (2) of the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005) / [2] Article 4 (2) (current deleted) and (3) (current deleted) of the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005) / [3] Article 4 (2) (current Deletion) and (3) (current deleted) of the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005)

Korea Asset Management Corporation (Law Firm Squae, Attorneys Gyeong-jin et al., Counsel for the plaintiff-appellant)

Suwon Automobile Co., Ltd. (Law Firm, Kim & Lee, Attorneys Noh Young-soo et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2004Na89525 decided April 19, 2006

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. As to the effect of reorganization proceedings commenced overseas:

A. Article 4(2) of the former Company Reorganization Act (repealed by Article 2 of the Addenda to the Debtor Rehabilitation and Bankruptcy Act, Act No. 7428 of March 31, 2005) provides that "the reorganization proceedings commenced in a foreign country shall have no effect on any property located in the Republic of Korea," and it is interpreted that "the reorganization proceedings commenced in a foreign country" means bankruptcy proceedings similar to those of the former Company Reorganization Act in terms of its purpose, character, structure, etc., and it does not necessarily require any similar name. As such, Article 4(2) of the former Company Reorganization Act provides that "the so-called "the so-called "the so-called principle" is adopted with respect to the validity of the reorganization proceedings commenced in a foreign country, regardless of whether an administrator appointed after the commencement of the reorganization proceedings in a foreign country can acquire or restrict the right of individual creditors to manage and dispose of the property of the reorganization company located in the Republic of Korea under the laws of that country, and the effect of the reorganization proceedings commenced in the foreign country can be taken to preserve and recover property of the reorganization company or bankrupt foundation.

B. Article 4(3) of the former Company Reorganization Act provides that “The claims entitled to a judicial claim under the Civil Procedure Act shall be deemed to be located in the Republic of Korea.” In order to acknowledge a judicial claim under the Civil Procedure Act, the international jurisdiction shall be acknowledged in respect of the lawsuit which is the subject matter of the lawsuit, and in such a case, the claims shall not have the original effect of foreign reorganization proceedings in accordance with Article 4(2) of the former Company Reorganization Act. However, where a foreign bankruptcy law prohibits or restricts an offset under certain conditions after the commencement of reorganization proceedings, the purport thereof is to allow the offset of individual creditors to be paid in preference to other creditors, thereby impairing equity among the creditors, or where it would hinder the smooth progress of the procedures such as the preparation of a reorganization plan, etc., or where it is necessary to prevent and realize the reorganization proceedings, the effect of such prohibition or restriction under the Foreign Bankruptcy Act shall be set-off against the claims of the foreign company established in the Republic of Korea and its original effect, even if the claims of the foreign creditor are set-off against such foreign company.

2. As to whether the offset in this case is invalidated by the application of the German Bankruptcy Act

가. 원심이 적법하게 확정한 사실에 의하면, 독일 브레멘 구법원(Amtsgericht Bremen)은 2000. 2. 1. 대우 아우토모빌 도이칠란트 게엠베하(DAEWOO Automobile Deutschland GmbH, 이하 ‘대우독일법인’이라고 한다)에 대하여 도산절차(이하 ‘독일도산절차’라고 한다)를 개시하고, 대우독일법인에 대한 관리인으로 에드가 그뢴다(Edgar Gronda)를 선임한 사실, 원고는 대우독일법인에 대한 유럽연합 통화 52,810,858.13 유로의 채권을 가진 채권자로서 독일도산절차에 참가하였으며, 대우자동차 주식회사(이하 ‘대우자동차’라고 한다)도 독일도산절차개시의 신청 전에 수출한 차량에 대한 수출대금 채권으로서 대우독일법인에 대하여 직접 청구할 수 있는 78,392,944.03 유로를 정리채권으로 신고하면서 도산절차에 참가한 사실, 대우독일법인의 관리인은 그 후 도산정리계획안을 마련하여 독일 브레멘 구법원에 인가를 신청하였고, 위 법원은 2002. 9. 25. 채권자회의 등을 거쳐 도산정리계획안을 인가한 사실, 그 인가된 도산정리계획은, 원고의 채권은 제1순위 채권으로 분류하고 총 21,594,000 유로를 변제하되, 대우독일법인이 도산절차 개시 후 관리인의 주도하에 사업활동을 재개하여 대우자동차로부터 취득한 또는 앞으로 취득할 보증수리대금 채권으로서 대우자동차가 그 지급을 보증하였음에도 불구하고 이를 실행하지 아니한 채권을 원고에게 양도하는 것으로 대체할 수 있도록 규정하고, 대우자동차의 위 78,392,944.03 유로 상당의 수출대금 채권에 대하여는 다른 청구권에 대하여 가장 후순위인 제4순위 채권으로 분류하고, 그 변제가 면제되는 것은 아니고 전체 금액 그대로 존속하기는 하지만 그 지급이 유예되며, 도산절차 내에서는 어떠한 변제도 이루어지지 않고, 도산절차 종료 후 대우독일법인과 추가 협상을 통하여 그 처리 여부를 결정하도록 규정하고 있는 사실, 대우자동차는 2000. 11. 10. 회사정리절차를 신청하여, 같은 달 30. 인천지방법원으로부터 회사정리절차 개시결정을 받은 사실, 원고는 대우독일법인의 도산정리계획에 따라 대우독일법인이 대우자동차로부터 지급받지 못한 합계 5,987,723.70 유로 상당의 수리대금 채권(이하 ‘이 사건 수리대금 채권’ 이라고 한다)을 양도받고, 2004. 6. 15. 대우독일법인의 관리인으로부터 대리권한을 부여받아 정리회사 대우자동차 주식회사(이하 ‘정리회사’라고 한다)의 관리인 소외인(이하 ‘정리회사의 관리인’이라고 한다)에게 그 채권양도 사실을 통지한 사실, 정리회사의 관리인은 이 사건 2004. 5. 14.자 준비서면의 송달로써 대우독일법인의 독일도산절차에서 정리채권으로 신고한 78,392,944.03 유로(위 준비서면에는 위 금액을 ‘78,392,244.03 유로’라고 표시하고 있으나, 이는 ‘78,392,944.03 유로’의 오기로 보인다.) 상당의 수출대금 채권을 자동채권으로 하고 원고가 양수한 독일도산법인의 이 사건 수리대금 채권 전체를 수동채권으로 하여 상계의 의사표시를 한 사실 등을 알 수 있다.

B. We examine the above legal principles and the above facts in light of the above legal principles. To the extent that the principal office of the reorganization company is located in the Republic of Korea and so long as it can be seen that the international jurisdiction of the lawsuit seeking payment of the repair payment exists in the Republic of Korea, the liquidation company's principal office is allowed to file a judicial claim with the court of the Republic of Korea pursuant to Article 4 (3) of the former Company Reorganization Act, and the claim is regarded as a property within the Republic of Korea pursuant to Article 4 (2) of the former Company Reorganization Act. Article 96 (1) 1 of the former Company Reorganization Act provides that the original effect of the reorganization procedure commenced in a foreign country under Article 4 (2) of the former Company Reorganization Act shall not be offset against the reorganization claim if the bankruptcy creditor bears any obligation against the bankrupt foundation after the commencement of the bankruptcy procedure. However, this provision provides that the reorganization claim cannot be offset against the automatic claim, so long as the effect of the above German liquidation procedure does not reach the validity of the above offset claim against the repair price.

Nevertheless, the court below held that the offset against the claim for the repair price of this case that the receiver of the reorganization company acquired by the plaintiff using the export price claim amounting to the above 78,392,24.03 as the automatic claim is not an issue as to whether it is possible to individually enforce the repair price claim of this case, and thus, the judgment below held that the above offset is not effective as it is in violation of the prohibition of offset under Article 96 (1) 1 of the German Bankruptcy Act, on the premise that since there is no room for application of Article 4 (2) and (3) of the former Company Reorganization Act, since it is not an issue as to whether it is possible to enforce the individual compulsory execution against the property held in Korea. The judgment below erred by misapprehending the legal principles on the interpretation and application of Article 4 (2) and (3) of the former Company Reorganization Act, which affected the conclusion of the judgment. The ground for appeal pointing this out

3. Conclusion

Therefore, without examining the remaining grounds of appeal, the judgment of the court below is reversed, and the case is remanded to the court below. It is so decided as per Disposition by the assent of all participating Justices.

Justices Kim Nung-hwan (Presiding Justice)