About the res judicata authority of the reorganization plan and/or of the measures taken by the judiciary administrator or liquidator within the frame of the insolvency procedure

Author:Ioan Schiau
Position:Professor, Ph.D. at Faculty of Law of the Transilvania University of Brasov
Pages:219-226
SUMMARY

This paper examines the legal force of various procedural acts delivered within the frame of the insolvency procedure as regulated by Law 85/2014. The study aims to assert the res judicata effects of the syndic judge judgments and to find out if the related procedural acts approved or scrutinized by the syndic judge or issued by the insolvency administrator or liquidator during the insolvency procedure enjoy such effects, concluding that, while not all these acts enjoy res judicata, all of them have binding legal force upon all participants to the procedure and even upon third parties.

 
CONTENT
About the res judicata authority of the reorganization plan and/or… 219
ABOUT THE RES JUDICATA AUTHORITY
OF THE REORGANIZATION PLAN AND/OR
OF THE MEASURES TAKEN BY THE JUDICIARY
ADMINISTRATOR OR LIQUIDATOR WITHIN THE FRAME
OF THE INSOLVENCY PROCEDURE*
Ioan SCHIAU**
Abstract: This paper examines the legal force of various procedural acts delivered within the
frame of the insolvency procedure as regulated by Law 85/2014. The study aims to assert the res
judicata effects of the syndic judge judgments and to find out if the related procedural acts approved
or scrutinized by the syndic judge or issued by the insolvency administrator or liquidator during the
insolvency procedure enjoy such effects, concluding that, while not all these acts enjoy res judicata,
all of them have binding legal force upon all participants to the procedure and even upon third
parties.
Key words: Private Law, Civil Procedural Law, Insolvency Procedure, Res Judicata,
Reorganization Plan, Procedural Acts, Administrator/Liquidator
Introduction
As it was noted in the dominant doctrine, the basic principle of res judicata (in
Romanian Language - autoritate de lucru judecat), while enjoying a wide recognition
in international law and case law, it varies, in terms of application, as between
jurisdictions. While the common law jurisdictions are dividing the effects of res
judicata in two categories (regarding the cause of the action and the issues already
decided in previous proceedings), many civil law jurisdictions apply res judicata
only to the cause of action and only to the dispositive part of the judgment or
award, not to the reasons1. Nevertheless, since it is concerning the effects of the
judgments or awards, the res judicata is governed by lex fori.
* The article was prepared for the International Law Conference, "Current Issues within EU and
EU Member States: Converging and Diverging Legal Trends", 3rd edition, held in Braşov (Romania)
and organized by the Faculty of Law – Transilvania University of Braşov on the 29th and 30th of
November 2019. All links were last accessed on 4 November 2019.
** Professor, Ph.D. at Faculty of Law of the Transilvania University of Brasov (schiau@schiau-
prescure.ro).
1 See Redfern and Hunter on International Arbitration, Oxford University Press, Fifth Edition, 2015,
p. 559, para. 9.174.
Law Review special issue, Decembre 2019, pp. 219-226
220 IOAN SCHIAU
According to Article 430 para. (1) and (2) of the Romanian Civil Procedure
Code (RCPC), the judgments deciding on the merits of the case or on a procedural
exception or incident enjoys res judicata (autoritate de lucru judecat), as from its
issuance date, in what regards both the dispositive part and the reasoning of the
judgment.2
The res judicata effects concern both the cause of the action (the negative or
preclusive effect, preventing the parties to file the same action against the same
party, in the same quality, for the same cause and object) and the legal issues
decided (the positive or the conclusive effect, allowing the parties to invoke the
legal issues previously decided, if they are in relation with the solution of the latter
file).3
While these texts are only making reference to the state court judgments, there
is a unanimous understanding that arbitral awards, having a final and binding
effect4, are also subject to the res judicata.
1. The Judgments of the Syndic Judge and the Reorganization Plan
The insolvency procedure is a judicial procedure, that meaning that it is
organized and supervised, according to the law, by the judicial power. Within the
frame of the insolvency procedure, the competent court (Tribunalul) will perform
its legal responsibilities through the syndic judge, which is a specialized
magistrate, assigned to an insolvency case, in accordance with the rules of judicial
organization.
According to Article 45 of the Insolvency Law5, the syndic judge will render
various judgments in order to decide upon the matters brought to his/her
attention, like the opening or closing of the procedure or the ruling upon different
requests filed by the debtor, the administrator/liquidator or creditors. All the
judgments handed down by the syndic judge are, undeniably, enjoying the res
judicata effect, insofar they are deciding, in whole or in part, on the merits of the
case or are ruling on a processual exception or any other procedural incident.
According to Insolvency Law, the judicial reorganization of the insolvent
debtor aims to allow for the payment of its debts in accord with a reorganization
2 Article 430 para (1) and (2) RCPC read as follows: (1) The court judgment that is deciding, in whole
or in part, on the merits of the case or it is ruling on a processual exception or any other incident, has, as from its
issuance, res judicata regarding the decided issue. (2) Res judicata regards the dispositive part as well as the
reasons on which it is based, including those that are deciding on a litigious matter.
3 Article 431 para (1) and (2) RCPC read as follows: (1) No one can be sued twice, in the same quality,
for the same cause and for the same object. (2) Any of the parties may oppose the issue previously decided in
another litigation, if it is related to the solution of the latter.
4 Article 606 RCPC reads as follows: The arbitral award communicated to the parties is final and
binding.
5 Insolvency Law is Law no. 84/2006 regarding the insolvency procedure, under whose imperium
was opened the insolvency procedure of the Claimant.
About the res judicata authority of the reorganization plan and/or… 221
plan, which may provide (a) for operational or financial restructuring of the
debtor, (b) for corporative restructuring through the modification of the share
capital as well as (c) for contraction of the activity of the debtor through total or
partial liquidation of the debtor estate [Article 3 (1) pt. 54 of the Insolvency Law].6
The reorganization plan is approved by the creditors assembly and it is
confirmed by the syndic-judge, who is endorsing the reorganization plan by
rendering a judgment (the Confirmatory Judgment), which, according to the law
[Article 46 (1) of the Insolvency Law], is executory and is subject only to appeal.
Without any doubt, the Confirmatory Judgment of the syndic-judge is
enjoying every effect of a court decision, including the res judicata authority. Article
430 RCPC states that the court decision that resolves, in whole or in part, the
substance of the case or it is ruling on a procedural exception or on any other
incident has, as from the ruling, the res judicata authority on the settled issue. The
res judicata authority concerns both the dispositive part as well as the reasoning
that decisively supports the solution, including those considerations through
which a litigious issue has been resolved.
According to Article 431 RCPC there are two main effects of the res judicata
authority: one negative and one positive. The negative one is that nobody may be
sued twice in same quality, for the same cause and for the same object. The
positive one is that any party may oppose the matter judged in another previous
case, if it has a connection with the latter case.
As any other judgment, the Confirmatory Judgment is enjoying res judicata
authority both for the solution givens as well as for the decisive consideration on
which that solution is grounded. That effect is a temporary one starting from the
ruling until the solution of the appeal and a final one from the moment when the
Confirmatory Judgment has become definitive.
Under these circumstances, the problem that needs an answer is if the
reorganization plan confirmed through the Confirmatory Judgment is enjoying the
same res judicata effects as the judgment itself? There are several arguments that
support a rather affirmative but nuanced answer to that question.
As soon as the judgment delivered by the syndic-judge has entered into force,
the creditors’ claims and rights are amended according to the previsions of the
plan [Article 140 (1) of the Insolvency Law]. That means that the provisions of the
6 Article 5 (1) pt. 52 of Insolvency Law reads as follows: The judicial reorganization is that procedure
that is applied to the insolvent debtor, legal person, for the pa yment of its debts, according to the claims’ payment
programme. The reorganization procedure involves th e preparation, approval, confirmation, implementation and
compliance of a plan, called a reorganization plan, which may provide, without limitation, together or separately:
a) the operational and/or financial restructuring of the debtor; b) the corporative restructuring through the
modification of the share capital; c) the contraction of the activity of the debtor through total or partial
liquidation of the debtor estate
222 IOAN SCHIAU
reorganization plan attain legal force as results of their sanction through a court
judgment, delivered in the conditions provided by the law7.
As mentioned in the legal doctrine, this effect is not a result of the approval of
the plan by the assembly or meeting of the creditors, but a direct consequence of
the confirmation given by the syndic-judge to the plan. As long as the syndic-judge
does not proceed to the analysis of the compliance of the plan and of the voting by
the creditors with the mandatory requirements of the law, validating the whole
procedure by his/her judgment, the vote of the various creditors’ categories does
not have the power to generate the reorganization, even if the plan is approved by
those creditors.8
Another legal scholar mentioned that, as a result of its confirmation through a
definitive judgment, the reorganization plan becomes mandatory for the debtor
and all his/her creditors whose claims are born before the opening of the
insolvency procedure, even if part of the creditors have voted against the plan.9
On the other hand, as a legal scholar, I have mentioned10 that the judgment
confirming the plan is similar to the court decision validating the agreement of the
parties to end or to settle a court or out of court dispute, as provided for by Article
438 RCPC. But, unlike the later judgment, which is incorporating the parties’
settlement the Confirmatory Judgment does not incorporate the reorganization
plan, which is still attached to the confirmation judgment, although not necessarily
in its substance.
Although, when confirming the reorganization plan, the syndic-judge is not
analysing its intrinsic merits but, merely, the meeting of all the conditions required
by the law in order to reach that stage of the procedure, he is entitled to take the
opinion of an insolvency specialist regarding the feasibility of the plan and,
consequently, to reject the confirmation of the plan if the specialist’s opinion is
negative.
In this regard, the Romanian courts have determined that the syndic judge
may refuse to confirm the plan only when the plan is missing, obviously,
mandatary mentions provided by the law or when the present mentions lack,
7 According to the same Article 140 (1) of the Insolvency Law, in case of the opening of the
bankruptcy procedure (i.e. the liquidation of the assets of the debtor) the receivables of the creditors
will be established through the definitive table of receivables, approved by the syndic judge after
deciding upon all the appeals filed by the creditors and after deducting the amounts already received
by the creditors through the reorganization period.
8 V. Moga-Shaban, Short considerations regarding the possi bility to amend (complete) the reorganization
plan before the phase of the confirmation to be given by the syndic-judge, 22.07.2017, available at
https://www.juridice.ro/495431/scurte-consideratii-asupra-posibilitatii-completarii-unui-plan-de-re
organizare-inaintea-etapei-confirmarii-de-catre-judecatorul-sindic.html
9 See N. ndreanu, The Judiciary Reorganization Procedure (Procedura reorganizrii judicare), All
Beck Publishing House, 2000, p. 215.
10 See I. Schiau, The Legal Regime of the Commercial Insolvency (Regimul juridic al insolvenei
comerciale), All Beck Publishing House, 2001, pp. 212-213.
About the res judicata authority of the reorganization plan and/or… 223
manifestly, any substance; if those mentions exist and the analysis of the plan
involves a choice of opportunities, this task exceeds the legal competencies of the
judge, being the solely attribute of the creditors, which have approved the plan.11
Consequently, by confirming the reorganization plan, the syndic-judge
confirms not only the meeting of the required procedural conditions but also the
content of the plan, although he/her has very limited competence to interfere with
that content.
In addition, the confirmation of the reorganization plan is one of the principal
duties of the syndic-judge, as provided by Article 45 (1) letter l) of the Insolvency
Law. According to the paragraph 2 of the same Article, the duties of the syndic
judge are limited to the judicial control of the activity of the insolvency
administrator and/or liquidator and to the processes and requests of judicial
nature that are related to the insolvency procedure.
That means, clearly, that when confirming the reorganization plan the
syndic-judge is not performing a simple administrative task but one of its principal
judicial duties, delivering a judgment whose object and/or solution regards the
fate of the reorganization plan.
More, there is an indestructible connection between the Confirmatory
Judgment and the reorganization plan. Naturally, any amendment of the
confirmed reorganization plan, will not enter into force unless it is confirmed by
the syndic-judge. Also, the termination of the reorganization plan, either successful
or aborted, will be decided by the syndic-judge, through a judgment, as provided
for by Article 145 (1) of the Insolvency Law.
All this argumentation may allow the conclusion that the content of the
reorganization plan, once confirmed by the syndic-judge, becomes inwardly linked
to the Confirmation Judgement and enjoys the same effect as this judgment. When
confirmed, the reorganization plan is not, anymore, an autonomous document
approved by the creditors, but part of the Confirmation Judgment, even if it is not
materially incorporated in that judgment and from that moment on it will be
considered as a final and irrevocably judgment. Therefore, as part of the
Confirmatory Judgment, the confirmed reorganization plan enjoys the res judicata
authority.
2. The Judgments of the Syndic Judge and the Acts or Measures of the
Insolvency Administrator or Liquidator
On the other hand, when examining the effects of the measures adopted by the
insolvency administrators or liquidators, in fulfilment of their procedural duties,
one must, obviously, observe that they are not delivering court judgments, since
11 Timişoara Court of Appeal, civil Section II, civil Decision no. 1215 of 18 June 2012, available at
https://lege5.ro/Gratuit/gm4danjrgi/procedura-insolventei-hotarare-de-confirmare-a-planului-de-r
eorganizare-judiciara-critici-de-oportunitate-consecinte.
224 IOAN SCHIAU
they are not magistrates but just representatives or proxies of the insolvency
procedure, subordinated to the syndic-judge.
Still, according to Article 59 (5) of the Insolvency Law, the creditors, the
insolvent debtor and any interested person may dispute/challenge the acts and the
measures of the insolvency administrator or liquidator, in the special limitation
period affixed by the law. If these persons do not file an opposition in due time,
then they are barred to do so in the future.
That means that the acts and the measures taken by the insolvency
administrator or liquidator become final/definitive as well as mandatory and
produce similar effects to the res judicata that is:
(a) Any party may oppose the acts generated or the measure taken by the
insolvency administrator or liquidator during the insolvency procedure, if there is
a connection between these acts or measures and a procedural or substantial issue
to be decided by the courts of justice or arbitration and
(b) The said matter cannot be revisited in a second case having the same object
and cause, involving the same parties, in the same qualities.
But, in my opinion, this effect of the acts and measures of the insolvency
administrator or liquidator becoming binding and final, is not a proper res judicata
authority; it is rather a consequence of the joint action of various causes, as
presented herein after.
1. The first circumstance that requires consideration is that linked to the expiry
of the limitation period that deprives the interested parties of their right to ask the
court to repeal the acts and the measures taken by the insolvency administrator or
liquidator. Indeed, Article 59 (6) of the Insolvency Law state that the debtor, any of
the creditors and any interested (concerned) person may file an appeal against the
measures of the insolvency administrator (or liquidator), in 7 days as from the
filing of the administrator’s periodical report. This seven-day term is a special
limitation period, which, if not observed, terminates the right to appeal of those
persons, with the consequence that the acts and measures of the insolvency
administrator or liquidator become uncontested and incontestable, i.e. definitive
and binding.
2. On the other hand, there is a legal presumption that the acts and the
measures of the insolvency administrator or liquidator that were not contested by
the debtor, creditors or any concerned person are valid and correct. For instance,
according to Article 102 (9) of the Insolvency Law, all the receivables admitted and
registered by the administrator, if not contested by the concerned parties, are
deemed to be correct and valid. Likewise, according to Article 112 (2) of the
Insolvency Law, after the registration of the final receivable list (including
undisputed receivables and those admitted or modified by the syndic-judge’s
judgment, upon an appeal of the concerned parties), only the creditors whose
claims were registered in the list may participate to distribution of the sums
recovered during the insolvency procedure. More, the undisputed acts and
About the res judicata authority of the reorganization plan and/or… 225
measures of the insolvency administrator or liquidator may be revoked by the
syndic-judge only if it is proved that they were result of forgery, fraud or essential
error [Article 113 (1) Insolvency Law].
3. A significant reason that supports the final and binding character of the acts
and measures of the administrator or liquidator is based upon the final approval of
the activity of the insolvency administrator or liquidator, hand out by the
syndic-judge. As a prerequisite to the closure of the insolvency procedure, the
administrator or the liquidator has to prepare and to present a final report,
accompanied by the financial situations of the insolvent debtor’s estate; this report
may be disputed by the creditors and the syndic-judge will decide upon all these
challenges and, thereafter, will approve the final report, as it was presented or,
respectively, amended (Article 167 of the Insolvency Law). This approval of the
final report and the attached balance sheets it is a result of the judicial control
exerted by the syndic-judge upon the acts and measures of the insolvency
administrator or liquidator and it is an endorsement of his/her overall activity,
making final and binding his/her acts and measures.
4. The collective, concursual and egalitarian character of the insolvency
procedure are principles that impede a creditor that did not take advantage of its
processual rights and did not dispute the measures of the administrator or
liquidator in the insolvency procedure to do so after the closure of the procedure,
by that aiming to avoid to be subjected to those equal measures, to the same extent
as the other creditors.
5. Likewise, another relevant principle of the insolvency procedure refers to
the material and procedural certainty and predictability of the insolvency process.
This necessity embraces in the Insolvency Law the form of two entwined
principles; according to Article 4 point 4 and 5 of the Insolvency Law, the
procedure has to ensure (i) a high grade of transparency and predictability and (ii)
the acknowledgement of the existing creditors’ rights and the observance of the
priority rang of the receivables, based upon a set of clearly determined rules,
uniformly applicable. Such predictability, based upon a set of uniform rules,
presuppose that the acts and measures of the insolvency administrator or
liquidator, that were not appealed and repealed by the syndic-judge, enjoy a
binding, undisputed and final authority, clearly required for the conduct of the
procedure in conditions of transparency, stability and orderly conduct. Indeed, it is
not conceivable that the limits of a receivable (in terms of amount, conditions,
privileges), established in the insolvency procedure, will be amended or ignored in
another jurisdictional procedure.
Therefore, one may say that the acts and measures of the insolvency
administrator or liquidator that were not challenged by the concerned persons or
reversed by the syndic-judge enjoy a final and binding authority that impedes their
contestation in another proceeding.
226 IOAN SCHIAU
On the other hand, insolvency administrator’s or liquidator’s measures,
summons, reports, verifications and any other documents or actions that are
ratified or confirmed, through judgments, by the syndic-judge, in accordance with
his/her legal powers, when solving the various oppositions or appeals that any of
the creditors, the debtor, the special administrator of the debtor or any interested
persons are allowed to file against the insolvency administrator or liquidator, enjoy
a proper res judicata authority.
According to Article 45 (1) of the Insolvency Law, the syndic-judge is judging
various requests filled by the insolvency administrator or liquidator as well as
various appeals filed by the debtor, creditors or any interested person that contest
the measures taken or the documents emanated by the insolvency administrator or
liquidator.
If, within the judgment given when deciding on these requests or appeals, the
syndic-judge is confirming the measures taken or the acts emanated by the
insolvency administrator or liquidator, such consideration or solution enjoy the res
judicata authority. But, as one may observe, such res judicata authority does not
pertain directly to the measures or acts of the insolvency administrator or
liquidator, but to the judgment delivered by the syndic-judge, although the object
of that judgments regards the said measures or acts.
Conclusions
The syndic judge judgments, as any other judgments, undoubtedly enjoy res
judicata authority in what regards both the dispositive part and the reasoning of
the judgment. Naturally, the Confirmatory Judgments has the same authority.
The reorganization plan, being approved through a judgments and consisting,
from a practical point of view, part of that judgment, is also impregnated with the
res judicata authority, being unconceivable that a court will decide, regarding the
existence and extent of a receivable, otherwise than provided for in the approved
and judicially confirmed reorganization plan.
Following the same rationale, the acts and the measures of the insolvency
administrator or liquidator that were approved through the judgments of the
syndic judge are enjoying res judicata authority. The unchallenged act and the
measures of the insolvency administrator or liquidator that were not challenged by
the interested persons become final and binding and may be opposed to all parties
to the insolvency procedure as well as to interested third parties (i.e. creditors that
were not participating to the procedure).