Ensuring the special protection of social security contributions in insolvency law.

RB – 02/2021

A focused minimum harmonisation for selected areas was announced as part of the "Capital markets union" presentation on 24 September 2020. This was followed by the public consultation procedure on the approximation of national insolvency laws on 18 December 2020. German Social Insurance continues to advocate the need for the protection of social security contributions.

What does the EC want to achieve?

The EC has said that inefficient insolvency procedures delay the recovery of business assets with a negative impact on productivity, the labour market and economic development. In particular, nationally varying insolvency laws are a major reason for reluctant cross-border investment, as the satisfaction of claims in insolvency cases is difficult to predict. Therefore, the EC intends to harmonise national differences in insolvency laws. Specific sectors, such as banks, will be excluded from this project.

What are the implications of harmonising insolvency laws for the German Social Insurance system?

As insolvency creditors, health insurers are on a par with other creditors. However, social insurance institutions are among the so-called insolvency creditors who cannot detach themselves from the insolvency debtor and they must finance benefits for their members despite outstanding contributions. In a joint press release (2010), the National Association of Statutory Health Insurance Funds (GKV-Sitzenverband), the German Federal Pension Insurance Association and German Social Accident Insurance all advocated a stronger position in insolvency law at national level.

In order to resolve the discrepancy between the obligation to pay benefits and outstanding claims, the German Social Insurance is of the opinion that social insurance institutions should be given a stronger position in insolvency law on account of their special status and social task.

In 2018, German Social Insurance commented on the EU Commission's proposal for EU Directive 2019/1023 on preventive restructuring procedures and increasing the efficiency of insolvency proceedings. The view of the German Social Insurance is that contributions to national social security schemes should be excluded from the suspension of enforcement measures and debt relief. However, national legislators should be given, at the very least, the opportunity to exempt these claims from the effects of restructuring and debt relief measures in order to protect their social security systems.

A common definition of insolvency, the conditions for opening insolvency proceedings, the ranking of claims, avoidance actions, identifying and tracing assets belonging to the insolvency estate were not regulated in the Directive.

The current initiative is intended to complement EU Directive 2019/1023 with regard to restructuring and insolvency and subsequently, it will also include aspects of insolvency law not covered by that Directive. German Social Insurance will participate in the public consultation and advocate the special need for the protection of social security contributions.