Using the trilogue to safeguard social systems.

Following the presentation of the positions of the Council and the European Parliament on the harmonisation of insolvency law during an "opening trilogue" shortly before the summer recess, the technical trilogues commenced on 4 September. The Council and the European Parliament now face the task of reaching agreement on minimum standards for harmonising the highly divergent national insolvency regimes. This will not be easy. Parliament is pushing for deeper harmonisation, with a strong focus on workers’ rights, financial market stability and broad stakeholder involvement. The Council, on the other hand, is prioritising efficiency, the lowest possible level of harmonisation and the protection of the insolvency estate.

Employees  as creditors

In particular, Parliament has engaged in a more in-depth debate on the claims of employees as creditors. According to the majority of Members of Parliament, employees’ claims should be recognised as genuine creditor claims, going beyond outstanding wages and salaries. This would apply, for example, to arrears in pension contributions. Moreover, in the event of a business sale prior to the opening of insolvency proceedings (the so-called pre-pack procedure), outstanding pension obligations should be safeguarded and transferred.

The need to protect social security

The German Social Insurance (DSV) has taken a similar line. Since the beginning of the political discussions on the Commission’s proposal of 7 December 2022 for the harmonisation of certain aspects of insolvency law, it has advocated for the special protection of social security contributions. Other Member States such as France or Spain already grant such contributions privileged status. In Germany, however, this special protection was abolished in the 1990s. Austrian social insurance institutions have likewise complained about a deterioration in their position. Given the major financial challenges facing health and social systems due to demographic change and technological progress, this situation is unacceptable.

Non-contestability of social security contributions

For this reason, the DSV has proposed amending the Commission’s draft directive so that the claims of social security institutions are exempted from avoidance actions. Excluding them from contestation proceedings would prevent the diversion of social security contributions for other purposes. These contributions should once again enjoy special protection in Germany, in order to uphold their earmarking as established by the Federal Constitutional Court in 2005 (2 BvF 2/01). The EU can provide the necessary impetus here.

Using the trilogue to strengthen social systems

The European Parliament has also endorsed this view and, in its position, proposed inserting a specific exemption clause into Article 6(3), allowing statutory social security institutions to be exempted under national law from avoidance actions concerning contributions already paid. The DSV is now watching the trilogue negotiations with great interest and calls on the negotiating parties to ensure that the Parliament’s proposal prevails, thereby reinforcing the financial sustainability of social protection systems.