STA, March 19, 2018 – The Supreme Court has upheld the Ljubljana District Court's decision not to recognise the insolvency procedure of retailer Mercator's parent company, Croatia's Agrokor, in Slovenia.
The decision, taken on 14 March and announced by the Supreme Court today, comes in response to an appeal by the crisis management of Agrokor.
In November the District Court established that the special law adopted in Croatia that involved the appointment of a crisis management in Agrokor (Lex Agrokor) does not follow the principle of equal treatment of creditors as a fundamental principle of insolvency procedures in Slovenia.
The November decision upheld an appeal by Russian bank Sberbank against the District Court's initial decision in July to recognise Lex Agrokor as a foreign insolvency procedure in Slovenia.
The Supreme Court upheld the lower court's decision in ascertaining that material consolidation (treating assets and liabilities of subsidiaries as a single estate) would not guarantee the principle of equal treatment of creditors.
Lex Agrokor also jeopardies certainty and enforcement of rights in terms of protecting claims as a basis for the right to separate satisfaction of rights, while it also makes it possible to expand the insolvency procedure to insolvent members of the group.
"Recognising the foreign crisis management procedure, which does not guarantee compliance with the principle of equal treatment of creditors (under which all creditors in equal position need to be treated equally), would hurt the public interest of the Republic of Slovenia," the Supreme Court stated.
The court also found that the failure to recognise the insolvency procedure was not against the EU law because equal treatment of creditors and protection of their interests is also a basic principle of the EU insolvency law.
It found that the recognition of Lex Agrokor in the UK was irrelevant to the case.
The recognition of Lex Agrokor would have made it impossible for Sberbank to recover its claims from Agrokor's assets in Slovenia, including Mercator shares.
Sberbank acquired ownership in Mercator in July after seizing shares in direct ownership of Agrokor's former chairman and owner Ivica Todorić.
The shares, representing a 18.53% stake in Mercator, were bought at an auction by Sberbank of Russia at the asking price of EUR 40.58m. Agrokor holds just shy of 70% in Mercator.
The Croatian desk of the regional broadcaster N1 reported on 8 March that the Agrokor crisis management and Sberbank were close to reaching a deal which would see Sberbank abandon its suits against Agrokor in Slovenia, Serbia and Bosnia-Herzegovina.
