HL Chronicle for Data Protection: Surrender! German court strengthens the position of data principals in insolvency proceedings

Christian Tinnfeld writes for the HL Chronicle of Data Protection that, in a recent decision, the Higher Regional Court of Duesseldorf held that data controllers may claim immediate surrender of customer data in the insolvency of marketing agencies and IT service providers in Germany according to section 47 of the German Insolvency Statute (decision of 27 September 2012, file number: I-6 241/11, for a German text version of this decision click here). Final decision is expected to be taken in the course of 2014 by the Federal Supreme Court who is appointed to decide on the insolvency administrator’s appeal.

The asset of customer data – clash of interests

Customer data have become a most valuable and irreplaceable asset for targeting consumers by online marketing tools. Literally no company can go without large-scale customer databases for advertising its products or services. Often such data is stored and processed by IT service providing companies or marketing agencies that develop marketing strategies or provide marketing tools for data controllers.

If these agencies or providers become insolvent there is a clash between two antagonistic interests: the interest of the insolvency administrator to liquidate the financial value of the customer data for augmenting the insolvency estate and the interests of the principal to receive the customer data for subsequent marketing measures.

This clash of interest became visible in a recent dispute between a sales company and an insolvency administrator at the courts in Duesseldorf (Germany), when the insolvency administrator of a marketing agency refused surrender of customer data that had been collected and processed for the purposes of a sales company.

The principle of separation

With its decision the Higher Regional Court of Duesseldorf took a stand on how the asset of customer data has to be treated in insolvency proceedings.

According to the German Insolvency Statute creditors may either (i) claim surrender of an object that is in the possession of the bankrupt debtor, if they can rely on a right in rem, or (ii) seek for separate satisfaction in respect of their claims or (iii) – even less privileged – register their claims for final distribution of the insolvency estate on a pro rata basis only.

In the case at issue the insolvency administrator argued that the marketing agency itself had received a right in rem by obtaining the customer data from carrying out the data collecting services (with the consequence that no right to separation would apply) and approved a claim of the sales company for separate satisfaction only.

Read the rest of the story here: Surrender! German court strengthens the position of data principals in insolvency proceedings

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