Violating a court injunction: Insolvency does not prevent arrest
If a court injunction (e.g. based on a patent or trademark infringement) is violated, German civil courts are entitled to impose a fine or an arrest as coercive means upon on obligee’s request. In the event that such fine cannot be obtained from the infringer, then the courts will order an arrest instead, which is enforced on the company director or general manager of a fined legal entity.
Such arrest as substitute for an unenforceable fine has to be executed even if the fined entity has been adjudged insolvent in the meantime as the Federal Constitutional Court recently affirmed (order of 9/5/2017 – 2 BvR 335/17). In the case decided, the civil courts imposed a fine of EUR 50,000 against a joint stock company for violating a court injunction and – in case the fine is unenforceable – an arrest of one day for each EUR 250. Following that violation, insolvency proceedings commenced against the fined company, so the civil courts ordered that the arrest had to be enforced against the chair of the board instead. His complaint remained ultimately unsuccessful before the Constitutional Court.
Indeed, the Constitutional Court was of the opinion that further violations of the court injunction are not to be expected, after the company’s insolvency and its ceased business, and thus the coercive purpose of fine and arrest could not be reached anymore. However, such means also serve the obligee’s interest of sanctioning a violation of such injunction. Moreover – as the Constitutional Court stated explicitly – in the interest of the proper functioning of judicial coercive means, a violation of a court injunction should not appear economically or personally worthwhile for the infringer. Therefore, only a reduction of the arrest would be justified, but not its complete annulment.