Christoph Bruckschweiger
Martin Gstoehl
Benedikt König
Karl Mumelter
Helene Rebholz
Peter Wolff
Florian Zechberger

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Corporate liability and US insolvency law: Lawsuit against Liechtenstein trustee involving millions finally dismissed

The case originated in earlier proceedings in which the trustee was accused of failing, in his capacity as a member of the board of directors of Liechtenstein Anstalts, to prevent a US lawyer from embezzling his clients’ funds. In the previous lawsuit, which ended successfully in 2022, it was held that the US lawyer had power to represent his clients and that the trustee could rely on that. Besides, all claims were time-barred (see: https://paragraph7.com/en/fallstudien/powers-of-attorney-in-the-fiduciary-sector-trust-is-good-control-is-better/ )

Subsequently, a Liberian company declared insolvent by a US Court filed a lawsuit on virtually identical grounds. The trustee was formally a director there, while the company actually served as a vehicle to “siphon off” client funds and to hide the US lawyer’s criminal acts. Now the company, represented by a US insolvency administrator, asserted claims for directors’ and officers’ liability against the trustee. The trustee was accused of insufficient control and failure to defend against a claim for damages in New York, which had led to a default judgment against the Liberian Company.

The proceedings were marked by significant conflict of law and procedural issues, in particular regarding the recognition of the US insolvency proceedings in Liechtenstein, the capacity of the US insolvency administrator to be a party and to sue in Liechtenstein, and international jurisdiction issues. At the same time, the forum non conveniens defense had already been successfully raised in the US.

The Liechtenstein Princely Court initially dismissed the action as inconclusive. Following appeal proceedings and referral back, extensive expert opinions on US law were obtained. In the continued proceedings, the court determined that the insolvency administrator had the right to sue, but ultimately dismissed the action on the grounds of limitation and lack of substantive merit.

In particular, the Liberian company had never been the owner of the misappropriated assets, but merely a “pass-through vehicle.” The claim was partly classified as an abuse of law. No appeal was lodged against the judgment, thus finally ending a decade-long legal dispute.

For further information, see “Case Studies” below.

Our partner Christoph Bruckschweiger can chalk up this success for our law firm.

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Bruckschweiger, Gstoehl, König, Mumelter, Rebholz, Wolff, Zechberger – Rechtsanwälte / Attorneys at Law

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