The Reform of the
European Insolvency Regulation
Co-funded by the
Civil Justice Programme
of the European Union
Co-funded by the
International Insolvency
Institute
Disclaimer
This publication has been produced with the financial support of the Civil
Justice Programme of the European Union. The contents of this
publication are the sole responsibility of Leiden University and/or
Nottingham Trent University and can in no way be taken to reflect the
views of the European Commission.
EIR Reform Project
History:
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Treaty of Rome 1957
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Brussels Regulation 1968 Art. 1 Exception
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1970 Draft (↑substantive and procedural)
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1980 Draft (↓substantive and procedural)
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CoE Istanbul Convention 1990 (procedural)
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European Insolvency Convention 1995 (proc.)
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European Insolvency Regulation 2000 (proc.)
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Amendments in 2004/06/13 (Acc), 2005 etc. (Am)
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Contents:
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Preamble
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Scope/Application/Definitions
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Jurisdiction
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Choice of Law/Exceptions
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Recognition Rules/Powers of Liquidator
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Conduct of Secondary Proceedings
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Creditors’ Information and Claims
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Transitional Provisions
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Preamble:
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Linked to Four Freedoms/Single Market issues
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Justification for legislation by EU
•
Conflicts Problems acknowledged (‘widely
differing substantive laws’)
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Modified Universalism Theory (main/secondary)
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Co-ordination Principle paramount
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Benefit for Creditors stressed
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Status of Preamble? Content Issues?
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Scope/Application (Article 1):
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Four Conditions:
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Collective (no individual action)
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Insolvent debtor (no pre-insolvency? CVA?)
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Partial/Total Divestment (DIP?)
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Liquidator appointed (DIP?)
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Application to all Debtors (Natural/Legal) except:
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Insurance Bodies (Directive 2001/17/EC)
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Credit Institutions (Directive 2001/24/EC)
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Investment Bodies (Trust/Pension Funds)
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Scope/Application (Article 1) (cont.):
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Territorial Application:
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27+1 (Denmark opt-out in Maastricht Treaty)
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European-based Debtors
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International Corporate Groups (with a base
in Europe) (Re:BRAC, Daisytek, Enron)
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Application in Time (Arts. 43, 47):
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31 May 2002 (14)/1 May 2004 (10)
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1 Jan 2007 (2)
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Relationship with other Instruments (Art. 45)
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Definitions (Article 2):
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Insolvency Proceedings (rescue + liquidation) in Annex
A
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Winding Up Proceedings (liquidation) in Annex B
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Liquidator in Annex C
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Court/Judgment (wide reading)
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Time of Opening of Proceedings (effectiveness)
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Member state in which assets are situated
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Establishment (q.v. Brussels Convention 1968)
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Jurisdiction (Article 3):
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Main Proceedings – ‘centre of main interests’ – full
effect – rescue and liquidation possible
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Secondary Proceedings – ‘establishment’ –
restricted (territorial) effect – liquidation only
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Main usually opened before Secondary
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Secondary can be opened before Main if
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(i) impediment to Main exists
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(ii) creditor’s request/claim related to
‘establishment’
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Jurisdiction (Article 3) (cont.):
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What’s Missing?
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What does COMI mean? No independent definition in
Article 2, so resort to domestic rules and possibility of
double-jurisdiction and conflict (Eurofoods)
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Virgos-Schmit Report (persuasive interpretation)
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Relationship to establishment definition?
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Shifting COMI? (forum shopping)
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Corporate Groups? (Eurofoods/Daisytek)
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Choice of Law (Article 4):
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Lex concursus (for both Main and Secondary
Proceedings) applicable to:
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Debtor’s capacity
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Asset treatment generally
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Debtor-liquidator powers
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Effect on availability of set-off, current
contracts, creditors’ execution/enforcement,
treatment of claims, proof of debts
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Choice of Law (Article 4) (cont.):
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Also applicable to:
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Priorities and distributions
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Closure and post-closure effects
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Costs and expenses
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Transaction avoidance (acts detrimental to
creditors)
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Widest scope of application to procedural and
substantive matters, subject to exceptions.
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Choice of Law Exceptions (‘carve-outs’):
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Article 5: rights in rem (security)
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Article 6: set-off (quasi-security)
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Article 7: reservation of title (quasi-security)
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Article 8: immoveables
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Article 9: financial market contracts
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Article 10: employment contracts
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Article 11: registrable rights (land/aircraft/ships)
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Article 12: community patents
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Choice of Law Exceptions (‘carve-outs’) (cont.):
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Article 13: protection of otherwise detrimental acts
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Article 14: protection of third party purchasers of
Article 11-type assets
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Article 15: lis pendens
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Carve-outs may require main/secondary jurisdictions to
determine foreign law if no proceedings can take place
in the carve-out jurisdiction (i.e. no establishment), but
will they be enforced?
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Recognition Principles:
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Article 16: principle of recognition (comity/full
faith and credit/Brussels Convention 1968)
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Article 16 does not prevent opening of
secondary proceedings
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Article 17: full effect given to main
proceedings elsewhere and to effect of
secondary proceedings limited to territorial
assets
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Recognition Principles (cont.):
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Article 18: full powers for main liquidator, limited extraterritorial powers for secondary liquidator (no coercive
powers can be used);
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liquidator must comply with domestic law for
realisation of assets
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Article 38: temporary liquidator may ask for
interim/preservation measures elsewhere
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Article 19: no formality for recognition of liquidator
other than proof of appointment
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Recognition Principles (cont.):
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Article 21: general publicity for proceedings
and appointments
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Article 22: publicity through registration for
particular assets
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Article 23: costs imputable to proceedings
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Article 24: pre-publication transactions with
debtor protected; constructive notice rule
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Recognition Principles (cont.):
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Article 25: recognition of further judgments
and orders following Article 16 recognition
(exception for postal secrecy and personal
freedom)
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Article 26: public policy avoiding recognition
altogether (pari passu rule and the problem of
priority: Re: MG Rover España SA; Re: HIH
Casualty and General Insurance Limited)
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Recognition Principles (cont.):
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Effect on creditors:
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Article 20(1): creditors must return seized
assets to liquidator, subject to security
exception (Articles 5 and 7)
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Article 20(2): creditors can not claim in
distributions unless acknowledging
distributions from other proceedings
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Conduct of Secondary Proceedings:
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Article 27: where main proceedings exist, secondary
proceedings can be opened without ‘insolvent’
requirement
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Article 28: applicable law is that of secondary
jurisdiction (see Article 4 for list)
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Article 29: main liquidator and any party permitted in
secondary jurisdiction may apply for opening
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Article 30: security for costs may be required
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Conduct of Secondary Proceedings (cont.):
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Article 31: liquidators’ duty to co-operate and
communicate (CoCo Guidelines; JudgeCo Project; ALIIII Project)
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Article 32: liquidators will lodge known claims in other
proceedings/participate on same footing as
creditor
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Article 33: stays in secondary proceedings at
request of main liquidator (subject to it being in the
interest of creditors)
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Article 34: main liquidator may propose end to
secondary proceedings
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Conduct of Secondary Proceedings (cont.):
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Effect on creditors:
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Article 32: right to prove debts/claims in all
proceedings
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Note also Article 20(2): creditors can not
claim in distributions unless acknowledging
distributions from other proceedings
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Article 35: surplus from secondary
proceedings may be transferred to main
proceedings (subject to Article 26?)
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Conduct of Secondary Proceedings (cont.):
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Where secondary opened before main:
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Article 36: once main proceedings opened,
secondary proceedings to comply with rules in
Articles 31-35
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Article 37: secondary proceedings may be
converted from rescue to liquidation
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Creditors:
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Article 39: right to prove debts/claims in all
proceedings (see also Article 32 for secondary
proceedings)
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Article 40: duty to inform known creditors
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Article 41: content of proof of debt
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Article 42: notice to creditors in language of
proceedings/headnote in all official EU languages;
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creditors’ proof in any language of state of
residence
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Reform Perspectives:
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Review by 1 June 2012 and 5-yearly intervals
thereafter (Art. 46)
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Pressure for early review (since in force!) to change:
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COMI Definition seen as urgent (ECJ in Eurofoods)
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Race to the Court (pending petitions)
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Forum-shopping to be discouraged
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The Problematic of Corporate Groups
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Secondary proceedings = liquidation?
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Reform Perspectives (cont.):
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Central Insolvency Register
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Communications Guidelines/Int’l Best
Practices to flesh out Art. 31
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Commentaries/Articles/Books
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• 2012-2014 Cursus
• Assessment: Vienna-Heidelberg Report
• Commission Draft 12.12.12
• Main Themes:
Scope/Jurisdiction/Art 25
COMI-Shifts/Synthetic Secondaries
Group Insolvencies and Coordination
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• EP Responses
• Group of Experts
• National Responses
• Questions:
Content/Coverage
Scope/Jurisdiction/Annexe A
General Coordination/Cooperation
Group Dynamic/UNCITRAL WG V Work
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•Reform Process (cont.):
•More EP Amendments
•Final Council Text
•Enactment 2015? In force 2016/7?
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The Future?
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A Wider European Legal Order:
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Unifying texts in insolvency jurisdiction
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Fitting into corporate migration issues
(Centros/Uberseering/Inspire-Art)
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Time to think about substantive change?
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Convergence process/Regulatory arbitrage
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Fresh Start/Wrongful Trading initiatives
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What substantive/procedural rules? INSOL Europe Rep
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Commission Recommendation of 2014
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