European Insolvency
Regulation 1346/2000
Dr Loukas Mistelis
Clive M Schmitthoff Senior Lecturer in
International Commercial Law
1
Issues covered





Historical background
Legal background and context
Scope, and salient features of
Regulation 1346/2000
Outstanding issues and the future
If time allows, a case study
2
“if the Gods wish to punish us,
they usually begin by
answering our prayers”
Ancient Greek proverb
3
Historical background



Major legislative activity in the last
decade: new laws in Germany, Japan,
Australia, Canada, and Mexico, and EC
Reform beyond domestic laws to
international co-operation and coordination
Abandon the legislative and nationalist
attitude of the 1970s and 1980s
4
Few Examples



UNCITRAL Model Law on Cross-Border
Insolvency with Guide 1997
EC Regulation on Insolvency
Proceedings (2000)
ALI Principles of Cooperation in
Transnational Insolvency Cases Among
the Members of NAFTA (2002)
5
UNCITRAL Model Law


Text at
http://www.uncitral.org/english/texts/in
solven/insolvency.htm
To date several countries have adopted
/ enacted the Model Law including


US, Canada, Australia, New Zealand, South
Africa
Overlap with the EC Regulation
6
Model Law continued


Primarily intended to prevent local
realisation of assets in situations where
there are insolvency proceedings within
a specific country, and
The company forming the subject
matter of those proceedings has assets
throughout the world.
7
Background of Regulation



1970-1982: a draft convention doomed
from the start
1990s: revival of the project: new, more
modest proposal, originally suggested
as a treaty
Regulation adopted in May 2000, came
into force on 31 May 2002
8
EU Private International
Insolvency Law Framework



1968 Brussels Convention / Regulation
44/2001
Regulation 1346/2000
Insurance undertakings Directive
2001/17 (entry into force on 20 April
2003); credit institutions Directive 2001
(entry into force on 5 May 2004)
9
… continued



Netting and securities settlement
systems Directive 1998/26 (1 January
1999)
Financial collateral arrangements –
implementation date 31 December 2004
Late payments in commercial
transactions Directive 2000/35 –
implementation date 8 August 2002
10
Application / Scope I



All EU member states but DK
Applies to intra-EU effects of insolvency
proceedings. It does not regulate the position
as between member states and non-member
states
Applies to several UK insolvency procedures:

Compulsory winding up, company voluntary
liquidations, administrations, partnerhip winding
up bankruptcy, individual voluntary agreements …
11
Application / Scope II




Insolvency proceedings opened after 31
May 2002
Replaced 10 bilateral or multilateral
conventions between Member States
Replaces Council of Europe Convention
of Istanbul 1990
Reservation by Portugal re Articles 26,
37
12
Application / Scope III

Applies to proceedings




Which are collective
Which are based on the debtor’s
insolvency and not on other grounds
Which entail total or partial divestment of
the debtor ad
Where a liquidator has been appointed.
13
Application / Scope IV

Limited framework

Proceedings and liquidator should be
mentioned in one of the applicable lists in
the annexes



Insolvency proceedings – Article 2(a)
Winding up proceedings – Article 2(c)
Liquidator – Article 2(b)
14
Application / Scope V

The Regulation applies




To all listed (52) insolvency proceedings
In which a person/body acting as liquidator
(58) is appointed
In 14 EU countries, whether the debtor is a
natural or a legal person
But not to insolvency proceedings
concerning financial institutions
15
Objectives of Regulation

Coordination of measures to be taken re
insolvent debtor’s assets – proper functioning
of internal market:



Determine international jurisdiction of the courts
or authorities with regard to intra-EU effects of
insolvency proceedings
Create uniform conflict of laws rules for such
proceedings
Ensure recognition and enforcement of
judgements given in such matters
16
…



Make provisions for the possibility of
opening secondary insolvency proceedings
Ensure mutual coordination and
communication between liquidators in main
and secondary proceedings
Guarantee information for creditors and a
right to lodge claims
17
Fundamental Principles I
1.
2.
3.
Main insolvency proceedings can only be
commenced in the Member State where the
debtor’s Centre of Main Interest (COMI) is
located – Article 3.1.
COMI presumption – place of registered
office
Main insolvency proceedings, once
commenced, are to be automatically
recognised across all Member States
18
Fundamental Principles II
4.
5.
6.
The law of the Member State where main
insolvency proceedings are commenced will
govern the proceedings – Articles 4 and 28
The office holder may exercise all powers
that he has under the law of the Member
State where main proceedings have been
commenced, in any other Member State
Insolvency Proceedings may also be
commenced in a Member State where a
debtor has an “establishment” for assets
there
19
Non-main proceedings

Secondary proceedings, if commencement in
a Member State after main proceedings have
been initiated – Articles 3.2 and 27


protect usually local creditors, assist and support
main proceedings and may be requested by main
liquidators
Territorial proceedings, if no main
proceedings have been commenced – Article
3.4
20
COMI




Must be established for proceedings to start
in a Member State
The Member State where the debtor conducts
the administration of his interests on a
regular basis
In the case of a company/legal person the
registered office is presumed to the COMI
Interest is widely defined, and extends to
general economic activities
21
“Establishment”



It must be established for secondary or
territorial proceedings
Any place of operations where the debtor
carries out a non-transitory economic activity
within human means and goods
A place of operations within a particular
Member State – mere presence of assets is in
itself insufficient
22
Applicable Law – Lex Forum
Concursus – Articles 4 and 28


The law of the Member State where
proceedings commenced
It governs all the effects of the
insolvency proceedings both procedural
and substantive


Article 4.2 (a) – (m)
Exceptions – Articles 5 - 15
23
Exceptions – Articles 5 -15




Third parties’ rights in rem – Article 5
Set off – Article 6
Reservation of title – Article 7
In some aspects another applicable law is
mentioned

Article 8 (immovable property); 9 (financial
markets settlement systems); 10 (employment
contracts); 11 (ship/aircraft); 14 (third party
purchasers) …
24
Recognition





Immediate recognition of judgments
concerning opening, conduct and closure of
insolvency proceedings, unless secondary
proceedings in other Member State are
opened – Art. 16
Automatic recognition also for other
judgments – 44/2002 – Art. 25
Meaning of automatic recognition
Principle of universality
Defence – public policy – Art. 26
25
Liquidator

Power


Restrictions



Proceedings in another Member State
Obligation to comply with law
Appointment


Art. 2(b) / Annex C, Art. 18.1
Art 19
Effects of publication – Art. 24
26
Coordination








Art.
Art.
Art.
Art.
Art.
Art.
Art.
Art.
20 – return what he has obtained
21 – request publication
22 – request registration
29 – request secondary proceedings
32 – participate in secondary proceedings
33/34 – request stay of proceedings
33 – request termination of stay
34 – propose a rescue plan
27
Coordination



Art. 34.2 – dis-content with finalising
liquidation in secondary proceedings
Art. 35 – claim the remaining assets
Art. 37 – request that the proceedings
will be converted in winding up
proceedings
28
Issues for Legislators of MS

Procedural



Registrations



National bankruptcy register
Of which court?
Publications and third party rights



Main or secondary?
International jurisdiction? Ex officio?
National trade register
In which sources?
Facilitate coordination of main and secondary
proceedings
29
EU information

http://europa.eu.int/comm/justice_hom
e/fsj/civil/insolvency/fsj_civil_1346_en.h
tm
30