th
th

St. John’s University School of Law,
Of Counsel, Greenberg Traurig LLP,
USA

Bob Wessels
University of Leiden
The Netherlands

• Goals and Scope of InsReg
• Some Cases of CJEU:
• Focus:
– Int.’l jurisdiction
– Coordination of proceedings
• Nortel Networks
• Lehman Brothers
• Alternatives for Treatment of Insolvency of
Multinational Groups
• EU Insolvency - Outlook

EU PRIVATE INT’L INSOLVENCY LAW FRAMEWORK
1. Int’l Jurisdiction and Enforcement of Judgments in Civil and Commercial
Matters
• 1968 Brussels Convention - now: 2002 Brussels Regulation (44/2001)
• Art. 1(2) excludes from its scope:
(b) “bankruptcy” and analogous proceedings;
2.
Int’l Jurisdiction, Recognition and Applicable Law in Insolvency Matters
• Regulation 1346/2000 on Insolvency Proceedings - Entry into force: 31 May 2002
• Art. 1(2) excludes “financial institutions” from its scope

3. Insurance Undertakings / Credit Institutions
• “ Insurance undertaking” Directive 2001/17 of 19 th March 2001
[implementation date: 20 04 2003] (Art. 213 - 213kk Neth. BA)
• “Credit institution” Directive 2001/24 of 4 th April 2001
[impl. date 05 05 2004] (Art. 212g – 212nn Neth. BA)
• Within context of Credit Institutions:
– Directive 94/19/EC on Deposit-guarantee Schemes
– EU Directive 98/26 on Netting and Securities settlement Systems
– EU Directive 2002/47 on Financial Collateral Arrangements
– The European Bank Recovery and Resolution Directive (BRRD): a minimum harmonization regime for resolution of banks and investment firms in the EU. Implementation: 1st January 2015 (with the exception of the part on the bail-in resolution tool – 1st January 2016).

Basis in TFEU (replaced TEC as of 1 December 2009 – O.J. C 115/171
(9.5.2008))
Title V (“Area of Freedom, Security and Justice”)
Art. 67 TFEU (ex Art. 61 TEC):
1. The Union shall constitute an area of freedom, security and justice with respect for fundamental rights and the different legal systems and traditions of the Member States.
2. It shall ensure the absence of internal border controls for persons and shall frame a common policy on asylum, immigration and external border control,…..
3. The Union shall endeavour to ensure a high level of security through measures to prevent and combat crime, racism and xenophobia …., as well as through the mutual recognition of judgments in criminal matters and, if necessary, through the approximation of criminal laws.
4. The Union shall facilitate access to justice, in particular through the principle of mutual recognition of judicial and extrajudicial decisions in civil matters.

Chapter 3 “Judicial Cooperation in Civil
Matters”
Art. 81 TFEU (ex Art. 65 TEC):
1. The Union shall develop judicial cooperation in civil matters having cross-border implications, based on the principle of mutual recognition of judgments and of decisions in extrajudicial cases. Such cooperation may include the adoption of measures for the approximation of the laws and regulations of the Member States.
2. ………….. versus Title IV “Free Movement of Persons,
Services and Capital””;
Art. 49 TFEU (ex Art. 43 TEC) “Right of Establishment”

• Convention 1995 (Report Virgós / Schmit) > InsReg 2002
• Rationale (object):
EU wishes to coordinate measures to be taken regarding an insolvent debtor’s assets, while the proper functioning of the internal market requires that cross-border insolvency proceedings should operate efficiently and effectively
InsReg aims to achieve this objective within the scope of judicial cooperation in civil matters within the meaning of Art. 65 [now Art.
81 TFEU] of the EC Treaty (“Freedom, Security and Justice”), so:

GOALS of EU INSOLVENCY REGULATION
• a. To determine the international jurisdiction of the courts or authorities with regard to the intra-Community effects of main insolvency proceedings
• b. To create certain uniform conflict-of-laws rules for such proceedings
• c. To ensure the recognition and enforcement of judgments given in such matters
• d. To make provisions for the possibility of opening secondary insolvency proceedings
• e. To ensure mutual coordination and communication between liquidators in main and secondary proceedings
• f. To guarantee information for creditors and a right to lodge claims

SCOPE IN SUBSTANCE
EU InsReg is applicable to proceedings (Art. 1(1)):
• 1. That are “ collective” : all creditors concerned may seek satisfaction only through these insolvency proceedings, as individual actions will be precluded
• 2. Based on “ the debtors insolvency’” and not on other grounds
• the insolvency-test itself is rooted in the legislation of the lex concursus
• 3. The proceedings must entail the total or partial divestment of the debtor, and
• 4. The appointment of a ‘liquidator’ .

SCOPE IN SUBSTANCE
Limited framework:
> “proceeding” and “liquidator” should be mentioned in one of the applicable Lists in the Annexes:
A. Insolvency proceedings, referred to in Art. 2(a);
B. Winding up proceedings, referred to in Art. 2(b), and
C. “Liquidator”, as referred to in Article 2(c).

• Parmalat SpA:
December 03

“One or more of the Art. 1(1) requirements are lacking”
Contentions:
– No “proceedings” > contractual
– No or only partly “collective”
– No “divestment” > forms of DIP
– No “appointment” of insolvency office holder
– No “insolvency” > pre-insolvency rescue
Major objection:
Whose definitions to use, national, “Home” country or “Targetted
Country”?? – there is no authorative (European) source

“One or more of the Art. 1(1) requirements are lacking”
A G Jacobs (Opinion of 27 September 2005 re
Eurofood ), rejected such submissions:
“84. The effect of Article 2(a) is that ‘the collective proceedings referred to in Article 1(1)’ are ‘listed in
Annex A’. There is consensus among commentators on the Regulation that ‘once the proceedings have been included in the list, the Regulation applies without any further review by the courts of other Member States’. ….
Since compulsory winding up by the court in Ireland is included in Annex A, I do not consider that the application of the Regulation to such proceedings may be put in doubt on the ground that certain aspects of the definition in Article 1(1) are not satisfied.”

France: “Provisional liquidator” in not mentioned in in Annex A
A G Jacobs:
“87. Again however that argument seems to me to betray a misunderstanding of the scheme of the Regulation. Compulsory winding up by the court in Ireland is listed in Annex A. The provisional liquidator, mentioned in the list in
Annex C, was appointed in the context of such a proceeding. Those factors to my mind suffice.”

• Italy:
Amministrazione straordinaria
• France:
Sauvegarde
• Amministrazione straordinaria delle grandi impressi in stato di insolvenza ”
(Extraordinary administration proceedings for huge undertakings),
• Sauvegarde financière accélérée.

“Not (yet) in Annex”
• 01-042009 Belgium “Act of Continuity of businesses” >
Gerechtelijke reorganisatie , only since March 2010 in
Annex A
• 01-072010 Austria “ Sanierungsverfahren mit
Eigenverwaltung unter Aufsicht eines Verwalters ” >
June 2011 Annex?
• Latvia - Annex A (of March 2010) listed 6 proceedings, but one misses the word “ Ārpustiêsas ” and three do not exist any more since 1 November 2010. The Annex of June 2011 only mentions three proceedings, but the cited word is still missing

Other examples
• Since 2004 12 countries from Central and Eastern
Europe joined the EU. These countries have mentioned the insolvency proceedings used in their national legislative body in Annex A, without prior review by the EU Commission or other MSs
• Estonia, since Dec 2008 included in national law a
“reorganisation” proceeding ( saneerimismenetlus) but it has not been added to Annex A
• In Annex A of Italy: concordato preventivo
But it’s not “insolvency”, only a state of financial difficulty
• 2012 Portugal included in national law “hybrid” proceeding processo especial de revitaliza ção. Listed in Annex A?

Other examples (cont’d)
• Chapter 6 (or articles 99 ff) Greek Bankruptcy Code (as of
September 2011) has introduced “rehabilitation” ( εξυγίανση)
(literally “restoration of health”).
• It includes two types of agreements, a consensual agreement with a cram down feature and a kind of liquidation of the going concern that is styled “special liquidation” ( ειδική
εκκαθάριση), which is a similar proceeding to a proceeding with the same name that was abolished in A.
• However Annex A already includes “special liquidation” which may have been meant for the proceeding that was abolished in 2007 that now has a different reference in the proceeding under the same name that was introduced in 2011.

Subsequent domestic changes – Annex A
Given the goals of the Annex (avoid difficult characterisations and to provide other Member
States certainty) an amendment of the Annex has to be awaited. Prof. Paulus submits:
“The alternative, that the recognition of a foreign proceeding is dependent on the determination in an individual case, would disproportionately harm the efficiency of the Regulation compared to the acceptance and recognition of a questionable proceeding”.

SCOPE IN GEOGRAPHY
•
As of 1 May 2004:
• As of 21 April 2005:
• As of 7 May 2006:
• As of 1 January 2007:
• As of 13 June 2007:
• As of 8 August 2008:
• As of 13 March 2010:
• As of 9 June 2011:
10 new Member States amended Annexes ditto
Bulgaria, Romania join EU amended Annexes ditto ditto ditto
And InsReg:
• Replaced 23 Bi-lateral Treaties and Conventions (Art. 44(1))
• Shall not apply where it is irreconcilable with obligations arising “in relation to bankruptcy” from conventions between MSs and third country before 31 May
2002
Consolidated text: Archive 2006-2013 , 2011-09-doc1

Changes to the Annexes in 2014
In a Council Implementation Regulation of 5 June 2014 the wellknown Annexes to the EU Insolvency Regulation have been replaced. The Annexes have been replaced at the request of 8
EU Member States, generally reflecting changes in their national law level, most notably the withdrawal of 'old' national proceedings, being out-of-date or replaced by 'new' insolvency proceedings. Where it is common ground that only proceedings mentioned in Annex A can benefit from the Insolvency Regulation, this is an important regulation
Do you wonder how Croatia, EU member since 1 July 2013, has been listed in the Annexes? Hrvatska 's insolvency proceedings (and the name of its liquidators) was dealt with in the accession documents, see this blog 2014-03-doc7. For the new
Annexes see blog 2014-06-doc12

Regulation (EC) No 1346/2000 is amended as follows:
(a) in Annex A, the following is inserted after the entry for France:
"HRVATSKA
Stečajni postupak";
(b) in Annex B, the following is inserted after the entry for France:
"HRVATSKA
Stečajni postupak";
(c) in Annex C, the following is inserted after the entry for France:
"HRVATSKA
Stečajni upravitelj
- Privremeni stečajni upravitelj
Stečajni povjerenik
- Povjerenik".

IMPACT
The EU Insolvency Regulation applies
• to all (app. 100) listed insolvency proceedings
• in which a person/body (acting as “liquidator”) is appointed
• in 27 EU countries, whether the debtor is a natural person or a legal person, a trader, a merchant or an individual but not to insolvency proceedings concerning financial institutions (Art. 1(2))
• ! 23 official EC languages !

InsReg: 5 Central Themes
• 1. International Jurisdiction
• 2. Conflict of law rules (PIL / “IPR”) -
- Wessels
• 3. Recognition
• 4. Coordination of proceedings
• 5. Creditors -
- Wessels
- Wessels

FORMAL SCOPE
Main proceedings (Art. 3(1)):
• The courts of a Member State where the “centre of the debtor’s main interests” (COMI) is situated
• Universal scope and aim at encompassing all the debtor’s assets
• Recital 13: The ‘centre of main interests’ should correspond to
“…. the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties”
• For a company or legal person COMI is the place of its registered office (rebuttable presumption)

FORMAL SCOPE
Secondary proceedings (Art. 3(2) and Art. 27)
• The court of another Member State shall have only jurisdiction, if the debtor possesses an establishment within the territory of that other Member State (Art. 3(2))
• Art. 2(h) – …. any place of operations where the debtor carries out a non-transitory economic activity with human means and goods
• Effects restricted to the assets of the debtor situated in the territory of the other Member State (Art. 3(2))

FORMAL SCOPE
Secondary proceedings (Art. 3(2) + Art. 27):
• Purposes:
– (a) Protect – usually – local creditors from the main proceedings
– (b) Assist and support the main proceedings
• Opened after opening main proceedings:
– No “insolvency test” in other State
– Nature must be winding up proceedings (Annex B)
(Art. (3)(3) and 27)
– Territorial scope www.bobwessels.nl

•
•
•
•
•
•

• Int’l Jurisdiction
– Main – COMI – Recital 13
• Nature: Annex A
• Universalism: lex concursus
• COMI Presumption - companies
– Secondary – establishment – 2(h)
• Nature: liquidation - Annex B
• No examination of debtor’s insolvency
• Effects restricted to territory

www.bobwessels.nl

Case law
• Abstracts at
NB LexisNexis

27. Turning to purposive interpretation, it seems to me that a reading of the Regulation which limited it (with regards legal persons) to debtors who are incorporated in any of the Member
States would prevent the Regulation from achieving some of the purposes which are described in the recitals and would leave it open to avoidance, providing an incentive for artificial operations as regards the status of debtors comparable to those which, according to recital (4), it is part of the purpose of the Regulation to avoid. It would allow those who use corporate bodies to arrange that, although their business, assets and operations are based in a Member State, the relevant corporate body is incorporated outside the Community, so that the provisions of the
Regulation would not apply to it or its assets. That would be inconsistent with the aim described in recital (3), and such an incentive for manipulation would be at least as inconsistent with the objectives of the Regulation as the examples of forumshopping among Member States mentioned in recital (4). This is particularly the case since the Regulation contains no provisions dealing with affiliated companies or groups of companies, so that each debtor must be considered separately.

Hundleby
Scotland
Daisytek Int.
Corp. USA
ISA Int.l
plc UK
“
Bradford
”
Source Ltd
North. Ireland
ISA Wholesale
Plc UK
450 p.
Par beteiligungs
GmbH
B + P
ISA Daisytek
SAS
150 p.
10 other subs
Isa Deutschland
GmbH
P
Supplies team
GmbH
P

•
– Administration Order 16 May 2003
– Judgment 6 July 2003

AG Düsseldorf 6 June 2003
In three nearly similar judgments of 6 June 2003 AG
Düsseldorf considers that the court is aware that the
Leeds judgment has to be respected, because it was first in time.
Then follows:
“The decision does not bring forward any legal effect towards the debtor-company. For the aforementioned decision has not mentioned and not respected the provisions of the Regulation. It is therefore rectified that the judgment of May 16 has its limits there, were the provisions of the German Insolvenzordnung have their own rules and insofar limit these effects to the preservation measures according to the decision of
19.5.2003
.”

Comments in Germany:
Britannia rules the waves again!

High Court of Justice (Leeds)
12. The English Court has jurisdiction to open insolvency proceedings by making administration orders in respect of the German and French companies if
“the centre of [the] debtor’s main interests” is centred in England or Wales
(Article 3(1) of Council Regulation 1346/2000 – “the Regulation”). Recital (13) of the Regulation reads: “(13) The ‘centre of main interests’ shall correspond to the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties.
” Article 3(1) provides that in the case of companies, “the place of the registered office shall be presumed to be the centre of its main interests in the absence of proof to the contrary”.
Accordingly, before the English Court can open insolvency proceedings in respect of any of the German and French companies in the Group, the petitioning company must provide sufficient proof that its centre of main interests is in England to rebut the presumption in Article 3(1).
13. The three German companies have their registered offices in Neuss,
Germany, but they conduct their business from premises in Freilassing,
Magdeburg and Mulheim. The evidence was that the majority of the administration of the German companies is conducted from the Bradford office of International. In particular:

High Court of Justice (Leeds)
13.1. Although the German companies have separate bank accounts in Germany, the finance function is operated from
Bradford, their business is funded by local subsidiaries of an
English subsidiary of the Royal bank of Scotland and by a factoring agreement through an English subsidiary of the Royal
Bank of Scotland, and their financial information is compiled in accordance with English accountancy principles and reviewed and approved by International in Bradford;
13.2. The German companies require the approval of
International to buy anything in excess of 5000 euros;
13.3. All senior employees of the German companies are recruited in consultation with International;
13.4. All information technology and support are run from
Bradford;

High Court of Justice (Leeds)
13.5. All pan-European customers are serviced by International in
Bradford; contracts with such customers are negotiated by and entered into by International. These account for 15% of sales of the German companies;
13.6. 70% of purchases are under contracts negotiated and dealt with from Bradford. Purchases for major suppliers are made under contracts between the supplier and International;
13.7. All corporate identity and branding are run by International;
13.8. The German companies are required to carry out their business in accordance with a management strategy plan drawn up by the Chief Executive Officer of Daisytek-ISA Limited. He visits the German companies two days per month and spends 30% of his time (mainly in Bradford) on the management of the German companies.

14. I am satisfied from this evidence that Bradford is a place where each of the German Companies conducts the administration of its interests on a regular basis (Recital (13)). Recital (13) refers to the place “where the debtor conducts the administration of its interests on a regular basis and is therefore ascertainable by third parties”, while Article 3(1) requires that the centre of the debtor’s “main” interests should be in this country if an English Court is to have jurisdiction to open insolvency proceedings.
………

Court of Pontoise 1 July 2003 (SAS ISA Daisytek)
The French company ISA Daisytek SAS is put into “redressement judiciaire ”. The Court considers:
“The fact that this French company is a subsidiary of the English company Daisytek ISA Ltd did not give the courts in the UK international jurisdiction to open insolvency proceedings towards the French company, because the notion of “group” does not have legal standing and that every legal person of the group has a corporate legal standing in its own right; the decision of the English court denies the separate legal existence of companies and could not lead to the application of the EU Insolvency Regulation; the
High Court in Leeds could not base its jurisdiction on the fact that
ISA Daisytek SAS has an establishment within its jurisdiction, because an establishment is not a separate corporation
.”

The High Court of Leeds’ way of reasoning is based on the notion that it did have international jurisdiction as meant in art. 3(1) InsReg ISA Daisytek SAS, considering that its COMI was in Bradford, England. It is untrue to argue that the High Court in Leeds funded its decision on the notion of establishment, group of companies or subsidiary. Art. 16 InsReg results in recognition of the judgment opening the proceedings pursuant to art. 3
InsReg and the administration order relating to ISA
Daisytek SAS should be recognized. Art. 17 InsReg means that this administration order produces, with no further formalities, the same effects in France as under
English law. The judgment of Commercial court
Pontoise is overturned.

• Procureur General Court de Versailles
Court de Cassation 27 June 2006
• BGH 29 May 2008
• BUT First:
– Staubitz-Schreiber ECJ 17 January 2006 (C-1/04)
– Eurofood ECJ 2 May 2006 (C-341/04)

www.bobwessels.nl

International jurisdiction - cases
• “COMI” controversy – illustrated by “bankr tourism” & Daisytek
• ECJ / CJEU cases ( http://curia.europa.eu
):
– Staubitz-Schreiber
– Parmalat / Eurofood
– Deko Marty (or: Seagon)
17 Jan. 06 (C-01/04)
2 May 06 (C-341/04)
12 Febr. 09 (C-339/07)
– MG Probud Gdynia
– Interedil
21 Jan. 10 (C-444/07)
20 Oct. 11 (C-396/09)
– Rastelli Davide and C
– F-Tex
15 Dec. 11 (C-191/10)
19 April 12 (C-213/10)
– Bank Handlowy (Christinapol)22 Nov 12 (C-116/11)
– Grontimmo
– Schmid v Hertel
19 Sept 13 (C-251/12)
14 Jan. 14 (C-328/12)
– Burgo Group SpA v Illochroma4 Sept. 14 (C-327/13)
– H v H.K.
– Nortel Networks SA
4 Dec. 14 (C-295/13)
11 June 15 (C-649/13)

ECJ 17 January 2006 Case C-1/04
Susanne Staubitz-Schreiber
• December 06, 2001:
– Opening of insolvency proceedings before the Amtsgericht -
Insolvenzgericht Wuppertal.
• April 01, 2002:
– Moved to Spain in order to live and work there.
• April 10, 2002:
– Wuppertal court refuses to open the insolvency proceedings
(on the ground that there were no assets).
• August 14, 2002 and October 15, 2003:
– Appeal by S dismissed by the Landgericht Wuppertal: no COMI ex Art.
3(1) InsReg, as her COMI is situated in Spain.
• November 27, 2003:
– German Supreme Court(BGH) decides to stay the proceedings before it and to refer to the ECJ

EUROPEAN COURT OF JUSTICE 17 January 2006 C-1/04
Susanne Staubitz-Schreiber) - Four main grounds:
• A transfer of jurisdiction from the court originally seised to a court in another MS would be contrary to the objectives pursued by the
InsReg (recital 4: “no forum shopping”)
• Such a transfer would also be contrary to the objective of efficient and effective cross-border proceedings (recitals 2 and 8), as it would oblige creditors to be in continual pursuit of the debtor wherever he chooses to establish himself more or less permanently and would often mean in practice that the proceedings would be prolonged

• The universal scope of the main insolvency proceedings, the opening, where appropriate, of secondary proceedings and the possibility for the temporary administrator appointed by the court first seised to request measures to secure and preserve any of the debtor’s assets situated in another Member State constitute, moreover, important guarantees for creditors, which ensure the widest possible coverage of the debtor’s assets, particularly where he has moved the centre of his main interests after the request to open proceedings but before the proceedings are opened.
• Retaining the jurisdiction of the first court seised ensures greater judicial certainty for creditors who have assessed the risks to be assumed in the event of the debtor’s insolvency with regard to the place where the centre of his main interests was situated when they entered into a legal relationship with him.

EUROPEAN COURT OF JUSTICE 17 January 2006 C-1/04
(Susanne Staubitz-Schreiber)
“The answer to be given to the national court must therefore be that Article 3(1) of the Regulation must be interpreted as meaning that the court of the Member
State within the territory of which the centre of the debtor’s main interests is situated at the time when the debtor lodges the request to open insolvency proceedings retains jurisdiction to open those proceedings if the debtor moves the centre of his main interests to the territory of another Member State after lodging the request but before the proceedings are opened.”

A large insolvency

7 ° largest Italian industrial company (Euro 2.5bn market capitalisation, Euro 7.2bn turnover)

Europe’s largest insolvency (restructured debt Euro 21.2bn)

32,000+ employees

40,000+ shareholders

100,000+ creditors
International impact

50%+ of turnover outside Italy

Around 200 subsidiaries, mostly outside Italy (35 jurisdictions)

32 countries of operations

65% of creditors international, from 103 countries

• December 24, 2003: In accordance with Decree-Law No 347 of 23 December
2003 concerning urgent measures for the industrial restructuring of large insolvent undertakings (companies > 1000 employees / amount of debt > € 1 bn) Parmalat SpA was admitted to Amministrazione straordinaria delle grandi impressi in stato di insolvenza (extraordinary administration proceedings) by the Italian Ministry of Production Activities, who appointed Mr Bondi as the
Commissario straordinaria (extraordinary administrator) of that undertaking
• December 27, 2003: Tribunale Civile e Penale di Parma (District Court,
Parma) (Italy) places Parmalat SpA in Amministrazione straordinaria. Appoints as ‘liquidator’ Dr Bondi
• December 30, 2003: ditto with Parmalat Finanziaria SpA
• January 27, 2004: Bank of America NA applied to the High Court (Ireland) for compulsory winding up proceedings to be commenced against Eurofood and for the nomination of a provisional liquidator, as the company is insolvent
• January 27, 2004: High Court appointed Mr Farrell as the provisional liquidator, with powers to take possession of all the company’s assets, manage its affairs, open a bank account in its name, and instruct lawyers on its behalf

• February 5, 2004: District Court Parma 5 NL Finance cy’s / COMI in Italy.
Dr Bondi appointed as Commissario straordanario
• February 9, 2004: Italian Minister for Production Activities admitted
Eurofood to the extraordinary administration procedure and appointed Dr
Bondi as the extraordinary administrator
• February 10, 2004: Application was lodged before the District Court Parma for a declaration that Eurofood was insolvent
• February 10, 2004: Bondi appoints 3 Italians as directors of Eurofood;
Removes Ms Meenaghan
• February 17, 2004: Hearing in Parma, Mr Farrell being informed of that date on 13 February
• February 20, 2004: District Court in Parma: COMI of Eurofood is in Italy;
Parma Court has international jurisdiction to determine whether Eurofood was in a state of insolvency
• March 23, 2004: High Court Dublin: COMI is in Ireland
• July 27, 2004: Dr Bondi appeals - Irish Supreme court refers to ECJ

To determine COMI according to Article 3(1), made precise in recital 13, in principle the criteria developped in applying Article 9 Legge
Fallimentare and therefore the center of the management activities and the driving force of the business are decisive.

Court of Parma 4 February 2005 Re Parmalat Capital Netherlands BV (Cont’d)
“The court, based on the facts, feels it quite evident that the company in question was simply a channel for the financial policy of Parmalat Finanziaria S.p.a. and was set up abroad for the sole purpose of managing the cash flows within the group with a view to tax optimization (subject to criminally relevant pressing requirements) and which therefore had as its point of reference exclusively the interests of the parent company, of which it could be regarded purely as a financial extension. If this is so, and the elements revealed (full control, activities focused purely on the interests of the parent company, a purely administrative body executing directives coming from the Parma head office) are univocal, one must conclude that the head office in terms of an effective operational seat was the same as that where the driving force and management centre of Parmalat Finanziaria and under its control Parmalat S.p.a. were active and that the Italian court therefore has jurisdiction and is competent.”

ECJ 2 May 2006 Case C-341/04 Eurofood IFSC
Main conclusions re COMI
1. Where a debtor is a subsidiary company whose registered office and that of its parent company are situated in two different Member States, the presumption laid down in the second sentence of Article 3(1) of
Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings, whereby the centre of main interests of that subsidiary is situated in the Member
State where its registered office is situated, can be rebutted only if factors which are both objective and ascertainable by third parties enable it to be established that an actual situation exists which is different from that which location at that registered office is deemed to reflect.

ECJ 2 May 2006 Case C341/04 (Cont’d)
>>> ... That could be so in particular in the case of a company not carrying out any business in the territory of the Member State in which its registered office is situated.
By contrast, where a company carries on its business in the territory of the Member State where its registered office is situated, the mere fact that its economic choices are or can be controlled by a parent company in another
Member State is not enough to rebut the presumption laid down by that Regulation.

ECJ 2 May 2006 Case C341/04 (Cont’d)
2. On a proper interpretation of the first subparagraph of
Article 16(1) of Regulation No 1346/2000, the main insolvency proceedings opened by a court of a Member
State must be recognised by the courts of the other
Member States, without the latter being able to review the jurisdiction of the court of the opening State.

ECJ 2 May 2006 Case C341/04 (Cont’d)
3. On a proper interpretation of the first subparagraph of Article 16(1) of the Regulation, a decision to open insolvency proceedings for the purposes of that provision is a decision handed down by a court of a
Member State to which application for such a decision has been made, based on the debtor’s insolvency and seeking the opening of proceedings referred to in Annex A to the Regulation, where that decision involves the divestment of the debtor and the appointment of a liquidator referred to in Annex C to the Regulation. Such divestment implies that the debtor loses the powers of management that he has over his assets.

ECJ 2 May 2006 Case C341/04 (Cont’d)
4. On a proper interpretation of Article 26 of the
Regulation, a Member State may refuse to recognise insolvency proceedings opened in another Member State where the decision to open the proceedings was taken in flagrant breach of the fundamental right to be heard, which a person concerned by such proceedings enjoys.

CJEU 20 October 2011 C-396/09 Interedil Srl
• Where is
“Interedil Srl”, in liquidation?

CJEU 20 October 2011 C-396/09 Interedil Srl
[Note: facts are vague]
• Interedil Srl was originally incorporated in Italy
(Monopoli)
• 18 July 2001: transfer of its registered office to
England and incorporated at Companies House as an “FC” (Foreign Company)
• Around the same time, Interedil was removed from the Italian equivalent of Companies House.
• Once Interedil had been registered in England, it was acquired by the British group Canopus and a few months thereafter, Interedil’s assets in Italy (real estate it owned Taranto) were transferred to
Windowmist Ltd.
• On 22 July 2002, Interedil Srl was dissolved and removed from the UK register of companies.

CJEU 20 October 2011 C-396/09 Interedil Srl
• Facts in Italy:
• In October 2003, the Italian bank Intesa Gestione Crediti SpA presented a windingup petition (“Fallimento”) against Interedil to the Tribunale Ordinario di Bari . Interedil opposed the petition: following the transfer of its registered office to England the
Italian Court no longer had jurisdiction over Interedil. It made an application to Corta suprema di Cassazione.
• However, without waiting for that determination, the Tribunale made a winding-up order in May 2004. Interedil appealed. The
Corte suprema di Cassazione rejected the appeal on 20 May
2005, observing: the presumption of Article 3(1) InsReg that
COMI corresponds to the place of the registered office could be rebutted as a result of various circumstances, namely (i) the presence of immovable property in Italy owned by Interedil, (ii) the existence of a lease agreement in respect of two hotel complexes, (iii) a contract concluded with a banking institution, and (iv) the fact that the Bari register of companies had not been notified of the transfer of Interedil’s registered office.

CJEU 20 October 2011 C-396/09 Interedil Srl
• Questions referred to the CJEU by the Tribunale were:
• 1. Is the term COMI to be interpreted in accordance with
Community law or with national law, and if it is to be interpreted in accordance with Community law, then what are the decisive factors or considerations?
• 2. Can the presumption be rebutted if it is established (as the
Corte suprema di Cassazione did) that “the company carries on genuine business activity in a State other than that in which it has its registered office” and also whether it was sufficient if the corporate debtor undertakes no business activity in the State in which it has its registered office.
• 3. If the company has, in a MS which is not the MS in which it has its registered office, immovable property, a lease agreement concluded with another company in respect of two hotel complexes and a contract with a banking institution, are these factors individually or together sufficient to rebut the registered office presumption?
• 4. Lastly: are these factors at least sufficient for the relevant company to be regarded as having an “establishment” in such other MS

CJEU 20 October 2011 C-396/09 Interedil Srl - interpretation
• 1. The Court has consistently held that it follows from the need for uniform application of European Union law and from the principle of equality that the terms of a provision of that law which makes no express reference to the law of the MSs for the purpose of determining its meaning and scope must normally be given an autonomous and uniform interpretation throughout the Union, having regard to the context of the provision and the objective pursued by the legislation in question. COMI, the ECJ held at paragraph 31 of Eurofood IFSC, is a concept peculiar to the Regulation, thus having an autonomous meaning, and must therefore be interpreted in a uniform way, independently of national legislation.

Further guidance
• on definition
• on how to apply presumption
• on reference time
• on definition of establishment

CJEU 20 October 2011 C-396/09 Interedil Srl – COMI determination
• 2 (and 3). For the purposes of determining a debtor company’s main centre of interests, the second sentence of Art. 3(1) InsReg must be interpreted as follows: a debtor company’s COMI must be determined by attaching greater importance to the place of the company’s central administration, as may be established by objective factors which are ascertainable by third parties. * Where the bodies responsible for the management and supervision of a company are in the same place as its registered office and the management decisions of the company are taken, in a manner that is ascertainable by third parties, in that place, the presumption in that provision cannot be rebutted. ** Where a company’s central administration is not in the same place as its registered office, the presence of company assets and the existence of contracts for the financial exploitation of those assets in a MS other than that in which the registered office is situated cannot be regarded as sufficient factors to rebut the presumption unless a comprehensive assessment of all the relevant factors makes it possible to establish, in a manner that is ascertainable by third parties, that the company’s actual centre of management and supervision and of the management of its interests is located in that other MS;

CJEU 20 October 2011 C-396/09 Interedil Srl – COMI relevant time
• Re the relevant date for the purpose of locating a debtor’s COMI: the InsReg does not contain any express provisions concerning the specific case involving the transfer of a debtor’s centre of interests. In the light of the general terms in which Article 3(1) is worded, the last place in which that centre was located must therefore be regarded as the relevant place for the purpose of determining the court having jurisdiction to open the main insolvency proceedings. That interpretation finds support in the Court’s case-law, as it has held that, where COMI is transferred after the lodging of a request to open insolvency proceedings, but before the proceedings are opened, the courts of the MS within the territory of which the COMI was situated at the time when the request was lodged retain jurisdiction to rule on those proceedings (Case C-1/04 Staubitz-Schreiber). It must be inferred from this that, in principle, it is the location of the debtor’s main centre of interests at the date on which the request to open insolvency proceedings was lodged that is relevant for the purpose of determining the court having jurisdiction.

CJEU 20 October 2011 C-396/09 Interedil Srl
• In a case such as that in the main proceedings in which the registered office is transferred before a request to open insolvency proceedings is lodged,
COMI is therefore presumed to be located at the place of the new registered office and, accordingly, it is the courts of the MS within the territory of which the new registered office is located which, in principle, have jurisdiction to open the main insolvency proceedings, unless the presumption in Article 3(1)
InsReg is rebutted by evidence that the COMI has not followed the change of registered office.
• The same rules must apply where, at the date on which the request to open insolvency proceedings is lodged, the debtor company has been removed from the register of companies and where, as submitted by Interedil in its observations, it has ceased all activity.
• The term “COMI” meets the need to establish a connection with the place with which, from an objective viewpoint and in a manner that is ascertainable by third parties, the company has the closest links. It is therefore logical in such a situation to attach greater importance to the location of the last centre of main interests at the time when the debtor company was removed from the register of companies and ceased all activities. Thus: where a debtor company’s registered office is transferred before a request to open insolvency proceedings is lodged, the company’s centre of main activities is presumed to be the place of its new registered office.

CJEU 20 October 2011 C-396/09 Interedil Srl -
Establishment
• 4. The term ‘establishment’ within the meaning of
Article 3(2) InsReg must be interpreted as requiring the presence of a structure consisting of a minimum level of organisation and a degree of stability necessary for the purpose of pursuing an economic activity. The presence alone of goods in isolation or bank accounts does not, in principle, meet that definition. In para 63: “…. in order to ensure legal certainty and foreseeability concerning the determination of the courts with jurisdiction, the existence of an establishment must be determined, in the same way as the location of the centre of main interests, on the basis of objective factors which are ascertainable by third parties.”

Some other jurisdiction complexities

In light of Arts. 3, 16 and 25: types of judgments:
• a. opening insolvency proceedings;
• b. relating to the course and closure of insolvency proceedings
– eg hearing of parties or dismissal liquidator
• c. deriving directly from the insolvency proceedings and which are closely linked with them
– eg action to set aside detrimental act
• d. relating to preservation measures taken after the request for the opening of insolvency proceedings, and
• e. other judgments (Art. 25(2).
Note: defence against 25(1) judgments, see Art. 25(3).

ECJ 12 February 2009 C-339/07
On 14 March 2002, Frick Teppichboden Supermärkte GmbH
(seat in Germany), transferred € 50 000 to an account with KBC
Bank in Düsseldorf in the name of Deko Marty Belgium N.V.
(seat in Belgium). Pursuant to an application made by Frick on
15 March 2002, the AG Marburg (Local Court) opened insolvency proceedings on 1 June 2002 in respect of Frick’s assets. By application to the LG Marburg (Regional Court), Mr
Seagon, in his capacity as liquidator in respect of Frick’s assets, requested that court, by way of an action to set a transaction aside by virtue of the debtor’s insolvency, to order Deko to repay the money. LG Marburg dismissed that application as inadmissible on the ground that it did not have international jurisdiction to hear and determine it.
Since the appeal brought by Mr Seagon was also dismissed he
Brought an appeal on a point of law (‘Revision’) before the
Federal Court of Justice (Germany).

German Supreme Court 21 June 2007 (Deko
Marty)
• (i) will the courts of a Member State, in the territory of which main insolvency proceedings against a debtor have been opened, have international jurisdiction concerning an avoidance action (Insolvenzanfechtungsklage) against a third party, a Belgian company, who has its statutory seat in Belgium, and
• (ii) in case the answer is negative, will the action fall within the scope of the exclusion of Article 1 II b Brussels Regulation 2000 or is the latter
Regulation applicable?

ECJ 12 February 2009 C339/07 (Cont’d)
The actions to set a transaction aside by virtue of insolvency is governed in German law (Para. 129 et seq InsO); only the liquidator may bring such an action in the event of insolvency with the sole purpose of protecting the interests of the general body of creditors, the action therefore is intended to increase the assets of the estate;
- An action similar to that at issue in the main proceedings is related to “bankruptcy or winding-up if it derives directly from the bankruptcy or windingup and is closely connected with the proceedings for the ‘liquidation des biens’ or the ‘règlement judiciaire’
(see Case 133/78 Gourdain [1979] ECR 733, paragraph 4). An action with such characteristics does not therefore fall within the scope of that convention (now Brussels I).

ECJ 12 February 2009 C339/07 (Cont’d)
This criterion is used by recital 6
Based on that intention of the legislature and the effectiveness of the regulation, Art. 3(1) thereof must be interpreted as meaning that it also contributes international jurisdiction on the Member State within the territory of which insolvency proceedings were opened in order to hear and determine actions which derive directly from those proceedings and which are closely connected to them.

ECJ 12 February 2009 C339/07 (Cont’d) // Reasons:
22. Concentrating all the actions directly related to the insolvency of an undertaking before the courts of the MS with jurisdiction to open the insolvency proceedings also appears consistent with the objective of improving the effectiveness and efficiency of insolvency proceedings having cross-border effects, referred to in recitals 2 and 8.
23. Furthermore, that interpretation is confirmed by recital 4, according to which it is necessary for the proper functioning of the internal market to avoid incentives for the parties to transfer assets or judicial proceedings from one Member State to another, seeking to obtain a more favourable legal position
(forum shopping).
24. The possibility for more than one court to exercise jurisdiction as regards actions to set a transaction aside by virtue of insolvency brought in various Member States would undermine the pursuit of such an objective.

ECJ 12 February 2009 C339/07 (Cont’d)
25. Finally, the interpretation of Art. 3(1), as set out in para. 21 above, is supported by Art. 25(1). The first subparagraph of that provision imposes an obligation to recognise judgments handed down by a court whose judgment concerning the opening of proceedings is recognised in accordance with
Art. 16 and which concern the course and closure of insolvency proceedings, that is to say, a court with jurisdiction under Art. 3(1).

CJEU 15-12-2011 Rastelli Davide e C. Snc, C-191/10
• Can main insolvency proceedings, based on a national (French) rule of
“consolidation”, include a debtor/company with registered office in another
Ms (Italy)?

CJEU 15-12-2011 Rastelli Davide e C. Snc, C-191/10
• May 7, 2007
- Commercial Court Marseille opens insolvency proceedings agianst
Médiasucre, with registered office in Marseille; appoints Hidoux as liquidator.
- Hidoux brought proceedings before the same court against Rastelli, registered office in Robbio (Italy), requesting that Rastelli be joined (basis in French national law) to the insolvency proceedings that had been opened against Médiasucre on the ground that the property of the two companies was intermixed.
• May 19, 2008
• - Court declines jurisdiction ex Art. 3 InsReg, as Rastelli’s registered office was in Italy and that it had no establishment in France.
• February 12, 2009
• - Court of Appeal d’Aix-en-Provence set judgment aside and held that the court had jurisdiction, as the liquidator’s application was not intended to open insolvency proceedings against Rastelli but to join it to the already opened judicial liquidation against Médiasucre.
• Court de cassation decided to stay the proceedings and to refer questions to the CJEU.

CJEU 15-12-2011 Rastelli Davide e C. Snc, C191/10 (Cont’d)
• The InsReg does not contain a rule concerning judicial or legislative competence that expressly refers to the joinder to insolvency proceedings opened in one MS of a company whose registered office is in another MS on the ground that the property of the two companies has been intermixed
• CJEU affirms system of int’l jurisdictions, and the terms COMI and establishment ( Eurofood, Probud,
Interedil )
• Can an application for joinder of insolvency proceedings on the ground that property has been intermixed, be deemed to be an action which derives directly from the initial insolvency proceedings and which is closely connected with them, within the meaning of recital 6 in the preamble to the
Regulation ( Seagon )?

CJEU 15-12-2011 Rastelli Davide e C. Snc, C191/10 (Cont’d)
• Joining another legal entity to opened insolvency proceedings on the sole ground that their property has been intermixed, without considering where the COMI is situated, would constitute a circumvention of the system established by the
Regulation. This would result, inter alia, in a risk of conflicting claims to jurisdiction between courts of different MSs, which the Regulation specifically intended to prevent in order to ensure uniform treatment of insolvency proceedings within the
EU
• The InsReg is to be interpreted as meaning that a court of a
MS that has opened main insolvency proceedings against a company, on the view that the debor’s COMI is situated in the territory of that MS, can, under a rule of its national law, join to those proceedings a second company whose registered office is in another MS “only if it is established that the centre of that second company’s main interests is situated in the first
Member State.”

CJEU 15-12-2011 Rastelli Davide e C. Snc, C-191/10
• Factors such as “the existence of intermingled accounts” and “abnormal financial relations” between the companies, such as the deliberate organisation of transfers of assets without consideration:
• “are in general difficult to ascertain by third parties. Furthermore, intermixing of property does not necessarily imply a single centre of interests. Indeed, it cannot be excluded that such intermixing may be organised from two management and supervision centres situated in two different Member States.”
• The InsReg is to be interpreted as meaning that where a company, whose registered office is situated within the territory of a MS, is subject to an action that seeks to extend to it the effects of insolvency proceedings opened in another MS against another company established within the territory of that other MS, the mere finding that the property of those companies has been intermixed is not sufficient to establish that the COMI of the company concerned by the action is also situated in that other MS. In order to reverse the presumption that this centre is the place of the registered office, it is necessary that an overall assessment of all the relevant factors allows it to be established, in a manner ascertainable by third parties, that the actual centre of management and supervision of the company concerned by the joinder action is situated in the MS where the initial insolvency proceedings were opened.

CJEU 14 January 2014 (Case C-328/12) Schmid v Hertel

• Schmid is a liquidator in German insolvency proceedings in which Aletta Zimmermann is the debtor. An action to set aside the transfer of EUR 8 015.08 from Zimmermann to Lilly Hertel, is brought by Schmid before the German courts. Hertel, though, resides in CH
• The German courts dismiss the action: the German courts lacked international jurisdiction. Schmid pursues his action before the Bundesgerichtshof (BGH), which observes that the dispute in the main proceedings falls within the scope ratione materiae of Article 3(1) InsReg, referring to Case C-339/07
( Seagon or Deko Marty )
• The BGH refers to CJEU as it had ruled that the courts of the
Member State within the territory of which insolvency proceedings have been opened have jurisdiction to decide an action to set a transaction aside that is brought against a person whose registered office is in another Member State, but that in that case it was not decided whether Article 3(1)
InsReg is also applicable where insolvency proceedings have been opened in a Member State, but the place of residence or registered office of the person against whom the action to have a transaction set aside is brought is not in a Member
State, but in a third country.

• Arguments:
• requirement of ‘connecting factors’ with two or several Member States to have the InsReg applied does not follow from the wording of Article 1 nor
Annex A and the same is true of recital 14 in the preamble to the InsReg, according to which application of the Regulation is precluded only if the centre of the debtor’s main interests (COMI) is located outside the European
Union
• - CJEU observes too that several provisions regarding applicable law in the
Regulation require the presence of connecting factors with the territory or the legal system of at least two Member States (e.g. Article 5(1)), but other provisions (such as Articles 6 and 14) do not. Text-arguments therefore do not provide a decisive answer. The Court then goes into interpreting the recitals in the preamble. Several of these, thus the Court, do not support a narrow interpretation of the Regulation’s scope. The Court refers to recitals 2 to 4 and continues ‘ Recital 8 refers to the objective of ‘improving the efficiency and effectiveness of insolvency proceedings having cross-border effects’ and recital 12 states that insolvency proceedings falling within the
Regulation’s field of application ‘have universal scope and aim at encompassing all the debtor’s assets ’. The latter objectives may encompass not solely relations between Member States but, by their nature and in accordance with their wording, any cross-border situation ’ [25]. Explaining the 2006 Case C-1/04 ( Staubitz-Schreiber ) the Court comes to the conclusion that application of Article 3(1) InsReg cannot (‘as a general rule’), depend on the existence of a cross-border link involving another Member
State.

• But wouldn’t the defendant (Hertel) in such an action to set a transaction aside then be sued before a court in a State other than the State where his place of residence is located?
The Court stays calm by considering that COMI determination
‘ … is normally foreseeable for the defendant, who may take it into account at the time when he participates, with the debtor, in an act liable to be set aside in insolvency proceedings.
Accordingly, the objectives of foreseeability of jurisdiction as regards bankruptcy and liquidation and of legal certainty, resulting from recital 8 in the preamble to the Regulation, and, as the case may be, the objective of avoiding incentives for the parties to transfer assets from one Member State to another, or to choose a particular forum, in order to obtain a more favourable legal position, referred to in recital 4, prevail over the concern to avoid the defendant being sued in a foreign court ’.

• But: Courts of a third country would be under no obligation at all to recognise or enforce a judgment delivered by a court having
COMI under the InsReg, therefore making such a judgment ineffective if the defendant’s place of residence were in a third country
Referring to the opinion of the AG CJEU provides three possibilities: (i) the fact that the provisions of the Regulation concerning recognition and enforcement of judgments delivered by the court which has opened the insolvency proceedings cannot bind third countries does not preclude the application of the rule governing jurisdiction which is laid down in Article 3(1)
InsReg,
(ii) if one can not rely on the Regulation itself for the recognition and enforcement of judgments, it is sometime possible to obtain under a bilateral convention the recognition and enforcement of a judgment delivered by the court with jurisdiction, and finally
(iii) even if such a judgment is not recognised and enforced, on the basis of a bilateral convention, by the State in which the defendant’s place of residence is located, it may be recognised and enforced by the other MSs under Article 25 InsReg, in particular if part of the defendant’s assets are in the territory of one of those States [36 – 38].

www.bobwessels.nl

(20) Main insolvency proceedings and secondary proceedings can, however, contribute to the effective realisation of the total assets only if all the concurrent proceedings pending are coordinated. The main condition here is that the various liquidators must cooperate closely, in particular by exchanging a sufficient amount of information. In order to ensure the dominant role of the main insolvency proceedings, the liquidator in such proceedings should be given several possibilities for intervening in secondary insolvency proceedings which are pending at the same time. For example, he should be able to propose a restructuring plan or composition or apply for realisation of the assets in the secondary insolvency proceedings to be suspended.

Model: COORDINATION RE PROCEEDINGS
The liquidator in the main proceedings may:
• Exercise right ex art. 20 (creditor in other MS shall return what he has obtained)
• Request publication of opening judgment or registration of judgment in public registers kept in another MS (Art. 21, 22)
• Request opening of secondary proceedings in other MSs (art. 29)
• Participate in secondary proceedings (Art. 32(3))
• Request stay of the process of liquidation of sec. proc. (Art. 33(1)) and may request measures ex Art. 34.1 (see Art. 34(3))
• Request termination of this stay (Art. 33(2))
• Propose a rescue plan, when allowed (Art. 34(1))
• Dis-content with finalizing liquidation in sec. proc. (Art. 34(1))
• Claim the remaining assets (art. 35)

COORDINATION RE PROCEEDINGS (Cont’d)
Key duties of liquidator in main and secondary proceedings:
• 1. To communicate information (Art. 31(1))
• 2. To cooperate (Art. 31(2))
• 3. To lodge all claims lodged in the main proceedings (Art. 32(2))
• 4. To immediately inform all known creditors (Art. 40(1)) by individual notice (Art. 40(2))
Article 31
Duty to cooperate and communicate information: text does not provide clear guidance > “CoCo Guidelines”

Several parallel proceedings:
• Communication
• Cooperation
• Coordination
Text Art. 31 InsReg: vague

European Communication and Cooperation
Guidelines For Cross-border Insolvency
(CoCo Guidelines www.insol-europe.org
// 2007-09 + 10)
• Aims Guidelines – Status
• Coordination, using ‘Protocols’
• Examples:
- Requirements for practitioners
- Language
- Fees and costs
- Role of courts

Guideline 1 Overriding objective
1.1. These Guidelines embody the overriding objective of enabling courts and liquidators to operate efficiently and effectively in cross-border insolvency proceedings within the context of the EC Insolvency Regulation.
1.2. In achieving the objective of Guideline 1.1., the interests of creditors are paramount and are treated equally.
I.3. All interested parties in cross-border insolvency proceedings are required to further the overriding objective as set out above in Guideline 1.1.
Guideline 2 Aim
2.1. The aim of these Guidelines is to facilitate the coordination of the administration of insolvency proceedings involving the same debtor, including through the use of a governance protocol.
2.2. In particular, these Guidelines aim to promote:
(i) The orderly, effective, efficient and timely administration of proceedings;
(ii) The identification, preservation and maximisation of the value of the debtor’s assets
(which includes the debtor’s undertaking or business) on a world-wide basis;
(iii) The sharing of information in order to reduce the costs involved; and
(iv) The avoidance or minimization of litigation, costs and inconvenience to all parties affected by proceedings.

CoCo Guidelines Guideline 4
4.2. A liquidator is required to act with the appropriate knowledge of the EC
Insolvency Regulation and its application in practice.
4.3. A liquidator is required to act honestly, objectively, fairly and expeditiously in dealing with all parties concerned, including the courts.

CoCo Guidelines - Guideline 10
10.1. Liquidators shall determine the language in which communications take place on the basis of convenience and the avoidance of costs. The court is advised to allow use of other languages in all or part of the proceedings if no prejudice to a party will result.
10.2. Courts are encouraged, to the maximum extent permissible under national law, to accept any
Documents related to those communications in language decided upon under Guideline 10.1, without the need for a translation into the language of proceedings before them.

CoCo Guidelines - Guideline 11 Fees and costs
11.2. Obligations and fees incurred by the liquidator in the main proceedings prior to the opening of any secondary proceedings but concerning assets to be included in the estate of these latter proceedings in principle will be funded by the estate corresponding to the secondary proceedings.

CoCo Guidelines – Guideline 16 Courts
16.1. Courts are advised to seek to give effect to the overriding objective of enabling courts and liquidators to operate efficiently and effectively operate in cross
Border Insolvency proceedings within the context of the
EC Insolvency Regulation, in the meaning of Guideline
1.
16.2. Courts are advised to operate in a cooperative
Manner to resolve any dispute relating to the intent or application of the terms of any cooperation agreement or protocol.

• 1. Literature: how to “include” in InsReg?
– Annex to InsReg?
– In a national “Kodex”?
– Standard / yardstick to measure “national” duties?
– A “European” standard for liquidators?
• 2. Practice:
– BenQ Holding 2007?
– Restructuring Committee Landsbanki – ICESAVE?
– Lehman Brothers Holdings Inc. (LBHI)
– High Court London 11 February 2009
– Nortel Networks, see CJEU 11 June 2015 (C-649/13)

Bank Handlowy w Warszawie SA, PPHU ‘ADAX’/Ryszard Adamiak,
V Christianapol sp. z o.o. (Case C-116/11)
• - Reference was made in the context of proceedings relating to the opening of insolvency proceedings, in Poland, further to an application made by Bank
Handlowy and Adamiak in respect of Christianapol sp. z o.o., a company governed by Polish law, in respect of which rescue proceedings ( procédure de sauvegarde ) had previously been opened in France. Christianapol is a wholly-owned subsidiary of a German company, which in turn is 90% owned by a French company.
• - By judgment of 1 October 2008, the Tribunal de commerce de Meaux
(France) opened insolvency proceedings against Christianapol (COMI in
France). The court opened sauvegarde proceedings on the ground that the debtor was not in a situation calling for the cessation of payments, but that it would be in that situation if financial restructuring was not undertaken quickly.
• - On 21 April and 26 June 2009, Bank Handlowy, established in Warsaw
(Poland), in its capacity as creditor of Christianapol, asked the referring court to open secondary insolvency proceedings against Christianapol under Article
27 of the Regulation. On 20 July 2009, the Tribunal de commerce de Meaux approved a rescue plan for Christianapol, under which debts would be paid off in instalments spread over 10 years and prohibiting the transfer of the undertaking of Christianopol, situated in Łowyń (Poland) and of certain defined assets belonging to the debtor. The French court maintained the appointment, made previously, of the persons responsible for representing the interests of creditors for the period up to the closure of the procedure for the verification of claims and the submission of a final report on the activities of those representatives. In its judgment it also appointed a person to oversee the implementation of the plan ( commissaire à l’exécution du plan ).

Bank Handlowy C116/11 (cont’d)
• - On 2 August 2009, another creditor, Adamiak, established in
Łęczyca (Poland), also asked for winding-up proceedings to be opened under Polish law.
• - Following the approval of the rescue plan by the French court, Christianapol contended that the secondary insolvency proceedings should be discontinued, since the main proceedings had closed. It also contended that it was fulfilling its obligations under the plan approved by the French court, with the result that no pecuniary claims were outstanding against it under Polish law and there were therefore no grounds supporting a declaration of insolvency in respect of it.
• “The referring court asked the Tribunal de commerce de
Meaux whether the insolvency proceedings in France, which were main proceedings for the purposes of the Regulation, were still pending. The answer given by the French court did not provide the necessary clarification. The referring court then consulted an expert.”
• In those circumstances, the Sąd Rejonowy Poznań-Stare
Miasto w Poznaniu decided to stay the proceedings and to refer questions to the Court for a preliminary ruling:

Bank Handlowy C116/11 (Cont’d)
• 1. Article 4(2)(j) InsReg must be interpreted as meaning that it is for the national law of the Member State in which insolvency proceedings have been opened to determine at which moment the closure of those proceedings occurs.
• 2. Article 27 InsReg must be interpreted as meaning that it permits the opening of secondary insolvency proceedings in the
Member State in which the debtor has an establishment, where the main proceedings have a protective purpose. It is for the court having jurisdiction to open secondary proceedings to have regard to the objectives of the main proceedings and to take account of the scheme of the Regulation, in keeping with the principle of sincere cooperation.
• 3. Article 27 InsReg must be interpreted as meaning that the court before which an application to have secondary insolvency proceedings opened has been made cannot examine the insolvency of a debtor against which main proceedings have been opened in another Member State, even where the latter proceedings have a protective purpose.

Bank Handlowy C-116/11 (final) - argumentation
• “59 …., the fact remains that the opening of secondary proceedings, which, under Article 3(3) of the Regulation, must be winding-up proceedings, risks running counter to the purpose served by main proceedings, which are of a protective nature.
• 60 It should be noted that the Regulation provides for a certain number of mandatory rules of coordination intended to ensure, as expressed in recital 12 in the preamble thereto, the need for unity in the Community. In that system, the main proceedings have a dominant role in relation to the secondary proceedings, as stated in recital 20 in the preamble to the Regulation.
• 61 The liquidator in the main proceedings thus has certain prerogatives at his disposal which allow him to influence the secondary proceedings in such a way that the protective purpose of the main proceedings is not jeopardised [follow examples]
• 62 The principle of sincere cooperation laid down in Article 4(3)
EU requires the court having jurisdiction to open secondary proceedings, in applying those provisions, to have regard to the objectives of the main proceedings and to take account of the scheme of the Regulation, which, ……, aims to ensure efficient and effective cross-border insolvency proceedings through mandatory coordination of the main and secondary proceedings guaranteeing the priority of the main proceedings.”

• The basic rules
• ECJ 2006 Eurofood
• Now: New case law

• Text for COMI-definition (February 2000):
• “.. der Ort, von dem aus der Schuldner hauptsächlich Geschäfsbeziehungen unterhält sowie andere wirtschaftliche
Tätigheiten ausübt und zu dem er deshalb die engsten Beziehungen unterhält”
• “…the place, from which the debtor mainly entertains economic relations as well as exercises other economic activities and to which place he therefore maintains the closest relationships”

•

• Registered office shall be presumed to be the COMI in the absence of proof of the contrary: substantive or evidentiary?
• “Head office functions” approach:
Any evidence designed to show that the COMI is in a
MS other than that in which the registered office is located, must demonstrate that the head office functions were carried out in that other State. The place in which “head office functions” are carried out will be the place where activities such as strategic, executive and administrative decisions regarding accounting, IT, corporate marketing, branding etc., are performed

COMI: Head office v. Contact with Creditors
Or: Mind of management v. Business activity
•

Trib. de Comm. Paris 2 August 2006 Re Eurotunnel
(conf’d)
The court
• refers to the Eurofood judgment and applies an autonomous – unrelated to national laws – interpretation
• considers that several facts and circumstances proved that COMI of the various companies was in
France, including:
(i) strategic and operative management of the group of companies is discharged by a joint council, based in
Paris, comprising only French citizens;
(ii) managing finances and accounting takes place in
France;
(iii) employees and assets are located in France; and
(iv) all negotiation on debt restructuring took place in
Paris

High Court of Justice 20 June 2008
Re Lennox Holdings PLC and two Spanish subsidiaries:
“What I should concentrate on is the head office functions of the two Spanish companies. It is, I should say, clear that the two Spanish companies do carry on business in the member state where their registered offices is situated and consequently the
‘mere fact,’ that its economic choices are or can be controlled by a parent company is not enough to rebut the presumption. That is not what is relied on in the present case. It is not control by a parent company that is relied on in the present case. It is control of the companies themselves by their boards of directors.
” ………..

High Court of Justice 20 June 2008 (Cont’d)
The relevant facts of the case at hand related to strategic, operational and managenent being conducted from England,the court concludes:
[t]hus the financing of the company, its major decisions and the administration of the company itself is conducted in this country and through
English suppliers, English directors and with
English funding.”

Re Hellas Telecommunications (Luxembourg) II SCA [2009] EWHC 3199
(Ch) [2009-11-26]
• head office and principal operating address had moved (in August 2009) to
London
• - its creditors were notified of its change of address around that time
• - an announcement was made by way of a press release that its activities were shifting to England.
• - It had opened a bank account in London and all payments were made into and from that bank account, although there still remained a bank account in
Luxembourg to deal with minor miscellaneous payments.
• - It registered under the Companies Act in England, although its registered office remained in Luxembourg and it would remain liable to pay tax in
Luxembourg too.
• - The purpose of the COMI was to enable creditors in particular to know where the company was and where to deal with the company. One of the most important features of the evidence was that all negotiations between
Hellas II and its creditors had taken place in London.
• On that evidence I am satisfied that the company has moved its COMI from
Luxembourg to England with the consequence that I have jurisdiction to make the order sought. There is no doubt on the evidence that the company is insolvent; and the evidence is compelling that administration will produce a better result for creditors than would be produced on a winding up.

[2009] EWCH 1441 (Ch); [2009] WLR (D) 230; blog
2009-09-doc8

[2009] EWCH 1441 (Ch); [2009] WLR (D) 230; blog 2009-09-doc8

At the request of the SEC the Court in Texas has appointed
Ralph Janvey as receiver over the assets worldwide of Stanford
International Bank Ltd ( “the company”) on the basis of alleged violations of investor protection legislation.
A few days later, the High Court of Antigua and Barbuda appointed Mr Hamilton-Smith and Mr Wastell as liquidators of the company.
Both the receiver and the liquidators applied to the High Court, under the 2006 Regulations, for recognition of their respective proceedings, each of them alleging that the proceedings in which they had been appointed were the “foreign main proceedings” for the purposes of art 2 the UNCITRAL Model Law on Cross-Border
Insolvency set out in Schedule 1 to the Regulations.
The company was incorporated in Antigua and had its registered office there. It was one of a number of companies owned either directly or indirectly by Sir Robert Allen Stanford who was a citizen of both the United States of America and Antigua.

Mr Justice Lewison
• ‘Simply to look at the place where head office functions are actually carried out, without considering whether the location of those functions is ascertainable by third parties, is the wrong test.’
‘The way in which the ECJ approached recital (13) was not to apply the factual assumption underlying it but to apply its rationale. I accept this submission. To the extent that I considered and applied the head office functions test in
Lennox Holdings on the basis accepted by Jacobs A-G in §
114, I now consider that I was wrong to do so. Pre-Eurofood decisions by English courts should no longer be followed in this respect’, especially mentioning in Re Ci4net.com
(presumption is only one of the many factors to consider).

‘I hold therefore that: i) The relevant COMI is the COMI of SIB; ii) Since its registered office is in Antigua, it is presumed in the absence of proof to the contrary, that its COMI is in
Antigua; iii) The burden of rebutting the presumption lies on the
Receiver; iv) The presumption will only be rebutted by factors that are objective; v) But objective factors will not count unless they are also ascertainable by third parties; vi) What is ascertainable by third parties is what is in the public domain, and what they would learn in the ordinary course of business with the company .’

• i) The location of the principal movers of the fraud is USA
• J: This fact ‘(if it is a fact)’ is not one that was ascertainable by third parties;
• ii) The location of most of the directors is USA and none was in Antigua
• J: The nationality of the directors has no bearing on COMI; the manner in which board meetings via conference calls took place would not have been ascertainable by third parties.
• iii) The principal place of business of the Bank was in the USA
• J: The marketing of certificates of deposit by financial advisers, located in the US is not seen by ‘an investor’ as this adviser conducting the Bank’s business);
• iv) The purchasers of certificates of deposit were all residents and citizens of countries other than Antigua
• J: This is true, may have been ascertainable by third parties, but this fact does not point in favour of any single state other than Antigua; the presumption cannot be rebutted by an attempt to demonstrate that Antigua was not the COMI of the Bank, unless it is also shown that the Bank had a
COMI in some other state: ‘It is not possible for a corporation to have a worldwide COMI’.

• v) The investments were managed outside Antigua, mostly in the USA
J: This is true, may to some extent be ascertainable by third parties, but management carried out by other companies under contractual arrangements with the Bank does not change the Bank ’s COMI;
• vi) The real management of the Bank SIB was carried out by employees in the USA J: Not ascertainable to third parties;
• vii) The location of books and records relating to the primary business of investments was in the USA
J: Books and records relating to the investors themselves were kept in Antigua, the primary records about investments were kept in the USA. It shows that the Banks books and records were split between Antigua and the USA.
• viii) The Banks ’ assets were located outside Antigua and mostly in the USA.
J: In as far as this fact is correct – more assets are located in the UK and in Switzerland – the location of the investments themselves is not significant as regards the Banks COMI.

Court of Appeal 25 February 2010, blog2010-03-doc2 en doc10
In Appeal, the Chancellor: the appropriate starting point for Consideration of the submissions is the question
Whether Lewison J was right to follow Eurofood : “In my view he was”.
The same expression COMI used in different documents
(UNCITRAL Model Law; InsReg) may bear different
Meanings because of their respective contexts. I can see nothing in the respective contexts of UNCITRAL and
InsReg to require different meanings to be given to the phrase COMI.

Court of Appeal 25 February 2010, blog2010-03-doc2 en doc10
Lewison J “confined factors ascertainable by third parties to matters already in the public domain and what a typical third party would learn as a result of dealing with the company and excluded those which might be ascertained on enquiry. …. To extend ascertainability to factors, not already in the public domain or apparent to a typical third party doing business with the company, which might be discovered on enquiry would introduce into this area of the law a most undesirable element of uncertainty.”
• “For all these reasons I would reject the submission that Lewison J applied the wrong test.”

• InsReg has deliberately left out rules rules for multinational groups
• Text was drafted in 80s/90s
• “Liquidation” focused

Treatment of multinational Groups of companies
• 1. Leave matter as they are: continue national case law
(Menjucq, Dammann)
• 2. Improve COMI definition (Moss, Paulus)
• 3. Introduce constrainted forum choice (Rasmussen,
Eidenmüller)
• 4. Subsidiary as “establishment” of parent in MS where it has its registered office. But:
– InsReg deliberately does not contain rules for groups
– InsReg has own definition for “establishment” (Art. 2(h))
– The mere own legal personality of the sub (“piercing”)
– Only in 100% shareholder-relations? (see CJEU in Burgos)
• 5. Treat creditors in other MSs “as if” secondary proceedings were opened (“Virtual” sec. proc.)
– Collins & Aikman
– MG Rover
– “Nortel Europe” 2009 example (next)

Workforce of 30,000 worldwide
- 12,000 R&D employees
- 3,200 Global sales force
- 9,700 Service organisation
Global scale of operations :
150 countries
More than half of Fortune
500 companies
Over 5,000 patents worldwide

[
2009] EWHC 206 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
THE HON MR JUSTICE PATTEN
Before:
THE HON MR JUSTICE PATTEN
IN THE MATTERS OF:
NORTEL NETWORK SA
NORTEL GMBH
NORTEL NETWORKS NV
NORTEL NETWORKS S.P.A.
NORTEL NETWORKS BV
NORTEL NETWORKS POLSKA SP. Z.O.O.
NORTEL NETWORKS HISPANIA SA
NORTEL NETWORKS INTERNATIONAL FINANCE&HOLDINGS BV
NORTEL NETWORKS (AUSTRIA) GMBH
NORTEL NETWORKS SRO
NORTEL NETWORKS ENGENEERING SERVICE KFT
Royal Courts of Justice
Strand, London, WC2A 2Ll
11th February 2009
NORTEL NETWORKS PORTUGAL SA
NORTEL NETWORKS SLOVENSKO
NORTEL NETWORKS FRANCE SAS
NORTEL NETWORKS OY
NORTEL NETWORKS ROMANIA SRL
NORTEL NETWORKS AB
NORTEL NETWORKS (IRELAND) LIMITED
(INDIVIDUALLY THE “COMPANY” AND TOGETHER THE “COMPANIES”)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986

- Administration orders based on COMI of 18 Nortel
Companies
- Blackburne J (by way of Day One Order) authorised the Joint Administrators in their discretion to make payments out of their assets to employees and preferential creditors of the relevant
Companies corresponding to the amounts they would receive in the event that secondary insolvency proceedings were to be commenced in other Member States
- The court also authorised the Joint Administrators to apply to the relevant judicial authorities in any other country for such assistance as they consider they may require in connection with the performance of their functions as administrators

Decision re an application by the Joint Administrators of the Nortel group of companies for the court:
1. to send a letter of request to the courts of a number of Member States in the EC asking those courts to put in place arrangements under which the Joint
Administrators will be given notice of any request or application for the opening of secondary insolvency proceedings in respect of any of the companies in administration,
2. this letter will also request the courts to which it is sent to permit the Joint Administrators to make submissions on any such applications in respect of the potential damage which secondary proceedings might have on the interests of the estate and the creditors of the relevant Companies.

The High Court has an inherent jurisdiction to issue a letter of request to a foreign court in appropriate circumstances:
- the request for assistance stems from Art. 31(2)
- this duty reflects “a wider obligation which extends to the courts which exercise control of insolvency procdures in their respective jurisdictions ”(see Re Stojevic, Vienna Higher Regional Court 9
November 2004)
- it is desirable that a court which is dealing with an application to open insolvency proceedings to be provided with the reasons why such proceedings might have an adverse impact on the main proceedings (see Rover France SAS, Court of Appeal
Versailles 15 December 2005)
- Art. 33(1) allows the stay of the process of liquidation, but it does not prevent the continuation of winding-up prodeedings (Re
Collins & Aikman, Higher Regional Court Graz 20 October
2005)

Hon Mr Justice Patten:

• Domestic and x-border calling / confusion

•

Lehman BHInc (Draft protocol of Febr. 09 – Final version appr.
June 09)
(Bankr. SDNY – Judge Peck)
• 2. Notice
• 3. Rights of Official Representatives and Creditors to Appear
• 4. Communication and Access to Data and Information Among Official
Representatives
• 5. Communication Among Tribunals
• 5.1. The Guidelines Applicable to Court-to-Court Communication in Cross-
• Border Cases (the “Guidelines”) attached as Schedule “A” hereto, shall be incorporated by reference and form part of this protocol in whatever form they are formally adopted by eachTribunal, in whole or in part and with or without modifications
(if any). Where there is any discrepancy between the Protocol and the Guidelines, this
Protocol shall prevail.
• 6. Communication Among Committees
• 7. Asset Preservation
• 8. Claims
• 9. Special Procedures for Intercompany Claims
• 10. Submission of Winding-Up Plan, Plan of Reorganization or Liquidation, or
Deed of Company Arrangement
• 11. Comity
• 12. Amendment

CJEU 11 June 2015, Case C-649/13 ( Comité d’entreprise de Nortel
Networks SA and Others v Cosme Rogeau and Cosme Rogeau v Alan
Robert Bloom and Others).
•
Main proc. England
– Sec. proc. in France.
• CJEU confirms the determination of the matter of international jurisdiction, more specifically the relationship between the EU Insolvency Regulation and
Brussels I (specifically referring to Nickel & Goeldner Spedition , C 157/13);
• The disputes before the referring French ‘secondary’ court fall within the context of the application of a large number of agreements concluded by or between the parties before it, including, in particular an Interim Funding and
Settlement Agreement (between the Canadian Nortel Networks Limited and a number of subsidiaries in the Nortel group), an intra-group Master R&D
Agreement’, a ‘coordinating protocol’ and a ‘memorandum settling the action’ between the involved insolvency practitioners (to which the CoCo Guidelines apply).
• CJEU concludes that it is apparent that the rights or obligations on which the actions before the referring French secondary court are founded derive directly from insolvency proceedings, are closely connected with them and have their source in rules specific to insolvency proceedings, and therefore it concludes that the EIR is applicable;

Nortel Networks (cont’d)
• (3) Where for main insolvency proceedings Article 3(1) EIR also confers international jurisdiction to hear and determine related actions on the
Member State within the territory of which the insolvency proceedings have been opened (the CJEU refers to F-Tex , C 213/10), it now decides that for secondary proceedings Article 3(2) EIR must be regarded (also) as conferring international jurisdiction to hear and determine related actions on the courts of the Member State within the territory of which secondary insolvency proceedings have been opened, in so far as those actions relate to the debtor’s assets that are situated within the territory of that State;
(4) Both the main as well as the secondary courts have jurisdiction, concurrently or ‘jointly’ to rule on the determination of the debtor’s assets falling within the scope of the effects of the secondary proceedings. [crossborder coordination challenges!];
(5) CJEU sets out a marching order for the French court to decide on the location of the assets. This court has the task of establishing (i) whether the assets at issue are property or rights ownership of or entitlement to which must be entered in a public register, or (ii) whether they must be regarded as being claims. Next (iii), that court will have the task of determining, respectively, whether the Member State under the authority of which the register is kept is the
Member State in which the secondary insolvency proceedings have been opened, namely the French Republic, or (iv) whether, as the case may be, the Member State within the territory of which the third party required to meet the claims has the centre of his main interests is the French Republic. It is only if one of those checks has a positive outcome that the assets at issue will fall within the secondary insolvency proceedings opened in France.

• 7. Analogy to EU
Competion rules?
• 8. An EU Directive on reorg of groups?
• 9. Others?

ECJ (“CJEU”) 10 Sept. 09, C-97/08
[Dismissing appeal Akzo Nobel v. Others (Case T-112/05)]
• “The Commission is able to address a decision imposing a fine for breach of the competition rules by a subsidiary to the parent company of a group of companies not because of a relationship between the parent and its subsidiary in instigating the infringement or, a fortiori, because the parent company is involved in the infringement, but because those companies constitute an economic entity and therefore a single undertaking within the meaning of Articles 81 EC and 82 EC if they do not independently determine their own conduct on the market.
• In the specific case of a parent company holding 100% of the capital of a subsidiary which has committed an infringement, there is a simple presumption that the parent company exercises decisive influence over the conduct of its subsidiary, and that they therefore constitute a single undertaking within the sense above. It is thus for a parent company which disputes before the Community judicature a Commission decision fining it for the conduct of its subsidiary to rebut that presumption by adducing evidence to establish that its subsidiary was independent.”

•

(a) “ Enterprise group”: two or more enterprises that are interconnected by control or significant ownership;
(b) “Enterprise”: any entity, regardless of its legal form, that is engaged in economic activities and may be governed by the insolvency law;
(c) “Control”: the capacity to determine, directly or indirectly, the operating and financial policies of an enterprise;
(d) “Procedural coordination”: coordination of the administration of two or more insolvency proceedings in respect of enterprise group members.
Each of those members, including its assets and liabilities, remains separate and distinct;
(e) “Substantive consolidation”: the treatment of the assets and liabilities of two or more enterprise group members as if they were part of a single insolvency estate [pooling of the assets and liabilities of two or more enterprise group members to form a single insolvency estate].

•
•
•
•
•
•
•

International Recommendations nrs. 239-254
• Legislative provisions
• - on access and recognition of foreign insolvency proceedings with respect to enterprise group members is to ensure that, access and recognition are available under applicable law.
• - on cooperation involving courts in the context of multinational enterprise groups
• - on cooperation between insolvency representatives and between insolvency representatives and foreign courts in the context of multinational enterprise groups is
• - on appointment of the insolvency representative in the context of multinational enterprise
• - on cross-border insolvency agreements

• InsReg
– The final text of Regulation (EU) 2015/848 of the EP and of the Council of
20 May 2015 on insolvency proceedings (recast) (the Recast Regulation), see OJ L 141/19. Effective: 26 June 2017.
• Recommendation (March 2014) ‘New approach to business failure in insolvency’
– “implementation” in national laws of ‘minimum standards’ for ‘preventive restructuring frameworks’
– Six Core Principles:
1.
Early recourse to framework for debtor in ‘likelihood of insolvency’
2.
Minimised court involvement
3.
Debtor in possession
4.
Court-ordered stay
5.
Ability to bind dissenting creditors to a restr. plan
6.
Protection for new finance
• Soft law see http://www.tri-leiden.eu
– JudgeCo
– IOH
- European Commission / III
- INSOL Europe
– Rescue of business - European Law Institute

Recast
European Insolvency regulation
An Introductory Analysis
Prof. Dr. Bob Wessels
Em. Prof. University of Leiden / The Netherlands info@bobwessels.nl
[August 2015]

Introduction: Context
•
Article 46 Reports
“ No later than 1 June 2012, and every five years thereafter, the Commission shall present to the European Parliament, the Council and the Economic and
Social Committee a report on the application of this Regulation. The report shall be accompanied if need be by a proposal for adaptation of this Regulation.
”
12-12-2012: Proposal for a Regulation amending EIR [COM(2012) 744]
Explanatory Memorandum, 13 recitals + 51 amendments
Includes:
- Report on the application [Com(2012) 743]
- Impact Assessment [SWD2012) 416final] http://ec.europa.eu/justice/civil/commercial/insolvency/index_en.htm
2013 - medio 2015 discussions with EP and Council
June 5, 2015 Recast of EIR http://data.consilium.europa.eu/doc/document/PE-31-2015-INIT/en/pdf or http://eur-lex.europa.eu/legalcontent/EN/TXT/?uri=uriserv:OJ.L_.2015.141.01.0019.01.ENG
Regulation (EU) 2015/848 of the EP and of the Council of 20 May 2015 on insolvency proceedings (recast), see OJ L 141/19 on 5 June 2015 ( OJ L
141/19 ). Entry info force: from 26 June 2015. It shall apply from 26 June 2017
(Art. 92 Recast EIR).

Explanatory memorandum 0f 12-12-12 proposal
• Two general objectives:
1. While the Insolvency Regulation is generally considered to operate successfully in facilitating cross-border insolvency proceedings within the
European Union, the consultation of stakeholders and legal and empirical studies commissioned by the Commission revealed a range of problems in the application of the Regulation in practice.
Moreover, the Regulation does not sufficiently reflect current EU priorities and national practices in insolvency law, in particular in promoting the rescue of enterprises in difficulties.

Explanatory memorandum
• 2. The overall objective of the revision of the
Insolvency Regulation is to improve the efficiency of the European framework for resolving crossborder insolvency cases in view of ensuring a smooth functioning of the internal market and its resilience in economic crises. This objective links in with the EU
s current political priorities to promote economic recovery and sustainable growth, a higher investment rate and the preservation of employment, as set out in the Europe 2020 strategy.
The revision of the Regulation will contribute to ensuring a smooth development and the survival of businesses, as stated in the Small Business Act
[COM2008)394]3. The revision is also one of the key actions listed in the Single Market Act II

Counter ‘Five main shortcomings ’
The elements of the reform of the Insolvency
Regulation can be summarised as follows:
• ’ Scope : EIR Recast extends the scope of the
Regulation by revising the definition of insolvency proceedings to include hybrid and pre-insolvency proceedings as well as debt discharge proceedings and other insolvency proceedings for natural persons which currently do not fit the definition
• Jurisdiction : EIR Recast clarifies the jurisdiction rules and improves the procedural framework for determining jurisdiction

Counter ‘Five main shortcomings’ (cont’d)
• Secondary proceedings: EIR Recast provides for a more efficient administration of insolvency proceedings by enabling the court (i) to refuse the opening of secondary proceedings if this is not necessary to protect the interests of local creditors, (ii) by abolishing the requirement that secondary proceedings must be winding-up proceedings and (iii) by improving the cooperation between main and secondary proceedings, in particular by extending the cooperation requirements to the courts involved;
• • EIR Recast requires MSs (i) to publish the relevant court decisions in crossborder insolvency cases in a publicly accessible electronic register and (ii) provides for the interconnection of national insolvency registers. It also (iii) introduces standard forms for the lodging of claims;
• • EIR Recast provides for a coordination of the insolvency proceedings concerning different members of the same group of companies by obliging the IPs and courts involved in the different main proceedings to cooperate and communicate with each other; in addition, it gives the IPs involved in such proceedings the procedural tools to request a stay of the respective other proceedings and to propose a rescue plan for the members of the group subject to insolvency proceedings.’

Today’s Agenda
Key points in Recast EIR
• Compare EIR v Recast
• Scope
• Jurisdiction
• Applicable law
• Secondary proceedings
• Information and publication
• Lodging claims
• Cross-border cooperation
• Groups of companies
• Leftovers + Next steps

• 33 recitals
• ‘Purposive interpration’
Virgós/Schmit 1996 Report
• 47 Articles
• 3 Annexes
• A: all insolvency proc.
• B: winding-up proc.
• C: all ‘liquidators’
• 89 recitals
• Ditto – no Report
• 92 Articles
• 4 Annexes
• A: ditto (Art. 2(4) Recast)
• B: all IPs (Art. 2(5) Recast)
• C: repealed Regs, including
1346/2000
• D: Correlation table Articles EIR and Recast
Transposition table
Recitals EIR and Recast
See blog 2015-08-doc1

Scope
• Scope of the current EIR
• Problems:
– Definition Art. 1(1) EIR
– Annexes: function and role of MSs

Scope (cont’d)
EIR is applicable to proceedings (Art. 1(1)):
• 1. That are “ collective” : all creditors concerned may seek satisfaction only through these insolvency proceedings, as individual actions will be precluded
• 2. Based on “ the debtors insolvency’” and not on other grounds
• the insolvency-test itself is rooted in the legislation of the lex concursus
• 3. The proceedings must entail the total or partial divestment of the debtor, and
• 4. The appointment of a ‘liquidator’
CJEU: listed in Annex A

Scope (cont’d)
The scope of the Recast extends to 8 (!) proceedings (Rec. 10):
1.
which promote the rescue of economically viable but distressed businesses and give a second chance to entrepreneurs
2 . which provide for the restructuring of a debtor at a stage where there is only a likelihood of insolvency
3 . which leave the debtor fully or partially in control of his assets and affairs
4.
which provide for a debt discharge or a debt adjustment of consumers and self-employed persons, e.g.
- by reducing the amount to be paid by the debtor, or
- by extending the payment period granted to him
Appointment of an IP?
Rec. 10: Such proceedings do not necessarily entail the appointment of an IP, but fall under the scope if they take place under the control or supervision of a court: ‘In this context, the term "control" should include situations where the court only intervenes on appeal by a creditor or other interested parties’
Introduction of Debtor in Possession (DIP) proceedings

Scope (cont’d)
• 5. ( ‘procedures’) which grant a temporary moratorium on enforcement actions brought by individual creditors where such actions could adversely affect negotiations and hamper the prospects of a restructuring of the debtor's business
• Such procedures should not be detrimental to the general body of creditors and, if no agreement on a restructuring plan can be reached, should be preliminary to other procedures covered by the scope of this Regulation (Rec. 11)
• 6. ( ‘proceedings’) the opening of which is subject to publicity in order to allow creditors to become aware of the proceedings and to lodge their claims, thereby ensuring the collective nature of the proceedings, and in order to give creditors the possibility to challenge the jurisdiction of the court which has opened the proceedings
• So no ‘confidential’ insolvency proceedings (Rec. 13)

Scope (cont’d)
• 7. that, under the law of some MSs, are opened and conducted for a certain period of time on an interim or provisional basis before a court issues an order confirming the continuation of the proceedings on a non-interim basis.
• Except for being labelled as "interim", these proceedings should meet all other requirements of this Regulation (Rec.
15)
• 8. which are triggered by situations in which the debtor faces non-financial difficulties, provided that such difficulties give rise to a real and serious threat to the debtor’s actual or future ability to pay his debts as they fall due
• ‘Threat’: The time frame relevant for the determination of such threat may extend to a period of several months or even longer in order to account for cases in which the debtor is faced with non-financial difficulties threatening the status of his business as a going concern and, in the medium term, his liquidity. This might be the case, for example, if the debtor has lost a contract which is of key importance to him (Rec. 17)

Other requirements?
(appointed liquidator? / divestment of debtor?)

Scope (cont’d)
• Collective proceedings? Rec. 14 distinguishes:
Rescue
‘The collective proceedings which are covered by this Regulation should include all or a significant part of the creditors to whom the debtor owes all or a substantial proportion of the debtor’s outstanding debts provided that the claims of those creditors who are not involved in such proceedings remain unaffected. This should also include proceedings which involve only the financial creditors of the debtor.
Proceedings which do not include all the creditors of a debtor should be proceedings aimed at rescuing the debtor.’
Liquidation
‘Proceedings that lead to a definitive cessation of the debtor’s activities or the liquidation of the debtor’s assets should include all the debtor’s creditors. Moreover, the fact that some insolvency proceedings for natural persons exclude specific categories of claims, such as maintenance claims, from the possibility of a debt-discharge should not mean that such proceedings are not collective.’

Scope (cont’d)
Based on debtor’s insolvency?
• Rec. 16: ‘This Regulation should apply to proceedings which are based on laws relating to insolvency.’
– However, proceedings that are based on general company law not designed exclusively for insolvency situations should not be considered to be based on laws relating to insolvency
– Similarly, the purpose of adjustment of debt should not include specific proceedings in which debts of a natural person of very low income and very low asset value are written off, provided that this type of proceedings never makes provision for payment to creditors

Scope: Annex A decisive
•

Jurisdiction
•
COMI retained
–
Companies: Art. 3(1) Recast and recital
30 follows current text and case law of
CJEU
–
Individuals: Art. 3(1) Recast amended
• Examination and specification of jurisdiction
Art. 4 Recast / Recital 27 and 28
• Judicial review
Art. 5 Recast / Recital 34
•
Jurisdiction for related actions
(actions which derive directly from the insolvency proceedings and are closely linked to them):
Art. 6 Recast / Recital 35
(follows CJEU case law)

Jurisdiction re companies
• Art. 3(1) Recast: The courts of the Member State within the territory of which the centre of a debtor's main interests is situated shall have jurisdiction to open insolvency proceedings
(‘main proceedings’). The centre of main interests shall be the place where the debtor conducts the administration of his interests on a regular basis and which is ascertainable by third parties (includes text of Recital 13 EIR)
Presumption
In the case of a company or legal person, the place of the registered office shall be presumed to be the COMI in the absence of proof to the contrary. That presumption shall only apply if the registered office has not been moved to another
Member State within the 3-months period prior to the request for the opening of insolvency proceedings.

Jurisdiction re individuals
• Art. 3(1), 3 rd and 4 th line distinguish:
Professionals
In the case of an individual exercising an independent business or professional activity, the COMI shall be presumed to be that individual's principal place of business in the absence of proof to the contrary
That presumption shall only apply if the individual’s principal place of business has not been moved to another Member State within the 3-months period prior to the request for the opening of insolvency proceedings
Individuals
In the case of any other individual, the COMI shall be presumed to be the place of the individual's habitual residence in the absence of proof to the contrary. This presumption shall only apply if the habitual residence has not been moved to another
Member State within the 6-month period prior to the request for the opening of insolvency proceedings.

Applicable law
• Only minor amendments
– Art. 13 Recast: if no secondary proc have been opened court retains jurisdiction to approve termination of employment contract
– Art. 15 EIR: law suits pending include arbitral proceedings
– Art. 5, 7 and 13 EIR remain unchanged
– ‘
This Regulation makes several provisions for a court to order a stay of opening proceedings or a stay of enforcement proceedings. Any such stay should not affect the rights in rem of creditors or third parties’ (Rec. 69) / Art. 20(2) Recast

Secondary proceedings
• More efficient administration of insolvency proceedings by
– abolishing winding-up requirement
– court may refuse opening of secondary proceedings if this is not necessary to protect the interests of local creditors;
– improving cooperation between main and secondary proceedings: extending the cooperation requirements to the courts involved and to IPs and courts

Refusal or postponement of opening secondary proceedings
Rec. 41: Secondary proceedings may also hamper the efficient administration of the insolvency estate. Therefore, this Regulation sets out two specific situations in which the court seised of a request to open secondary proceedings should be able, on request of the insolvency practitioner in main insolvency proceedings, to postpone or refuse the opening of such proceedings:
- IP in main proceedings has the possibility to give an undertaking to local creditors that they will be treated as if secondary proceedings had been opened (Art. 36 Recast)
[- Court temporarily stays the opening of secondary proceedings,
Art. 46 Recast]

‘Undertaking’

Art. 36 (‘Right to give an undertaking in order to avoid secondary proceedings’)
• Art. 36 Recast, with 11 paragraphs
Art. 36(1): In order to avoid the opening of secondary proceedings, the insolvency practitioner in the main proceedings may give a unilateral undertaking ("the undertaking") in respect of the assets located in the Member State in which secondary proceedings could be opened, that when distributing those assets or the proceeds received as a result of their realisation, it will comply with the distribution and priority rights under national law that creditors would have if secondary proceedings were opened in that Member State
– Synthetic / virtual / as if – proceedings
The undertaking shall specify the factual assumptions on which it is based, in particular with respect to the value of the assets located in the Member State concerned and the options available to realise such assets

Art. 36 Undertaking (cont’d)
Art. 36 Recast
2. the law applicable to the distribution of proceeds, ranking of creditors' claims and the rights of creditors is ‘secondary state’ law
3. language
4. form requirements
5. the undertaking is to be approved by the ‘known local creditors’ according to rules on qualified majority and voting that apply for the adoption of restructuring plans under ‘secondary law’
6. the undertaking given and approved shall be binding on the estate
Strong position local creditors
7. IP shall inform local creditors about the intended distributions prior to distributing the assets and proceeds referred to in paragraph 1. If the information does not comply with the terms of the undertaking or the applicable law, any local creditor may challenge such distribution before the courts of the MS in which main proceedings have been opened in order to obtain a distribution in accordance with the terms of the undertaking and the applicable law.
In such cases no distributions until court has decided on the challenge.

Art. 36 Undertaking (cont’d) – position of local creditors
8. Local creditors may apply to the courts of the MS in which main proceedings have been opened in order to require the IP in the main insolvency proceedings to take any suitable measures necessary to ensure compliance with the terms of the undertaking available under the law of the MS of the opening of main proceedings
9. Local creditors may also apply to the courts of the MS in which secondary proceedings could have been opened in order to require the court to take provisional or protective measures to ensure compliance by the IP with the terms of the undertaking.
10. The IP shall be liable for any damage caused to local creditors as a consequence of his non-compliance with the obligations and requirements set out in this Article.

Postponing secondary proceedings

Postponing secondary proceedings: court temporarily stays their opening
• Rec. 45: …, this Regulation should provide for the possibility that the court temporarily stays the opening of secondary proceedings, when a temporary stay of individual enforcement proceedings has been granted in the main insolvency proceedings, in order to preserve the efficiency of the stay granted in the main insolvency proceedings.
– The court should be able to grant the temporary stay (no longer than 3 months (Art. 38(2)2 nd line)) if it is satisfied that suitable measures are in place to protect the interest of local creditors. In such a case, all creditors that could be affected by the outcome of the negotiations on a restructuring plan should be informed of the negotiations and be allowed to participate in them
–
In order to ensure an effective protection of local interests, the IP in the main insolvency proceedings should not be able to realise or relocate, in an abusive manner, the assets situated in the MS where an establishment is located, in particular, with the purpose of frustrating the possibility that such interests can be effectively satisfied if secondary insolvency proceedings are opened subsequently
(Art. 46 Recast)

Opening secondary proceedings
Art. 38 (‘Decision to open secondary proceedings’)
1. The court seized of a request to open secondary proceedings shall immediately give notice to the IP or the DIP in the main insolvency proceedings and give it an opportunity to be heard on the request.
2. Where the IP in the main insolvency proceedings has given an undertaking in accordance with Article 36, the court referred to in paragraph 1 shall, at the request of the IP, not open secondary proceedings if it is satisfied that the undertaking adequately protects the general interests of local creditors.

Information and publication
• Establishment and interconnection of insolvency registers (Art. 24 and
25 Recast)
• Interconnection cost for EU (Art. 26
Recast)
• Info into the system of interconnection (Art. 27 Recast)
• Publication in another MS of opening decision and appointment
(Art. 28 Recast)
• Registration in public registers of another MS (Art. 29 Recast)
• Costs of Art. 28 and Art. 29 are costs incurred in the proceedings
(Art. 30 Recast)

Lodging claims
Art. 53 Recast – Any foreign creditor ‘… may lodge claims in the insolvency proceedings by any means of communication, which are accepted by the law of the State of opening.
Representation by a lawyer or another legal professional shall not be mandatory for the sole purpose of lodging of claims.’
Duty to inform creditors via standard notice form (Art. 54(3) Recast)
Lodging via standard claims form (Art. 55
Recast)
Minimum period for foreign creditors: 30 days following publication in insolvency register of state of opening (Art. 55(6) Recast)

Cross-border Communication and Cooperation
• Renewed recital 20 (Rec. 48 Recast)
• Two new recitals (Rec. 49 and 50
Recast)
• Renewed Art. 31 (Art. 41 Recast)
CoCo between IPs
• New Art. 42 Recast
CoCo between courts
• New Art. 43 Recast
CoCo between liquidators and courts

• Rec. 48 Recast: ‘… When cooperating, IPs and courts should take into account best practices for cooperation in cross-border insolvency cases, as set out in principles and guidelines on communication and cooperation adopted by
European and international associations active in the area of insolvency law, and in particular relevant guidelines prepared by the United
Nations Commission on International Trade Law
(Uncitral).’

CoCo between IPs
Art. 41 (‘Cooperation and communication between insolvency practitioners’)
1. The IP in the main insolvency proceedings and the IP or IPs in secondary insolvency proceedings concerning the same debtor shall cooperate with each other to the extent such cooperation is not incompatible with the rules applicable to the respective proceedings.
Such cooperation may take any form, including the conclusion of agreements or protocols.
2. In implementing the cooperation set out in paragraph 1, the IPs shall:
(a) as soon as possible communicate to each other any information which may be relevant to the other proceedings, in particular any progress made in lodging and verifying claims and all measures aimed at rescuing or restructuring the debtor or at terminating the proceedings, provided appropriate arrangements are made to protect confidential information;
(b) explore the possibility of restructuring the debtor and, where such possibility exists, coordinate the elaboration and implementation of restructuring plan;
(c) coordinate the administration of the realisation or use of the debtor's assets and affairs; the IP in the secondary insolvency proceedings shall give the IP in the main insolvency proceedings an early opportunity to submit proposals on the realisation or use of the assets in the secondary insolvency proceedings.

Article 42 (recast) CoCo between courts
Cooperation and communication between courts
1. In order to facilitate the coordination of main, territorial or secondary insolvency proceedings concerning the same debtor, a court before which a request to open insolvency proceedings is pending, or which has opened such proceedings, shall cooperate with any other court before which insolvency proceedings are pending, or which has opened such proceedings, to the extent such cooperation is not incompatible with the rules applicable to each of the proceedings. For that purpose, the courts may, where appropriate, appoint an independent person or body acting on its instructions, provided that this is not incompatible with the rules applicable to them
2. In implementing the cooperation set out in paragraph 1, the courts, or any appointed person or body acting on their behalf, as referred to in paragraph 1, may communicate directly with, or request information or assistance directly from each other, provided that such communication respects the procedural rights of the parties to the proceedings and the confidentiality of information

Article 42 (recast) CoCo between courts
3. The cooperation referred to in paragraph 1 may be implemented by any means that the court considers appropriate. It may, in particular, concern
(a) coordination in the appointment of the insolvency practitioners;
(b) communication of information by any means considered appropriate by the court;
(c) coordination of the administration and supervision of the debtor's assets and affairs;
(d) coordination of the conduct of hearings;
(e) coordination in the approval of protocols, where necessary.

CoCo and groups
Rec. 49: ‘In light of such cooperation, IPs and courts may enter into agreements and protocols for the purpose of facilitating cross-border cooperation of multiple insolvency proceedings in different Member States concerning the same debtor or members of the same group of companies, where this is compatible with the rules applicable to each of the proceedings
…’
• Rec 52: ‘Where insolvency proceedings have been opened for several companies of the same group, there should be proper cooperation between the actors involved in these proceedings.
The various IP and the courts involved should therefore be under a similar obligation to cooperate and communicate with each other as those involved in main and secondary insolvency proceedings relating to the same debtor. Cooperation between the IPs should never go against the interests of the creditors in each of the proceedings and such cooperation should be aimed at finding a solution that would leverage synergies across the group.

Shaping and Modeling ‘Cooperation’?
Rec. 48, last line:
‘In their cooperation, IPs and courts should take into account best practices for cooperation in cross-border insolvency cases as set out in principles and guidelines on communication and cooperation adopted by European and international associations active in the area of insolvency law, and in particular relevant guidelines prepared by … (Uncitral)’

www.insol-europe.org

EU Cross-Border Insolvency Court-to-Court Cooperation
Principles (‘EU JudgeCo Principles’), including EU Cross-
Border Insolvency Court-to-Court Communications Guidelines
(‘EU JudgeCo Guidelines’)

Outcomes
• EU JudgeCo Principles & EU JudgeCo Guidelines (Febr.
2015)
• In addition to R&A group (40+ experts) discussion/input from appr. 50 judges (JudgeCo trainings) and 150 judges
(other events)
• 26 EU Cross-Border Insolvency Court-to-Court
Cooperation Principles
• 18 EU Cross-Border Insolvency Court-to-Court
Communications Guidelines
• Small booklet with black letter text
• Report + Commentary
• ‘web-forum’ (under construction)
• www.bobwessels.nl
, weblog / www.tri-leiden.eu

Groups of companies

Groups of companies
Chapter V ‘Insolvency proceedings of members of a group of companies’ (Arts. 56-77 Recast)
Art. 2(1)(13) and (14) Recast: definitions for ‘groups of companies’ and ‘parent undertaking’
Ch V Section 1 (‘Cooperation and communication’) – Art. 56-60
Recast Ch V Section 2 (‘Coordination’), with 2.1 (‘Procedure’) (Arts.
6170) and 2.2 (‘General provisions’) (Arts. 71-77), providing for an impartial ‘(group)’ coordinator
No rules for a uniform European rescue plan

Leftovers
Ch. VI (‘Data-protection’) (Arts. 78-83)
Ch. VII (‘Transitional and final provisions’)
(Arts. 84-92)
• Art. 86: Info on national and Union insolvency law
• Art. 89: ‘Committee procedure
• ‘Art. 90: review clause: 5 years
• Art. 92(1): Entry info force: 20 th day following date of publication in O.J.
• Art. 92(2): It shall apply 24 months after entry into force, but:
– 12 months for Art. 86
–
36 months for Art. 24(1) Establishment national insolvency registers
– 48 for Art. 25 (Interconnection of registers)

Thank you for your attention!
Bob Wessels info@bobwessels.nl
++31629577403
These are presentation slides only.
The information within these slides does not constitute definitive advice and should not be used as the basis for giving definitive advice without checking the primary sources.

Ian Fletcher, University College London, UK
Nicholas Segal,
Freshfields Bruckhaus Deringer,
UK

INSOL global insolvency practice course
UK restructuring practice – the legal framework
8 September 2015
Nick Segal

Schemes – some history and context
1.
The revival of schemes in the 1990s
(a).
(b).
(c).
The Heron Group restructuring – see Re Heron International NV [1994] 1
BCLC 664
Marconi (and the insurance company run-off schemes) responding to changes in debt structures
2.
(a).
(b).
(c).
(d).
(e).
(f).
Schemes are now the preferred mechanism for restructuring financial indebtedness not an insolvency proceeding (Companies Act 2006 – CA) ability to select creditors to be party to the scheme broad jurisdiction flexibility – judge made law (only five sections in the CA) extensive practical experience and expertise has now developed
-
transaction structures debt restructuring – see Re Stemcor [2014] 2 BCLC 373 debt for equity swaps
assets sales to Newco or other purchaser

1.
Schemes of arrangement – some issues and practice points: I
Consider procedure and substantive law
2.
Procedure
(a).
(b).
the four key stages
(i).
(iii).
practice statement letter (PSL)
(ii).
meeting(s) application to court for order convening creditors’ creditors’ meeting(s)
(iv).
sanction hearing (treatment of issues dealt with at (ii)) the key documents
(i).
the PSL - see the comments in the recent judgment of
Snowden J in Re VGG [2015] EWHC 2151 (Ch)
(ii).
(iii).
the explanatory statement the restructuring documents
-
method of execution amendments

Schemes of arrangement – some issues and practice points: II
3.
4.
Substantive law
(a).
(b).
(c).
jurisdiction and discretion jurisdiction
– the issues discretion
– the need for a “sufficient connection”
(d).
(e).
(f).
classes fairness – valuations, exit consents and new obligations voting – treatment of intermediated securities
Jurisdiction – two types of jurisdictional question
(a).
(b).
can the company concerned propose a scheme?
are the classes properly constituted?
(c).
the first issue has given rise to a number of first instance judgments
- still awaiting the first judgment from the Court of Appeal
(d).
note that there is no jurisdiction to discharge or amend proprietary rights – Re Lehman Brothers International [2010] 1 BCLC 496

Schemes of arrangement – some issues and practice points: III
5.
Can the company concerned propose a scheme?
(a).
is the company liable to be wound up: section 895(2)(b) CA
-
does the EU Insolvency Regulation (EUIR)apply?
does the EU Judgments Regulations (Recast) (EUJR) apply?
(b).
there is a power to wind-up foreign companies (unregistered companies): see sections 220 and 221 IA 1986 but:
-
is this qualified by the mandatory rules as to the English court’s jurisdiction to open insolvency proceedings imposed by the EUIR? No.
is this qualified by the mandatory rules as to the English court’s in personam jurisdiction against defendants and other parties to proceedings?
-
-
are schemes covered by the EUJR?
solvent/insolvent companies if so:

Schemes of arrangement – some issues and practice points: IV
5.
6.
Can the company propose a scheme [continued]
[if schemes are covered by the EUJR]
if so, which provisions of the EUJR apply?
-
article 25 (jurisdiction agreement) article 8(1) (one of a number of defendants domiciled in England)
article 6 (where defendant not domiciled in a Member State, apply the law of the forum)
Discretion – the sufficient connection test and changes to the governing law
(a).
sufficient connection established where debt which is being amended or discharged by the scheme is governed by English law
Re Rodenstock GmbH [2011] EWHC 1104 (Ch)

Schemes of arrangement – some issues and practice points: V
6.
Discretion – the sufficient connection test and changes to the governing law [continued]
(b).
change in the governing law to English law is there still a sufficient connection?
(c).
-
Re Apcoa GmbH [2014] EWHC 3849 (Ch) (German to
English)
-
Re DTEK Finance BV [2015] EWHC 1164 (Ch) (New York to
English – note had been a COMI shift) is the amendment of the credit agreement effective under the original governing law?
may now be amendments to credit agreements to state that amendments to governing law need super majority governing law is not English law
Magyar Telecom BV [2013] EWHC 3800 (Ch) (New York law debt but scheme provided it would not become effective until recognition order obtained under chapter 15)

Schemes of arrangement – some issues and practice points: VI
7.
Class issues
(a).
are rights so dissimilar that cannot consult together with a view to a common interest?
(b).
differences in rights of creditors
(c)
-
prior to scheme under the scheme
as regards rights prior to scheme taking effect: are there differences?
need to identify correct comparator
where scheme is proposed as alternative to a windingup, it is the creditors’ rights in an insolvent liquidation that count
but is winding-up the only and realistic alternative?

Schemes of arrangement – some issues and practice points: VII
7.
8.
Class issues [continued]
even if there are differences in point of strict legal rights, objectively is there more to unite than divide the creditors?
Fairness (discretion to sanction)
(a).
court askes (i) whether provisions of the statute have been complied with (ii) whether the class was fairly represented by those who attended the meeting and that the majority are acting bona fide and not coercing the minority; and (iii) whether the arrangement is such as an intelligent and honest person, a member of the class concerned, might reasonably approve
(b).
-
treatment of subordinated debt and equity is there a surplus for sub-debt and equity?
how are the company’s assets valued?
see: MyTravel Group [2004] EWHC 2741 (Ch)
Re Bluebrook [2009] EWHC 2114 (Ch)

Schemes of arrangement – some issues and practice points: VIII
8.
9.
Fairness (discretion to sanction) [continued]
if is no surplus, sub-debt and equity holders are not made parties to the scheme
Treatment of intermediated securities - bondholders
(a).
(b).
(c).
(d).
voting by value and number (the numerosity requirement) can the beneficial owners of bonds vote?
who is the creditor? Who has the right to sue (benefit of covenant to pay)?
bearer bonds
– constructive possession mechanism (used in Heron and Marconi schemes) contingent creditor analysis
– Re Castle Holdco 4 [2009] EWHC 3919
(e).
(Ch)
(f).
see the approach taken in Cayman
– see Re Little Sheep [2012] (1)
CILR 34 and Re Alibaba.com Ltd [2012] (1) CILR 272
– also GCR O.102 r20(6) and Practice Direction No 2/2010

Simon Appell, AlixPartners, UK

Janis Sarra
University of British Columbia
Faculty of Law
Canada