International insolvency law
– basic principles within the
European union
The aim of international insolvency law –
the reasons for its establishment
• Insolvency may be generally understood as situation
when the debtor has not sufficient financial resources to
comply with his obligations (is not able to pay his debts).
• Each national law has its own regulation of this situation
– with the aim of redistribution of available debor‘s
resources to his creditors in such way that each creditor
gains at least a part of his receivable.
• A problem may arise when the debtor has his assets not
only in one country --- there are big differences between
the national regulations and to cover the debor‘s assets
in another country by the effects of insolvency
proceedings in one country may cause big troubles (may
be incompatible with the national law of the other state.)
The aims of international insolvency law
• The international insolvency law shall react upon the situations
when there is an insolvent debtor having assets in more countries.
• The aim is to set down rules which assure that no debtor‘s assets
will be left outside of insolvency proceedings (i.e. all assets will be
used to settle the claims of his creditors.)
• The international insolvency law is based upon the principle of
universality – the insolvency proceedings affect all the assets of the
debtor regardless the place where it is situated. BUT !!! To affect
assets of the territory of a state it requires a decision issued within
the state‘s power (authority) – applying the principle of universality
shall mean that one member state would be allowed to exercise his
powers on the territory of another state
• Establishment of so called principle of controlled universality – there
shall exist one insolvency proceeding (so called primary insolvency
proceeding) which affects all the assets of the debtor. Beside this
primary proceeding there may exist secondary proceeding in
another state which may affect only the assets situated on the
territory of that state and support the primary proceeding.
The efforts of unification of
international insolvency law
• 1997 – UNCITRAL Commission prepared the Model law on
cross-border insolvency.
• This law regulates especially the position of the bankruptcy
trustee, the recognition of the insolvency proceeding in
foreigner country.
• Under this law insolvency proceeding in one state has no
direct effects in another country – sets down conditions for
international legal aid.
• Since 1990 there exists European convection on certain
international aspects of bankruptcy – it is opened for the
signature, but the ratification procedures are very slow, the
convention has not entered into force yet. (no complex
regulation, only ceratain aspects are regulated).
The historical background of the
Regulation no 1346/2000
• Before the signature of the Amsterdam
Treaty, there was created a draft of a
convention concerning the unification of
insolvency proceedings in the EU.
• The convention was not signed – the text
was transferred into a regulation – Council
Regulation no 1346/2000 on insolvency
proceedings.
Regulation on insolvency
proceedings General characteristics
• Entered into force – 31.5.2002.
• For all Member states with the exception
of Denmark.
• Is based upon the principle of controlled
universality, but is different from the
UNCITRAL Model law.
Regulation on insolvency
proceedings General characteristics
• Contains:
a) Insolvency procedural law – regulates the
jurisdiction for insolvency proceedings, and
some aspects of their course.
b) Insolvency substantial law – regulates e.g. the
position of „liquidator“.
c) Insolvency conflict rules – regulates the law
applicable for the concrete proceedings.
Regulation on insolvency
proceedings – scope of application
• Applies to collective insolvency proceedings
which entail the partial or total divestment of a
debtor and the appointment of a liquidator.
• It does not apply to insolvency proceedings
concerning undertakings, credit institutions,
investment undertakings which provide services
involving the holding of funds or securities for
third parties or to collective investment
unduertakings.
Regulation on insolvency
proceedings – important notions
• Insolvency proceedings – collective
proceedings – listed in the Annex A.
• Liquidator – any person of body whose
function is to administer or liquidate assets
of which the debtor has been divested or
to supervise the administration of his
affairs (concrete persons – listed in Annex
C)
Regulation on insolvency proceedings –
the principle of controlled universality
• The jurisdiction to open insolvency proceeding have the
courts of the Member state within the territory of which
the centre of a debtor‘s main interests is situated – see
also judgment Judgment of the Court (Grand Chamber)
of 2 May 2006. Eurofood IFSC Ltd.
• In the case of company or legal person – the place of
main interests is the place of the registered office (in
absence of proof to the contrary).
• It is the so called „main insolvency proceeding“ – with
the effects on the assets of the debtor situated in another
Member state as well.
• The liquidator appointed in this proceeding may exercise
his powers in another Member state as well as long as
no other proceeding has not been opened there.
Regulation on insolvency proceedings –
the principle of controlled universality
• Court of another Member state than where the
centre of debtor‘s main interests is situated shall
have jurisdiction to open insolvency proceeding
against the same debtor only if he possesses an
establishment (any place of operation where he
carries out o non-transitory economic activity with
human means and goods) within the territory of
that Member state.
• It is so called secondary insolvency proceeding.
• The effects shall be restricted to the assets of the
debtor situated in the territory of that Member
state.
Regulation on insolvency proceedings recognition
• Article 16 of the Regulation sets down the
„principle“ – any judgment opening insolvency
proceeding issued by court having jurisdiction
upon this Regulation shall be recognised in all
other Member states from the time it becomes
effective in the State of opening proceedings.
• This does not mean that a secondary
insolvency proceeding may not be opened.
Regulation on insolvency proceedings –
the applicable law
• The law applicable to main insolvency
proceeding and its effect shall be the law
of the Member state within the territory of
which such proceeding was opened.
• The applicable law to the secondary
insolvency proceeding is the law of the
Member state within the territory of which
the secondary proceeding was opened.