European Insolvency Regulation Research Articles

Article Oh Captain(s)! My Captain(s)

In this article, the author examines to what extent the European Insolvency Regulation (recast) authorizes Member States' courts to cooperate cross-border through appointing the same insolvency practitioner in insolvency proceedings relating to group companies (a so-called 'group insolvency practitioner'). The author concludes that, within certain boundaries which the article examines thoroughly, courts already can and should make such appointments. The article concludes with various recommendations in order to improve the useful application of this valuable cross-border insolvency tool. 

Group concerns and communication and cooperation between practitioners under the European Insolvency Regulation (Part II)

AbstractIn this article, the author examines with a specific focus on the insolvency practitioner to what extent the Recast European Insolvency Regulation's provisions on communication, cooperation and coordination between the main actors in group companies' insolvency proceedings allow for efficient restructurings of those group companies. In doing so, the author will, at points, compare the provisions in Chapter V of the Recast European Insolvency Regulation to—and draw inspiration from—the German provisions on groups of companies that were adopted into the German Insolvency Act (Insolvenzordnung) and the United Nations Commission on International Trade Law's Model Law on Enterprise Group Insolvency. The author also aims to outline, among other things, the various forms of (cross‐border) communication, cooperation and coordination that the Recast European Insolvency Regulation obligates insolvency practitioners of groups of companies to engage in, how they should implement those forms of ‘CoCo’ and what would happen if they neglect to comply with those obligations. This article is Part II of a diptych on this topic; Part I was published in an earlier issue of this journal.

Group concerns and communication and cooperation between practitioners under the European Insolvency Regulation (Part I)

AbstractIn this article, the author examines with a specific focus on the Insolvency Practitioner to what extent the Recast European Insolvency Regulation's provisions on communication, cooperation and coordination between the main actors in group companies' insolvency proceedings allow for efficient restructurings of those group companies. In doing so, the author will, at points, compare the provisions in Chapter V of the Recast European Insolvency Regulation to—and draw inspiration from—the German provisions on groups of companies that were adopted into the German Insolvency Act (Insolvenzordnung) and the United Nations Commission on International Trade Law's Model Law on Enterprise Group Insolvency. The author also aims to outline, among other things, the various forms of (cross‐border) communication, cooperation and coordination that the Recast European Insolvency Regulation obligates insolvency practitioners of groups of companies to engage in, how they should implement those forms of ‘CoCo’ and what would happen if they fail to comply with those obligations. This article is Part I of a diptych on this topic, Part II of which will be published in a subsequent issue of this journal.

Cross-border Insolvency Protocols: Cooperation, Coordination, and Communication Duties under the European Insolvency Regulation Recast

Cross-border insolvency protocols are a practical phenomenon developed at the international level in the last 30 years. These protocols are agreements entered by the insolvency practitioners to facilitate cooperation and communication between insolvency practitioners and courts involved in cross-border insolvency proceedings. Protocols have been mentioned but not regulated by the European Insolvency Regulation Recast. This contribution seeks to analyse the aims, principles, and standard features of the protocols emerging in practice. Second, it aims to evaluate how this phenomenon fits with the duties of cooperation, coordination, and communication within the European Insolvency Regulation Recast to define the scope and role of protocols within the EU member states. Cross-border insolvency, protocols, transnational, cooperation, coordination, communication, European Insolvency Regulation

A commentary on the European Insolvency Regulation, Edited by ReinhardBork and KristinvanZwieten (eds) (2nd edition) (2022, OUP, Oxford), lxxxiv and 1052 pp, GBP 275, ISBN 978‐0‐19‐885211‐7

A commentary on the European Insolvency Regulation, Edited by ReinhardBork and KristinvanZwieten (eds) (2nd edition) (2022, OUP, Oxford), lxxxiv and 1052 pp, GBP 275, <scp>ISBN</scp> 978‐0‐19‐885211‐7

Contractual performance by a third party governed by lex contractus and the effectiveness of avoidance action in insolvency proceedings

Upon a request for a preliminary ruling on the articulation between Article 13 of the European Insolvency Regulation n° 1346/2000 and Article 12(1)(b) of Rome I Regulation, the Court of Justice of European Union has confirmed in a decision on April 22, 2021 that a payment made in perfor-mance of a contract by a third party is subjected to the law applicable to that contract and not to the law of the Member State opening the insolvency proceedings where the payment is challenged by an avoidance action. The decision raises some reflections on the correlation between the European Insolvency and Rome I Regulations as well as the effectiveness of avoidance action in insolvency proceedings.

Cross-border insolvency between Chinese Mainland and Hong Kong: the past, the present, and the future

ABSTRACT This article examines the new Chinese Mainland–Hong Kong cross-border insolvency cooperation arrangement. The new Record of Meeting reached in May 2021 between the Supreme People’s Court of the People’s Republic of China and the Government of the Hong Kong Special Administrative Region marks a significant step towards mutual recognition in cross-border insolvency cases, laying down the bedrock for future cooperation. Yet, the new arrangement is still a rough draft, without considering detailed issues. This article provides a comprehensive evaluation of the feasibility of the new arrangement, taking into account previous international insolvency cases in both the Mainland and Hong Kong. In particular, this article proposes that the current arrangement needs further revision and enhanced cooperation, following the model of the European Insolvency Regulation.

An Introduction to the European Insolvency Regulation, as Made and as Recast (Second Edition)

An Introduction to the European Insolvency Regulation, as Made and as Recast (Second Edition)

Legislation Comment: Opt-In to Coordination Proceeding According to the Czech Insolvency Law

The European Insolvency Regulation enables to coordinate recovery procedures of the group of companies within the EU member states on voluntary basis. In the matter of approval of coordinated proceeding the national rules for approval of recovery proceedings are referred. The authors therefore deal with the question whether and how it is possible to apply national legislation on decision to opt-in to coordination proceeding in the frame of Czech law. The paper also focuses on question who gives approval to opt-in and what kind of majority is needed. Furthermore there is a question raised whether the conditions for approval according to national rules should have been passed to European level of legislation. Contractual interpretation, commercial contracts, principles of interpretation, subjective interpretation, objective interpretation, contextualism, textualism, English contract law, French contract law

Breaking Up Is Hard to Do – What Brexit Means for UK Insolvency and Restructuring Law

Abstract This paper asks whether the UK can maintain its insolvency and restructuring pre-eminence post Brexit i. e. after Britain’s departure from the European Union (EU). In the past 20 years or so, the UK is said to have become the insolvency and restructuring capital of Europe or in less politically correct terms, the bankruptcy brothel of Europe. In part, this is because of the European Insolvency Regulation which provides for automatic recognition of insolvency proceedings opened in a EU Member State in the other EU Member States. Such proceedings may make provision for the discharge of debts and the restructuring of financial obligations.The specific insolvency law regime is part of a more general European Private International Law framework. With Brexit, the UK has now left this framework without any negotiated replacement agreement, a so-called ‘skinny’ Brexit. The loss of the ability to deal with insolvencies and corporate restructurings through a single process, with automatic recognition across the EU, may make it more complex, lengthy and expensive to resolve cross-border cases. It gives rise to the prospect of parallel proceedings in different jurisdictions. The paper also addresses how any disadvantages associated with the ‘skinny’ Brexit may be alleviated.

Rethinking the legitimacy of expectations: Speculative crossclaims, fraudulent transactions, and the immunity rules of the European Insolvency Regulation: Finnish (and some Swedish) perspectives

AbstractAs a general principle of the law of the European Union, legitimate expectations should be respected as much as possible. The EU Regulation on Insolvency Proceedings (recast) (EIR) aims to achieve this goal by providing a comprehensive set of rules governing the choice of law in cross‐border insolvency cases. Despite the academic criticism targeted at these rules, they remained intact in the recast EIR. The basic problem discussed in this article is that according to the prevailing regime created by the EIR, the expectations of the general body of creditors might be ignored, regardless of whether the expectations of the counter party—the favored creditor or any other contracting party of the debtor—are actually illegitimate. The purpose of this article is to evaluate this discrepancy and to propose means that might allow for its rejection at both the theoretical and practical levels. It will also be argued that the CJEU's judgment in Vinyls Italia (C‐54/16) is insufficient to tackle the basic problem, even though the abuse of the freedom of the choice of law was clearly rejected by the CJEU. The problem discussed in this article is not the abusive choice of the applicable law, but the fraudulent character of the transaction concluded under said law. Furthermore, it seems highly unlikely that the public policy exception (ordre public) would resolve the basic problem, as immunity protection, provided by the various leges causae, is adopted as an integral part of the EIR, with no exceptions for fraudulent or otherwise inappropriate transactions or arrangements. Therefore, immunity protection is part of the public policy of the EU itself. To conclude this article, it is suggested that immunity protection not be revoked but limited only to crossclaims and transactions with no speculative, fraudulent, or otherwise inappropriate motives. This would most likely require a new preliminary ruling of the CJEU. To concretize the problems discussed in this article, the choice of law rules of the EIR regarding creditors' right to set‐off and transaction avoidance are evaluated and applied in the context of the insolvency law of Finland, and, to the extent the basic principles of the national laws are similar, the insolvency law of Sweden.

Defining groups of companies under the European Insolvency Regulation (recast): On the scope of EU group insolvency law

AbstractThis article examines the general scope of application of the provisions on insolvency regarding members of a “group of companies”, as included in Chapter V of the European Insolvency Regulation (recast) (“Recast EIR”), in order to review whether that scope is appropriate to deal with the different group structures in which business may be conducted. With the definition for a “group of companies” playing a paramount role in determining the scope of these provisions, the article includes a thorough analysis of the current definition for a “group of companies” as included in the Recast EIR. Based upon a teleological approach, the article argues in favour of an independent, broad and flexible interpretation of “group of companies”, in order to include a large number of groups within the scope of the Recast EIR's provisions regarding group insolvencies.

JCOERE Judicial Cooperation Supporting Economic Recovery in Europe Report 2: Report on Judicial Cooperation and European Harmonisation and Integration in Preventive Restructuring

The JCOERE Project, funded by the European Commission’s DG Justice Programme (2014-2020), addresses two aspects of the European Union’s strategy to respond to the problems of cross-border insolvency within the increasingly integrated internal market. The European Commission’s strategy is described in the Commission Recommendation 2014/135/EU on a new approach to business failure. The first aspect concerns the co-operation obligations that have been imposed on all domestic Member State courts and judiciary under the European Insolvency Regulation (Recast) 2015/848 (EIR Recast). The second concerns the implementation, subsequent to the Preventive Restructuring Directive 2019/1023, of a preventive restructuring framework in the domestic law of all Member States. The second JCOERE Report analyses the co-operation obligations arising from the EIR Recast, which are imposed on courts and practitioners in EU Member States to co-operate in cross-border insolvency and restructuring matters. The Report also undertakes a benchmarking of judicial utilization and awareness of best practice guidelines on co-operation that have been adopted by European and international organizations. This was achieved through engagement with judicial networks during a number of interactive workshops and through the distribution of a judicial survey to three focus groups comprised of members of the judiciary. This, together with JCOERE Report 1, has contributed to answering the overall project research question, which asks: Based on existing experience with restructuring (e.g. Ireland), will obstacles to court co-operation arise from substantive rules, which are particular to preventive restructuring. Will some of these obstacles to court co-operation be exacerbated in the preventive restructuring context, given that they pertain to existing procedural rules? JCOERE Project Report 2 reflects the goals of Work package 3 of the Project and accordingly focusses on the courts, including judicial and administrative authorities, charged with approving and implementing restructuring plans and to which the co-operation obligations are addressed. The second Report considers the application of best practices for co-operation of cross-border preventive restructuring cases, judicial awareness of existing obligations and guidelines and judicial practice in this area. Report 2 also considers broader questions, such as differences in judicial culture across the EU Member States, how this impacts mutual trust and effective cooperation, and how the obligations and broader initiatives concerning judicial co-operation are fundamental to the question of European integration and harmonization. The research in Report 2 also undertakes a comparative analysis of judicial co-operation in another federalized jurisdiction, undertaking a comparison between the European Union and the United States. The JCOERE Project was led by a team at University College Cork School of Law in collaboration with a team at the University of Florence, Titu Maiorescu University in Romania and INSOL Europe. The content of this document represents the views of the author only and is his/her sole responsibility. The European Commission does not accept any responsibility for use that may be made of the information it contains.

Set‐off under the European insolvency regulation (and English law)

This paper addresses critically the meaning and effect of the set‐off provisions in the European Insolvency Regulation. The Regulation sets out the authority of EU Member States to open insolvency proceedings and provides that, subject to exceptions, the law of the State that opens insolvency proceedings shall apply to those proceedings. Setoff is one such exception for the opening of insolvency proceedings does not affect the rights of creditors to demand the set‐off of their claims against the insolvent debtor. Set‐off is intended to perform a guarantee type function for creditor claims. Nevertheless, the Regulation does not define what is meant by set‐off nor clarify whether set‐off rights under the law of a third country (such as English law) may be relied upon. The paper provides valuable clarification and critical analysis.

Conflicts of interest, intra‐group financing and procedural coordination of group insolvencies

AbstractModern insolvency law instruments recognise the specificity of enterprise group insolvencies, premised on the existence of close operational and financial links between group members. It is widely accepted that maximisation of insolvency estate value and procedural efficiency depend on coordination of insolvency proceedings opened with respect to group entities. Such coordination is prescribed in the European Insolvency Regulation (recast), the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Enterprise Group Insolvency and the recently reformed German insolvency law. Yet in insolvency, group members retain their own insolvency estates and pools of creditors. This is based on the traditional company law principle of entity shielding. Active communication and cooperation between insolvency practitioners and courts do not sit well with the separate (atomistic) nature of insolvency proceedings, as well as different and oftentimes conflicting interests of creditors in such proceedings. As a result, communication and cooperation may be restricted in a situation of conflicts of interest. This article explores how in the context of group distress the risks arising from conflicts of interest can be controlled and mitigated, while ensuring efficient cross‐border cooperation and communication to the maximum extent possible. It analyses three cutting‐edge coordination mechanisms, namely (a) cross‐border insolvency agreements or protocols, (b) special (group coordination and planning) proceedings and (c) the appointment of a single insolvency practitioner. It concludes that both the likelihood and significance of conflicts of interest correlate with the degree of procedural coordination. Therefore, conflict mitigation tools and strategies need to be tailor‐made and targeted at a specific level and coordination mechanism.

Gerard McCormack and Reinhard Bork (eds), Security Rights and the European Insolvency Regulation

Gerard McCormack and Reinhard Bork (eds), <i>Security Rights and the European Insolvency Regulation</i>

Groups of companies in the Recast European Insolvency Regulation: Around and about the “group”

AbstractRegulation (EU) 2015/848 (Recast European Insolvency Regulation/Recast EIR) contains a set of articles dedicated to the insolvency proceedings relative to members of groups of companies. No substantial consolidation or any procedural nature is envisaged. Article 2(13) of Regulation 2015/848 clarifies that, for the purposes of the same, a “group of companies” must be understood as “a parent undertaking and all its subsidiary undertakings.” However, many doubts arise when one goes deeper into that definition. The author deals with some of those problems and gives some suggestions to overcome them.

Cross-Border Insolvency and International Commercial Arbitration ('Insolvencia transfronteriza y arbitraje comercial internacional')

This thesis argues that one of the main reasons why the interaction between insolvency and international arbitration remains an intriguing intersection is the absence of a unified choice-of-law method that identifies the relevant law that should govern the effects of insolvency on the arbitration agreements, proceedings and awards of the insolvent party. Currently, the private international law methodologies of international arbitration and insolvency simply coexist, sometimes overlap and frequently fail to provide a clear path of analysis for arbitral tribunals and national courts. As a result, those tribunals and courts are frequently faced with two different (and sometimes colliding) methodologies as to how they should resolve the challenges posed by the insolvency of a party to arbitration. The analysis of this clash is a central part of my study. The thesis then designs a comprehensive solution applicable to arbitrators and courts. Very succinctly, the model proposes that the insolvency choice-of-law rules of the seat should be included in the lex loci arbitri. As such, arbitrators should apply those rules to identify the law applicable to the jurisdictional and procedural effects generated by the commencement of insolvency proceedings. Together with the use of the principle of normative hierarchy, this interpretation would align arbitral and judicial methodologies and would contribute to the desired identity of outcome between courts and tribunals. From a pragmatic point of view, this means that the effects of insolvencies covered by the European Insolvency Regulation or the Spanish Insolvency Act should be governed by the lex fori concursus or to the lex loci arbitri depending the pendency of arbitration at the time of the opening of the insolvency proceedings. In contrast, when the seat of the arbitration is located in a jurisdiction that has adopted the UNCITRAL Model Law on cross-border insolvencies, the effect of foreign insolvencies in arbitration will be governed by the lex loci arbitri. The success of this model would be facilitated by the adoption of an international instrument. UNCITRAL is the best positioned organisation to produce this instrument, either by way of amendment to one of its Model Laws in arbitration or insolvency, or by way of a Toolkit for arbitrators. In addition, the IBA has demonstrated a leading role in the field of international dispute resolution and would be well-equipped to prepare a set of Guidelines recommending the proposed model. The thesis suggests that, if a fully-developed model is not achievable in the near future, one of these international organisations should publish a Toolkit that helps arbitrators and parties identify the most common issues raised by the insolvency of a party to arbitration and contributes toward the harmonisation of the method of legal analysis of those issues. The thesis contains the text of the proposed Toolkit.

Parallel Reorganizations under the Recast European Insolvency Regulation – A Hypothetical Case Study

This article aims to explore the implications of the repeal, through the recast European Insolvency Regulation 2015/848, of the rules in Article 3(3) and Article 27 of the original EIR which required that secondary insolvency proceedings take the form of a liquidation (winding-up). The article's goal is to start to develop an understanding of what will – and what will not – be feasible within the new regulatory framework laid down for non-liquidation secondary proceedings under the Recast EIR. In doing so, the article analyses the new EU regime in the setting of a notional experiment – a hypothetical corporate debtor who wishes to reorganize in parallel proceedings in the Czech Republic, where it is incorporated and where its COMI is, and in the Slovak Republic, where it has its only establishment. The article therefore tests the key variables of parallel non-liquidations conducted under the Recast EIR not in the abstract but in the context of real-life rules on reorganizations contained in insolvency codes of Member State which have both adopted relatively modern provisions on reorganizations, broadly modelled on the U.S. Chapter 11 template. Based on the outcomes of the notional experiment, the article concludes that in principle, the Recast EIR provides EU debtors with a feasible cross-border platform to reorganize in more than one Member State, provided that the insolvency laws of the Member States involved show a reasonable degree of convergence.

The Rise and Fall of Regulatory Competition in Corporate Insolvency Law in the European Union

In this article, I discuss the rise and fall of regulatory competition in corporate insolvency law in the European Union. The rise is closely associated with the European Insolvency Regulation (EIR, 2002), and it is well documented. The UK has emerged as the ‘market leader’, especially for corporate restructurings. The fall is about to happen, triggered by a combination of factors: the recasting of the EIR (2017), the European Restructuring Directive (ERD, 2019) and Brexit (2019). The UK will lose its dominant market position. I present evidence to support this hypothesis.