DR MAREK PORZYCKIJAGIELLONIAN UNIVERSITY

Assessment of the European Insolvency

Regulation

Was EIR a step forward?

more predictability as regards:- jurisdiction to open proceedings- conflict of laws rules

Recognitions of judgments

Recognition of powers of insolvency liquidators

Effectiveness in preventing forum shopping?

Aftermath of the Eurofood decision no examination of decisions by courts of other Member States on COMI „race to the court”

Lack of legal certainty as regards COMI and competence to open main proceedings

Incentives for forum shopping by shifting COMI abroad and filing for insolvency in the advantageous jurisdiction

On the other hand, there would be incentives for forum shopping as long as differences between national insolvency laws persist.

Restructuring in cross-border cases

Better possibilities for cross-border restructuring within main proceedings

Weak point – secondary proceedings, in particular in cases where most assets of the debtor are situated within the secondary jurisdiction

- limitation to winding-up proceedings- problematic coordination with main proceedings

lack of provision on cooperation between courts (useful initiatives: protocols for cooperation, CoCo Guidelines)

Lack of specific rules for proceedings aimed specifically at restructuring (e.g. French sauvegarde)

In general, the EIR is too liquidation-oriented.

Scope of application

Deficiences in the functioning of the annexes to the EIR

- amendments are triggered in practice by Member States, without regard to the criteria of Article 1(1) of the EIR questionable entries in Annexes A and C

- delay in amending the Annexes following changes to national law lack of clarity as regards proceedings opened following the change of national law but before the amendment of the Annexes.

Groups of companies

Strict approach of the EIR based on separate legal personalities of entities within corporate groups

Results: lack of coordination of winding-up or reorganisation efforts within a group

on the other hand – difficulties in developing a sound legal framework, as issues beyond international insolvency law would need to be tackled (in particular arising under civil law and company law)

Lack of easy and reliable access to information on insolvency proceedingsuniversal effectiveness of insolvency

proceedings in the EU is linked to purely national and divergent publication procedures

no pan-European insolvency case registernational registers are not coordinated and not

always accessible on-linenational publication rules are not harmonisedlanguage issuesthere is no single access point with reliable

information on insolvency laws in force in the Member States

Reform initiative

reform initiative triggered by the need for an application report on the EIR due under Article 46 of the EIR (until mid-2012 and every 5 years thereafter) steps taken by the Commission in 2012:

- establishment of a group of experts, regular meetings during 2012;

- external evaluation of the EIR, conducted by a team coordinated by the Universities of Heidelberg and Vienna, with participation of national reporters;

- public consultation.

Reform initiative- continued

Initiative of the European Parliament – resolution of 15.11.2011 with recommendations to the Commission on insolvency proceedings in the context of EU company law (2011/2006(INI)), available at http://www.europarl.europa.eu/

- proposal to harmonise certain aspects of national insolvency proceedings: opening of proceedings, filing of claims, avoidance actions, some issues related to liquidators, some basic aspects of restructuring

- proposal of amendments related to some cross-border issues: scope of application, definitions of COMI and establishment, cooperation between courts

- proposal for a regulation on insolvency of groups of companies

- recommendation for an EU insolvency register

Reform initiative - continued

Influence of the case-law of the ECJ- cf. ECJ judgment of 20.10.2011 in case C-

396/09, Interedil- judgment of 22 November 2012, C-116/11,

Bank Handlowy and Adamiak on restructuring in secondary proceedings

Reform initiative - results

Documents adopted on 12 December 2012, including:- draft regulation amending the EIR (COM(2012) 744

final);- report on the application of the EIR;- communication from the Commission „A new European

approach to business failure and insolvency”.Declared purpose: a more growth-oriented insolvency

framework, second chance for honest enterpreneurs, promoting restructuring, enhancing legal certainty

see http://ec.europa.eu/justice/newsroom/civil/news/121212_en.htm

Draft amending regulation – main features

Scope and definition – broader definition, including debt adjustment proceedings and proceedings without a liquidator

COMI – inclusion of some wording from the Eurofood and Interedil judgments into the EIR, some clarification of rules on natural persons but no major changes in the definition alone

ex officio examination of jurisdiction under Article 3; obligation to include grounds for jurisdiction in the opening decision

right of foreign creditors and interested parties to challenge the opening decision on jurisdiction grounds

Draft amending regulation – secondary proceedings

secondary proceedings will be no longer limited to winding-up proceedings – type of proceedings to be decided according to the interests of local creditors

possibility of postponment of the opening of secondary proceedings on request of the liqudator in main proceedings

„synthetic secondary proceedings” – creditors from a secondary jurisdiction may be satisfied in main proceedings as if secondary proceedings had been opened a way to avoid the opening of secondary proceedings while maintaining the position of local creditors

more detailed rules on communication and cooperation between courts and liquidators

Draft amending regulation – groups of companies

cooperation similar to the coordination between main and secondary proceedings but on a somewhat lower level

cooperation and communication between courts and liquidators

rights of the liquidator in insolvency proceedings against other companies belonging to the same group

- right to participate and be heard- right to propose restructuring measures- right to request a stay of proceedings

Draft amending regulation – insolvency registers and information

minimum common features for national insolvency registers

- availability free of charge on the internet- contents: main information on the opening,

conduct and closure of insolvency proceedingsinterconnection between national insolvency

registers on the EU level- European e-Justice Portal as central access point- unified search engine in all official languagesinformation on national insolvency laws to be

made available via the European Judicial Network

Draft amending regulation – lodgement of claims

standard forms to be provided on the European e-Justice Portal

each Member State to indicate at least one language (other than its official language) which it will accept for the purposes of lodgement of claims in practice lodgements in English will be probably possible across the whole EU

Sources

Proposal for a Regulation amending Council Regulation (EC) No 1346/2000 on insolvency proceedings, COM(2012) 744 final http://ec.europa.eu/justice/civil/files/insolvency-regulation_en.pdf

accompanying documents: http://ec.europa.eu/justice/newsroom/civil/news/121212_en.htm

Hess/Oberhammer/Pfeiffer, Study for an evaluation of Regulation (EC) No 1346/2000 on Insolvency Proceedings; to be published at http://ec.europa.eu/justice/civil/document/index_en.htm

Additional reading – older documents

Revision of the European Insolvency Regulation, proposals by INSOL Europe, 2012:

www.insol-europe.org/download/file_/6856Presentations from the conference „The Future of the

European Insolvency Regulation”, Amsterdam 28 April 2011, http://www.eir-reform.eu/presentations

in particular:- Bob Wessels, Revision of the EU Insolvency Regulation:

What type of facelift?- Glenn Flannery, Shortcomings and proposals for reform- G. Moss, Ch. Paulus, The EIR – The Case for Urgent

Reform, 2005, reproduced at http://www.eir-reform.eu/uploads/papers/Reforms%20EC.pdf