Amending the European Insolvency Regulation to Strengthen Main Proceedings (original) (raw)
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Juridical Tribune, 2017
In this paper we will present the notion of Center of Main Interests (COMI) of a debtor in the insolvency proceedings at the European Union level in the light of EU Regulation No. 1346 / 29.05.2000 and the EU Regulation No. 848 / 20.05.2015 with constant reference to the European jurisprudence. The concept of center of main interests of a debtor has a particular importance in the cross border bankruptcy cases as its location determines the court which is competent to open the insolvency proceedings. Although at the European level adopting the EU Regulation No. 1346 / 29.05.2000 was considered a legislative progress in bankruptcy proceedings, in the end it had relatively few applications as it was unable to cover large factual aspects. The mentioned regulation was offering a rigid and abstract definition and interpretation of the COMI concept which resulted in important legal application divergences that lead in the end to a legislative reform. This legislative reform was concluded w...
The breach of public policy is the sole reason in terms of the Regulation that justifies the exceptional refusal of an EU Member State to recognize the main insolvency proceedings and grant their effects. However, the application of ordre public in this connection is more than questionable. It is doubtful whether the EU Member States may in an individual case deny effects to a European regulation as a significant and directly applicable source of European law, which is simultaneously a source of its own law, and whether such approach would not rather be an attempt to evade the regulation, which would be prohibited according to the principles of EU law. Moreover, Article 26 of the Regulation only provides for the procedural ordre public, not the substantive ordre public. The latter could apply in connection with the determination and, especially, the effects of the applicable substantive law of national origin as the lex fori concursus; the ordre public exception could in such case at least theoretically be possible from the substantive-law perspective. However, the substantive-law aspects of the situation are already reflected in Article 5 of the Regulation, which provides for the conflict-of-laws exceptions to Article 4 of the Regulation (and, indeed, in substantially all immunity and special provisions of the Regulation, i.e. Articles 5 to 15 of the Regulation). Consequently, it is more than appropriate to examine the purpose of the rule enshrined in Article 26 of the Regulation, i.e. in which situation the recognition and enforcement would have a result that is principally incompatible with the public policy of the respective Member State. No problems arise if the recognition concerns an individual normative act, i.e. an individual court decision rendered in connection with specific insolvency proceedings, for instance, in connection with a creditor’s claim or the bankrupt’s obligation. It is unclear whether the liquidator’s powers in the main insolvency proceedings can be contested and, for instance, their registration be denied in public registers in terms of Article 21 of the Regulation, such as the Land Register, the Companies Register, etc. We may probably agree that the ordre public exception is not applicable in such cases, as it is not applicable for instance in connection with the debtor’s eligibility as a party to the insolvency proceedings (cf. Article 16(2) of the Regulation, or here in the entire context of the Regulation, i.e. especially, though not exclusively, in terms of Articles 3 and 4 of the Regulation, etc.). Similarly, the ordre public exception is also not applicable if, for instance, the rescue plan relating to the bankrupt’s assets (estate) impairs the creditor’s status compared to the option of liquidating, i.e. selling, the estate. Besides, the rescue plan must still rest on the principles that guarantee due procedure, primarily the following principles: (i) each creditor must obtain at least as much as they would obtain if the estate were liquidated, (ii) further operation of the enterprise must be based on a sufficient estate, so that obligations that arise in the future in connection with the due operation of the business will be satisfied, (iii) the absolute priority rule is observed, which requires that the priority satisfaction rights are honored, or that the payment of benefits to lower classes of creditors before satisfaction of the higher classes of creditors is contingent on the latter’s consent, and (iv) the rescue plan for the bankrupt’s enterprise is subject to the court’s consent, and such consent must be withheld if the plan is contrary to laws or good morals, provided that it is approved by the majority of creditors during a separate vote within the individual classes of creditors.
Opening secondary insolvency proceedings in the EU
Opening secondary insolvency proceedings in the EU: Bernard P.A. Santen, Fabian A. van de Ven and Gert-Jan Boon provide a concise survey of what judges should consider before opening secondary proceedings in an EU Member State after Burgo/Illochroma.
The European Parliament, after a lengthy debate, has eventually approved a reform of Regulation 1346/2000 on cross-border insolvency proceedings (hereinafter, the ‘Insolvency Regulation Recast’), which provides for significant innovations in the original Regulation, such as an EU-wide register of insolvencies and a new proceeding for insolvencies of corporate groups. The fundamental logic of the Regulation, however, does not change: the Recast does not harmonise insolvency rules at EU level and its goal is still selecting competent venues and applicable insolvency regimes. In many respects, the reform simply codifies CJEU’s case law, with the aim of increasing legal certainty. The Insolvency Regulation Recast is, however, innovative regarding the definition of COMI, by repealing the causality relation between criterions of ‘permanence’ and ‘ascertainability’. Eventually, the Recast aims at better coordinating secondary proceedings and main proceedings; in this regard, it introduces ‘synthetic secondary proceedings’, whereby the insolvency practitioner of the main proceeding undertakes to respect other Member States distributional criterions in order to avoid the opening of a secondary proceeding. The real impact of these innovations is, however, uncertain.
EU insolvency regulation and multiregulational combines
Scandinavian Studies in Law, 2012
The EU Insolvency Regulation ……………..……………..……… 3 The Application of EIR to Multinationals ………………………. 4 How has the COMI Concept been Interpreted in Case Law where Multinational Groups are Concerned? ……….
Eu Insolvency Law - New Recast Regulation on Insolvency Proceedings
EU AND COMPARATIVE LAW ISSUES AND CHALLENGES SERIES, 2017
Intensive process of Europeanization and the creation of internal market significantly changed European business landscape. More and more European companies are spreading their businesses across Europe what consequently raised considerable number of issues to address, such as, law applicable to corporate activities, creditor's rights, etc. The problem is particularly complex and complicated in case of companies' bankruptcy. In "massive" bankruptcy cases with cross border elements, involving large number of creditors, companies assets in several member states, large number of employees etc., it is hard or impossible to coordinate all activities, to ensure equal treatment and equal rights to all creditors, prevent forum shopping or/and to trace, collect and sell debtor's assets. Having in mind all that and the fact that conflicting Member States insolvency rules create uncertainty among investors, discourages cross-border investments and cause delay in restructuring, EU is taking steps in harmonizing insolvency law since early 1980's. However, the first EU Insolvency Regulation was not enacted until year 2002. The 2002 EU Insolvency Regulation sets forth a framework for cross border insolvency within the EU, especially providing rules for the international jurisdiction of a court in a Member State for opening of insolvency proceedings, the automatic recognition of these proceedings and the power of "liquidator" in the other Member State, and important choice of law provisions. After 10 years of application of 2002 Insolvency Regulation, in year 2012, the EU Commission decided that it is time to modernize EU insolvency law. As a result it came out with the proposal of the Recast Insolvency Regulation. Recast Insolvency Regulation was finally adopted by the EU Parliament and Council in June 2015 but it will enter into force in year 2017. The new Recast Insolvency Regulation does not adopt radically different approach compared to previous Regulation not it offers revolutionary different solutions. The fundamental premise that insolvency law is a matter for each EU member state has remained. However the Recast regulation strengthens and broadens the framework of recognition and cooperation which the 2002 Insolvency regulation set up over a decade ago. In that context, paper will address processes of harmonization of EU insolvency law. It will emphasize the most important aspects of EU insolvency regime. Special attention will be given to substantive and procedural issues as regulated in the Recast Insolvency Regulation.
Abstract As companies become increasingly international, there has also been a growing need to regulate insolvency proceedings, including the international element that will undoubtedly satisfy needs for businesses focused in more than one country. The EU Insolvency Regulation was adopted in 2002 in response to these needs for an effective approach to cross-border insolvency. Although this Regulation does not cover all issues of insolvency, it is a big step forward in the effective dealing with insolvency proceedings within the EU. The purpose of this paper is to analyze EU Insolvency Regulation and recent Recommendation of the European Commission, emphasizing their main goal, to present a package of measures to modernize these insolvency rules. Key words: insolvency regulation, bankruptcy, cross-border insolvency, recommendation