The Evolution of European Insolvency Law Part 3: The EU Parliament’s Report on the Amendment of the European Insolvency Regulation (EIR)
by | posted in: International and Comparative | 0

By Robert Arts and Dr. Björn Laukemann (Maîtr. en droit)

Robert Arts Laukemann PicAfter the external evaluation of European Insolvency Law (Part 1) and the European Commission’s proposal for the amendment of the EIR (Part 2), the report of the European Parliament (EP) on this proposal marked the latest stage of the reform process.

While the Parliament generally supports the changes proposed by the Commission and many of its amendments simply clarify wording or align the text with the existing legislation, the draft report made some noteworthy revisions:

  1. To prevent abusive venue-shopping, the draft requires the factual circumstances of the debtor’s centre of main interests to be established three months prior to the opening of insolvency proceedings.
  2. While welcoming the introduction of synthetic proceedings (i.e. the granting of special rights to groups of local creditors in order to avoid the opening of secondary insolvency proceedings) the EP strengthens the procedural standing of the local creditors by:

(i) granting them the power to challenge any decision to postpone or refuse the opening of secondary proceedings;

(ii) allowing them to petition the court conducting the main proceeding to take protective measures, e.g. by prohibiting the removal of assets or the distribution of proceeds, or by ordering the administrator to provide security; and

(iii) empowering the court to appoint a trustee to safeguard their interests.

  1. The coordination and cooperation between administrators appointed in different proceedings within a group of companies is further enhanced by the implementation of an independent coordinator who, for instance, is empowered to present a non-binding, court-approved group coordination plan, to mediate in disputes between insolvency representatives of group members, or to request a stay of proceedings with respect to any member of the group.

As a result, the Parliament report  aims to strengthen the role of main insolvency proceedings while still sufficiently considering interests of local creditors and to improve coordination within groups of companies. The draft is expected to pass the European Council by the end of this year.

See the full report here.

The Evolution of European Insolvency Law Part 2: The EU Commission’s Proposal for the Amendment of the European Insolvency Regulation
by | posted in: International and Comparative | 0

Author: Dr. Björn Laukemann, Maître en droit (Aix-en-Provence), Senior Research Fellow at the Max Plack Institute Luxembourg for International, European and Regulatory Procedural Law

Laukemann PicFollowing the external evaluation (Part 1), the EU Commission released a proposal for the amendment of the European Insolvency Regulation in December 2012, aimed at enhancing the efficiency of cross border insolvency proceedings and thus ensuring a proper “functioning of the internal market and its resilience in economic crises”. The following main changes were proposed:

  1. The Regulation’s scope of application now includes hybrid proceedings (“debtor in possession”), pre-insolvency proceedings and debt discharge proceedings for natural persons. The Commission will scrutinize whether specific national proceedings fall within the revised scope.
  2. Retaining the jurisdictional criterion of the debtor’s centre of main interests, the proposal clarifies the criteria and improves the procedural framework for determining the competent court (examination ex officio, information of foreign creditors and creditors’ right to judicial review).
  3. The proposal empowers the court to refuse to open secondary proceedings (i.e. parallel territorial proceedings opened in the Member State of the debtor’s establishment) if they are unnecessary to protect the interests of local creditors, and thus to reduce detrimental effects on rescue efforts (abolishment of the winding-up-requirement; improved cooperation and communication between main and secondary proceedings, also on a court-to-court basis).
  4. Member States are required to establish publicly accessible and interconnected electronic registers in which the relevant court decisions are published.
  5. The implementation of standard forms will facilitate the lodging of claims for foreign creditors.
  6. A framework for the coordination of insolvency proceedings within groups of companies is set up (obligation of courts and liquidators to cooperate and communicate with each other; extending certain rights of administrators to proceedings of other group members, e.g. the right to be heard, to participate, to request a stay of proceedings and to propose a rescue plan).

Part 3 will address the reactions of the European Parliament and the Council and comment on ongoing and future developments.