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Welcome address
Professor Stefania Bariatti
(University of Milan)
First Session:
Reforming the European Insolvency
Regulation I.
Chair:
Professor Stefania Bariatti
(University of Milan)
Upstreaming Rescue:
Pre-Insolvency Proceedings
and the EIR
Professor Paul Omar
(Nottingham Trent University)
Upstreaming Rescue
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Development of Rescue
Chapter 11 and the 1970s
The Development of the EIR
A Reflection of its Times:
Jurisdiction
“Constellation” Paradigm
Procedures included
Upstreaming Rescue
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•
•
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New Procedures: DIPs, Pre-Packs
The Changing Face of Rescue
EIR Reforms: Procedural to Substantive Moves
Reports:
– INSOL Europe (June 2012)
– Vienna-Heidelberg (December 2012)
Upstreaming Rescue
• European Proposals
– Scope
– Definition
– Annex A Process
– EC Oversight
• UK Response
• Scope
• Definition
• SoAs
Real Seat for Debt,
Incorporation for Equity – and a
Conundrum for Everyone Else?
Professor Tomas Richter
(Radboud University Nijmegen
and Charles University in Prague)
Strengthening the Dominance
of Main Proceedings: from Bank
Handlowy to the EIR Revision
Antonio Leandro
(University of Bari)
The EIR regime of co-operation between
liquidators for safeguarding the main
proceedings’ purposes
• Coexistence, with respect to the same debtor, of one main
proceeding and several secondary proceedings.
• The co-operation and the communication between liquidators
appointed in the main and in the secondary proceedings.
• Distinct position at the moment of co-operation because of
different scope and purposes characterizing main and
secondary proceedings: the dominance of the “main
liquidator”.
Proposal amendments to reinforce
such regime (from the courts’ perspective)
• Refusing the opening of secondary proceedings if such
opening would not be necessary to protect the interests
of local creditors.
• Opening proceedings different from winding-up
proceedings.
• Extending the co-operation and communication
requirement to the courts.
Proposal amendments to reinforce such regime
(from the “main liquidator’s” perspective)
• The opportunity to be heard so as to plead for refusing
or postponing the opening of the secondary
proceedings.
• The “undertakings” pro creditors and third parties set
forth by new Article 18 (1).
• The right to challenge the decision to open the
secondary proceedings (new Article 29 (a) (4)).
ECJ criteria for preserving the main
proceeding’s role
• ECJ brought forward certain aspects of Proposal in the
Bank Handlowy judgment (Bank Handlowy w Warszawie SA v
Christianapol sp. z o.o. (Case C-116/11) [2012])
• ECJ emphasized:
– a) the EIR “mandatory rules of coordination” (Bank Handlowy,
paragraph 60);
– b) the dominant role of the main proceedings (ibidem);
ECJ criteria for preserving the main
proceeding’s role
ECJ emphasized that:
– c) the principle of sincere cooperation laid down in Article 4(3) EU Treaty
requires “the court having jurisdiction to open secondary proceedings
[...] to have regard to the objectives of the main proceedings and to take
account of the scheme of the Regulation, which [...] aims to ensure
efficient and effective cross-border insolvency proceedings […]
guaranteeing the priority of the main proceedings” (Bank Handlowy,
paragraph 62);
– d) “it is for the court having jurisdiction to open secondary proceedings
to have regard to the objectives of the main proceedings […]” (Bank
Handlowy, paragraph 63).
Autonomous and uniform conditions for opening
secondary proceedings: critical remarks
• The evaluation of the main proceedings objectives as
well as its “dominance” as “conditions for the
opening of secondary proceedings”.
• Derogating the general rule according to which the
conditions for opening (and closing) the proceedings
are determined by the lex concursus (Bank
Handlowy, paragraph 46 ff.).
Autonomous and uniform conditions for
opening secondary proceedings: critical remarks
• The court requested to open secondary proceedings
and its discretionary power when ascertaining the
main proceedings objectives, the need and
opportunity to open secondary proceedings, the real
interests of local creditors.
Is all this consistent with legal certainty in relation
to the opening of secondary proceedings?
Concluding remarks:
supporting the Proposal
Hearing the main liquidator before the secondary
proceedings being opened and the “undertakings”
set out in new Article 18 (1) as means to best look
after the legal certainty and the interests of local
creditors.
Insolvency and Related Actions
under the Insolvency and
Brussels 1 Regulations
Professor Gerard McCormack
(University of Leeds)
Main legal instruments
•Insolvency Regulation – 1346/2000
•Brussels 1 Regulation – 44/2001
•Replaces earlier Brussels Convention
•Applies to civil and commercial matters
•Exception for “bankruptcy, proceedings relating to
the winding‐up of insolvent companies or other
legal persons, judicial arrangements, compositions
and analogous proceedings”
Jurisdictional focus
•Insol Reg – main insolvency proceedings where debtor
has its COMI
•Secondary proceedings where debtor has an
establishment
•Brussels 1 Reg – general rule that defendant should be
sued in its State of domicile
•Exceptions for choice of forum clauses in contracts
•Court first seised of a matter must determine if it has
jurisdiction – ‘Italian torpedo’
Conflicts between courts
• Brussels 1 Reg ‐ court first seised of a matter must
determine if it has jurisdiction –‘Italian torpedo’
• Recast Reg ‐ if the parties have given a particular court
exclusive jurisdiction, that court may go on to hear the
case even if it was not first ‘seised’ ‐ Reg 1215/2012/E
• Insol Reg – decision to open insolvency proceedings in
one State must be recognisedin other States
Interaction between instruments
•Travaux preparatoire suggest instruments
intended to dovetail almost completely
•No unjustifiable loopholes
•Exclusion from Brussels 1 Regulation of
‘analagous proceedings’ - seems to cover
insolvency‐related actions
Jurisdiction of Insolvency court
• No express conferral of jurisdiction on ‘insolvency court’
• Recital 6 of preamble suggests jurisdiction should extend to insolvency
related actions
• Art 25 of Insol Reg extends recognition of judgments opening insolvency
proceedings to judgments derived directly and closely linked with them
• Seagon v Deko – Art 3 impliedly confers jurisdiction
• Efficiency advantages in centralizing all legal actions directly related to a
debtor’s insolvency before courts of the EU state with jurisdiction to open
insolvency proceedings
Gaps and uncertainties
• Overlaps in jurisdiction ‐ F‐Tex SIA ‐European
Court declined to answer direct question
though said two regulations sat symmetrically
• Gaps – schemes of arrangement or
restructuring proceedings not part of formal
insolvency process
Insolvency related actions
– general rule
• Defendant should be sued in State that opens
insolvency proceedings rather than State of
domicile
• Denial of due process rights? – Rubin
comparisons in respect of non‐EU States
• What is and insolvency related action?
• Actions based on insolvency law that seek to fix
liability on company officers – Gourdain v Nadler
What is an insolvency related action?
• Actions based on insolvency law that seek to set aside
pre‐insolvency transactions entered into by debtor – Seagon v Deko
• Actions challenging the exercise of a power or discretion by a
liquidator – SCT Industri and Polymer Vision v Van Dooren
• Not insolvency related ‐ actions by insolvency representative
seeking to establish debtor’s ownership of property
• Grey areas – misfeasance proceedings in insolvency and fraudulent
transfer actions
• Difficulties in formulating general principles
Effect of opening of insolvency
proceedings
• Art 4 –general rule that law applicable to
insolvency proceedings and their effects is that of
EU State where proceedings are opened
• Art 15 exception for law suits pending
• If COMI State imposes a stay on actions against
debtor then it should apply throughout EU
Europe wide stays
• Europe wide stay held effective in respect of
Credit Institutions Directive in Kaupthing
• Different view taken on Insolvency Reg in
German Graphics
• But general view in textbooks that insolvency
stays should have Europe wide effect
Reform proposals
• Codification of the rule in Seagon v Deko
• Court that opens insolvency proceedings should
have jurisdiction in respect of insolvency related
actions
• But concurrent jurisdiction – action may be
cumulated with action based on company law or
tort under Brussels 1
Reform proposals 2
• No infringement of due process rights since
defendant sued in country of domicile rather than
possibly distant insolvent forum
• Nothing on what is an insolvency related action
• No proposals on Art 4 and potential Europe wide
effects of stays
• Compliance or otherwise with EU professed
principles of freedom, security and justice?
Coffee break
Report on Past
Activities 2012-2013
Professor Paul Omar
(Nottingham Trent University)
Past Projects:
• Brussels Annual Conference
(10-11 October 2012)
• Trier Joint Conference with ERA
(18-19 March 2013)
• Conference Proceedings Booklets
Venice (Dec); Nottingham (Jul)
Brussels and Trier/Paris (in progress)
• Newsletters (Aut/Win 12; Spr/Sum 13)
Future Planning:
• Leiden Joint Conference
(14-15 April 2014)
• Istanbul Annual Conference
(8-9 October 2014)
• 2015 Events: Berlin
• Associated CP Booklets
2014 Anniversary Publication:
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Essays on Topical Insolvency
10-12,000 words
Academic Rigour
Contributions Peer-Reviewed
Part of IEAF-Assoc Publications Series
Professionally Published
What you can do?
• Propose Technical Papers/Reports
• Contribute to 10th Anniversary Collection
• Workshops/Events Proposals for Advertising or
Assistance
• Volunteer Assistance/Info for Newsletters
• Find us on Facebook and IEAF Website
Envoi
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Professor Sebastian Kortmann 2004-2007
Professor Bob Wessels 2007-2010
Professor Stefania Bariatti 2010-2013
??
Second Session:
Reforming the European Insolvency
Regulation II.
Chair:
Professor Paul Omar
(Nottingham Trent University)
The EIR Revision from
a German Perspective
Dr Jessica Schmidt
(Friedrich-Schiller University Jena)
A. Background: The German insolvency reform
I. The reform in general
→ started in 2010
→ 3 stages:
(1) facilitation of the restructuring: ESUG (in force: 2012)
(2) consumer insolvencies: GlRStG (in force: July 2014)
(3) group insolvencies (draft bill: 2013)
II. In particular: the Group Insolvencies Bill 2013
→ goal: better coordination of the individual insolvency
procedures
→ two dovetailing approaches:
(1) building upon current practices
→ legal bases for jurisdiction, referral and cooperation
(2) new: creation of a coordination procedure
→ key elements: coordination liquidator & coordination plan
B. Comparison of the rules on group insolvencies
in the EIR revision draft and the German reform
draft
I. Common features and similarities
1. No substantive consolidation
2. Cooperation duties
a) Cooperation of liquidators
art. 41a(1) EIR draft
§ 269a InsO-draft
(1) Where insolvency proceedings relate to
two or more members of a group of
companies, a liquidator appointed in
proceedings concerning a member of the
group shall cooperate with any liquidator
appointed in proceedings concerning another
member of the same group to the extent such
cooperation is appropriate to facilitate the
effective administration of the proceedings, is
not incompatible with the rules applicable to
such proceedings and does not entail any
conflict of interests. That cooperation may take
the form of agreements or protocols.
The liquidators of group-affiliated debtors shall
have a duty to inform and cooperate with each
other as long as the interests of the parties
concerned in the proceedings for which they
are appointed are not prejudiced. In particular,
they have, upon request, to relay all
information which can be of relevance for the
other proceedings without undue delay.
b) Cooperation of courts
art. 42a(1) EIR draft
§ 269b InsO-draft
(1) Where insolvency proceedings relate to
two or more members of a group of
companies, a court before which a request to
open proceedings concerning a member of the
group is pending or which has opened such
proceedings shall cooperate with any other
court before which a request to open
proceedings concerning another member of
the same group is pending or which has
opened such proceedings to the extent such
cooperation is appropriate to facilitate the
effective administration of the proceedings
and is not incompatible with the rules
applicable to them. …
If the insolvency proceedings relating to the
assets of group-affiliated debtors are being
conducted at different insolvency courts, the
courts shall have a duty to cooperate and in
particular to exchange the information which
can be of relevance to the other proceedings.
…
c) Divergences in relation to cooperation duties
•
only art. 42c EIR draft provides specifically for
cooperation and communication also between
liquidators and courts
•
only § 269c InsO-draft specifically provides
for cooperation of the creditors’ committees of
group-affiliated debtors
II. Differences and divergences
1. Definition of group
art. 2 (i), (j) EIR draft
§ 3e InsO-draft
(i) "group of companies" means a number of companies
consisting of parent and subsidiary companies;
(j) "parent company" means a company which
(i) has a majority of the shareholders' or
members'
voting
rights
in
another
company (a "subsidiary company"); or
(ii) is a shareholder or member of the subsidiary
company and has the right to
(aa) appoint or remove a majority of the
members
of
the
administrative,
management
or supervisory body of that subsidiary; or
(bb) exercise a dominant influence over the
subsidiary company pursuant to a contract
entered into with that subsidiary or to a
provision in its articles of association.
A group of undertakings consists of legally
independent undertakings which have the
centre of their economic activities within
the territory of the Federal Republic of
Germany and which are directly or indirectly linked with each other by
1. the possibility to exercise a dominant
influence or
2. a management on a unified basis.
2. Group jurisdiction
a) German reform draft
§ 3a(1) InsO-draft
Jurisdiction for groups
(1) Upon application of a debtor who is a member of a group undertakings
within the meaning of § 3e (group-affiliated debtor), the court seized
assumes jurisdiction for the insolvency proceedings against the other
group-affiliated debtors (subsequent group proceedings) if there is an
admissible request to open insolvency proceedings with respect to the
debtor and the debtor is not evidently of minor importance for the
group of undertakings as a whole.
b) EIR revision draft
•
no special group venue
•
but: possibility to determine that COMI of all group
members is located at the same place
3. “Group liquidator“
a) German reform draft
§ 56b(1) InsO-draft
Appointment of liquidator in case of debtors
belonging to the same group of undertakings
(1) If the opening of insolvency proceedings relating to the assets of groupaffiliated debtors is requested, the insolvency courts seized shall consult
one another whether it is in the interests of the creditors to appoint
only one person as liquidator. The consultation shall consider in
particular whether this person can administer the proceedings relating
to the group-affiliated debtors with the necessary independence and if
potential conflicts of interests can be dispelled by the appointment of a
special liquidator.
b) EIR revision draft
.
•
no special provision
•
but:

draft recital 20b: if same court has jurisdiction
for several proceedings, it should be able to
appoint the same liquidator

possibility of appointment of one person
as liquidator in all proceedings encompassed
by duty of cooperation between courts
pursuant to art. 42b
4. Cooperation mechanisms
a) EIR revision draft: art. 42d
→ each liquidator has standing in the other proceedings
→ extensive and comprehensive participation rights:
•
right to be heard and participate (lit. a)
•
right to request stay of proceedings (lit. b)
•
right to propose a rescue plan, a composition or a
comparable measure for all or some members of
the group (lit. c)
•
right to request any additional procedural measures
which may be necessary to promote rescue (lit. d)
b) German reform draft
aa) No mutual participation rights
bb) Instead: coordination proceedings
→ §§ 269d – 269i InsO-draft
(1) Coordination court, § 269d InsO-draft
•
court having group jurisdiction pursuant to
§ 3a InsO-draft (cf. § 269d(1) InsO-draft)
•
right to apply: each group-affiliated debtor
(or the respective liquidator, as the case may be);
each (provisional) creditors‘ committee
(cf. § 269d(2) InsO-draft)
(2) Coordination liquidator
(aa) Appointment (§ 269e InsO-draft)
•
neutral third person
(bb) Tasks and position (§ 269f InsO-draft)
•
provide for the coordinated conduct of the
proceedings relating to the group-affiliated debtors
insofar as this is in the interests of creditors
•
liquidators of individual proceedings have a duty to
cooperate with the coordination liquidator
(3) Coordination plan (§§ 269h, 269i InsO-draft)
•
“cropped insolvency plan”: only descriptive elements
•
right to submit: coordination liquidator
(subsidiarily: jointly by liquidators of the
group-affiliated debtors)
•
all measures relevant for the coordinated conduct
of the proceedings can be described
•
requires assent of group creditors’ committee
(if appointed)
•
must be confirmed by the court
•
implementation effect by way of the individual
insolvency plans
•
not directly binding
•
but: indirectly binding

§ 269i(1) InsO-draft: “comply or explain”

§ 269i(2) InsO-draft: binding due to decision
of creditors’ committee

potential liability for damages
c) Comparison
The EIR and The Reduction
of Asset-less Insolvencies
in Estonia
Dr Signe Viimsalu
(Foundation THETA;
Tallinn University of Technology)
Problem
• 58% of insolvency proceedings have ended
with abatement even before the opening of
insolvency proceedings
• 6% of insolvency proceedings have ended with
abatement during insolvency proceedings
• Only in 35% of cases – distributions made to
the creditors
Source: PWC, March 2013
Potential reasons
• Late submission of insolvency petitions by
debtors
• Potential management mistakes
• Lack of responsibility
• Other – use of shadow directors &
professional liquidators
Source: PWC, March 2013
Aim of the project
The main purpose of this project is to reduce the
amount of asset-less insolvencies in Estonia by
finding various appropriate means.
Proposed measures should have bigger impact,
and should be implemented in most simple,
efficient and effective way.
Tasks: to analyze…
1) how to influence the members of the
management board to submit insolvency
petitions on time.
2) whether and if yes, how to apply certain type
of business bans to the management board
members.
3) whether it is possible to define the criteria for
insolvency status / when legal entity should be
presumed to be permanently insolvent.
Prerequisites for implementing
different measures
1) Improvement of entrepreneurial ecosystem
2) Identification and analysis of causes of
insolvency
3) Determination of moment of temporary and
permanent insolvency
4) Clarification of severe mismanagement
concept
Proposed alternative measures (1)
1) Debtor’s obligation to pay deposit and/or
cover the costs of the insolvency proceedings
in case of abatement
2) To raise stamp tax for bankruptcy petitions
submitted by the debtors
3) To implement state deposit system already
during the establishment of the company
4) Different types of business bans
Proposed alternative measures (2)
5) Community work, (temporary) seizure of
certain personal object, fines
6) Debtor’s obligation to apply funds for its
employees from Employment Fund, to liquidate
the company and archive the documents
7) Debtor’s duty to insert latest financial reports
to its bankruptcy petition
Proposed alternative measures (3)
8) Strike-off
9) Compulsory managerial courses
10) Different awareness programs
etc
Next steps
• Selection of appropriate favorable measures
by the Ministry of Justice – pending
• Amendments in the Bankruptcy Act, draft law
(version 0.1) - pending
• Impact from EIR/to EIR – to what extent and
what specific (procedural) questions?!
Social Policy and the Reform
of the European Insolvency
Regulation
Jennifer Gant
(Nottingham Trent University)
Social policy and insolvency
• Parallel discussions
• Benefits of crossover
• Business rescue and acquired rights
Evolution of modern corporate rescue
• France – Law of 1967
– Judicial Settlement
– Judicial Liquidation
• UK focus on creditor wealth maximisation
• 1970s and UK accession to EU
• The Cork Report
Business rescue in the 1980s
• Adoption of a more social approach to insolvency
• France – Law of 1985 - Protecting employees and the
business at the risk of creditor rights
• UK – Insolvency Act 1986 – increased emphasis on
rehabilitation
Business rescue today
• French perspective and the Law of 2005
• UK Enterprise Act 2002
• Treatment of employees
– Preferential treatment in France and UK
– Acquired Rights/ Transfer of Undertakings
(Protection of Employment)Regulations 2006
Acquired rights as social policy
A short history
• Social dimension of the EU
• History of acquired rights
– France 1928 to today
– UK - Freedom of contract and a paradigm shift
• Risk to employees of the Common Market
Acquired rights as social policy
Acquired rights in action
• Implementation
• Corporate rescue and business transfers –
Abels
• The insolvency exception
The problem with acquired rights
•
•
•
•
•
Case law and the insolvency exception
Application of TUPE 2006
The consequences of acquired rights – R3
A fundamental French concept
Effects of diverse employment protection
The once and future EU Insolvency
Regulation
• Purpose and reform
• Acquired rights in the Regulation
• A variety of approaches
Impact of a diversity of approaches
•
•
•
•
Investment
Divestment
Example: Peugeot 2006
The repercussions of differences in labour
flexibility
Harmony or dissonance?
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EU regulation of social policy
Directives and latitude of implementation
Flexibility and instability
Harmonisation