Recognition of Debt Restructuring and Resolution Measures under the European Union Regulatory Framework

Under the proposed Bank Recovery and Resolution Directive (BRRD), member states will be required to provide for bail‐in powers to restructure failing financial institutions. At this moment, the Dutch, French, UK and German legislator already provide public authorities with resolution powers. In order to be effective in debt restructuring of failing (non‐)financial institutions, the measures taken by the resolution authorities need to be enforceable (before all courts) and effective in the entire European Union. Given the fact that not all the firm's debt is issued in the home jurisdiction, the question of recognition is critically important. In regard of non‐financial firms, the Dutch, UK, French and German jurisdictions provide for court proceedings to impose a collective settlement reached by the debtor and the majority of its creditors binding on the opposing minority. Out‐of‐insolvency plans approved by the court are recognised under the Brussels I Regulation. If the EU Insolvency Regulation reform proposal is adopted, these court‐approved debt restructuring plans in insolvency situations will be subject to the recognition regime of this regulation. Credit institutions, insurance undertakings, investment undertakings holding funds or securities for third parties and collective investment undertakings are excluded from the scope of the Insolvency Regulation whereas the scope of application of the Reorganisation and Winding Up Directive is limited to credit institutions. The regime under the future BRRD and the Single Resolution Mechanism is limited to credit institutions. National (private international) law determines the recognition of resolution measures taken by the authorities of another member state. Copyright © 2014 INSOL International and John Wiley & Sons, Ltd     

Grounds for Refusal of Recognition of (Quasi‐) Annex Judgements in the Recast European Insolvency Regulation

Insolvency‐related (annex) actions and judgements fall within the scope of the Recast European Insolvency Regulation (‘Recast EIR’). That instrument both determines international jurisdiction regarding annex actions and sets up a simplified recognition system for annex judgements. However, tension between the Recast EIR's provisions on jurisdiction and recognition arises when a court of a state different from the state of insolvency erroneously assumes jurisdiction for annex actions. Such ‘quasi‐annex’ judgements rendered by foreign courts erroneously assuming jurisdiction threaten the integrity of the insolvency proceedings. Besides, the quasi‐annex judgements may violate the effectiveness and efficiency of the insolvency proceedings as well as the principle of legal certainty. In this article, it is argued that even the current legal framework may offer some ways to avoid the recognition of such quasi‐annex judgements. First, the scope of the public policy exception may be extended in order to protect the integrity of the insolvency proceedings from the quasi‐annex judgements rendered by foreign courts erroneously assuming jurisdiction. Second, it may be argued that quasi‐annex judgements do not equal real annex judgements and therefore do not enjoy the automatic recognition system provided by the Recast EIR. At the same time, their close connection to the insolvency proceedings – disregarded by the forum erroneously assuming jurisdiction – may exclude quasi‐annex judgements from the scope of the Brussels Ibis Regulation, as well. As a consequence, those quasi‐annex judgements may fall within the gap between the two regulations, meaning that no European instrument instructs the courts of the member state addressed to recognise quasi‐annex judgements. Copyright © 2017 INSOL International and John Wiley & Sons, Ltd.     

The European Insolvency Regulation and the UNCITRAL Model Law on Cross‐Border Insolvency

This article compares the Recast European Insolvency Regulation of 2015 with the UNCITRAL Model Law on Cross‐Border Insolvency of 1997, focussed on their scope of application, international jurisdiction and the coordination of main and secondary proceedings. The scopes of both catalogues of norms and their rules on coordination of main and secondary insolvency proceedings reflect one another. However, the Recast EIR makes a significantly greater contribution to the unification of law and is also more fully differentiated and more precise, even if this comes at a price, namely, limited flexibility. The UNCITRAL Model Law made an important contribution to the harmonisation of international insolvency law but requires now modernisation. Copyright © 2017 INSOL International and John Wiley & Sons, Ltd.     

Rights in rem,Article 5 and the EC Insolvency Regulation: an English perspective

The treatment of security interests is central to any insolvency régime, national or transnational. Under Article 5 of the EC Regulation on Insolvency Proceedings (E.C. 1346/2000) extensive protection is given to a security interest—or right in rem—over assets of the debtor situate in a Member State other than one in which insolvency proceedings have been opened. The absence, thus far, of any significant body of European case law on Article 5, allows commentators to put forward a range of views on how Article 5 ought to be applied. This article aims to examine the scope of Article 5 protection both conceptually and in terms of illustrations drawn largely from English insolvency law and practice. Particular attention is given to the following issues: what is meant by the ‘opening of insolvency proceedings’ with reference to Article 5; when a liquidator may pay off the holder of a right in rem; whether the rules under the Regulation for determining the situs of an asset alter the English common law position; whether Article 5 prohibits the discharge of an underlying debt by way of a restructuring plan; the position of unsecured creditors who attempt to acquire rights in rem prior to the opening of insolvency proceedings; and whether the English court's equitable jurisdiction to enforce a charge which does not comply with the lex situs, survives the coming into force of the Regulation. Through the discussion of these topics, this article seeks to identify an approach to the interpretation of Article 5 which is consistent not only across the wide range of issues identified but also with the broad policy objectives underlying the treatment of in rem rights in the Regulation. Copyright © 2006 John Wiley & Sons, Ltd.     

Jurisdiction concerning annex actions in the context of the insolvency and Brussels Ibis regulations

The legislation of the European Union has addressed the private international law aspects of civil and commercial matters and those of insolvency cases separately. While the Brussels Ibis Regulation (and its predecessors) focuses on “classic” civil of commercial cases, insolvency proceedings are subject to the (recast) Insolvency Regulation. However, the close interference between the two related areas of law—commercial and insolvency—results in a category of cases that are commercial and contentious in nature, and so they would tend to gravitate towards the Brussels regime, but yet they are so closely connected to the insolvency proceedings that justifies a special approach. This article focuses on the question of international jurisdiction regarding these “annex actions” in the context of the EU law. It will attempt to explore the historical roots of the current provisions and the evolution of both the European legislation and the relevant case law. The examination of this progression provides a better understanding of the current legislation and answers some questions apparently left open in the recast Insolvency Regulation.     

Bridge over Troubled Water: The Revised Insolvency Regulation

The EU legislature has used the last two and a half years to negotiate a modernised framework for cross‐border insolvencies largely outside the spotlight of public debate. The revised Insolvency Regulation introduces new rules on secondary proceedings and innovative provisions on insolvency proceedings for groups of companies. Some parts of the final reform package were not originally envisaged by the European Commission, and it was the European Parliament and the Council that, in an unusual display of unity, agreed on more ambitious steps than the EU executive had proposed. However, not all that glitters is gold. The legislature missed the opportunity to clarify the concept of Centre of Main Interest, and it is still for the courts to establish international jurisdiction on the basis of rather vague criteria. It will soon be time to give life to the rules and ensure that cross‐border insolvencies are conducted more effectively than they are today. The new rules entered into force on 25 June 2015 and apply from 26 June 2017. Copyright © 2015 INSOL International and John Wiley & Sons, Ltd     

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

Regulation (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.     

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.     

The regime for circulation of judgements under the EC regulation on insolvency proceedings

The regime for recognition and enforcement of judgements under the EC Regulation 1346/00 on insolvency proceedings raises several issues due to gaps in its provisions (Chapter II). This article analyses these rules and suggests solutions to its principal shortcomings particularly focusing on the prohibition against reviewing decisions as to their merits and conflicts between judgements opening main insolvency proceedings in different member states. This analysis draws on the European Court of Justice's interpretation of the 1968 Brussels Convention in preliminary rulings, which is a valuable tool for dealing with problems concerning recognition and enforcement of judgements as the Regulation is based on a similar framework. Copyright © 2006 John Wiley & Sons, Ltd.     

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

This 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.     

The ancillary insolvency proceeding

The main legal acts on International Insolvency Law (the European Regulation, the UNCITRAL Model Act and the European Convention on Certain International Aspects of Bankruptcy) lay down several local proceedings with substantive effects as regards the debtor, the distribution of proceeds and the ranking of claims. These—full—proceedings are characterized by a high degree of unpredictability and prove to be inadequate for creditors. These are the reasons why, as an immediate solution, the existing insolvency rules should be reinterpreted according to a certain logic of the market. However, such revision would only partially and provisionally solve the inconveniences of the current model. The true and ‘unsolvable’ problem is that even though the full local proceeding is based on international assistance, it alters the substantive insolvency rules. Therefore, in future it would be necessary to create a truly ancillary proceeding. Such a proceeding would not have any substantive effect as regards the debtor, the creditors and third parties, nor would it require any kind of distribution of proceeds and ranking of claims. However, this proceeding would enable to provide procedural assistance to foreign courts and procedural protection to local creditors. Copyright © 2010 John Wiley & Sons, Ltd.     

The transaction avoidance regime in the recast European insolvency regulation: Limits and prospects

In the last decade, transaction avoidance in insolvency law has been in the limelight of the academic discussions. In particular, the scholarship has highlighted how the European Insolvency Regulation gives rise to several private international law issues. Moreover, the scholarship has explored solutions to these issues and proposed to harmonise the regime of transaction avoidance at European Union level. However, the recent legislative developments on the cross‐border insolvency law seem resistant to the proposed harmonisation. This article focuses on the transaction avoidance regime in the Recast European Insolvency Regulation. In particular, it seeks to evaluate whether the Recast has solved the issues arising within the original European Insolvency Regulation in relation to transaction avoidance. Secondly, it questions the suitability of the private international law approach to transaction avoidance in cross‐border insolvency within the European Union framework. The research suggests that the efforts required to the private international law framework to deal efficiently with transaction avoidance make the harmonisation of the regime of transaction avoidance at the European Union level a more appealing option.     

Investment Incentives: New Money, Debt Relief, and the Critical Role of Conditionality in the Debt Crisis

External debt depresses investment and lowers economic growthbelow its potential through its negative effect on liquidityand expected profitability. These effects can pull a countryinto a downward spiral in which both the debtor country andcreditors lose. This article considers the possibilities forrevising contracts between a debtor and its creditors once adebt crisis has erupted. The framework that we develop showshow various combinations of new money and cuts in debt and debtservice affect a debtor country's welfare, its debt repayments,and the earnings of its creditors. The analysis distinguishesbetween debtor countries that are willing and able to precommitcredibly to an adjustment program and those that are not. Thisdistinction provides the basis for a discussion of conditionallending by the international financial institutions to provideincentives and sanctions that make credible a debtor's promisesto invest.     

Public or private gatekeepers in non-consensual debt restructurings in emerging jurisdictions

In advanced jurisdictions, the choice of a non-consensual debt restructuring is between a public or a private gatekeeper model where either the court or the licensed insolvency professional respectively approves a restructuring plan that binds dissenting creditors. In the United States, the only gateway is found in Chapter 11 of the Bankruptcy Code 1978, which requires court approval and gives the debtor a significant say in the outcome. In contrast, in the United Kingdom, there exist four gateways, only two of which require court approval (scheme of arrangement and restructuring plan), while the remaining two (administration and company voluntary arrangement) give significant powers to the insolvency practitioner to decide on the outcome. In emerging jurisdictions such as Mainland China and India, due to path dependency and lack of institutional capacity, the court-supervised model is chosen as the only or primary gateway to legitimise non-consensual restructurings though the insolvency practitioner has an important statutory role. Using the two jurisdictions as case studies, this article argues that such a choice has several initial benefits but also leads to several problems, including delays in the restructuring, does not necessarily improve substantive outcomes and does not adequately address the shareholder–creditor and creditor–creditor agency costs. This article proposes that for debt restructuring that involves the sale of the business as a going concern, the private gatekeeper should be able to decide on the sale and the distributions following pre-bankruptcy entitlements. Recourse to the court as a public gatekeeper should only be used for reorganisation proceedings.     

What is in a Name? Group Coordination or Consolidation Plan—What is Allowed Under the EIR Recast?

The European Insolvency Regulation Recast allows for group coordination proceedings if insolvency proceedings have been opened against different companies belonging to a single group. Group coordination proceedings imply the drafting of a group coordination plan in order to define an integrated solution to the group's problems. This plan shall not include recommendations as to any consolidation of proceedings or insolvency estates. Against the backdrop of the evolving notion of ‘procedural consolidation’ and the fact the insolvency practitioners and courts concerned have to cooperate and communicate with each other, this prohibition is misplaced and should be interpreted to mean only that main or secondary proceedings opened in a member state cannot be transferred to another jurisdiction. The effective administration of insolvency proceedings of related group companies often demands an integrated solution to the group's problems, which will inevitably lead to some form of consolidation. Copyright © 2016 INSOL International and John Wiley & Sons, Ltd.     

欧洲银行业联盟架构设计及建设进展

作为应对欧债危机的重要举措,2012年6月,欧盟委员会提出建立欧洲银行业联盟的设想。文章介绍了近一年多来欧洲银行业联盟的三大支柱——单一监管机制、单一处置机制和存款保险机制的架构设计和建设推进情况。目前,银行业单一监管机制建设已基本完成,欧央行发挥维护金融稳定的主导作用;对单一处置机制重要性的认识得到提升,但一些核心问题仍有待明确;存款保险机制建设仍可能保留在各国层面。     

Chinese cross‐border insolvencies: current issues and future developments*

This article deals with several problems pertaining to cross‐border insolvency, an important but ignored area in China. In this article, the current status of Chinese bankruptcy laws has been firstly addressed, with a focus on its legal blank on cross‐border insolvency and unsatisfactory judicial practice. Thereafter, the influential Guargdong International Trust and Investment company case has been analysed, which further highlights the inadequacy of Chinese bankruptcy legislation and crying needs for its reform. Basing on the essential principles embodied in the United Nations Commission on International Trade Law Model Law and European Union Regulation, the gaps between Chinese bankruptcy laws and international practice have been made clear. Accordingly, the developments of Chinese cross‐border insolvency have been proposed in order to provide helpful references for the future legislation. Copyright © 2001 John Wiley & Sons, Ltd.     

Harmonising European Insolvency Law: The Emerging Role of Stakeholders

In recent years, the European Commission has given increased room for stakeholder involvement in the area of insolvency and restructuring. In revising the European Insolvency Regulation in 2012–2015 and preparing the proposal for a directive on preventive restructuring frameworks 2016, the role and direct influence of stakeholders has been noteworthy. In these efforts, the Commission touched upon a field of law characterised by diverse stakeholders with strongly opposing interests. Following the active involvement of all stakeholders by the Commission, this study examines what relevant stakeholders are, what their positions are with respect to European Union insolvency legislation and what their role has been and can be in legislative processes in the area of insolvency and restructuring. Copyright © 2018 INSOL International and John Wiley & Sons, Ltd.     

The legal responses of Canada and Poland to international bankruptcy and insolvency with a focus on cross‐border insolvency law

This article discusses and compares the respective legal responses of Canada and Poland to international bankruptcy and insolvency with a focus on cross‐border insolvency law. Specifically, the issues addressed herein concern jurisdiction, recognition of foreign bankruptcy proceedings, and co‐operation with foreign courts and foreign administrators. Notwithstanding some real differences between Canadian and Polish international insolvency proceedings, both legal regimes may be compared, since both countries have adopted many of the principles contained in the UNICTRAL Model Law on Cross‐Border Insolvency. The major impetus behind the changes established by Canada in its bankruptcy and insolvency laws have been the economic realities produced by the North American Free Trade Agreement. Likewise, Poland's accession to the European Union (EU) has been a major catalyst for revising the Polish Insolvency and Restructuring Act. Part II of the said act is entirely devoted to international insolvencies. However, following Poland's adherence to the EU, those sections of the Polish Insolvency and Restructuring Act that deal with international or cross‐border insolvencies will be severely limited or constrained in scope. The article indicates that Poland, the EU and Canada are taking the necessary steps to meet the needs of debtors who would like to restructure in an international setting. Copyright © 2006 John Wiley & Sons, Ltd.     

‘Bankruptcy tourism’ under the EC regulation on insolvency proceedings: A view from England and Wales

This article provides an account of the emergent phenomenon of ‘bankruptcy tourism’—forum shopping by debtors for favourable personal insolvency law—within the EU and with particular reference to England and Wales. After outlining the structural features of the European legal framework that make forum shopping for personal insolvency law possible, including the EC Regulation on Insolvency Proceedings and explaining why England and Wales in particular has proved to be an attractive ‘tourist’ destination, the article charts how the official receivers and the courts in England and Wales have sought to manage the influx of foreign bankruptcies in terms of legal principle and process drawing on two reported cases, Eichler and Mitterfellner. It will be seen that the institutional response in England and Wales has been twofold. First, the ‘problem’ of forum shopping debtors has been framed as a problem of policing the line between genuine and fictional relocations. Secondly, there are signs that the procedural onus on debtors to evidence their claim to English jurisdiction before a bankruptcy order is made has been increased, a move that can be interpreted as a form of institutional resistance designed to raise the barrier to entry. Having sought to illuminate the problems, costs and inconvenience associated with forum shopping from a practitioner standpoint, we explore the ‘good’ versus ‘bad’ forum shopping question and consider the scope for reform of the EC Regulation. Adopting a creditor perspective, we conclude provisionally that the Regulation could usefully be reformed to limit the scope for insolvent debtors to switch their COMI in anticipation of filing for bankruptcy. Copyright © 2010 John Wiley & Sons, Ltd.