The Insolvency Regulation aims to establish procedural rules on jurisdiction and applicable law in relation to insolvency proceedings, and to aid the mutual recognition of cross-border insolvency proceedings in EU Member States. It is intended to deter parties from forum shopping within the EU in relation to insolvency proceedings. However it does not seek to harmonize substantive insolvency law.
The Insolvency Regulation has direct effect in all Member States other than Denmark, so if the UK left the EU, then it would no longer automatically apply to the UK. The treatment of UK insolvency proceedings in the courts of the remaining Member States (and the treatment of EU insolvency proceedings in the UK courts) would depend on the approach taken. The UK could seek to adopt a similar regime to the current Insolvency Regulation but it would need to come to agreement with the EU (and potentially amend this agreement each time the Insolvency Regulation is amended).
The newly introduced regime for cross-border insolvency of banks (EU Bank Recovery and Resolution Directive (BRRD)) would also be affected.
Alternatively, there are other mechanisms in English law which are intended to assist cross-border insolvency proceedings outside the EU: the UNCITRAL Model Law on Cross-Border Insolvency has been adopted in national law in the UK as well as in other jurisdictions such as Australia, the US, and some EU Member States. The English courts have recognised the importance of international co-operation in cross‑border insolvencies, while noting that full universalism can be obtained only by international treaty. This indicates that a broader approach to international cross-border insolvencies could be taken, which could be expanded to include the remaining EU Member States. The key point would therefore be timing, and what interim solutions would be available. Without having workable solutions in place by the time of an exit, cross-border restructurings involving the UK will become significantly more difficult and the UK would be a significantly less attractive jurisdiction in which to restructure.