On 30 March 2012, the European Commission published a consultation on the future of European insolvency law.
The cornerstone of European insolvency law is Regulation (EC) No 1346/2000, known as the Insolvency Regulation. The Insolvency Regulation has been in force since 31 May 2002 and applies whenever a debtor has assets or creditors in more than one member state. It sets out provisions in relation to jurisdiction, recognition, applicable law and the coordination of insolvency proceedings opened in several member states.
However, in the 10 years since the Insolvency Regulation came into operation, there have been significant changes both in terms of the national law on bankruptcy and insolvency with the introduction of numerous pre-insolvency and other statutory schemes, and in terms of the business environment with the financial crisis and the increased globalisation of businesses. In addition, certain shortcomings in the operation of the Insolvency Regulation have been highlighted in various quarters. In October 2011, the European Parliament published a report recommending the revision of the Insolvency Regulation, in particular to address the harmonisation of specific aspects of insolvency law and company law, to create an EU register for insolvency cases, and to improve the coordination of insolvency proceedings involving a group of companies.
As a result, the Commission has decided to consider revising the Insolvency Regulation and has opened a consultation to seek the views of the public on the issues involved.
Among the questions the consultation raises are the following:
- Should the Insolvency Regulation be extended to cover what the Commission describes as "national procedures which provide for the restructuring of a company at a pre-insolvency stage ("pre-insolvency proceedings") or leave the existing management in place ("hybrid proceedings")", because, when the Insolvency Regulation does not apply, companies do not benefit from the automatic recognition of the effects of the procedure throughout the EU?
- Has it created problems that the Insolvency Regulation does not contain any provisions on the recognition of, or coordination with, insolvency proceedings commenced outside the EU where there are assets located or litigation pending in the EU, or insolvency proceedings commenced in parallel inside and outside the EU?
- Is it correct that the Insolvency Regulation provides that only the courts of the member state in which the debtor has the centre of its main interests have jurisdiction to open main insolvency proceedings, or has this concept been open to abuse by debtors or the interpretation of this concept by the courts been problematic?
- Are there problems with the interaction of the Insolvency Regulation with the Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the Brussels I Regulation)? Should the Insolvency Regulation set out specific rules to address the insolvency of a multi-national group of companies or does the current system, where each individual member of the group is treated as an independent entity for which main proceedings can be opened, work efficiently and effectively?
- Does the system of main insolvency proceedings, which have EU-wide effect and aim at encompassing all of the debtor's assets, and secondary proceedings, which run in parallel with the main proceedings in order to protect the interests of local creditors or to facilitate the administration of complex cases, work effectively and, in particular, has it created any problems that the Insolvency Regulation does not contain a duty of cooperation between insolvency practitioners and the foreign court or between the relevant courts themselves?
- Are the Insolvency Regulation's provisions on applicable law and recognition and enforcement of decisions satisfactory? Should the Insolvency Regulation contain provisions requiring the mandatory publication in an insolvency register of the decision opening insolvency proceedings?
- Are there difficulties created by the lack of harmonisation of the various national laws on insolvency, and are there any particular inefficiencies in the various national laws?
- Are the costs of cross-border insolvency proceedings, or of cross-border restructuring or reorganisation, disproportionate with the debt and should there be a simplified and more cost-effective regime for debtors such as small businesses or self-employed individuals?
The deadline for responses to the consultation is 21 June 2012.
For a link to the consultation, please click here.