Recent Developments

Europe—On 12 September 2012, the European Commission issued a proposal for an EU regulation which would confer upon the European Central Bank ("ECB") supervisory responsibility for all banks operating in the Eurozone. The controversial proposal will transfer to the ECB a broad range of supervisory powers currently performed by national regulators, including far-reaching supervisory powers over Eurozone banks. This has caused concern among non-Eurozone member states that "back-door" supervisory powers will be exercised by the ECB in relation to non-Eurozone banks—particularly with respect to operations such banks conduct within the Eurozone. For investors, the proposals will likely change the dynamic of opportunities to acquire or sell bank assets in the Eurozone. The ECB's supervisory board responsible for exercising the oversight mandate will comprise representatives from EU member states and will be monitored by the Chair of the European Banking Authority and a member of the European Commission. Accordingly, bank mergers and acquisitions activity will be subject to scrutiny by a broader group of stakeholders than the relevant member state regulator. The target date for implementation of the new supervisory regime is 1 January 2013 (in line with the target date for implementation of the Basel III proposals in the EU). However, in recognition of the time it will take to prepare for the supervision of banks across 17 nations, it is currently anticipated that the ECB will not assume in full the tasks conferred upon it until 1 January 2014.

The UK—In a pair of recent cases involving challenges to noteholder resolutions by minority investors whose rights were affected by majority noteholders' binding decisions, the UK High Court for the first time attempted to establish the limits of acceptable practice in the context of consent solicitations. In Azevedo v Imcopa [2012] EWHC 1849 (Comm), the High Court as a matter of first impression directly considered the validity under English law of a "consent payment"—a payment of cash or other consideration by the issuer to noteholders in exchange for noteholder consent to amend the existing terms of the notes. The Court held that consent payments are valid if openly disclosed and offered to all noteholders on an equal basis prior to any noteholder meeting. In Assénagon Asset Management S.A. v Irish Bank Resolution Corporation Limited (formerly Anglo Irish Bank Corporation Limited) [2012] EWHC 2090 (Ch), the High Court ruled that an "exit consent"—a deemed acceptance of a resolution issued in connection with an exchange offer—that was approved by an extraordinary resolution of noteholders was oppressive and unfair to minority noteholders because, among other things, it was unlawful for the majority to vote in favour of a resolution which effectively expropriated the minority's rights for nominal consideration. A more detailed discussion of the rulings can be found at http://www.jonesday.com/two_recent_cases/.

Italy—On 3 August 2012, the Italian Parliament approved Italian law decree No. 83 of 22 June 2012 (the "Decree") on a final basis. The decree introduces significant amendments to the Italian Insolvency Act designed to reform the bankruptcy system by increasing its efficiency and facilitating the reorganization of distressed debtors. The general framework and key principles originally contained in the Decree remain unchanged, but in giving final approval to the amendments, Italian legislators have refined certain procedural elements and clarified other key aspects of the reforms. These changes include amendments to the automatic stay procedures in cases where an insolvency petition is filed solely to forestall a debtor's insolvency, new rules and procedures to govern voting on a plan of reorganization and new rules designed to encourage interim financing. Additional information concerning the reforms can be found in the 20 July 2012 edition of EuroResource.

Germany—On 12 September 2012, Germany's Federal Constitutional Court ruled that Germany could proceed with its contribution to the European Stability Mechanism ("ESM"), subject to certain conditions. The court rejected several applications for interim injunctions blocking Germany's President from signing laws approving the Treaty Establishing the European Stability Mechanism (the "ESM Treaty") and the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (the "Fiscal Compact"). By signing both laws—which were passed by the German Bundestag and the Bundesrat in June 2012—President Gauck fulfilled a precondition for the German ratification of the ESM Treaty and the Fiscal Compact. Although the court denied the applications for provisional relief, it held that the ESM Treaty may be ratified only if the court is provided with assurance under international law that: (i) Germany's liability is limited to its share of approximately €190 billion in the authorized capital stock of the ESM, and that the ESM Treaty will not be construed to establish greater German payment obligations without the consent of the German parliament; and (ii) the provisions of the Treaty concerning the inviolability of the documents of the ESM and the professional secrecy of all persons working for the ESM do not prevent disclosure of such information to the Bundestag and the Bundesrat. The ruling clears the way for the establishment of the ESM.