Europe has been a hot bed of legislative reform in the R&I space since the GFC. This panel discussed where some of the key jurisdictions had ended up in this process, in some cases, making significant changes to allow greater flexibility of treatment and efficiencies of process. Led by Philip Hertz (Clifford Chance), Lucas Kortmann (RESOR), Angel Martin (KPMG) and Dr Leo Plank (Kirkland & Ellis) discussed processes available in the UK, the Netherlands, Spain and Germany and some impending changes.
The general picture conveyed was that huge strides have been made but, in many cases, much remains to be done. The Netherlands is to introduce a new Scheme-like procedure which will additionally incorporate features such as vertical as well as horizontal cramdown, and a light touch from the courts, which is therefore likely to be relatively cheap. Significant progress has been made in Spain and there are successful examples of restructurings using new procedures there. Whilst Germany made changes in 2012, they may not be sufficiently flexible requiring all debt, not only say financial debt, to be restructured and only available to insolvent companies. Hence, the line of significant German restructurings that have been effected through UK Schemes.
The new European Directive may change things requiring the introduction of pre-insolvency procedures across the EU. However, it requires local implementation and therefore there is room for speculation as to whether it will create the pan-European level playing field of flexible, efficient processes that the EU Commission intends so as to get rid of the still considerable debt overhang in the Region and conserve businesses and jobs, among other things.
Would Brexit detract from the appeal of UK Schemes? In particular, would UK Schemes continue to be legally recognised in the EU. The view expressed was that Brexit shouldn’t detract as reliance could continue to be placed on the Rome Convention, albeit that the Judgements Regulation would cease to apply in the UK.
Certain things will stay the same, including investors’ and debtors’ desire for predictability of outcome and timing and, therefore, judicial decision-making along the way. So, we can look forward to a world of more choices, one where the debate around what process to use may well become more rather than less complex and require more input with regard to more jurisdictions.