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European Insolvency Regulation 1346/2000

European Insolvency Regulation 1346/2000. Dr Loukas Mistelis Clive M Schmitthoff Senior Lecturer in International Commercial Law. Issues covered. Historical background Legal background and context Scope, and salient features of Regulation 1346/2000 Outstanding issues and the future

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European Insolvency Regulation 1346/2000

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  1. European Insolvency Regulation 1346/2000 Dr Loukas Mistelis Clive M Schmitthoff Senior Lecturer in International Commercial Law

  2. Issues covered • Historical background • Legal background and context • Scope, and salient features of Regulation 1346/2000 • Outstanding issues and the future • If time allows, a case study

  3. “if the Gods wish to punish us, they usually begin by answering our prayers” Ancient Greek proverb

  4. Historical background • Major legislative activity in the last decade: new laws in Germany, Japan, Australia, Canada, and Mexico, and EC • Reform beyond domestic laws to international co-operation and co-ordination • Abandon the legislative and nationalist attitude of the 1970s and 1980s

  5. Few Examples • UNCITRAL Model Law on Cross-Border Insolvency with Guide 1997 • EC Regulation on Insolvency Proceedings (2000) • ALI Principles of Cooperation in Transnational Insolvency Cases Among the Members of NAFTA (2002)

  6. UNCITRAL Model Law • Text at http://www.uncitral.org/english/texts/insolven/insolvency.htm • To date several countries have adopted / enacted the Model Law including • US, Canada, Australia, New Zealand, South Africa • Overlap with the EC Regulation

  7. Model Law continued • Primarily intended to prevent local realisation of assets in situations where there are insolvency proceedings within a specific country, and • The company forming the subject matter of those proceedings has assets throughout the world.

  8. Background of Regulation • 1970-1982: a draft convention doomed from the start • 1990s: revival of the project: new, more modest proposal, originally suggested as a treaty • Regulation adopted in May 2000, came into force on 31 May 2002

  9. EU Private International Insolvency Law Framework • 1968 Brussels Convention / Regulation 44/2001 • Regulation 1346/2000 • Insurance undertakings Directive 2001/17 (entry into force on 20 April 2003); credit institutions Directive 2001 (entry into force on 5 May 2004)

  10. … continued • Netting and securities settlement systems Directive 1998/26 (1 January 1999) • Financial collateral arrangements – implementation date 31 December 2004 • Late payments in commercial transactions Directive 2000/35 – implementation date 8 August 2002

  11. Application / Scope I • All EU member states but DK • Applies to intra-EU effects of insolvency proceedings. It does not regulate the position as between member states and non-member states • Applies to several UK insolvency procedures: • Compulsory winding up, company voluntary liquidations, administrations, partnerhip winding up bankruptcy, individual voluntary agreements …

  12. Application / Scope II • Insolvency proceedings opened after 31 May 2002 • Replaced 10 bilateral or multilateral conventions between Member States • Replaces Council of Europe Convention of Istanbul 1990 • Reservation by Portugal re Articles 26, 37

  13. Application / Scope III • Applies to proceedings • Which are collective • Which are based on the debtor’s insolvency and not on other grounds • Which entail total or partial divestment of the debtor ad • Where a liquidator has been appointed.

  14. Application / Scope IV • Limited framework • Proceedings and liquidator should be mentioned in one of the applicable lists in the annexes • Insolvency proceedings – Article 2(a) • Winding up proceedings – Article 2(c) • Liquidator – Article 2(b)

  15. Application / Scope V • The Regulation applies • To all listed (52) insolvency proceedings • In which a person/body acting as liquidator (58) is appointed • In 14 EU countries, whether the debtor is a natural or a legal person • But not to insolvency proceedings concerning financial institutions

  16. Objectives of Regulation • Coordination of measures to be taken re insolvent debtor’s assets – proper functioning of internal market: • Determine international jurisdiction of the courts or authorities with regard to intra-EU effects of insolvency proceedings • Create uniform conflict of laws rules for such proceedings • Ensure recognition and enforcement of judgements given in such matters

  17. … • Make provisions for the possibility of opening secondary insolvency proceedings • Ensure mutual coordination and communication between liquidators in main and secondary proceedings • Guarantee information for creditors and a right to lodge claims

  18. Fundamental Principles I • Main insolvency proceedings can only be commenced in the Member State where the debtor’s Centre of Main Interest (COMI) is located – Article 3.1. • COMI presumption – place of registered office • Main insolvency proceedings, once commenced, are to be automatically recognised across all Member States

  19. Fundamental Principles II • The law of the Member State where main insolvency proceedings are commenced will govern the proceedings – Articles 4 and 28 • The office holder may exercise all powers that he has under the law of the Member State where main proceedings have been commenced, in any other Member State • Insolvency Proceedings may also be commenced in a Member State where a debtor has an “establishment” for assets there

  20. Non-main proceedings • Secondary proceedings, if commencement in a Member State after main proceedings have been initiated – Articles 3.2 and 27 • protect usually local creditors, assist and support main proceedings and may be requested by main liquidators • Territorial proceedings, if no main proceedings have been commenced – Article 3.4

  21. COMI • Must be established for proceedings to start in a Member State • The Member State where the debtor conducts the administration of his interests on a regular basis • In the case of a company/legal person the registered office is presumed to the COMI • Interest is widely defined, and extends to general economic activities

  22. “Establishment” • It must be established for secondary or territorial proceedings • Any place of operations where the debtor carries out a non-transitory economic activity within human means and goods • A place of operations within a particular Member State – mere presence of assets is in itself insufficient

  23. Applicable Law –Lex Forum Concursus– Articles 4 and 28 • The law of the Member State where proceedings commenced • It governs all the effects of the insolvency proceedings both procedural and substantive • Article 4.2 (a) – (m) • Exceptions – Articles 5 - 15

  24. Exceptions – Articles 5 -15 • Third parties’ rights in rem – Article 5 • Set off – Article 6 • Reservation of title – Article 7 • In some aspects another applicable law is mentioned • Article 8 (immovable property); 9 (financial markets settlement systems); 10 (employment contracts); 11 (ship/aircraft); 14 (third party purchasers) …

  25. Recognition • Immediate recognition of judgments concerning opening, conduct and closure of insolvency proceedings, unless secondary proceedings in other Member State are opened – Art. 16 • Automatic recognition also for other judgments – 44/2002 – Art. 25 • Meaning of automatic recognition • Principle of universality • Defence – public policy – Art. 26

  26. Liquidator • Power • Art. 2(b) / Annex C, Art. 18.1 • Restrictions • Proceedings in another Member State • Obligation to comply with law • Appointment • Art 19 • Effects of publication – Art. 24

  27. Coordination • Art. 20 – return what he has obtained • Art. 21 – request publication • Art. 22 – request registration • Art. 29 – request secondary proceedings • Art. 32 – participate in secondary proceedings • Art. 33/34 – request stay of proceedings • Art. 33 – request termination of stay • Art. 34 – propose a rescue plan

  28. Coordination • Art. 34.2 – dis-content with finalising liquidation in secondary proceedings • Art. 35 – claim the remaining assets • Art. 37 – request that the proceedings will be converted in winding up proceedings

  29. Issues for Legislators of MS • Procedural • Main or secondary? • International jurisdiction? Ex officio? • Registrations • National bankruptcy register • Of which court? • Publications and third party rights • National trade register • In which sources? • Facilitate coordination of main and secondary proceedings

  30. EU information • http://europa.eu.int/comm/justice_home/fsj/civil/insolvency/fsj_civil_1346_en.htm

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