the reform of the european insolvency regulation
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The Reform of the European Insolvency Regulation. EIR Reform Project. History: Treaty of Rome 1957 Brussels Regulation 1968 Art. 1 Exception 1970 Draft ( ↑ substantive and procedural) 1980 Draft ( ↓substantive and procedural) CoE Istanbul Convention 1990 (procedural)

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eir reform project
EIR Reform Project


  • Treaty of Rome 1957
  • Brussels Regulation 1968 Art. 1 Exception
  • 1970 Draft (↑substantive and procedural)
  • 1980 Draft (↓substantive and procedural)
  • CoE Istanbul Convention 1990 (procedural)
  • European Insolvency Convention 1995 (proc.)
  • European Insolvency Regulation 2000 (proc.)
  • Amendments in 2004/06/13 (Acc), 2005 etc. (Am)
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EIR Reform Project


  • Preamble
  • Scope/Application/Definitions
  • Jurisdiction
  • Choice of Law/Exceptions
  • Recognition Rules/Powers of Liquidator
  • Conduct of Secondary Proceedings
  • Creditors’ Information and Claims
  • Transitional Provisions
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EIR Reform Project


  • Linked to Four Freedoms/Single Market issues
  • Justification for legislation by EU
  • Conflicts Problems acknowledged (‘widely differing substantive laws’)
  • Modified Universalism Theory (main/secondary)
  • Co-ordination Principle paramount
  • Benefit for Creditors stressed
  • Status of Preamble? Content Issues?
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EIR Reform Project

Scope/Application (Article 1):

  • Four Conditions:
  • Collective (no individual action)
  • Insolvent debtor (no pre-insolvency? CVA?)
  • Partial/Total Divestment (DIP?)
  • Liquidator appointed (DIP?)
  • Application to all Debtors (Natural/Legal) except:
  • Insurance Bodies (Directive 2001/17/EC)
  • Credit Institutions (Directive 2001/24/EC)
  • Investment Bodies (Trust/Pension Funds)
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EIR Reform Project

Scope/Application (Article 1) (cont.):

  • Territorial Application:
  • 27+1 (Denmark opt-out in Maastricht Treaty)
  • European-based Debtors
  • International Corporate Groups (with a base in Europe) (Re:BRAC, Daisytek, Enron)
  • Application in Time (Arts. 43, 47):
  • 31 May 2002 (14)/1 May 2004 (10)
  • 1 Jan 2007 (2)
  • Relationship with other Instruments (Art. 45)
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EIR Reform Project

Definitions (Article 2):

  • Insolvency Proceedings (rescue + liquidation) in Annex A
  • Winding Up Proceedings (liquidation) in Annex B
  • Liquidator in Annex C
  • Court/Judgment (wide reading)
  • Time of Opening of Proceedings (effectiveness)
  • Member state in which assets are situated
  • Establishment (q.v. Brussels Convention 1968)
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EIR Reform Project

Jurisdiction (Article 3):

  • Main Proceedings – ‘centre of main interests’ – full effect – rescue and liquidation possible
  • Secondary Proceedings – ‘establishment’ – restricted (territorial) effect – liquidation only
  • Main usually opened before Secondary
  • Secondary can be opened before Main if
  • (i) impediment to Main exists
  • (ii) creditor’s request/claim related to ‘establishment’
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EIR Reform Project

Jurisdiction (Article 3) (cont.):

  • What’s Missing?
  • What does COMI mean? No independent definition in Article 2, so resort to domestic rules and possibility of double-jurisdiction and conflict (Eurofoods)
  • Virgos-Schmit Report (persuasive interpretation)
  • Relationship to establishment definition?
  • Shifting COMI? (forum shopping)
  • Corporate Groups? (Eurofoods/Daisytek)
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EIR Reform Project

Choice of Law (Article 4):

  • Lex concursus (for both Main and Secondary Proceedings) applicable to:
  • Debtor’s capacity
  • Asset treatment generally
  • Debtor-liquidator powers
  • Effect on availability of set-off, current contracts, creditors’ execution/enforcement, treatment of claims, proof of debts
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EIR Reform Project

Choice of Law (Article 4) (cont.):

  • Also applicable to:
  • Priorities and distributions
  • Closure and post-closure effects
  • Costs and expenses
  • Transaction avoidance (acts detrimental to creditors)
  • Widest scope of application to procedural and substantive matters, subject to exceptions.
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EIR Reform Project

Choice of Law Exceptions (‘carve-outs’):

  • Article 5: rights in rem (security)
  • Article 6: set-off (quasi-security)
  • Article 7: reservation of title (quasi-security)
  • Article 8: immoveables
  • Article 9: financial market contracts
  • Article 10: employment contracts
  • Article 11: registrable rights (land/aircraft/ships)
  • Article 12: community patents
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EIR Reform Project

Choice of Law Exceptions (‘carve-outs’) (cont.):

  • Article 13: protection of otherwise detrimental acts
  • Article 14: protection of third party purchasers of Article 11-type assets
  • Article 15: lispendens
  • Carve-outs may require main/secondary jurisdictions to determine foreign law if no proceedings can take place in the carve-out jurisdiction (i.e. no establishment), but will they be enforced?
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EIR Reform Project

Recognition Principles:

  • Article 16: principle of recognition (comity/full faith and credit/Brussels Convention 1968)
  • Article 16 does not prevent opening of secondary proceedings
  • Article 17: full effect given to main proceedings elsewhere and to effect of secondary proceedings limited to territorial assets
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EIR Reform Project

Recognition Principles (cont.):

  • Article 18: full powers for main liquidator, limited extra- territorial powers for secondary liquidator (no coercive powers can be used);
  • liquidator must comply with domestic law for realisation of assets
  • Article 38: temporary liquidator may ask for interim/preservation measures elsewhere
  • Article 19: no formality for recognition of liquidator other than proof of appointment
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EIR Reform Project

Recognition Principles (cont.):

  • Article 21: general publicity for proceedings and appointments
  • Article 22: publicity through registration for particular assets
  • Article 23: costs imputable to proceedings
  • Article 24: pre-publication transactions with debtor protected; constructive notice rule
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EIR Reform Project

Recognition Principles (cont.):

  • Article 25: recognition of further judgments and orders following Article 16 recognition (exception for postal secrecy and personal freedom)
  • Article 26: public policy avoiding recognition altogether (paripassu rule and the problem of priority: Re: MG Rover España SA; Re: HIH Casualty and General Insurance Limited)
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EIR Reform Project

Recognition Principles (cont.):

  • Effect on creditors:
  • Article 20(1): creditors must return seized assets to liquidator, subject to security exception (Articles 5 and 7)
  • Article 20(2): creditors can not claim in distributions unless acknowledging distributions from other proceedings
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EIR Reform Project

Conduct of Secondary Proceedings:

  • Article 27: where main proceedings exist, secondary proceedings can be opened without ‘insolvent’ requirement
  • Article 28: applicable law is that of secondary jurisdiction (see Article 4 for list)
  • Article 29: main liquidator and any party permitted in secondary jurisdiction may apply for opening
  • Article 30: security for costs may be required
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EIR Reform Project

Conduct of Secondary Proceedings (cont.):

  • Article 31: liquidators’ duty to co-operate and communicate (CoCo Guidelines; JudgeCo Project; ALI- III Project)
  • Article 32: liquidators will lodge known claims in other proceedings/participate on same footing as creditor
  • Article 33: stays in secondary proceedings at request of main liquidator (subject to it being in the interest of creditors)
  • Article 34: main liquidator may propose end to secondary proceedings
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EIR Reform Project

Conduct of Secondary Proceedings (cont.):

  • Effect on creditors:
  • Article 32: right to prove debts/claims in all proceedings
  • Note also Article 20(2): creditors can not claim in distributions unless acknowledging distributions from other proceedings
  • Article 35: surplus from secondary proceedings may be transferred to main proceedings (subject to Article 26?)
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EIR Reform Project

Conduct of Secondary Proceedings (cont.):

  • Where secondary opened before main:
  • Article 36: once main proceedings opened, secondary proceedings to comply with rules in Articles 31-35
  • Article 37: secondary proceedings may be converted from rescue to liquidation
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EIR Reform Project


  • Article 39: right to prove debts/claims in all proceedings (see also Article 32 for secondary proceedings)
  • Article 40: duty to inform known creditors
  • Article 41: content of proof of debt
  • Article 42: notice to creditors in language of proceedings/headnote in all official EU languages;
  • creditors’ proof in any language of state of residence
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EIR Reform Project

Reform Perspectives:

  • Review by 1 June 2012 and 5-yearly intervals thereafter (Art. 46)
  • Pressure for early review (since in force!) to change:
  • COMI Definition seen as urgent (ECJ in Eurofoods)
  • Race to the Court (pending petitions)
  • Forum-shopping to be discouraged
  • The Problematic of Corporate Groups
  • Secondary proceedings = liquidation?
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EIR Reform Project

Reform Perspectives (cont.):

  • Central Insolvency Register
  • Communications Guidelines/Int’l Best Practices to flesh out Art. 31
  • Commentaries/Articles/Books
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EIR Reform Project
  • 2012-2014 Cursus
  • Assessment: Vienna-Heidelberg Report
  • Commission Draft 12.12.12
  • Main Themes:

Scope/Jurisdiction/Art 25

COMI-Shifts/Synthetic Secondaries

Group Insolvencies and Coordination

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EIR Reform Project
  • EP Responses
  • Group of Experts
  • National Responses
  • Questions:


Scope/Jurisdiction/Annexe A

General Coordination/Cooperation

Group Dynamic/UNCITRAL WG V Work

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EIR Reform Project
  • Reform Process (cont.):
  • More EP Amendments
  • Final Council Text
  • Enactment 2015? In force 2016/7?
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EIR Reform Project

The Future?

  • A Wider European Legal Order:
  • Unifying texts in insolvency jurisdiction
  • Fitting into corporate migration issues (Centros/Uberseering/Inspire-Art)
  • Time to think about substantive change?
  • Convergence process/Regulatory arbitrage
  • Fresh Start/Wrongful Trading initiatives
  • What substantive/procedural rules? INSOL Europe Rep
  • Commission Recommendation of 2014