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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

European Insolvency Regulation 1346/2000

Dr Loukas Mistelis

Clive M Schmitthoff Senior Lecturer in International Commercial Law

issues covered
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
if the gods wish to punish us they usually begin by answering our prayers

“if the Gods wish to punish us, they usually begin by answering our prayers”

Ancient Greek proverb

historical background
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
few examples
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)
uncitral model law
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
model law continued
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.
background of regulation
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
eu private international insolvency law framework
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)
continued
… 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
application scope i
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 …
application scope ii
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
application scope iii
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.
application scope iv
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)
application scope v
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
objectives of regulation
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
slide17
  • 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
fundamental principles i
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
fundamental principles ii
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
non main proceedings
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
slide21
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
establishment
“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
applicable law lex forum concursus articles 4 and 28
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
exceptions articles 5 15
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) …
recognition
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
liquidator
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
coordination
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
coordination1
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
issues for legislators of ms
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
eu information
EU information
  • http://europa.eu.int/comm/justice_home/fsj/civil/insolvency/fsj_civil_1346_en.htm