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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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The reform of the european insolvency regulation

The Reform of the European Insolvency Regulation

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