The EU insolvency law has resulted in insolvent debtors shopping for a better jurisdiction in which to become bankrupt. This article examines why and how.
Why?
The EC Regulation on Insolvency Proceedings 2000 (the ECIR), came into effect in May 2002, providing a framework for the national jurisdictions to work together by recognition of each states insolvency mechanisms. However the EC Regulation does not harmonise substantive differences in insolvency law between the subscribing nations.
On 30 March 2012, the European Commission published a consultation on the future of European insolvency law.
The cornerstone of European insolvency law is Regulation (EC) No 1346/2000, known as the Insolvency Regulation. The Insolvency Regulation has been in force since 31 May 2002 and applies whenever a debtor has assets or creditors in more than one member state. It sets out provisions in relation to jurisdiction, recognition, applicable law and the coordination of insolvency proceedings opened in several member states.
Europe has struggled mightily during the last several years to triage a long series of critical blows to the economies of the 27 countries that comprise the European Union as well as the collective viability of eurozone economies. Here we provide a snapshot of some recent developments relating to insolvency and restructuring in the EU.
The global crisis and the rights of foreign creditors of Sovereign States
The global financial crisis has been well documented in the press, with one recent headline in The Times reading “Like Iceland, Ireland can refuse to pay up”. Claims that States face bankruptcy not unnaturally raise the alarm bells for the financial markets. Can States be sued if they default in payment? RPC recently enforced a claim against assets of an EU State, as discussed below...
Bankrupt States: A misnomer
Facts
Extension for intermingling of assets
Issues
On April 13 2010 the Court of Cassation rendered a noteworthy decision sending two interlocutory questions to the European Court of Justice (ECJ). In anticipation of the ECJ's decision, this update examines the issues raised before the Court of Cassation.
Introduction
The eurozone crisis and the fallout taking place in Greece are keeping Europe on edge. An increasing number of analysts anticipate a new recession. Perhaps you, too, are wondering how the situation will affect your business, especially your international contracts. Below is a short outline of potential issues that we think are relevant. We have approached these issues from the perspective of doing business, or planning to do business, with foreign parties that run a higher than average risk of being "hit" by the current economic situation.
Potential issues
On Friday 21 October 2011, the Bankruptcy Court in the Southern District of New York handed down an important decision, confirming that foreign (groups of) companies can use Chapter 11 without any significant threshold as to their nexus with the United States. This may be good news for corporates that seek to use Chapter 11 for restructuring their business or capital structure.
It is now clear that even very limited property in the U.S. is sufficient to qualify for a reorganisation through Chapter 11.
Restructuring companies in respect of which there exists a significant credit default swaps (CDS) market adds an additional level of complexity which the debtor and all stakeholders should consider and assess early on in the process, as it could determine the success or failure of a restructuring plan.
Introduction
On November 1 2007 the State Commission for Insolvency presented the Preliminary Bill for an Insolvency Act to the minister of justice. The bill contains rules for the recognition of insolvency proceedings in non-EU countries and the law applicable to foreign proceedings. This update examines those rules and their relationship to the EU Insolvency Regulation and the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency.
Case Law