On 6 January 2011, the European Commission (the “Commission”) published a consultation paper on the technical details of a possible EU framework for bank recovery and resolution (the “Consultation Paper”).1 The paper follows the communication from the Commission dated 20 October 2010 on an EU framework for crisis management in the financial sector (the “Communication”).2

On 22 February the European Council published guidelines for the rescue and restructuring of financial institutions. The objective of the initiative is to maintain a level playing field between member states granting state aid measures for the rescue and/or restructuring of a financial institution in difficulty.

Does the German restructuring clause of Sec. 8c para. 1a CTA (see our Client Alert of 10 July 2009) conform to European Community law? This will be analyzed by the European Commission which has — by circular of 24 February — announced the initiation of a formal examination procedure (Art. 108 para. 2 TFEU, former Art. 88 para. 2 of the EC Treaty). Already before completion of the formal procedure, corporations with unrestricted and restricted tax liability in Germany may face farreaching consequences.

A. The Restructuring Clause of Sec. 8c para. 1a CTA

On 28 June 2010 a motion was passed by the European Parliamentary Committee on Economic and Monetary Affairs requesting that the European Parliament pass a resolution enabling the European Commission to prepare draft legislation on cross-border crisis management in the financial sector. The proposed framework would encompass amongst other things:  

Today, the European Commission announced its approval, under EU State Aid rules, of the restructuring of Latvian bank, Parex, which was partially nationalized in November 2008.

Yesterday, the European Commission announced that it was termporarily approving, under E.U.

The European Commission has published a paper on its study covering pre-insolvency, early intervention, reorganisation and liquidation.

The European Commission has published a report by external consultants (Oxera), Should aid be granted to firms in difficulty, a study on counterfactual scenarios to restructuring state aid? It is intended to inform the Commission of the consequences for intended recipients and their relevant industries if aid is not given, including whether the aid will, in fact, save jobs and economic activity.

A report has been published on whether the harmonisation of the insolvency laws of EU Member States is necessary or worthwhile. The European Parliament commissioned the report, and it was produced and published by INSOL Europe, the professional association for European restructuring and insolvency specialists.

The report considers:

Yesterday, Dexia S.A., a European bank that was rescued by the French and Belgian governments in September 2008, announced that it would no longer rely on state guarantees for future funding. All debt instruments issued prior to June 30, 2010 will remain guaranteed by the government pursuant to their terms.