INSOL International Global Insolvency Practice Course Module A Royal Suite Grange St. Pauls Hotel Monday 7th November Wednesday 9th November 2016 Day Two Welcome G. Ray Warner, Course Leader
St. John's University School of Law Of Counsel, Greenberg Traurig LLP, USA European Union Regulation on Insolvency Proceedings Cross-border Communication and Cooperation Bob Wessels Emeritus Professor of International Insolvency Law, University of Leiden, Leiden Law School, The Netherlands
Coordination main and secondary proceeding(s) Recital 20 (20) Main insolvency proceedings and secondary proceedings can, however, contribute to the effective realisation of the total assets only if all the concurrent proceedings pending are coordinated. The main condition here is that the various liquidators must cooperate closely, in particular by exchanging a sufficient amount of information. In order to ensure the dominant role of the main insolvency proceedings, the liquidator in such proceedings should be given several possibilities for intervening in
secondary insolvency proceedings which are pending at the same time. For example, he should be able to propose a restructuring plan or composition or apply for realisation of the assets in the secondary insolvency proceedings to be suspended. Model: COORDINATION RE PROCEEDINGS The liquidator in the main proceedings may: Exercise right ex art. 20 (creditor in other MS shall return what he Request publication of opening judgment or registration of registers kept in another MS (Art. 21, 22)
has obtained) judgment in public Request opening of secondary proceedings in other MSs (art. 29) Participate in secondary proceedings (Art. 32(3)) Request stay of the process of liquidation of sec. proc. (Art. measures ex Art. 34.1 (see Art. 34(3)) Request termination of this stay (Art. 33(2)) Propose a rescue plan, when allowed (Art. 34(1))
Dis-content with finalizing liquidation in sec. proc. (Art. 34(1)) Claim the remaining assets (art. 35) 33(1)) and may request COORDINATION RE PROCEEDINGS (Contd) Key duties of liquidator in main and secondary proceedings: 1. To communicate information (Art. 31(1)) 2. To cooperate (Art. 31(2)) 3. To lodge all claims lodged in the main proceedings (Art. 32(2)) 4. To immediately inform all known creditors (Art. 40(1)) by
individual notice (Art. 40(2)) Article 31 Duty to cooperate and communicate information: text does not provide clear guidance > CoCo Guidelines Model of InsReg: Key to success? Several parallel proceedings: Communication Cooperation Coordination Text Art. 31 InsReg: vague
www.insol-europe.org European Communication and Cooperation Guidelines For Cross-border Insolvency (CoCo Guidelines www.insol-europe.org // full text 2016-08-doc2 Aims Guidelines Status Coordination, using Protocols
Examples: - Requirements for practitioners - Language - Fees and costs - Role of courts Aim CoCo Guidelines Guideline 1 Overriding objective
1.1. These Guidelines embody the overriding objective of enabling courts and liquidators to operate efficiently and effectively in cross-border insolvency proceedings within the context of the EC Insolvency Regulation. 1.2. In achieving the objective of Guideline 1.1., the interests of creditors are paramount and are treated equally. I.3. All interested parties in cross-border insolvency proceedings are required to further the overriding objective as set out above in Guideline 1.1. Guideline 2 Aim
2.1. The aim of these Guidelines is to facilitate the coordination of the administration of insolvency proceedings involving the same debtor, including through the use of a governance protocol. 2.2. In particular, these Guidelines aim to promote: (i) The orderly, effective, efficient and timely administration of proceedings; (ii) The identification, preservation and maximisation of the value of the debtors assets (which includes the debtors undertaking or business) on a world-wide basis; (iii) The sharing of information in order to reduce the costs involved; and (iv) The avoidance or minimization of litigation, costs and inconvenience to all parties affected by proceedings. CoCo Guidelines - Guideline 4
4.2. A liquidator is required to act with the appropriate knowledge of the EC Insolvency Regulation and its application in practice. 4.3. A liquidator is required to act honestly, objectively, fairly and expeditiously in dealing with all parties concerned, including the courts. CoCo Guidelines - Guideline 10 10.1. Liquidators shall determine the language in which communications take place on the basis of convenience and the avoidance of costs. The court is advised to allow use of
other languages in all or part of the proceedings if no prejudice to a party will result. 10.2. Courts are encouraged, to the maximum extent permissible under national law, to accept any documents related to those communications in language decided upon under Guideline 10.1, without the need for a translation into the language of proceedings before them. CoCo Guidelines - Guideline 11 Fees and costs 11.2.
Obligations and fees incurred by the liquidator in the main proceedings prior to the opening of any secondary proceedings but concerning assets to be included in the estate of these latter proceedings in principle will be funded by the estate corresponding to the secondary proceedings. CoCo Guidelines Guideline 16 Courts 16.1. Courts are advised to seek to give effect to the overriding objective of enabling courts and liquidators to operate efficiently and effectively operate in cross-border
Insolvency proceedings within the context of the EC Insolvency Regulation, in the meaning of Guideline 1. 16.2. Courts are advised to operate in a cooperative manner to resolve any dispute relating to the intent or application of the terms of any cooperation agreement or protocol. CoCo A Useful Medicine? Co Co Guidelines in practice? 1. Literature: how to include in InsReg? Annex to InsReg?
In a national Kodex? Standard / yardstick to measure national duties? A European standard for liquidators? 2. Practice: BenQ Holding 2007? Restructuring Committee Landsbanki ICESAVE? Lehman Brothers Holdings Inc. (LBHI) High Court London 11 February 2009 Nortel Networks, see CJEU 11 June 2015 (C-649/13) Bank Handlowy w Warszawie SA, PPHU ADAX/Ryszard Adamiak,
V Christianapol sp. z o.o. (Case C-116/11) - Reference was made in the context of proceedings relating to the opening of insolvency proceedings, in Poland, further to an application made by Bank Handlowy and Adamiak in respect of Christianapol sp. z o.o., a company governed by Polish law, in respect of which rescue proceedings (procdure de sauvegarde) had previously been opened in France. Christianapol is a wholly-owned subsidiary of a German company, which in turn is 90% owned by a French company. - By judgment of 1 October 2008, the Tribunal de commerce de Meaux (France) opened insolvency proceedings against Christianapol (COMI in France). The court opened sauvegarde proceedings on the ground that the debtor was not in a situation calling for the cessation of payments, but that it would be in that situation if financial restructuring was not undertaken quickly. - On 21 April and 26 June 2009, Bank Handlowy, established in Warsaw (Poland), in its capacity as creditor of
Christianapol, asked the referring court to open secondary insolvency proceedings against Christianapol under Article 27 of the Regulation. On 20 July 2009, the Tribunal de commerce de Meaux approved a rescue plan for Christianapol, under which debts would be paid off in instalments spread over 10 years and prohibiting the transfer of the undertaking of Christianopol, situated in owy (Poland) and of certain defined assets belonging to the debtor. The French court maintained the appointment, made previously, of the persons responsible for representing the interests of creditors for the period up to the closure of the procedure for the verification of claims and the submission of a final report on the activities of those representatives. In its judgment it also appointed a person to oversee the implementation of the plan (commissaire lexcution du plan). Bank Handlowy C-116/11 (contd)
- On 2 August 2009, another creditor, Adamiak, established in czyca (Poland), also asked for winding-up proceedings to be opened under Polish law. - Following the approval of the rescue plan by the French court, Christianapol contended that the secondary insolvency proceedings should be discontinued, since the main proceedings had closed. It also contended that it was fulfilling its obligations under the plan approved by the French court, with the result that no pecuniary claims were outstanding against it under Polish law and there were therefore no grounds supporting a declaration of insolvency in respect of it. - The referring court asked the Tribunal de commerce de Meaux whether the insolvency proceedings in France, which were main proceedings for the purposes of the Regulation, were still pending. The answer given by the French court did not provide the necessary clarification. The referring court then consulted an expert.
In those circumstances, the Sd Rejonowy Pozna-Stare Miasto w Poznaniu decided to stay the proceedings and to refer questions to the Court for a preliminary ruling: Bank Handlowy C-116/11 (Contd) 1. Article 4(2)(j) InsReg must be interpreted as meaning that it is for the national law of the Member State in which insolvency proceedings have been opened to determine at which moment the closure of those proceedings occurs. 2. Article 27 InsReg must be interpreted as meaning that it permits the opening of secondary insolvency proceedings in the Member State in which the debtor has an establishment, where the main proceedings have a protective purpose. It is for the court having jurisdiction to open secondary proceedings to have regard to the objectives of the main proceedings and to take
account of the scheme of the Regulation, in keeping with the principle of sincere cooperation. 3. Article 27 InsReg must be interpreted as meaning that the court before which an application to have secondary insolvency proceedings opened has been made cannot examine the insolvency of a debtor against which main proceedings have been opened in another Member State, even where the latter proceedings have a protective purpose. Bank Handlowy C-116/11 (final) - argumentation 59 ., the fact remains that the opening of secondary proceedings, which, under Article 3(3) of the Regulation, must be winding-up proceedings, risks running counter to the purpose served by main proceedings, which are of a protective nature.
60 It should be noted that the Regulation provides for a certain number of mandatory rules of coordination intended to ensure, as expressed in recital 12 in the preamble thereto, the need for unity in the Community. In that system, the main proceedings have a dominant role in relation to the secondary proceedings, as stated in recital 20 in the preamble to the Regulation. 61 The liquidator in the main proceedings thus has certain prerogatives at his disposal which allow him to influence the secondary proceedings in such a way that the protective purpose of the main proceedings is not jeopardised [follow examples] 62 The principle of sincere cooperation laid down in Article 4(3) EU
requires the court having jurisdiction to open secondary proceedings, in applying those provisions, to have regard to the objectives of the main proceedings and to take account of the scheme of the Regulation, which, , aims to ensure efficient and effective cross-border insolvency proceedings through mandatory coordination of the main and secondary proceedings guaranteeing the priority of the main proceedings. Treatment of multinational Groups of companies InsReg has deliberately left out rules rules for multinational
groups Text was drafted in 80s/90s Liquidation focused Solutions? Treatment of multinational Groups of companies
1. Leave matter as they are: continue national case law (Menjucq, Dammann) 2. Improve COMI definition (Moss, Paulus) 3. Introduce constrainted forum choice (Rasmussen, Eidenmller) 4. Subsidiary as establishment of parent in MS where it has its registered office. But:
InsReg deliberately does not contain rules for groups InsReg has own definition for establishment (Art. 2(h)) The mere own legal personality of the sub (piercing) Only in 100% shareholder-relations? (see CJEU in Burgos) 5. Treat creditors in other MSs as if secondary proceedings were opened (Virtual or synthetic sec. proc.) Collins & Aikman MG Rover Nortel Europe 2009 example (next)
Nortel Networks Workforce of 30,000 worldwide - 12,000 R&D employees - 3,200 Global sales force - 9,700 Service organisation Global scale of operations : 150 countries More than half of Fortune 500 companies Over 5,000 patents worldwide
 EWHC 206 (Ch) IN THE HIGH COURT OF JUSTICE Royal Courts of Justice CHANCERY DIVISION Strand, London, WC2A 2Ll COMPANIES COURT 11th February 2009 THE HON MR JUSTICE PATTEN
Before: THE HON MR JUSTICE PATTEN IN THE MATTERS OF: NORTEL NETWORK SA NORTEL GMBH NORTEL NETWORKS NV NORTEL NETWORKS S.P.A. NORTEL NETWORKS BV NORTEL NETWORKS POLSKA SP. Z.O.O. NORTEL NETWORKS HISPANIA SA NORTEL NETWORKS INTERNATIONAL FINANCE&HOLDINGS BV
NORTEL NETWORKS (AUSTRIA) GMBH NORTEL NETWORKS SRO NORTEL NETWORKS ENGENEERING SERVICE KFT NORTEL NETWORKS PORTUGAL SA NORTEL NETWORKS SLOVENSKO NORTEL NETWORKS FRANCE SAS NORTEL NETWORKS OY NORTEL NETWORKS ROMANIA SRL NORTEL NETWORKS AB NORTEL NETWORKS (IRELAND) LIMITED (INDIVIDUALLY THE COMPANY AND TOGETHER THE COMPANIES)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986 Nortel Group (14 Jan. 2009) - Administration orders based on COMI of 18 Nortel Companies - Blackburne J (by way of Day One Order) authorised the Joint Administrators in their discretion to make payments out of their assets to employees and preferential creditors of the relevant Companies corresponding to the amounts they would receive in the event that secondary insolvency proceedings were to be commenced in other Member States - The court also authorised the Joint Administrators to apply to
the relevant judicial authorities in any other country for such assistance as they consider they may require in connection with the performance of their functions as administrators Nortel Group (11 Febr. 2009) Decision re an application by the Joint Administrators of the Nortel group of companies for the court: 1. to send a letter of request to the courts of a number of Member States in the EC asking those courts to put in place arrangements under which the Joint Administrators will be given notice of any request or application for the opening of secondary insolvency proceedings in respect of any of the companies in administration,
2. this letter will also request the courts to which it is sent to permit the Joint Administrators to make submissions on any such applications in respect of the potential damage which secondary proceedings might have on the interests of the estate and the creditors of the relevant Companies. Nortel Group (contd) The High Court has an inherent jurisdiction to issue a letter of request to a foreign court in appropriate circumstances: - the request for assistance stems from Art. 31(2) - this duty reflects a wider obligation which extends to the courts which exercise control of insolvency procdures in their respective jurisdictions
(see Re Stojevic, Vienna Higher Regional Court 9 November 2004) - it is desirable that a court which is dealing with an application to open insolvency proceedings to be provided with the reasons why such proceedings might have an adverse impact on the main proceedings (see Rover France SAS, Court of Appeal Versailles 15 December 2005) - Art. 33(1) allows the stay of the process of liquidation, but it does not prevent the continuation of winding-up prodeedings (Re Collins & Aikman, Higher Regional Court Graz 20 October 2005) Nortel Group (final) Hon Mr Justice Patten:
In these circumstances, it seems to me highly desirable that the assistance of the foreign courts specified in the Schedule to the draft order should be sought with a view to enabling the Joint Administrators to be heard prior to the opening of any secondary insolvency proceedings in these jurisdictions and I will therefore authorise the sending of appropriate letters of request to the judicial authorities in those States Reaction? Domestic and x-border calling / confusion
Treatment of multinational Groups of companies 6. Contractual approach - Protocol Draft Intl Protocol Lehman BHInc (Draft protocol of Febr. 09 Final version appr. June 09) (Bankr. SDNY Judge Peck) 2. Notice
3. Rights of Official Representatives and Creditors to Appear 4. Communication and Access to Data and Information Among Official Representatives 5. Communication Among Tribunals 5.1. The Guidelines Applicable to Court-to-Court Communication in Cross Border Cases (the Guidelines) attached as Schedule A hereto, shall be incorporated by reference and form part of this protocol in whatever form they are formally adopted by each Tribunal, in whole or in part and with or without modifications (if any). Where there is any discrepancy between the Protocol and the Guidelines, this Protocol shall prevail. 6. Communication Among Committees 7. Asset Preservation 8. Claims 9. Special Procedures for Intercompany Claims
10. Submission of Winding-Up Plan, Plan of Reorganization or Liquidation, or Deed of Company Arrangement 11. Comity 12. Amendment CJEU 11 June 2015, Case C-649/13 (Comit dentreprise de Nortel Networks SA and Others v Cosme Rogeau and Cosme Rogeau v Alan Robert Bloom
and Others). Main proc. England Sec. proc. in France. CJEU confirms the determination of the matter of international jurisdiction, more specifically the relationship between the EU Insolvency Regulation and Brussels I (specifically referring to Nickel & Goeldner Spedition, C 157/13); The disputes before the referring French secondary court fall within the context of the application of a large number of agreements concluded by or between the parties before it, including, in particular an Interim Funding and Settlement Agreement (between the Canadian Nortel Networks Limited and a number of subsidiaries in the Nortel group), an intra-group Master R&D Agreement, a coordinating protocol and a memorandum settling the action
between the involved insolvency practitioners (to which the CoCo Guidelines apply). CJEU concludes that it is apparent that the rights or obligations on which the actions before the referring French secondary court are founded derive directly from insolvency proceedings, are closely connected with them and have their source in rules specific to insolvency proceedings, and therefore it concludes that the EIR is applicable; Nortel Networks (contd) (3) Where for main insolvency proceedings Article 3(1) EIR also confers international jurisdiction to hear and determine related actions on the Member State within the territory of which the insolvency proceedings have been opened (the CJEU refers to F-Tex, C 213/10), it now decides that for secondary proceedings Article 3(2) EIR must be regarded (also) as
conferring international jurisdiction to hear and determine related actions on the courts of the Member State within the territory of which secondary insolvency proceedings have been opened, in so far as those actions relate to the debtors assets that are situated within the territory of that State; (4) Both the main as well as the secondary courts have jurisdiction, concurrently or jointly to rule on the determination of the debtors assets falling within the scope of the effects of the secondary proceedings. [cross-border coordination challenges!]; (5) CJEU sets out a marching order for the French court to decide on the location of the assets. This court has the task of establishing (i) whether the assets at issue are property or rights ownership of or entitlement to which must be entered in a public register, or (ii) whether they must be regarded as being claims. Next (iii), that court will have the task of determining, respectively, whether the Member State under the authority of which the register is kept is
the Member State in which the secondary insolvency proceedings have been opened, namely the French Republic, or (iv) whether, as the case may be, the Member State within the territory of which the third party required to meet the claims has the centre of his main interests is the French Republic. It is only if one of those checks has a positive outcome that the assets at issue will fall within the secondary insolvency proceedings opened in France. Other solutions re Groups (contd ? 7. Analogy to EU Competion rules? 8. An EU Directive on reorg of groups? 9. Others? EIR Recast
EIR Recast: Cross-border Communication and Cooperation Renewed recital 20 (Rec. 48 Recast) Two new recitals (Rec. 49 and 50 Recast) Renewed Art. 31 (Art. 41 Recast) CoCo between IPs New Art. 42 Recast CoCo between courts New Art. 43 Recast CoCo between liquidators
and courts Norms for cooperation? Rec. 48 Recast: When cooperating, IPs and courts should take into account best practices for cooperation in cross-border insolvency cases, as set out in principles and guidelines on communication and cooperation adopted by European and international associations active in the area of insolvency law, and in particular relevant guidelines prepared by the United Nations Commission on International Trade Law (Uncitral). CoCo between IPs Art. 41 (Cooperation and communication between insolvency practitioners)
1. The IP in the main insolvency proceedings and the IP or IPs in secondary insolvency proceedings concerning the same debtor shall cooperate with each other to the extent such cooperation is not incompatible with the rules applicable to the respective proceedings. Such cooperation may take any form, including the conclusion of agreements or protocols. 2. In implementing the cooperation set out in paragraph 1, the IPs shall: (a) as soon as possible communicate to each other any information which may be relevant to the other proceedings, in particular any progress made in lodging and verifying claims and all measures aimed at rescuing or restructuring the debtor or at terminating the proceedings, provided appropriate arrangements are made to protect confidential information;
(b) explore the possibility of restructuring the debtor and, where such possibility coordinate the elaboration and implementation of a restructuring plan; exists, (c) coordinate the administration of the realisation or use of the debtor's assets and affairs; the IP in the secondary insolvency proceedings shall give the IP in the main insolvency proceedings an early opportunity to submit proposals on the realisation or use of the assets in the secondary insolvency proceedings.
Article 42 (recast) CoCo between courts Cooperation and communication between courts 1. In order to facilitate the coordination of main, territorial or secondary insolvency proceedings concerning the same debtor, a court before which a request to open insolvency proceedings is pending, or which has opened such proceedings, shall cooperate with any other court before which insolvency proceedings are pending, or which has opened such proceedings, to the extent such cooperation is not incompatible with the rules applicable to each of the proceedings. For that purpose, the courts may, where appropriate, appoint an independent person or body acting on its instructions, provided that this is not incompatible with the rules applicable to them
2. In implementing the cooperation set out in paragraph 1, the courts, or any appointed person or body acting on their behalf, as referred to in paragraph 1, may communicate directly with, or request information or assistance directly from each other, provided that such communication respects the procedural rights of the parties to the proceedings and the confidentiality of information Article 42 (recast) CoCo between courts 3. The cooperation referred to in paragraph 1 may be implemented by any means that the court considers appropriate. It may, in particular, concern (a) coordination in the appointment of the insolvency practitioners; (b) communication of information by any means considered appropriate by the court;
(c) coordination of the administration and supervision of the debtor's assets and affairs; (d) coordination of the conduct of hearings; (e) coordination in the approval of protocols, where necessary. CoCo and groups Rec. 49: In light of such cooperation, IPs and courts may enter into agreements and protocols for the purpose of facilitating cross-border cooperation of multiple insolvency proceedings in different Member States concerning the same debtor or members of the same group of companies, where this is compatible with the rules applicable to each of the proceedings Rec 52: Where insolvency proceedings have been opened for several
companies of the same group, there should be proper cooperation between the actors involved in these proceedings. The various IP and the courts involved should therefore be under a similar obligation to cooperate and communicate with each other as those involved in main and secondary insolvency proceedings relating to the same debtor. Cooperation between the IPs should never go against the interests of the creditors in each of the proceedings and such cooperation should be aimed at finding a solution that would leverage synergies across the group. Shaping and Modeling Cooperation? Rec. 48, last line:
In their cooperation, IPs and courts should take into account best practices for cooperation in cross-border insolvency cases as set out in principles and guidelines on communication and cooperation adopted by European and international associations active in the area of insolvency law, and in particular relevant guidelines prepared by (Uncitral)
www.insol-europe.org Crucial role of court EU Cross-Border Insolvency Court-to-Court Cooperation Principles (EU JudgeCo Principles), including EU Cross-Border Insolvency Court-to-Court Communications Guidelines (EU JudgeCo Guidelines) Profs Bob Wessels and Jan Adriaanse Prof. Paul Omar
Outcomes EU JudgeCo Principles & EU JudgeCo Guidelines (Febr. 2015) In addition to R&A group (40+ experts) discussion/input from appr. 50 judges (JudgeCo trainings) and 150 judges (other events) 26 EU Cross-Border Insolvency Court-to-Court Cooperation Principles 18 EU Cross-Border Insolvency Court-to-Court Communications Guidelines Small booklet with black letter text Report + Commentary web-forum (under construction) www.bobwessels.nl, weblog / www.tri-leiden.eu
EU JudgeCo Principles and Guidelines http://bobwessels.nl/2 015/09/2015-09-doc7eu-judgeco-principlesbook-published/ EU JudgeCo Principle 17 (Independent intermediary) http://www.tri-leiden.eu 17.1. Courts should consider the appointment of one or more independent intermediaries within the meaning of Principle 17.2, to ensure that an international insolvency case proceeds in accordance with these EU JudgeCo Principles. The court
should give due regard to the views of the insolvency practitioners in the pending insolvency cases before appointing an intermediary. The role of the intermediary may be set out in a protocol or an order of the court. 17.2. An intermediary: (i) Should have the appropriate skills, qualifications, experience and professional knowledge, and should be fit and proper to act in an international insolvency proceeding; (ii) Should be able to perform his or her duties in an impartial manner, without any actual or apparent conflict of interest; (iii) Should be accountable to the court which appoints him or her; (iv) Should be compensated from the estate of the insolvency case in which the court has jurisdiction.
Groups of companies Groups of companies Chapter V Insolvency proceedings of members of a group of companies (Arts. 56-77 Recast) Art. 2(1)(13) and (14) Recast: definitions for groups of companies and parent undertaking Ch V Section 1 (Cooperation and communication) Art. 56-60 Recast Ch V Section 2 (Coordination), with 2.1 (Procedure) (Arts. 61-70) and 2.2 (General provisions) (Arts. 71-77), providing for an impartial (group)
coordinator No rules for a uniform European rescue plan Norms for protocols in EIR Recast? (49) In light of such cooperation, insolvency practitioners and courts should be able to enter into agreements and protocols for the purpose of facilitating cross-border cooperation of multiple insolvency proceedings in different Member States concerning the same debtor or members of the same group of companies, where this is compatible with the rules applicable to each of the proceedings. Such agreements and protocols may vary in form, in that they may be written or oral, and in scope, in that they may range from generic to specific, and may be entered into by different parties. Simple generic agreements may emphasise the need for close cooperation between the parties, without addressing
specific issues, while more detailed, specific agreements may establish a framework of principles to govern multiple insolvency proceedings and may be approved by the courts involved, where the national law so requires. They may reflect an agreement between the parties to take, or to refrain from taking, certain steps or actions. What is it: protocol as EU instrument? (i) What is the legal character of a protocol? Is it substantial and/or procedural?; a mix of private law and pubic law?; or an automomous concept? (ii) Which law governs a protocol? The lex forum concursus? Is Regulation no 593/2008 on the law applicable to contractual obligations (Rome I) applicable? Do parties have the freedom to choose applicable law? Or choose a forum? How does that relate to mandatory
rules for instance on transparency of proceedings, protecting rights of creditors or a stay of proceedings? (iii) Protocol-parties: do all parties in an insolvency proceeding have permission to agree on a protocol? What are the consequences of not using the agreed protocol? (iv) Treatment of creditors: does the protocol, agreed between IOHs where necessary approved by courts (art. 42(3)(e) EIR Recast) bind creditors? Do they still have additional rights? What is the effect on third parties? What if creditors arent pleased with the use or the content of a protocol? (v) Courts: are courts bound by it? If not, can a party appeal? National effects of protocol as EU instrument?
(i) If seen as contract: national rules will apply re approval by creditors and/or approval by court (ii) Regarded as EU instrument: possible to define its EU meaning See recital 49/ art. 43 focused at cooperation, e.g. Nortel Protocol, resulting in Protocol Inherent Causes (iii) Rec. 49 an agreement to take, or to refrain from taking, certain steps or actions. Are these: Non-PIN clauses (applicable or chosen law to apply?) Refrain to call upon a surety (Brgschaft) Waive the right to sue directors To include a clause saying that costs of creating/drafting the protocol will also be borne
by creditors Innovation? Suggest to further study Analyse appr. 40 protocols - www.iiiglobal.org Innovation? Mmmm Thinking outside the box;
manageable? - Careful/prudent realisation in MSs National law - Templates to assist practice Undertaking Art. 36 EIR Recast (Right to give an undertaking in order to avoid secondary proceedings) Art. 36 Recast, with 11 paragraphs
Art. 36(1): In order to avoid the opening of secondary proceedings, the insolvency practitioner in the main proceedings may give a unilateral undertaking (the undertaking) in respect of the assets located in the Member State in which secondary proceedings could be opened, that when distributing those assets or the proceeds received as a result of their realisation, it will comply with the distribution and priority rights under national law that creditors would have if secondary proceedings were opened in that Member State Name game: Synthetic secondary / virtual territoriality / as if proceedings The undertaking shall specify the factual assumptions on which it is based, in particular with respect to the value of the assets located in the Member State
concerned and the options available to realise such assets Art. 36 Undertaking (contd) 11 paragraphs - Undertaking (1) (2) (3) (4) Definition
Law applicable Language In writing - Approval (5) To be approved by qualified majority of known local creditors (6) Binding on the estate - Enforcement (7) Duty to inform re local distribution; creds may challenge non-compliance with undertaking
(8) Local creds have remedy with COMI court (9) Local creds have remedy with as if court (10) Liability of IP in main proceedings 11. (synthetic) authority to guarantee payments to employees. Undertaking ex Article 36(1) 1. Legal nature of an as if undertaking; autonomous concept? 2. Exclusive power main IP; domestic powers replaced?
3. Contents of an as if undertaking? A no worse off rule in an as if undertaking? A conditional as if undertaking? May it be revoked (within what number of days)? Undertaking ex Article 36(1) (contd) Art. 36(1)(2nd line) The undertaking shall specify the factual assumptions on which it is based, in particular with respect to the value of the assets located in the Member State concerned and the options available to realise such assets. Not e.g.
the reasons to prevent sec. proc. (could be general going concern sales, but also preventing conflicts with sec. IP re commencing avoidance proceedings or fee conflicts to be expected) the quota of creds in the main proceeding being an as if local creds Value of assets, not an estimate value Will info be available at relevant time (art. 36(2)(2nd line) No qualified undertaking, to make it practical and more flexible, with something like to the extent reasonably practicable at the time the undertaking is given Few thoughts 11 paragraphs reflect distrust
Approval process deviates from English model As does an additional test (art. 38(2)) Where the IP of the main insolvency proceedings has given an undertaking in accordance with Art. 36, the court seised with a request to open sec. proc. shall at the request of the main IP not open secondary insolvency proceedings if it is satisfied that the undertaking adequately protects the general interests of local creditors.
Overregulated, with many vague term and open questions Adds complexity, additional costs and time delay Innovation? It affects the model of EIR a political balance of over 20 years ago between univ and terr leading to coordinated universality That careful State-State balance is interfered by a private actor Whats the new model?
Further refinement of coordinated univ (Janger)? A form of procedural consolidation (Hirte; Mevorach)? De facto consolidation to the detriment of the coordination paradigm (Omar)? Is the existing model sustainable for Private acts of this nature contractualisation Shift from liquidation to restructuring (private ordening) Assessing mandatory rules to protect legal rights in light of necessities to efficient administration, saving viable business and save jobs
Legal transplant: Innovation or disruption? Thank you for your attention! Bob Wessels [email protected] ++31629577403 These are presentation slides only. The information within these slides does not constitute definitive advice and should not be used as the basis for
giving definitive advice without checking the primary sources. Follow my blog InsReg The final text of Regulation (EU) 2015/848 of the EP and of the Council of 20 May 2015 on insolvency proceedings (recast) (the Recast Regulation), see OJ L 141/19. Effective: 26 June 2017. Recommendation (March 2014) New approach to business failure in insolvency implementation in national laws of minimum standards for preventive restructuring frameworks
1. 2. 3. 4. 5. 6. Six Core Principles: Early recourse to framework for debtor in likelihood of insolvency Minimised court involvement
Debtor in possession Court-ordered stay Ability to bind dissenting creditors to a restr. plan Protection for new finance - EU instrument October 2016 Soft law see http://www.tri-leiden.eu JudgeCo - European Commission / III IOH - INSOL Europe
Rescue of business - European Law Institute Coffee Break European Union Regulation on Insolvency Proceedings General outline and main features Michael Veder Radbound University The Netherlands
Lunch Novello Restaurant UK restructuring practice on the ground Ian Fletcher, University College London, UK Stephen Taylor, Isonomy, UK Coffee Break Cross-border rescue in EU: A Case Study
Nick Cropper AlixPartners LLP UK Introduction to Module C Peter Declercq, Fellow, INSOL International, Morrison & Foerster (UK) LLP, UK Charlotte Moller, Fellow, INSOL International, Reed Smith, UK Close Day Two