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The European Insolvency Regulation: A Criticism of the Jurisdiction Paradigm
M. Cristina di Luigi, Avvocato, LLM, European and International Trade Law, Sussex, UKIntroduction
This article begins from the viewpoint of the heterogeneous
European law environment and the protectionism approach of member states and will focus on the European coordinating legal instrument for cross-border insolvencies, namely Council Regulation (EC) No 1346/2000 (‘Insolvency Regulation’).2 In particular, it will look at the normative models on which the Insolvency Regulation is based and, by doing so, will consider what features have been adopted in the European text. It will then analyse the advantages and disadvantages of those models’ features and move on to looking critically at the wording of the Insolvency Regulation concerning the jurisdictional paradigm. There will also be a discussion of the probable practical controversies that may arise from implementation of the Insolvency Regulation. Moreover, the need for the Insolvency Regulation to be reformed will be considered, focusing on the more controversial issues. To conclude, the argument whether or not a different jurisdiction paradigm would be more effective and efficient will be outlined, together with what the difficulties may be in considering this.
Universalism and territoriality: the European controversy
International insolvency has shown itself to be a very controversial subject in the European Community, a statement which is confirmed if the time needed to achieve the Insolvency Regulation is the parameter used to make this evaluation. However, notwithstanding over 40 years of negotiations, the context of the European single market and the always increasing growth of trade within European member states have forced the European countries (apart from Denmark) to finally agree on the Insolvency Regulation. It might be of great interest to understand the reasons why it took so long to collect all the member states’ signatures. The key words seem to be ‘diversity’3 and ‘territory’,4 which is linked to ‘sovereignty’. In fact, European countries and territories have different insolvency cultures, which are deeply linked to their legal roots; different national insolvency laws (some of them being more pro-debtor, others more pro-creditor);5 and diverse political, economic and social interests to protect.6 As the insolvency of a company might have a significant impact on the well-being of a state, it is clear that it is of primary importance for the state itself to have the possibility of intervening in order to limit possible damage. Having understood this, it may be stated that the protection of domestic sovereignty on insolvency matters was the main stumbling block to signing the Insolvency Regulation. However, the increasing business activities of companies throughout the European Community made it necessary to coordinate member states’ insolvency laws at Community level,7 the same achievement being impossible at national level.8 The idea of a single set of rules embodied in a Community legal instrument, able to guarantee that a single insolvency proceeding would have had effect in all member states, was strongly opposed. As already mentioned, the differences amongst European countries and the protection of domestic interests made this idea unrealisable.
Therefore, it may be deduced that it was not considered of primary or sufficient importance whether or not that system would have been efficient and effective for the functioning of the internal market, because of reduced fragmentation, and which could have guaranteed a high degree of legal certainty.
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