Vol 4 (2007) - Issue 3

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EC Regulation 1346/2000 of 29 May 2000 on Insolvency Proceedings: A Five-Year Summary of its Application in Spain

Close to five years have elapsed since EC Regulation 1346/2000 of 29 May 2000 on Insolvency Proceedings (the ‘EC Regulation 1346/2000’ or the ‘Regulation’)
came into force (31 May 2002). Therefore, sufficient time may have passed in order to analyse how EC Regulation 1346/2000 has been applied in practice in Spain during these years.

As an initial remark it must be highlighted that the Spanish economy has been growing steadily above the European Union average over the past five years. This
economic bonanza has been fuelled by many different causes (historically low interest rates, a booming real estate market, steady growth of consumer expenditure, and so on). This has had the effect that, generally, Spanish companies are in good economic health andtheir profits are increasing. Those sectors or companies that are not performing well are taking advantage of
the global market’s liquidity to restructure their debt and avoid insolvency. This scenario has caused a reduction in the number of applications for insolvency by Spanish companies during the last few years.

Additionally, the main insolvencies of Spanish companies in terms of debt that have taken place during this period of time have affected companies without subsidiaries or business abroad (Centro Asegurador, Paconsa, Forum Filatélico, Ediciones del Prado) or with business in North and Latin America (Afinsa and Air Madrid). No big insolvency of a Spanish group with substantial economic interests in EU countries has occurred since EC Regulation 1346/2000 came into force.

This does not imply that the Spanish jurisdiction has remained unaffected by EC Regulation 1346/2000. On the contrary, major European restructurings carried
out under the Regulation have had a Spanish connection (Enron, Collins & Aikman, MG Rover, and so on).

As is examined below, Spanish judicial and other public bodies (for example the Spanish Registries)have applied EC Regulation 1346/2000, assuming effectively and in practice the principle of Community trust between the EU Member States. Experience shows that prior to the ECJ Eurofoods IFSC ruling, Spain was a ‘friendly jurisdiction’ in respect of main insolvency proceedings opened by courts of other EU countries involving Spanish companies.

Two factors have had an important effect on this situation: (i) the enactment of the new Spanish Insolvency Act (which came into force on 1 September 2004)
which abolished the former Spanish insolvency law system which had been in force since the 19th century, and set forth a private international law system for non-EU countries similar to EC Regulation 1346/2000 (which confirms that Spanish law has assumed the principles behind the Regulation); and (ii) the creation of a new special jurisdiction on commercial issues (including insolvency) comprised of judges specialising in commercial law.

These factors have resulted in a total reorganisation and modernisation of Spanish insolvency law and the courts system, which has contributed to the practical application of EC Regulation 1346/2000 in Spain.