Vol 4 (2007) - Issue 5

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Accommodating Cross-border Coordination: European Communication and Cooperation Guidelines For Cross-Border Insolvency

Background

Recently the European Communication and Cooperation Guidelines For Cross-border Insolvency have
been published. These Guidelines aim to overcome the procedural model of the EC Insolvency Regulation
dealing with assets of one debtor spread over several jurisdictions. That model is build on a procedural división between two or more Member States (main proceedings based on COMI; secondary proceedings wherever the debtor has an establishment) and a mandatory coordination between the liquidators of these proceedings. Main and secondary proceedings, as they are both concerned with the same debtor, should be coordinated and the Guidelines mainly focus on insolvency practitioners in inviting them indeed to take this role generously.

Main and secondary insolvency proceedings do not operate on an equal footing: ‘Main insolvency proceedings and secondary proceedings can … 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’, thus recital 20. It is mainly in the power of the liquidator in the main insolvency proceedings to exercise measures for coordination, e.g. he may request opening of secondary proceedings in other Member States (Article 29), participate in secondary proceedings (Article 32(3)), request a stay of the process of liquidation of secondary proceedings (Article 33(1)), request termination of this stay (Article 33(2)), propose a rescue plan in the context of these secondary proceedings or he may disagree with finalizing liquidation in secondary proceedings (Article 34(2)). He shall, under given conditions, lodge all claims in the secondary proceedings which have been lodged in the main proceedings (Article 32(2)), he is duty bound to communicate information (Article 31(1)) and to cooperate (Article 31(2)). These three obligations are duties for liquidators in secondary proceedings as well. The mutual duty between liquidators to communicate and to cooperate symbolizes the bridging of the still existing deficit of uniform law. The performance of these obligations to communicate and to cooperate is necessary in order to voice, with regard to all claims, the principle of equal treatment of pari passu ranked creditors.

Given the absence of guidance in the text of Article 31 of the EC Insolvency Regulation a group of academics and practitioners, supported by several judges, have discussed proposals to address the principal issue of the liquidators’ duties of communication and cooperation in cross-border insolvency instances. The group mooted the idea of the possibility/necessity of the establishment of a (non-binding) set of standards for communication and cooperation in cross-border insolvency cases, which are subject to the application of the EC Insolvency Regulation. These proposals were supported by the Academic Wing of INSOL Europe, the European insolvency practitioners’ organisation. The intensive and lively discussions started in 2005, in an area where international practitioners’ focus mainly seemed to be concerned with COMI controversies. They have now resulted in European Communication and Cooperation Guidelines For Cross-border Insolvency, which were drafted by us.