Vol 3 (2006) - Issue 5

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The EC Regulation on Insolvency Proceedings: Streamlining Cross-border Insolvency? The Contrasting Approaches of the Courts in England and France

The EU Regulation on Insolvency Proceedings 2000 [EC 1346/2000] (‘Regulation’) became effective on 31 May 2002.1 Unlike many pieces of EU legislation its impact has been a bang, not a whimper: it has spawned a rapidly expanding body of case law on its interpretation
and application and continues to challenge lawyers and insolvency practitioners. The acceptance of the Regulation as a piece of legislation overriding national law has also proved to be a political hot potato for some Member States. This article compares the different approaches of the English and French courts to the application of the Regulation using the examples of the cross border insolvencies of the ISA Daisytek Group of companies (‘Daisytek’) and the MG Rover Group of companies (‘Rover’).
The Regulation
The aim of the Regulation was to introduce a streamlined process for the administration of the affairs of an insolvent company operating its business in more than one Member State, thereby delivering greater efficiency and effectiveness to the process and a better result for creditors. The experience of the administrators appointed in respect of both Daisytek and Rover, however, has been that the application of the Regulation across the multiple jurisdictions these groups of companies traded in is anything but streamlined.
The basic tenet of the Regulation is automatic recognition of another Member State’s insolvency proceedings:
Article 17 of the Regulation provides that the opening of main proceedings in a Member State shall ‘with no further formalities’ produce the same effect in any other Member State as under the law of the country in which the proceedings are opened. This means that the national law of the Member State in which the main proceedings are opened will govern insolvency proceedings relating to the business across all other Member States and the officer appointed will have the conduct of the main proceedings in each jurisdiction, rather than separate proceedings and appointments in each relevant Member State. Some matters, however, are still reserved to national law, regardless of the law governing the main proceedings; chief of these are rights under employment contracts and property rights relating to assets located in another Member State. Secondary proceedings, that are restricted to the liquidation of assets within a particular jurisdiction, can be opened concurrently with the main proceedings in any Member State where assets are located.