Vol 12 (2015) - Issue 1

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A Happy New Era

There are plenty of reasons for believing that 2015 will be a difficult year to make predictions. Internationally and domestically the political and economic outlook is far from clear. However for readers of International Corporate Rescue, one thing is very clear – a rereading of the European Union Insolvency Regulation (1364/2000) will be necessary.
Anyone who has failed to take a 12 year sabbatical will be aware that the Regulation was born in 2000 and first shown to the world in 2002. It was a short document for a legal text, being the product of over 30 years of discussion, argument and political gamesmanship in which the basic principle was that if no agreement could be reached on a phrase or section it was taken out. This left broad, open spaces for interpretation, imagination and in some cases, manipulation upon which the restructuring profession, especially in the UK, gratefully seized.
In particular nothing was more open to debate than the concept of Centre of Main Interest or CoMI as it is now universally known. After an initial flurry of migrations from the Continent to UK, later cases included transfers between other countries too.
It was clear from quite early on that there was some misuse of the Regulation going on, especially for personal insolvencies. In the corporate sector this was less clear and indeed in the vast majority of cases, migrations took place with the active support of major creditors and other stakeholders. Meanwhile, responding to the threat to their indigenous insolvency industry, almost every country in the European Union revisited their own laws and made huge changes to make them more attractive for users in order to stem the flow of migrations.
Not everyone was happy though. Many theorists condemned the highly flexible interpretations and there was a general concern that the common-law English courts were helping their practitioners gain an unfair advantage over their civil law constrained counterparts. Even the latter could see that the Regulation was throwing up some odd decisions and real areas of difficulty.
The Regulation did though have one important feature – an inbuilt requirement for it to be reviewed no later than 1 June 2012. Reviewed it has been and the results are now published. A revised Regulation has now been published that is presently being translated into all the languages of the Union prior to its official passage through the European Parliament in May. It will then be published in the Official Journal and will come into force 20 days later. This being the European Union everyone is then given two years in which to read it and plan how to use it before it enters into application. In the meantime there seems little doubt that courts will use the new text as an aid to interpreting the open spaces in the current version.
The regulation has been subject to a very comprehensive review, involving several fact finding exercises, input from many organisations, an 'Experts Panel' to assist with the drafting and by no means least, vigorous comments from every one of the 28 national governments of the Union.
In contrast with the slim line original text with its 33 paragraph introductory recital and 47 articles, the new version is a heavyweight 83 and 91 respectively reflecting a determination to bring clarity and to prevent what were seen as wilful misinterpretations. Additionally the opportunity has been taken to introduce whole new sections which provide scope for new approaches to restructuring while limited the benefit of some of the old ideas.
There are three broad categories of change:
1. Some changes bring clarity and reflect the changes that have been widely called for by practitioners and courts based on experiences of the last 12 years and especially those since 2008. Some are mundane – the change of the word 'liquidator' for the more modern 'Insolvency Practitioner' for instance, while others such as the revised Article 2(g) which defines the location of many more classes of assets will result in some subtle but important changes to creditor outcomes. Wholly new articles 3-5 help explain how the decision to open proceedings should be conducted and how appeals should be made.