Dear Members

As we quickly head towards the end of another year that no one saw coming, we pause again to reflect and take stock. For me, it has become a time to check-in with myself. To practice gratitude and take stock of the good – in our lives, in each other, in the world. 

As for the good in my life, I am delighted to report that I just burned 2,000 calories. That is the last time I leave brownies in the oven while I nap. As for each other, and on a more serious note, our recent online events provided great opportunities yet again to catch up on European initiatives and recently introduced legislation and to connect with practitioners, young and young at heart across Europe and beyond. For those of you who missed these events, you are in luck as there is more to come and I refer you to our column of upcoming activities.

Lastly, this month’s newsletter offers a collection of technical articles on cross-border insolvency matters, namely the Hungarian Government’s introduction of a new type of insolvency procedure, designed to be the main alternative to the existing traditional insolvency procedure and, further, a comprehensive summary of the 7th and 8th meetings of the EU Experts’ Group on Restructuring and Insolvency which took place on 16 November and 10 December 2021 respectively. We also report on the UK’s ill-fated attempt to join the Lugano Convention and, further, our own organisation’s joint project with LexisPSL on 'How EU Member States recognise insolvency and restructuring proceedings of a third country'. Summaries of the results collected from all EU Member States with links through to the more in-depth articles are available on our website. 

I wholeheartedly recommend that you take some time - maybe over a cup of coffee (or tea) - to read the collection of pieces in this month's edition. I do not think you will regret it. 

In closing, I hope wherever you are reading this, you are staying safe and well.

Season's greetings!

Frank Tschentscher
President INSOL Europe

This issue is kindly sponsored by:
 

DLA Piper is a global law
firm with lawyers located
in more than 40 countries throughout the world.
www.dlapiper.com

Gone were the days when IPs could confidently expect any insolvency proceedings listed in Annex A and started in England to be recognised across all EU Member States automatically, without question. Instead, we were faced by a confusing patchwork of different local regimes, now that England was effectively treated as a third country. England was effectively in a similar position to the US, Australia, Japan or Canada, when seeking to have its insolvency proceedings recognised in EU Member States.

This was the driver for the Joint Project between LexisPSL and INSOL Europe to map out local processes in each Member State. 

The starting point for the project was to ask whether each Member State had adopted (or was considering adopting) the UNCITRAL Model Law on cross border insolvency. Although not as comprehensive as the EIR Recast, it does provide some assistance for recognition following an application to the local court. However, its use is significantly hampered as, besides the UK, only a handful of Member States have enacted it (Greece, Poland, Romania, Slovenia) and none of the others questioned thought future adoption was likely.

As the results came back, some key themes started to emerge. On the specific question of whether an English scheme of arrangement or restructuring plan would be recognised, most countries had not yet tested this in caselaw, so pointed back to their general principles on recognition. The INSOL Europe Country Coordinators and other authors thought that roughly 40% of the Member States would probably grant recognition, though many said the position was unclear, with some drawing a distinction, following gategroup Guarantee Limited [2021] EWHC 304 (Ch), between the restructuring plan (which may be more readily classed by Member States under their PIL as an insolvency procedure) and the scheme of arrangement. Obviously, each case depends on its own facts and local advice should always be sought before commencing proceedings.

We have produced a table summarising the results from all EU Member States with links through to the more in-depth articles from the INSOL Europe Country Coordinators and other authors, which is available via LexisPSL and the INSOL Europe website here.

Kathy Stones (LexisNexis, UK) will be joining Chris Laughton (Mercer & Hole, UK), who is chairing a panel of speakers from the UK, the Netherlands, Germany and Ireland at the INSOL Europe 2022 Dublin Congress, to discuss ‘Cross-border schemes and plans: how they work in different jurisdictions’ and also some of the joint project’s findings on recognition.

In the Aachen treaty dated 22 January 2019, France and Germany agreed to deepen the integration of their economies and to harmonize their business laws, including their respective insolvency proceedings. The transposition of the EU Directive on Restructuring and Insolvency was a first opportunity to implement this programme, writes Reinhard Dammann, Dammann Avocat / Sciences Po, France.

What is the comparative result? At first sight, both countries took quite different approaches. France transposed the directive, de minimis, by way of an Ordonnance dated 15 September 2021, amending existing accelerated safeguard proceedings and introducing classes of creditors into safeguard and redressement judiciaire proceedings. By contrast, the German StaRUG created, as of 1 January 2021, a brand new standalone and very detailed restructuring procedure, containing no less than 102 paragraphs, in accordance with very thorough German-style legislation. But in reality, there is a great deal of convergence of both systems.

French law was known for an efficient and successful two-stage model. A restructuring agreement was negotiated in the framework of a transparent pre-insolvency conciliation procedure. To overcome the holdout position of dissenting minority creditors, financial accelerated safeguard, functioning as a prepack, was available. However, the French system was also known for its debtor-friendly approach, lacking classes of creditors, cross-class cram-down and efficient creditor protection through the best interest of creditors’ test. On the other hand, Germany was starting from a blank sheet. There was no pre-insolvency restructuring procedure, but only efficient debt restructuring in the framework of the Planverfahren within regular insolvency proceedings (InsO).

With StaRUG, the German legislator has created brand-new mediation and preventive restructuring proceedings (Sanierungsmoderation, StaRUG-restructuring procedure). The French approach sticks to its successful two-stage system, but introduces classes of affected parties, replacing the old creditors’ committees. 

Following the first Fraud Conference hosted jointly by The Fraud Advisory Panel, INSOL Europe and R3 in February 2021, we are now organising a live event to take place in London on 30 March 2022. This conference will bring together world-class speakers including policy makers, insolvency experts, fraud specialists and renowned academics, who will deliver unique insights into hot topics related to global financial crime including tackling rogue companies, cryptocurrency fraud, digital forensics, how to make fraudsters pay and much more!

If you would like to enquire about the sponsorship opportunities for this event, please contact Hannah Denney for more information about the packages available.

Joint Online Speed Networking with AIJA, 13 January 2022

Following our successful Young Members Group online networking events, this time we are joining forces with the International Association of Young Lawyers (AIJA) on 13 January 2022 for an opportunity to network with fellow young members from both associations. The event will be free to attend and more details will be posted on our website soon.

Full details of both these events will be launched on our website soon, but in the meantime please email Harriet Taylor for further details.