Legal advice generated by Large Language Models (LLMs) may prove unsound, erroneous, or even absurd.

According to a recent study*, gpt-4 and other similar public models: “hallucinate at least 58% of the time, struggle to predict their own hallucinations, and often uncritically accept users’ incorrect legal assumptions.” 

To address these problems, as well as an unmet request for professional and accurate legal advice from both laypersons and professionals with limited experience in a technical and narrow area of law like insolvency law, a research group headed by Eugenio Vaccari (Senior Lecturer in Law, Royal Holloway University of London) developed and tested the performance of a retrieval augmented generation (RAG) system for answering legal queries related to corporate insolvency in England and Wales. 

The Insolvency Bot they created relies on open-source legal information and HMRC forms to provide sound responses to a user’s query focusing on insolvency matters regulated by English law. According to a tailor-made mark scheme, they show that the Insolvency Bot consistently outperforms LLMs queried without the RAG setup, and show that newer versions of LLMs consistently outperform older ones when queried with the Insolvency Bot’s RAG enhancements, and its data sources. 

*Matthew Dahl et al., ‘Large Legal Fictions: Profiling Legal Hallucinations in Large Language Models’ (2024) 16(1) Journal of Legal Analysis 64, 64.

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This is the time of year when we consider retirements from and elections to our Council.

Countries with 30 or more members are entitled to a reserved seat on Council and in October this year, vacancies will arise for the following seats: Austria, Denmark, Netherlands, Poland, Romania and Switzerland.

There will also be two general (non-reserved) seat vacancies on Council, which are open to any member. In addition, there will be two special general seats which are available to smaller countries with fewer than 30 members.

Full details of the nominations process can be found on our website.

We have learned that an optimist is a person who is not aware of the full facts. Now these days it is a challenge to be an optimist even if you are not aware of all the facts. In a world where tariffs performing rollercoaster like moves are making the headlines and we fail to bring an end to more and more inhuman warfare, a growing number of businesses is struggling. More even as the times of seemingly unlimited subsidies are over and we’re seeing paradigm changes in the automotive and healthcare sector and good old High Street Retail is ailing as always. 

With that in mind it goes without saying that the number of insolvencies and distressed businesses are rapidly growing in Germany where we are by tradition heavily relying on exports and the manufacturing industry, write Renate Müller (Forvis Mazars Germany) and Michael Thierhoff (Forvis Mazars Germany).

Statistical numbers of formal business insolvencies have seen highs and lows in the century. The peak was in 2009 during the financial crisis when we had 33,000 with the low being at 13,993 at the height of the pandemic in 2021. Numbers have been on the rise since. In 2022 we were at 14,590 and the following year (2023) we reached 17,814 bringing it to 21,812 in 2024. And we are on the rise again this year. A recent study by Alvarez & Marsal reported that as much as 16.6% of the German businesses were to be classified as distressed in 2024. The highest number of all EU countries surveyed.

Total claims of creditors in corporate insolvencies in 2024 were reported to be EUR 58.1 billion (2023: EUR 26.6 billion). It can be assumed that particularly numerous major insolvencies (companies with an annual turnover of over EUR 50 m) had an impact on the increase of claims. In comparison to 2023, 314, more than double of those filed in 2024.

Preventive restructuring (StaRUG) introduced in 2021 with high expectations and a lot of publicity as the German answer to the English Scheme of Arrangement continued its very slow start. To those with more experience this does not come as a surprise as institutional lenders in Germany are very shy when it comes to innovation. Numbers here were 22 at the start in 2021 rising to 27 in 2022. Growth in 2023 was significant, bringing the number to 56 and last year we had 84 cases reported.

Looking ahead, current trends do not deliver a uniform message. While the economy grew at a rate of 0.4 % in the first quarter of 2025, which was two times what was expected, uncertainty is still prevailing about future tariffs, the development of the situation in Ukraine and the impact of the sweeping economic policy changes announced by the new government which is in office since early May. The first months of 2025 again saw a rise of clearly two digit percentages for business insolvencies. So, we are moving forward with some hopes but also some sorrows. Tough times for optimists.

Read further updates from Germany and other jurisdictions on our website here.

INSOL Europe Luxembourg Country Coordinators, Christel Dumont and Thibault Jauffret, recently hosted a conference in Luxembourg to mark the 25th anniversary of the Centre of Main Interests (COMI), with a keynote presentation by Professor Thomas Mastrullo. The event brought together local members and other participants for a valuable exchange on the evolution and future direction of this foundational concept in European insolvency law.

Introduced by Regulation No. 1346/2000 and refined in Regulation No. 2015/848 (EIR Recast), the COMI determines which EU Member State has jurisdiction to initiate main insolvency proceedings. Defined as the “place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties,” the COMI has become an autonomous and harmonised concept under EU law, by contrast to its UNCITRAL Model Law equivalent, where local applications can vary significantly across jurisdictions.

Professor Mastrullo emphasized how case law from the Court of Justice of the European Union - most notably Eurofood, Interedil, and Rastelli - has developed a fact-based, objective approach to interpreting the COMI. However, ongoing challenges remain, particularly in preventing forum shopping.

The presentation also explored important recent clarifications by the French and Luxembourg courts on:

• Substantive safeguards, including rebuttable presumptions and anti-abuse provisions (EIR Recast, art. 3(1)), and
• Procedural mechanisms, such as mandatory jurisdictional checks (EIR Recast., art. 5). and judicial review (EIR Recast., art. 4).
• The distinction between the main place of business - which does not require the presence of assets or personnel - and an establishment under the EIR,
• The criteria for identifying the COMI of individuals, where habitual residence plays a central role. It was ruled that presumption is not rebuttable solely by the fact that the debtor’s only real estate asset is located outside the Member State of habitual residence.

As cross-border restructuring becomes increasingly frequent, a robust and predictable COMI framework is vital for businesses, practitioners, and investors alike. This conference reaffirmed the importance of a harmonised approach that protects creditors while allowing viable businesses to restructure efficiently.