Germany is one of Europe’s lager countries where restructuring and insolvency law has changed dramatically over the last decade. The book of Eberhard Braun, InsO – Insolvenzordung, 7th ed., C.H. Beck, 2017, 2060 pp. (ISBN 978-3-406-69675-6), known as ‘the Braun’, reflects these recent changes. It provides an article-by-article commentary on the German Insolvenzordnung, with in addition a commentary on the revision of the EU Insolvency Regulation. It also includes a concise and compact treatment of Germany’s new (domestic) group insolvency law (the final version has been presented last March) and a commentary on its proposed rules on transaction avoidance.
Some thirty authors have contributed to the book, all being active as lawyers or financial consultants, which results in a clear orientation to the needs of practice, and the explanations given many times are the result of their rich experiences. The users of the book will be, I gather, primarily insolvency practitioners and attorneys. Having glanced through the commentary on the Insolvency Regulation recast (Reg. 2015/848) of around 250 pages, this orientation has its pros and cons.
References to ‘foreign’, non-German literature are near to absent (except for the Bork/Mangano book). That’s a pity as in cross-border cases other, non-domestic literature might present arguments in favor of the interests of a client or a party in litigation. On the other hand, the authors have several times referred to court cases (probably based on their own experiences) from for instance Spain, Poland and Bulgaria, to present ‘non-German’ views. A strength of the book is that several commentaries at the end provide for ‘practical hints and tips’.
In the treatment of the new rules for insolvency registers the following caught my eye. Recital 76 provides: ‘In order to improve the provision of information to relevant creditors and courts and to prevent the opening of parallel insolvency proceedings, Member States should be required to publish relevant information in cross-border insolvency cases [my italics] in a publicly accessible electronic register. In order to facilitate access to that information for creditors and courts domiciled or located in other Member States, this Regulation should provide for the interconnection of such insolvency registers via the European e-Justice’. Which information must be published?
The chosen wording regarding the information to be published (see my italics), and what this information specifically needs to contain (e.g. Article 24(2)(d) says: ‘… whether jurisdiction for opening proceedings is based on Article 3(1), 3(2) or 3(4)’), as well as the goal of providing this information (in recital 76: ‘In order to facilitate access to that information for creditors and courts domiciled or located in other Member States … ’) seems to indicate that only those proceedings mentioned in Annex A (compare Article 24(2)(c)) will be taken into the register that indeed have extra-territorial effect.
This reading would necessitate to make a selection between ‘cross-border’ cases and pure domestic cases. If this would be possible at all – cross-border effects may only come to the surface some time after the opening of proceedings – and if it would be clear who has to make this selection (the ‘Member State’, or an agency on its behalf, the court, the insolvency practitioner, ‘if any’ (see Article 24(2)(g))?), such a limitation is difficult to align with the general goal of enhancing the effectiveness on collective insolvency proceedings and the effet utile of EU law. See in this way too Dugué (Art. 28, nr. 20), submitting that national legislators should oblige ‘courts’ to supply the register with information (unless it is clearly a domestic case). I wonder whether the better solution should be a technology driven one: all cases in the register, which is, if I am correct, the present practice in the system of the European e-Justice Portal.
On groups of companies, initially, under the former Insolvency Regulation, matters of insolvency for groups of companies had been deliberately left out. Under the present regulation, they form a large part of the new provisions, commented and discussed by Tschentscher, Esser and Cülter. Article 56(2) provides that, in implementing the cooperation and communication between the insolvency practitioners (IPs), these IPs ‘shall’ a soon as possible cooperate and communicate etc.
The character of this ‘duty’ is discussed. Tschentscher (Art. 56, nr. 14) submits that its character is an ‘Obliegenheit’, which is an ‘obligation’ that only comes to live when it its triggered by the addressee of it. The result would be that the duty to inform only exists in case the insolvency practitioner in a foreign proceeding requires certain information. The text in different language versions is rather unclear (English: shall; German: ‘obliegt’; Dutch: insolventiefunctionarissen ‘gaan … als volgt te werk’; French: ‘[D]ans le cadre de la mise en oevre …’). Given the goal of ensuring the efficient administration of insolvency proceedings relating to different companies forming part of a group (recital 51) as well as the words ‘as soon as possible’ in Article 56(2)(a) I would expect IPs to be more active and start communication on their own initiative. At another place in the commentary Tschentscher (Art. 60, nr. 24), indeed seems to support the view that in practice IPs should inform each other on their own initiative.
In practice, on a case-by-case basis, it will many times be clear which of the IPs is or should be in the lead (e.g. in considering and proposing a restructuring plan), although it should be noted that there is no such thing as a ‘dominant’ proceeding (known from the interrelationship between ‘main’ and ‘secondary’ insolvency proceedings, see recital 48), as in the context of coordinating the members of a group all pending insolvency proceedings related to these members function on the same footing.
In the case that the court is satisfied that the three requirements as expressed in Article 63(1) are met (opening of group coordination proceedings is approapriate, no creditor financially disadvantaged; the coordinator fulfils professional requirements), it must notify the other IPs and it will hear them. Article 63(2)-(4) provide the rules on timing, form etc. of this notification. The court seised shall give the insolvency practitioners involved the opportunity to be heard. See Article 63(4). In such a case these IPs can bring any relevant aspects regarding the fulfilment of the requirements and any potential objections to the attention of the court before it decides on whether to send the notice. Esser (Art. 63, nr. 28), submits that Article 64 (‘Objection by insolvency practitioners’) allows the IPs to bring forward objections, and that for this reason the hearing in the meaning of Article 63(4) does not seem necessary.
I do not think that this is correct. Not only are the objections, provided for in Article 64 limited, to have a court decide on a certain matter without a hearing could easily contracdict the principle of equility of arms. Aforementioned right to object is limited to two situations, see Article 64(1)(a) and (b) (inclusion within group coordination proceedings; prior authorisation to the objection). Article 64(1) seems to limit the subject of the objections to the two given examples. What if the IP wishes to protest against the outline of the estimated costs and the share of the cost to be paid by each group member (see Article 61(3)(d))? Esser (Art. 64, nr. 6) submits that such objections should be allowed. In the light of the efficiency strived for I would support the view to limit the objections to the two mentioned in Article 64(1)(a) and (b). The regulation should not serve as an invitation to litigate. In closing, I refer to the ‘outsider’ in the insolvency arena, Articles 78 – 83, on privacy and data protection law, with a clear comment by Becker.
The new Braun is, in all, a very timely and relevant book, that helps practitioners to understand better (EU cross-border) insolvency law and assists in overcoming the obstacles that this area so often presents.
Prof. Dr. Bob Wessels
Prof. em. international insolvency law University of Leiden, The Netherlands
April 2017