CIGI (Centre for International Governance Innovation) and BIICL (British Institute of International and Comparative Law) recently published a paper in the series Brexit: The International Legal Implications | Paper No. 17 — February 2018, under the title 'Cross-border Insolvencies after Brexit: Views from the United Kingdom and Continental Europe'. The paper addresses the main problems arising from the UK's decision to leave the European Union with regard to insolvency proceedings. Issues discussed are the modes of recognition of foreign insolvency proceedings under British law (Section 426 of the Insolvency Act 1986, the UNCITRAL Model Law and the UK variant of the CBIR, covering not fully consistent case law and the British 'joker card' of Common Law) and the likely effect of Brexit (based on 5 variables in the relation UK-EU), the impact of Brexit on forum and law shopping, the reform proposal for British workout procedures and the use of British workout procedures by EU companies. Its authors are Howard P. Morris, Gabriel Moss, Federico M. Mucciarelli and Christoph G. Paulus. The views presented are based on talks the authors gave during a conference held in May 2017.
Brexit is around the corner and it is time to discuss and decide on the best way forward, including the alternatives available for a legal institutional instrument and options for insolvency related procedural and substantial solutions. One hears several times that such a solution should be that the EU would adopt the UNCITRAL Model Law.
Six years ago INSOL Europe has advocated to start with leveling up the Model Law to a Regulation to be adopted by the EU. In a report presented in 2012 Ian Fletcher and I have rejected that idea. Both the nature and the original effect of the Model Law (a template for individual countries, not economic regions), as well as the fact that certain matters already have been included in national legislation of Member States (be they followers of the Model Law or having drafted their own systems) in our opinion would only justify the use of a Directive as the medium for bringing about harmonisation of the laws of the Member States in relation to insolvency proceedings originating in non-EU states (as the situation is post-Brexit). See http://www.verenigingburgerlijkrecht.nl/images/preadvies2012.pdf, para. 183ff.
A 'Model Law' solution - if preferred - must, first, be tested against the present Insolvency Regulation (Recast) (EIR 2015), and, second, take into account new concepts that have not found a place in the Model Law, the text of which now is over 20 years old.
Matters to take care of relate to (i) inconsistency with the EIR 2015 (e.g. non-equal treatment of tax claims), (ii) the uncertain exclusion of certain proceedings relating to financial institutions (reference is made to a CIGI-BIICL paper (nr. 11 in the same series, written by Dorothy Livingston), (iii) a well-thought through provision regarding the relation between the EIR, the 'Model Law' and existing international treaties and agreements, and (iv) the inclusion of an interpretation provision which is not unproblematic in its application, given the purposive, sometimes autonomous interpretation which has to be given to EU-matters, as well as the fact that the originally intended 'unity' of terms (such as the bothersome 'COMI') only a few years after enactments have resulted in 'diversity' in several jurisdictions all over the world (note that the Cross-border paper signals aligning apporaches in this matter).
A 'Model Law' must be modernised. I have addressed this issue a few monthe ago, suggesting that a 'Model Law' also should include rules on applicable law (the ones contained in the Legislative Guide are not nuanced enough), provisions on data protection, group insolvency provisions, registration of insolvency decisions, the main insolvency practitioner’s power to give a unilateral undertaking (in order to prevent opening of proceedings in another state), professional and ethical rules for insolvency practitioners or rules for recognition of for instance decisions on director’s disqualification. See http://www.bobwessels.nl/blog/2017-11-doc7-some-remarks-on-the-model-law/.
Let's not confuse the dress rehearsal for the real thing. Put in place the institutional instrument first, with a framework of some bare key provisions. The hot potato (jurisdiction of the CJEU) should in this tier 1 instrument be a given. This part also could also cover other third countries. Then work jointly further in a EU-UK context to fill the topics mentioned. In addition, one of these could be the creation of a specific EU-UK court.
On December 4, 2017, the U.S. Bankruptcy Court for the Southern District of New York had to decide about a petition to recognise Dutch insolvency proceedings launched by an affiliate of Brazilian telecoms company Oi. The petition was brought by the insolvency trustee of Oi Brasil Holdings Coöperatief U.A. (Coop), a Netherlands incorporated subsidiary of a Brazilian parent company Oi S.A. The petition contains the request to recognise these proceedings in the Netherlands as a foreign main proceeding, and to terminate or modify the court’s prior recognition under Chapter 15 U.S. Bankruptcy Code of Brazilian bankruptcy proceedings in relation to Oi. These proceedings include the Dutch Coop. Aurelius Capital Management, and other creditors in the international bondholder committee, supported the petition. Together these parties are called ‘Movants’. The relief requested is opposed by the debtors that previously received recognition of the Brazilian bankruptcy proceedings in the New York Court. These debtors are joined by a separate group of Oi Group creditors (the ‘Steering Committee’). These parties are called Objectors. The Court decides on the parties’ competing views of the applicable legal standard for evaluating the Dutch petition and Coop’s centre of main interest (COMI). The Movants urge the Court to conduct a de novo review of Coop’s COMI under Section 1517(a) U.S. Bankruptcy Code as of the date this petition was filed. On the other hand, the Objectors advocate reviewing this case under Section 1517(d) U.S. Bankruptcy Code, which looks at whether a prior COMI determination should be terminated or modified because it was incorrect in the first instance or based on events that occurred after that recognition.
The Court finds that Section 1517(d) provides the appropriate standard.
Subsequently, the Court considers whether the doctrines of judicial estoppel and comity apply in this case: should the Court conduct its own determination of COMI under Chapter 15 or should it defer to prior rulings made by the Dutch courts. The Court concludes that judicial estoppel and comity should not apply here, one reason being the differences between the legal question before it and the one decided by the Dutch courts.
Finally, the Court evaluates the two prongs of Section 1517(d) for terminating or modifying a prior recognition. The first of these prongs directs the Court to determine whether the grounds for granting recognition were lacking. The Court examines the record before the Court at the time it recognized Coop’s COMI as Brazil. The Court determines that it should not modify or terminate recognition under the first prong in Section 1517(d). The second prong in Section 1517(d) examines whether the grounds of recognition have ceased to exist. The Court examines whether events after the prior recognition have changed Coop’s COMI from Brazil to the Netherlands. The Court concludes that this second prong has not been met and considers the economic reality of the special purpose nature of Coop, the expectations of creditors, the limitations on the Dutch Insolvency Trustee presented by the proceedings in Brazil, and allegations of impropriety against creditor hedge fund Aurelius. Aurelius’ actions are inconsistent with the trend in international insolvency law in the light of present draft rules from the UNCITRAL working group studying cross border insolvencies of multinational enterprise groups of the kind at issue in this case. Its actions here are at odds with the focus of this draft legislation on cooperation, value maximization and enterprise preservation.
In a 120 pages decision, the Court’s findings of fact and conclusions of law are presented. I have commented the case in the Dutch case law review JOR 2018/57, in English. The commentary is attached.
The Ian Fletcher International Insolvency Law Moot aims to encourage the best and brightest students around the globe to learn about international insolvency law and international commercial litigation. The yearly competition, which recently started, poses a hypothetical problem to challenge students' appellate advocacy skills. There is one qualifying written round, and the oral round finals were held in the beautiful and vibrant city of Sydney at the University of Sydney Law School Moot Courtroom. The competition is dedicated to raising the profile of insolvency and restructuring within the university curriculum. Students will have a chance to engage with their peers, judges and members of international insolvency bodies. The Fletcher Moot also provides an avenue for academics, judges and a diverse range of insolvency experts to collaborate in mentoring the next generation of lawyers. Professor Rosalind Mason (QUT Law Faculty, Brisbane) informed me that the 2018 Fletcher Moot was a great success. The names of the final 8 teams and the award winners can be found on: www.qut.edu.au/law/about/news-events/international-insolvency-law-moot/for-teams/awards. I see teams from Canada, Australia, Singapore. Are European continental universities up to the standard to enter into this global competition?
On March 23, 2018, at the University of Leuven, a celebration takes place of the 50th year since the adoption of the 1968 Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters, now Brussel I Recast. The Convention introduced and facilitated the free movement of judgments in the EU and helped to lay the foundations for the developments in European private international law (PIL) which have occurred since. Once PIL was obscure, now it forms the core of every cross-bor commercial relation or litigaton. The event is co-organised by Leuven Law’s Institute of Private International Law and Jura Falconis, KU Leuven’s student law review. Some eight topics will be presented and discussed, surrounding the European procedural rules on jurisdiction and enforcement of civil judgments (Brussels I Recast), including the future direction of EU private international law both for civil and commercial matters, provisional measures as well as ADR and Brussels I, the extra-EU application of European private international law, the relation between the Insolvency Regulation and Brussels I (see recently the 20 December 2017 case of Re CJEU C-649/16 Peter Valach & Ors v Waldviertel Sparkasse Bank AG & Ors (http://www.bobwessels.nl/blog/2018-02-doc1-liability-of-members-of-a-creditors-committee-in-cross-border-insolvency/) and the relation with the Hague Judgments Project. The conference ends with the future (the current European Commission agenda for the development of European private international law) and ends in a bit of a minor key (the relationship between the UK and the EU post Brexit). In all, an interesting event, not to be missed by students, scholars, judges and practitioners. Further information via https://gavclaw.com/2018/02/08/the-brussels-jurisdictional-regime-at-50-a-conference-at-leuven-on-23-march/
At Leiden Law School several Advanced Master programmes start again in September 2018. One ofe them is the programme on International Civil and Commercial Law, in which I lectured on matters of international restructuring and insolvency law. Since my retirement the present staff, professor Reinout Vriesendorp and Ilya Kokorin, asked me for some guest lectures. See https://www.universiteitleiden.nl/en/education/study-programmes/master/international-civil-and-commercial-law. This time my focus on a very interesting programme indeed, the full year programme of the Advanced Master on Law & Finance, see https://www.universiteitleiden.nl/en/education/study-programmes/master/law-and-finance, or see https://www.linkedin.com/pulse/advanced-llm-programme-law-finance-call-matthias-haentjens/.
The programme too has quite some output, to wich many international scholars or other financial experts contribute, including a programme of periodically inviting non-Dutch speakers. I was fortunate to work together with the director of this programme, professor Matthias Haentjens. The titles of the examples reflect the subjects lectures, such as Bank Recovery and Resolution – A Conference Book, The Hague: Eleven International Publishing 2014, a large Research Handbook on Crisis Management in the Banking Sector, in the series Research Handbooks on Financial Law, Edward Elgar Publishing, Cheltenham, UK, 2015, and last year with the second edition of Gabriel Moss, Bob Wessels and Matthias Haentjens (eds.), EU Banking and Insurance Insolvency, Oxford University Press, 2nd edition, 2017 (see http://www.bobwessels.nl/blog/2017-04-doc1-eu-banking-and-insurance-insolvency-2nd-ed-2017/) and the books published or forthcoming in the research together with Chinese professors and backed by the Netherlands Academy of Academic Science (KNAW) on New Bank Insolvency Law for China and Europe. Input is also delivered by a Dutch and a Chines PhD researcher, working in the Leiden staff. In 2017 the institute where this all is taking place celebrated its first lustrum, see http://www.bobwessels.nl/blog/2017-04-doc5-first-lustrum-of-hazelhoff-centre-for-financial-law/, and presently my colleague and I are in the final phase of editing a Research Handbook on Cross-border Bank Recovery and Resolution, with contributions on global and regional solutions to banks in distress, rules on corporate governance and risk taking by large banks, issues of law applicable to banks when measures taken must have effect outside the jurisdiction in which they are taken and an overview on cross-border cases (such as Lehman Brothers Treasury) and the way cross-border bank resolution is handled in Japan and China. Law & Finance covers global banking and financial matters, so the Advance Master welcomes candidates from all over the world.