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Blog 2013

2013-12-doc10 Leiden Law School Turnaround, Rescue & Insolvency research

Together with international partners, such as the European Law Institute, the European Commission, International Insolvency Institute, American Bankruptcy Institute and Universities of Nottingham, Regensburg and Oxford a group of researchers is involved in several research projects. The attached information sheet provides a brief overview, wtih themes and contactdetails of the persons involved. Is was distributed at a mini seminar early this week, with around 30 participants. Information Sheet - Leiden Law School Turnaround Rescue Insolvency Research Seminar

2013-12-doc11 To Warrant Independency of Insolvency Office Holders

In post 2013-12-10 I refered to several ongoing research projects in the area of turnaround, rescue and insolvency in which the Leiden Law School is involved in. One of these is the IOH-project. For an article (in Dutch) on how to better warrant the independency of insolvency professionals, see attached the proofprint on Maandblad voor Vermogensrecht 2013-10. MvV 2013-10

2013-12-doc9 European approach to business failure and insolvency

During the general congress of INSOL Europe, end of September in Paris, I was invited to speak on the theme of 'To restructure or to liquidate'. I was able to say some words on the July 2013 initiative of the European Commission, launching a public consultation for a new approach to business rescue. My remarks will be published soon in INSOL Europe's newsletter. The proof is attached.Wessels Eurofenix Winter 2013-2014

2013-12-doc8 English Scheme of Arrangement - recognition in the Netherlands?

Since some three years there has been a growing use of the English’ ‘scheme of arrangement’ by companies incorporated in other EU Member States. In the early days I have doubted that such a scheme of arrangement would be a viable option for a European rescue strategy. See in my 2006-2013 Archive document 2010-12-doc2. Since then, several high profiles cases have hit the legal news, such as TeleColumbus GmbH, Primacom Holdings GmbH and Rodenstock GmbH. On the latter my 2006-2013 Archive document 2011-05-doc3. These were German incorporated companies, able to access the English scheme of arrangement without transferring their seat or their COMI to the UK, but were the court found that there was a ‘sufficient connection’ to assume jurisdiction. In these cases typically the rights of the relevant creditors were governed by English law. Another test the English court applies, before it sanctions a scheme, is whether indeed the scheme will achieve its purpose, meaning that it will be recognised in the states where (most of) the creditors are located. Several recognition methods may apply, such as a national law enacting the UNICTRAL Model Law on Cross Border Insolvency, the EU Insolvency Regulation (although the Scheme of Arrangement is not listed in Annex A), Rome I or the Brussels I Regulation. It also may be the case that certain countries follow the concept of universality which would allow the English scheme to have legal effect in that country. For understanding the dimension of a scheme of arrangement, a most interesting case was decided by the English High Court on 3 December 2013 (Magyar Telecom B.V. [2013] EWCH 3800 (Ch)). Here the company is registered in the Netherlands and the relevant creditors’ notes at hand were not governed by English law but by New York law. In this case there is expert evidence of US law that it is likely that the US Courts would, under Chapter 15 of the U.S. Bankruptcy Code, recognise the scheme and give effect to it. Interestingly, the Court observes the same consequence for the Netherlands: ‘… Similarly, there is expert evidence that the courts of the Netherlands would recognise and give effect to the scheme, …’ In general in the Netherlands there will be a majority view for recognising a scheme of arrangement if it is sufficiently connected to the English legal system, which however is not the case in Magyar Telecom. The Court does not express any other observation regarding the Dutch evidence presented. It may be the case that the expert has submitted that his expert advice was supported by the view of the Netherlands Supreme Court expressed in its judgment of 13 September 2013, ECLI:NL:HR:2013:BZ5668 (Promneftstroy) generally authorising a foreign bankruptcy trustee (representing the insolvency Russian oil giant Yukos Oil) to manage as well as sell or otherwise dispose of assets located in the Netherlands, provided that this is allowed under the lex concursus (Russian law). He may in principle – I leave exceptions aside – do so without having his Russian proceeding recognised or otherwise controlled by a Dutch court. This renewed expression of the Supreme Court's view (a mixture of universality and territoriality) could have been used by the expert. It leaves all enough food for though. For insolvency practitioners the High Court may also serve as a warning: ‘There is one point of practice in relation to the expert evidence of foreign law filed by the company in this case. The evidence of US law and Hungarian law was given by partners in White & Case in New York and Hungary respectively. White & Case, acting by their London office, are the solicitors acting for the company. While I am satisfied that the reports provided on US and Hungarian law have been expertly and conscientiously prepared, I consider that the important feature of independence would be enhanced if such reports were provided by experts unconnected with law firms professionally engaged in the scheme. This consideration is all the more important in cases where there is no opposition to the application.’ In the Netherlands we would say: that is once, but never again.2013-12-03 Magyar Telecom

2012-12-doc6 Detroit is eligible for Chapter 9 bankruptcy

On August 13, I posted a blog on the Leiden Law Blog ( with the quesion whether a city in principle can go ‘bankrupt’. I concluded that the Chapter 9 U.S. Bankruptcy Code proceeding has too much of its own characteristics to regard it as a 'bankruptcy' in the classical sense. Last week bankruptcy Judge Steven Rhodes decided positive indeed on the question of eligibility of the City of Detroit being a debtor in Chapter 9 proceedings. It has been said that Chapter 9 may become a more viable option for distressed municipalities, especially those struggling with pension debts. Although I am not aware of specific insolvency rules for municipalities in the European Member States, Judge Rhodes’ 150 pages Opinion definitively is an interesting read. 2013-12-05 Detroit Opinion