The Turnaround, Rescue and Insolvency (TRI) research group from Leiden Law School is organising its 3rd annual conference. The speakers explain and discuss current reseach and the results achieved. The topics include drafting of European rules for the profession of turn around expert, proposals for a European approach on selected matters of recue of (near to insolvent) companies, principles and guidelines for cross-border cooperation between Insolvency courts and liability of company directors in and before Insolvency. The audience will be around 40, including practitioners and international students. Thursday 10 December, 14.00 - 17.00 hrs, plus drinks, KOG building, Steenschuur 25, Leiden. See http://www.tri-leiden.eu/research-seminar/
This week the Federal Government of Australia presented proposals for renewing its insolvency law. These should assist entrepreneurs to really act as such, by taking risk and leave behind the fear of failure (the 'stigma' of insolvency) and be more innovative and ambitious. The package of insolvency law reforms will include: (i) a default bankruptcy duration of one year (currently this is three years), (ii) protection from insolvent trading claims for directors who appoint a qualified restructuring advisor to develop and implement a turnaround plan; and (iii) protection against so called 'ipso facto clauses' which would otherwise permit suppliers to terminate contracts with companies undergoing a formal restructure. It is announced that a proposal paper will be released in 2016. Legislation is expected to pass in mid-2017. See http://www.innovation.gov.au/page/insolvency-laws-reform. Here in Europe a similar wind is blowing. The context, however, is different, as Europe in insolvency law terms, is a quilt with 28 different sorts of fabric in just as many different colours. In March 2014, the European Commission adopted Recommendation on a new approach to business failure and insolvency addressed to the Member States concerning the national rules on insolvency. The Recommendation aims at establishing at an EU level minimum standards for (1) preventive restructuring procedures enabling debtors in financial difficulty to restructure at an early stage with the objective of avoiding their insolvency, and (2) discharge periods for honest bankrupt entrepreneurs which would allow them to have a second chance. The Member States were invited to implement the Recommendation by 14 March 2015. The results, however, are limited. Just a few of them have - selectively - applied the recommended provisions. The Commission keeps underlining the need for a greater coherence between the national insolvency frameworks in order to reduce divergences and inefficiencies which hamper the early restructuring of viable companies in financial difficulties and the possibility of a second chance for honest entrepreneurs, and thereby lower the cost of restructuring for both debtors and creditors. This seems like a dual approach for national countries: improve your national laws, but do it in a way that all Member States dance to the same music, and preferably at the same time. In September 2015 I reported some of the changes to be expected in upcoming corporate insolvency law in Australia. Examples described in a preliminary report included: (i) that formal restructuring of companies through voluntary administration should be enabled as an option for the sitiation when a company may become, but is not yet, insolvent, (ii) that there should be a ‘safe harbour’ provision to allow company directors to explore restructuring options without liability for insolvent trading, and (iii) that a simplified liquidation process should be introduced to reduce the time and expense toward winding up businesses with little or no recoverable assets, to name a few. See http://bobwessels.nl/2015/09/2015-09-doc19-australian-corporate-insolvency-law-reform/. The December 2015 proposals presented now embrace these examples. In Australia this week too, it was announced that the efficient operation of Australia's insolvency regime requires an insolvency profession that stakeholders can have confidence in. In Europe, I have defended the same benchmark to further develop not only national, but European professional rules for the insolvency profession. The Bill introduced in Australia is meant to assist in restoring confidence in the insolvency profession by raising the standards of professionalism and competence, as well as allowing for better identification and swift removal of practitioners who fail to meet the necessary requirements. In Europe, I would say, it is not so much restoring confidence, but securing confidence in insolvency practitioners in a harmonised way, before a moment that we come to regret that we left the present hotchpotch in place. For the Australian bill, see http://kmo.ministers.treasury.gov.au/media-release/031-2015/?utm_content=buffer74cc1&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
In September 2015 the General Assembly of the United Nations adopted resolution 69/319, in which it declared that sovereign debt restructuring processes should be guided by nine ‘Basic Principles on Sovereign Debt Restructuring Processes'. The General Assembly, in its considerations, stressed ‘… the importance of a clear set of principles for the management and resolution of financial crises that take into account the obligation of sovereign debtors and their creditors to act in good faith and with a cooperative spirit to reach a consensual rearrangement of the debt of sovereign States’. It then declared that a sovereign debt restructuring process should be guided by nine Basic Principles, including (1) a Sovereign State’s right – at a last resort and preserving at the outset creditors’ rights - to sovereign debt restructuring, (2) the observance of good faith both by the sovereign debter as well as all of its creditors, (3) the transparency of the process, (4) the impartiality of all actors involved, (5) an equitable treatment of creditors (mainly negatively: a State’s duty to refrain from arbitrarily discriminating among creditors), (6) respecting a restrictively interpreted sovereign immunity, (7) ensuring legitimacy in the process, including the rule of law at all levels, (8) applying both a sustainable process (timely and efficient leading to a stable debt position), and (9) the principle of majority restructuring. These Basic Principles are the result of years of negotiations and deliberations on sovereign debt restructuring. Although a small step, they should be welcomed as reflecting the rudiments of existing rules and principles of international law which apply to sovereign debt issues, as well as a response to the existing ad hoc way of addressing sovereign debt problems, being rather inadequate to resolve growing incidences of debt crises in a timely, legitimate, impartial and balanced manner. For related documents see http://www.ohchr.org/EN/Issues/Development/IEDebt/Pages/Debtrestructuringvulturefundsandhumanrights.aspx While the Basic Principles were supported by over 130 States, there is reason to doubt whether a binding treaty will be concluded in this decade. Of course, every word used needs further clarification. More importantly, six (large ‘creditor’) countries, such as USA, Canada, Germany, Japan, and the UK) have not given their support to the principles, obviously struggling with the first principle, a Sovereign State’s right, ‘… in the exercise of its discretion, to design its macroeconomic policy, including restructuring its sovereign debt, which should not be frustrated or impeded by any abusive measures'. These latter words seems to be addressed to certain institutional funds and hedge ('vulture') funds. Any interest in the theme of sovereign debts, see the activities at the Leiden Law School, Wednesday 9 December, in the afternoon (see http://bobwessels.nl/2015/12/2015-12-doc2-focus-on-sovereign-debts/).
The Helsingin hovioikeus (Court of Appeal, Helsinki, Finland) referred several questions to the CJEU in a case between Nike European Operations Netherlands BV (‘Nike’, incorporated in the Netherlands) v Sportland Oy, in liquidation (‘Sportland’, incorporated in Finland), concerning an action to have certain transactions declared void by virtue of insolvency. Sportland was a retailer of goods supplied by Nike under a franchising agreement, which by a choice of law clause was governed by the laws of the Netherlands. Sportland paid Nike outstanding debts arising from the purchase of stocks set out in the agreement in 10 separate instalments made between 10 February 2009 and 20 May 2009, with a total of € 195 108.15. Two week prior to the last payment, with an application of 5 May, the District Court of Helsinki opened insolvency proceedings in respect of Sportland on 26 May 2009. Sportland brought an action before the court seeking an order that the payments be annulled and that Nike be required to make restitution of the amounts paid plus interest in accordance with Paragraph 10 of the Finish Law on recovery of assets (takaisinsaannista konkurssipesään annettu laki). The provision says that the payment of a debt within three months of the prescribed date may be challenged if it is paid with an ‘unusual’ means of payment, is paid prematurely, or in an amount which, in view of the amount of the debtor’s estate, may be regarded as significant. Nike, on the contrary, sought an order that the action be dismissed. It relied, inter alia, on Article 13 of EU Insolvency Regulation No 1346/2000 (EIR), claimed that the payments at issue were governed by Dutch law, and that Article 47 of the Bankruptcy Act (Faillissementswet) (providing that the payment of an outstanding debt, so a claim which is due, may be challenged only if it is proven that when the recipient received the payment he was aware that the application for insolvency proceedings had already been lodged or that the payment was agreed between the creditor and the debtor in order to give priority to that creditor to the detriment of the other creditors) does not apply. So, thus Nike, those payments were not able to be annulled. The legal context of the case is formed by the interplay between Articles 4 and 13 EIR. For my commentary, see further the attachment. 2015 Oct 10 Wessels Comment Nike BV v Sportland Oy
Souvereign Debts. Wednesday 9 December 13.30: a mini-seminar and a PhD defense at the Leiden Law School. Wednesday 9 December at 16.00 my NWO PhD researcher Yanying Li will defend her PhD dissertation ‘Inter-creditor Equity in Sovereign Debt Restructuring. Towards the Establishment of a Multilateral Legal Framework' (Academy building, Rapenburg 67 – 73, Leiden). After having been a PhD researcher in Leiden for some three years, since a few months Ms Li works as an associate at Clifford Chance in London. Her dissertation is very timely, with Argentina and Greece as vivid examples. She explores the relationship among creditors in sovereign debt restructuring and specifically focuses on the issue of inter-creditor equity. It consists of five (peer reviewed) articles, focusing on the core issues regarding inter-creditor equity in the context of domestic insolvency law. It is largely inspired by international developments on the legal reform and practice of sovereign debt restructuring in the past three years. Overall, she argues that a multilateral legal framework for sovereign debt restructuring should not take the form of a collective proceeding and should not include debt claims with all types of maturities. In the context of a cram-down, a safeguard procedure should be put in place to ensure that any amendment of the contract terms imposed by majority bondholders is fair and equitable with respect to minority bondholders who have voted against the amendment. Arbitral tribunals established pursuant to international investment treaties could serve as an appropriate forum to develop such a safeguard provision. Ms Li suggests the establishment of a new arbitral tribunal, preferably modelled after the tribunal concerning the Bank for International Settlements (BIS), which could apply the safeguard provision once developed, because not all sovereign debt claims can be filed before investment treaty tribunals. Preceding her defense a mini seminar on Perspectives on Sovereign Debt Restructuring is organised. Date & Location: Wednesday 9 December 2015 from 13.45 – 15.30, Room B017 - Kamerling Onnes Building - Steenschuur 25 2311 ES Leiden. The seminar is chaired by prof. Matthias Haentjens, professor of financial law, Hazelhoff Centre for Financial Law, Leiden Law School. Programme: 13.30 Coffee/tea 13.45 Welcome by the chair 13.55 – 14.15 International perspectives - Prof. Dr. Ignacio Tirado, LLM Área de Derecho Mercantil de la Facultad de Derecho Universidad Autónoma de Madrid, Spain 14.15 – 14.35 Insolvency law perspectives - Prof. Dr. Reinout Vriesendorp, as of 1 January 2016 professor of insolvency law, Leiden Law School 14.35 – 14.55 Practical perspectives - Miss Kim Solberg, Senior policy advisor IMF, International Affairs, Directorate, Ministry of Finance The Netherlands, The Hague 14.55 – 15.30 Discussion 15.30 End of mini-seminar No entry fee. Registration prior to Tuesday 8 December 12.00 hours via Ms Maureen Aartman at email@example.com.