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Blog 2015

2015-11-doc17 How to regulate the Insolvency profession?

Regulation of the insolvency profession should be created both at EU level and via hard law as well as soft law. This is what the audience found last Friday 20 November 2015, at the occasion of a conference, where the Institute for Corporate Law, Governance and Innovation Policies (ICGI), University of Maastricht, celebrated its first lustrum. Theme of the conference ‘Kansen en bedreigingen bij herstructurering van ondernemingen in financiële moeilijkheden’ (Challenges and Threats for Companies in Financial Distress). As my research for the European Law Institute is in English I delivered a paper in English (though spoke in Dutch), published as: B. Wessels, Business Rescue in Insolvency Law – Changing the laws and challenges for the profession, in: Tijdschrift voor vennootschapsrecht, rechtspersonenrecht en ondernemingsbestuur (TvOB), December 2015, pp. 207-215. For the draft manuscript, see the attachment. Wessels 2015-08 Business rescue TvOB final  Allthough the voting system (via a voting app for some 80 participants) could have worked better, around 90% of the voters found that approximation or harmonisation of insolvency law is in principle a task of the EU in creating a more predictable, stronger internal market. Will that have repercussion for the creation of professional rules for insolvency practitioners? From 45 voters, these were the answers to the following proposition: ‘To the extent that you have identified a need for reform of domestic rules or procedures in matters of rescue and insolvency, this will influence the position of professionals (know how; skills; integrity; supervision). Do you believe that any reforms would best be achieved’: (1) A purely at the domestic level (including selfregulation via national professional associations) 13%; (2) Through some form of harmonisation at EU Level 31%; (3) Through some form of soft law via a non-binding 'legislative guide' (mainly addressing national legislators) 7%; (4) A combination of 1,2 and 3: 49%. See attachment 'votes'. Votes An outcome that presently matches with my own thoughts about this topic.

2015-11-doc16 Allignment Brussels I and Insolvency Regulation

On 16 September 2015 the Federal Supreme Court of Germany had to decide about its international jurisdiction (ex Article 3(1) EIR) in a cross-border insolvency case between the Netherlands and Germany. The plaintiff in this case is the court-appointed liquidator of the assets of LG GmbH (‘the debtor’), who ran a chicken mästerei (fattening farm) until its petition for insolvency in March 2006 at the District court of Bielefeld, Germany. A broiler production contract was carried out in such a way that the debtor obtained from the Netherlands ‘one-day’ old chickens and related food items, reared and fed the chickens and then delivered them to a slaughterhouse (X) in the Netherlands. The course of business was laid down in a Dutch language ‘integration contract broiler’ of May 2005 between the debtor and the Dutch slaughterhouse. Art. 7 of the contract determined (in my translation; Wess.): ‘The purchase price for the delivered broilers is based on the ruling for delivery-time acceptance conditions of the slaughterhouse. ... The purchase price fixed in this way will be paid for delivery of slaughter chickens from feed suppliers on behalf of the slaughterhouse to the fatteners. The amount payable will be at least 14 days after delivery of broiler chicks to the bank or giro account of LG. The slaughterhouse has at any time the right to charge LG payable purchase price with bills for delivered food that has to be paid to the feed suppliers, and bills of breeding operation for the delivered day-old chicks.’ Moreover, Article 14 of the contract contains the following clause: ‘Any dispute arising from this contract, the court in ‘s-Hertogenbosch is authorized in accordance with the normal procedural rules.’ The plaintiff claimed from the defendant the purchase price in the amount of € 222,650.73 plus interest for broilers, which have been delivered in February and March 2006 to X. In that regard, however, X questioned the payment obligation in dispute, but also raised its claims arising from the supply of food, claims from the supply of day-old chicks and for a loan of over € 50,000. His claim for sett-off, the plaintiff protests, is in accordance with § 96 para. 1 no. 3 German Insolvency Act (InsO) invalid. The Bielefeld court decides – based on the objection of the defendant – that it has no international jurisdiction and dismisses the plaintiffs claim. The appeal against that judgment by the plaintiff was rejected by the Court of Appeal of Hamm on 4 December 2014. The Federal Supreme Court of Germany, in its decision of 16 September 2015, decides the following: The international jurisdiction of German courts for a purchase price action – in this case a price action on behalf of third parties – of a German court appointed insolvency practitioner for an insolvent debtor, subject to German insolvency proceedings, concerning a contract concluded prior to the commencement of insolvency proceedings with a supplier established in other EU Member State is not determined according to Art. 3(1) EIR, but according to the provisions of the Brussels I Regulation, if the alternative way of payment, via sett-off in accordance with § 96 para. 1 no. 3 InsO, looks ineffective. I think the judgment is in line with CJEU 4 September 2014, C-157/13 (Nickel & Goeldner), in which the European court decided that Article 1 of the Brussels I Regulation must be interpreted as meaning that an action for the payment of a debt based on the provision of carriage services taken by the insolvency administrator of an insolvent undertaking in the course of insolvency proceedings opened in one Member State and taken against a service recipient established in another Member State comes under the concept of ‘civil and commercial matters’ within the meaning of that provision. In this category also falls such an action, regardless of the fact that a counterclaim based on a provision in an act on insolvency law may be possible.

2015-11-15 Joint research into New Bank Insolvency Law in China and Europe

In February 2014, China University of Political Science and Law (CULP, Beijing, China) and Leiden Law School’s Hazelhoff Centre for Financial Law launched the innovative joint research project New Bank Insolvency Law for China and Europe. The project is partly funded with a grant from the Royal Netherlands Academy of Science (KNAW). Clearly in the spotlight of the Chinese and European legislators, the last seven years bank insolvency law is unequivocally a subject of major economic, social and political relevance. A team of some ten researchers from both universities are taking part in the project. In March 2015 the first results were discussed at a workshop in Beijing. In that workshop, CUPL and Leiden researchers discussed elaborate reports written by them, which reports set out the current and future state of, in short, bank insolvency law in China and Europe. As a result of the meeting, some topics were selected for further investigation in a second report. This second report has been the focal point at a workshop that took place in Leiden on 5 and 6 November 2015. The report elaborates on several topics, including the financial transactions entered into by a failing bank, judicial redress, deposit guarantee schemes, bail-in and the recognition of resolution measures of and in third countries. On behalf of Leiden Law School, Prof.  Matthias Haentjens, Prof.  Bob Wessels, PhD candidate Ms Lynette Janssen and exchange PhD-candidate Jing Zhang participated in the Leiden seminar. From CUPL side, professor Qingjiang Kong, PhD candidate Shuai Guo and the lawyer Armstrong Chen were present. The project will conclude with a conference for which eminent scholars in the field as well as high level policy makers will be invited. The results of the research project will be published in a book. Moreover, the research will result in practical advice to the national and European legislature, for instance in the form of consultation papers and legislative proposals. For further information: info@bobwessels.nl

2015-11-doc14 4e druk van monografie over 'Koop' verschenen

Koop: algemeen Deze week verscheen de vierde druk van de mijn monografie over ‘Koop: algemeen’.  Het onderwerp ‘koop’ neemt in de systematiek van het Nederlandse vermogensrecht een belangrijke plaats in. In deze publicatie wordt aandacht gegeven aan Titel 1 van Boek 7 BW en de bijzondere rechten en verplichtingen die deze titel voor contractspartijen bij koop in petto heeft. Omdat aan de onderwerpen ‘consumentenkoop’ en ‘koop van onroerende zaken’ andere deeltjes in deze serie Monografieën BW gewijd zijn, ligt het accent in dit deel op koop en verkoop tussen professionele (handels-)partijen van roerende zaken en van 'rechten'. Bijzondere aandacht is gegeven aan varianten met koop (zoals de koopoptie, koop op proef of op monster, recht van wederinkoop, voorkeursrecht tot koop), het recht van reclame en de koop en verkoop van vermogensrechten, waaronder aandelen, de koop en verkoop van een onderneming en goodwill, en natuurlijk de overdracht vrij van rechtsgebreken en feitelijke gebreken (‘conformiteit’) en de klachtplicht van de koper. Info: B. Wessels, Koop: algemeen, Monografieën BW, Deventer: Wolters Kluwer, 4e druk, XIV + 136 pp. ISBN 9 789013 126426 (http://www.wolterskluwer.nl/shop/boeken_products/koop-algemeen/prod10158081.html).

2015-11-doc13 UK scheme of arrangement for Ukraine bank.

For the first time in England a scheme was applied to a foreign bank. On 13 November 2016 the English High Court of Justice sanctioned a scheme of arrangement for the ‘Privatbank’ of Ukraine. The bank has since 1992 operated under a full banking licence issued by the National Bank of Ukraine. The bank is quite a player in Ukraine, being the largest bank by assets, loans and deposits, with a market share of approximately 34% of all retail deposits. Mid 2015 it had 30 branches, 2,881 outlets in Ukraine, a branch in Cyprus, a subsidiary in Latvia and rep. offices in China and the UK. Non-UK companies sought and found scheme jurisdiction in the UK, based on a ‘sufficient connextion’ to England (Drax, Stocznia Gdanska) and companies were able to restructure via a scheme by using English-law governed finance documentation, e.g. Rodenstock, Primacom and – in July 2015 – the Dutch Van Gansewinkel group. See http://bobwessels.nl/2015/09/2015-09-doc16-scheme-of-arrangement-for-van-gansewinkel-group/. The scheme in the Privatbank case was ‘… overwhelmingly approved’ (thus the Court) by its creditors. With the restructuring of its public debt the bank will significantly strengthen its capital base, ensuring its customers that they can have confidence in Privatbank. The High Court relies heavily on the results where Asplin J at the hearing of the application came to: after hearing of submissions, she was satisfied that the English court had jurisdiction and that holders of certain notes were creditors of the bank. She was also satisfied that the bank is ‘… a company liable to be bound up under the  Insolvency  Act 1986 for the purposes of the sections dealing with schemes of arrangement’. Although incorporated under the laws of Ukraine, the bank is capable of being wound up as an unregistered company under section 221 of the  Insolvency  Act 1986. Both Asplin J and Richards J, at the sanction hearing, examined the requirement of there being a sufficient connection with England to make it appropriate for the court to consider the proposed scheme of arrangement. Richards J found that all the agreements and trust deeds connected with the two sets of notes and the related subordinated loans are, by their express terms, governed by English law and that all the agreements and trust deeds contain either clauses giving jurisdiction to the English courts or clauses submitting disputes to arbitration with a London seat. As regards the connection with England, Richards J marked as the critical point that the arrangements relating to a series of 2016 Notes and of 2021 Notes are governed by English law. Subject to public policy exceptions, variations to the rights of parties to contracts made in accordance with the law of the country governing the contract will, under the conflicts of laws principles applied by most countries, be recognised as valid in those countries. And the Court noted that the expert evidence of Ukrainian law established that this is the case as regards Ukraine. Richards J follows what Lawrence Collins J observed in Drax that an important aspect of the international effectiveness of a scheme involving the alteration of contractual rights may be that it should be made … by the courts of the country whose law governs the contractual obligations. The High Court in Privatbank ([2015] EWHC 3299 (Ch)) found that this is a sufficient connection with England to justify the court considering and, if thought fit, sanctioning the proposed scheme of arrangement. The Court also concluded that, if sanctioned, the scheme will have a substantial effect, where the rights of noteholders will be varied in accordance with the governing law and the expert evidence on Ukrainian law had established that the Ukrainian courts would recognise and give effect to such variation.