Last week, the Financial Stability Board (FSB) announced it is seeking feedback from stakeholders as part of its evaluation of the effects of the too-big-to-fail (TBTF) reforms for banks that were agreed by the G20 in the aftermath of the global financial crisis. The evaluation aims to assess whether the implemented reforms are indeed reducing the systemic and moral hazard risks associated with systemically important banks (SIBs). A second aim is to examine the broader effects of the reforms to address TBTF for SIBs on the overall functioning of the financial system. The G20 launched a comprehensive programme of financial reforms to increase the resilience of the global financial system, while preserving its open and integrated structure. With the post-crisis reforms nearly complete and their implementation well under way, the FSB's position is that an analysis of the effects of these reforms is becoming possible. To that end, the FSB published in July 2017 a framework for the post-implementation evaluation of the effects of the G20 financial regulatory reforms. For the feedback on the May 2019 announcement a working group has been set up, chaired by Claudia Buch (Vice-President Deutsche Bundesbank). The feedback more particularly addresses the following issues:
1. To what extent are TBTF reforms achieving their objectives as described in the terms of reference? Are they reducing the systemic and moral hazard risks associated with SIBs? Are they enhancing the ability of authorities to resolve systemic banks in an orderly manner and without exposing taxpayers to loss, while maintaining continuity of their economic functions? What evidence can be cited in support of your assessment?
2. Which types of TBTF policies (e.g. higher loss absorbency, more intensive supervision, resolution and resolvability, other) have had an impact on SIBs and how? What evidence can be cited in support of your assessment?
3. Is there any evidence that the effects of these reforms differ by type of bank (e.g. global vs domestic SIBs)? If so, what might explain these differences?
4. What have been the broader effects of these reforms on financial system resilience and structure, the functioning of financial markets, global financial integration, or the cost and availability of financing? What evidence can be cited in support of your assessment?
5. Have there been any material unintended consequences from the implementation of these reforms to date? What evidence is available to substantiate this?
6. Are there other issues relating to the effects of TBTF reforms that are not covered in the questions above and on which you would like to provide your views? Please substantiate your comments with evidence.
Feedback, including evidence in support of the responses, is to be submitted by 21 June 2019 to email@example.com under the subject heading “TBTF evaluation”. Provided responses will be published on the FSB’s website (www.fsb.org) unless respondents expressly request otherwise. The feedback (expeced in 4 weeks) will be considered by the FSB as it prepares the draft report, which will be issued for public consultation in June 2020. The final report will be published in some 18 months from now, late 2020.
De Nederlandse wetgever zend eind mei 2019 een open consultatie uit tot wijziging Boek 7 Burgerlijk Wetboek en enige andere wetten in verband met de introductie van een regeling betreffende de rechten van de werknemer bij overgang van een onderneming in faillissement. Zij wil een nieuwe regeling ingevoeren betreffende de positie van werknemers in faillissement, in het bijzonder ten aanzien van de rechten van een werknemer bij een overgang van onderneming in faillissement.
Voor de open consultatie, zie https://www.internetconsultatie.nl/overgang_van_onderneming_in_faillissement
In september 2017 hebben prof. Stephan Madaus (Universiteit van Halle, Duitsland) en ik ons rapport 'Instrument of the European Law Institute - Rescue of Business in Insolvency Law' aan het European Law Institute (ELI) (http://www.europeanlawinstitute.eu/) aangeboden. Het is toen door alle organen binnen het ELI unaniem aanvaard. Het bevat 115 aanbevelingen, die door auteurs in diverse landen al zijn opgepikt en waarvan er één mede Engelse voorstellen bepaalt, zie https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/736163/ICG_-_Government_response_doc_-_24_Aug_clean_version__with_Minister_s_photo_and_signature__AC.pdf.
Madaus en ik vragen de Nederlandse regering (de verantwoordelijke ministeries van Justitie en Veiligheid en Sociale Zaken en Werkgelegenheid) aandacht voor de negen aanbevelingen die wij ten aanzien van 'arbeid' doen. Deze steunen mede op rechtsvergelijkend onderzoek in ruim tien Europese landen en richten zich ook op de situatie dat een bedrijf zich 'in the likelihood' van insolventie bevindt. De aanbevelingen luiden als volgt:
Labour, benefit and pension issues
Recommendation 5.01: Member States ensure that employees and workers’ councils receive timely notice about an imminent restructuring or insolvency.
Recommendation 5.02: Employment contracts should not end automatically upon the commencement of (pre-)insolvency proceedings. Member States should ensure that such contracts enjoy full labour law protection outside of formal insolvency proceedings while being treated under the applicable rules for executory contracts in insolvency proceedings.
Recommendation 5.03: Member States provide for a default continuation rule combined with the right of the insolvency practitioner or the debtor in possession to terminate employment contracts within a short period.
Recommendation 5.04: Labour law protection, including special protection for pregnant or ill employees, should only be applicable outside of formal insolvency proceedings. In formal restructuring proceedings, any redundancies should be required to follow from the necessities of the rescue strategy pursued by the restructuring plan. The plan should, in principle, provide for severance payments.
Recommendation 5.05: Employees whose employment contract was terminated in the course of formal insolvency proceedings, should be free to conclude a new contract with any employer available. Neither contractual non-competition clauses nor statutory non-competition rules should apply unless the employee receives adequate protection or compensation.
Recommendation 5.06: Member States should provide that, whenever a specific number of employees in an establishment are likely to be affected by a restructuring plan or a liquidation (including a business transfer), a representative should have a right to represent and to protect their interest by participating in formal restructuring and liquidation proceedings (e.g. in a creditors’ committee).
Recommendation 5.07: The protection of unpaid salary claims can be achieved by treating them as preferred claims or even administrative expenses in a formal procedure. Where a cost-efficient guarantee institution exists, Member States should ensure rely on it and ensure that it covers as much unpaid salary as possible and allows for a timely payment to employees.
Recommendation 5.08: The European Commission is invited to conduct an overall comparative study on the laws relating to the treatment and protection of pension-related contribution and claims in case of an (imminent) insolvency of the contributing employer that includes all relevant aspects of EU rules as well as substantive national pension, labour, and insolvency law.
Recommendation 5.09: Member States should ensure that individual or occupational pension schemes are to be restricted to indirect pension schemes which either use (insolvency-remote) third parties or are protected by a guarantee scheme. The restructuring of pension entitlements from a direct pension scheme should only be possible where a guarantee protection scheme is in place.
In this contribution, Leiden PhD researcher Ilya Kokorin and I, seek to revisit the Zetta Jet case, as was decided on 4 March 2019 by the High Court of Singapore (Justice Aedit Abdullah) (Re: Zetta Jet Ptd and others (Asia Aviation Holding Pte Ltd, intervener)  SGHC 53 (Zetta Jet)). We highlight what we see as its major significance, namely two clarifications related to the determination of “centre of main interests” (COMI) under Singapore law. These clarifications relate to the international foundations of the law, not to Singapore law itself. They concern (i) the date (reference time) on which the assessment of the debtor’s COMI should take place under UNCITRAL Model Law on Cross-Border Insolvency (as enacted in Singapore in May 2017), and (ii) the test for COMI determination, including the strength of the registered office presumption. Our general conclusion is that the position adopted by the High Court of Singapore in Zetta Jet sets it apart from current European rules, when it comes to the application of the concept of COMI. We argue that this divergence is neither justifiable, nor economically desirable.
The case concerns debtor Zetta Jet Pte Ltd (Zetta Jet Singapore, debtor), a Singapore-incorporated company, involved in aircraft rental and charter. Together with Zetta Jet USA, Inc., its wholly owned US subsidiary, Zetta Jet USA, Inc. (together called “Zetta Entities”), Zetta Jet Singapore filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. The proceedings were subsequently converted into Chapter 7 proceedings. At its first try, the Singapore courts refused recognition of these proceedings was refused in Singapore, based on the fact that they effectively contravened an Singapore injunction granted in Singapore, enjoining foreign proceedings. As the court then argued, “ignoring an injunction granted by a Singapore court undermines the administration of justice.” But in summer 2018, however, the injunction was discharged by consent of the parties involved in summer 2018, and the path for recognition was now clear. As the public policy obstacle for recognition (arguably) disappeared, the court had to decide whether the US proceedings against Zetta Jet Singapore should be recognised as foreign main proceedings or foreign non-main proceedings. It is worth highlighting the key difference between the two. Foreign main proceedings qualify for more extensive reliefs than foreign non-main proceedings. For instance, only main proceedings trigger automatic relief (e.g.for instance, a stay of execution against the debtor’s assets) pursuant to Article 20(1) of the Singapore Model Law. The question then comes down to localisation of the debtor’s COMI, which determines the jurisdiction of main proceedings (Article 2 of the Singapore Model Law).
The largest part of the judgment of the Hight Court of Singapore’s (more than 30-page judgments) discusses the issue of COMI, taking a broad comparative perspective. In particular, the court reviews the (sometimes diverging and inconsistent) approaches adhered to in the USA, the UK (and the EU, in general), and Australia. Ultimately, the court decides for the most part to follow the US approach. This concerns the relevant date for determining COMI (COMI date) and factors to be considered in determining COMI (COMI test).
How do we view this approach from the current European stance on COMI?
Regarding the date (or reference time) of COMI, the court analyses three options: 1) the date of the commencement of the foreign insolvency proceedings, which is ( the UK and EU view), 2) the date of the hearing of the recognition application, (as followed in Australia,) and 3) the date the application for recognition is filed, (a view found in the US). Opting for the latterst one, the court reasons that “determining the debtor’s COMI as at the date the recognition application is filed, ie the US position, provides greater certainty and better accords with commercial realities and the language of the provisions of the Model Law.”.
We believe that the court’s choice is rather unfortunate. Imagine a situation, where the foreign court opens main insolvency proceedings, finding the debtor’s COMI to be present in the jurisdiction of that court. One year later, a court in another country faced with thea recognition application (recognising court) concludes otherwise, taking into account the facts around the application date into account. As a result, the foreign proceeding loses support in the form of relief available under Article 20 of the Singapore Model Law and universality of the foreign main proceedings is thus severely weakened.
The resulting divergence of COMI reference times indirectly accepts the possibility of having more than one COMI. This contradicts one of the major assumptions behind the Model Law, namely that there can be only one main insolvency proceeding. Moreover, the divergence leaves important stakeholders (such as creditors) in the dark as to which legal regime determines their substantial and procedural rights.
Whereas the US courts continue to consider the date of the application, their jurisprudence has recently been heavily criticised by prominent insolvency law scholars. A letter from 20 August 2018, to the National Bankruptcy Conference (NBC, an organization of leading American bankruptcy judges, professors, and practitioners) argues that the current US approach conflicts “with the original intention of the Model Law and the recent revision of the Guide to Enactment (Guide), which measure COMI as of the date of the commencement of the foreign proceeding.” We wholeheartedly adhere to the same view.
Firstly, as explained by the Guide, the language of the Model Law “does not address the question of the relevant date, but rather requires the foreign proceeding to be current or pending at the time of the recognition decision” (Guide, paragraph. 158). Secondly, drafters of the Model Law assumed that COMI would not – (and could not –) change once foreign proceedings have been initiated (NBC letter, p. 12). This makes the discussion of forum shopping (or, as the court refers to it, the discretion to select the jurisdiction) less relevant. In any case, the benefits of forum shopping remain questionable. Finally, the Guide to Enactment of 1997, a relevant and important document in the interpretation of the Singapore Model Law, clearly states that the concept of the main proceeding, where “the debtor has the centre of its main interests”, as found in the Model Law “corresponds to the formulation in article 3 of the EU Convention on Insolvency Proceedings, thus building on the emerging harmonization as regards the notion of a “main" proceeding” (paragraph. 31). The same thrust towards harmonious interpretation of the European Insolvency Regulation (EIR, now recast) and the Model Law is evidenced in paragraph. 82 of the Guide.
Our second point relates to the COMI test. The UNCITRAL Model Law does not contain a definition of “centre of main interests”. It only provides that the debtors’ registered office is presumed to be the COMI (Art. 16(3)). A similar presumption can be found in Article 3(1) of the European Insolvency Regulation, as renewed in June 2017 (EIR recast), contains a similar presumption. In practice, European courts have set a rather high bar for the rebuttal of the presumption and require the applicant to provide sufficient evidence that COMI is somewhere else – for instance in (see the Regional Court of Berlin’s, early 2018, ruling in the NIKI case). In contrast, US courts treat the presumption as merely indicative for “speed and convenience in instances in which the COMI is obvious and undisputed, for instance see the (Bankr. S.D.N.Y. Bankruptcy Court’s 2016 in Creative Finance) ruling.
The High Court of Singapore in Zetta Jet seems to have occupied a middle ground. On the one hand, the court accepts that “the presumption would be displaced if it is shown that the place of the company’s central administration and other factors point the COMI away from the place of registration to some other location”; (a similar formula isto that proposed in 2011 by the Court of Justice of the EU in 2011 in the Interedil case). On the other hand, the court suggests focusing on the “centre of gravity”, irrespective of the distinction between different entities within the group. This is strongly reminidscent of the US “nerve centre” doctrine, which is a national legal phenomenon and is unrelated to the international basis of the COMI-norm, and is clearly at odds with the current entity-by-entity COMI determination under the EIR recast.
The approach of the High Court of Singapore benefits certainly from its inherent flexibility, allowing for better consideration of the economic reality, (e.g.for instance in cases of corporate groups). However, the same flexibility may prove damaging for certainty and predictability of court determinations. In practice, simultaneous application of the divergent and conflicting COMI tests opens the door to forum shopping, jurisdictional conflicts and even situations in which the COMI of the same company is found in different countries at the same time.
This is exactly what happened in the recent case of the Oi Group, Brazil’s largest fixed-line telecoms operator, where a Dutch member of the Oi Group, Oi Brasil Holdings Coöperatief U.A., ended up having two COMIs. The first COMI (accepted in Brazil and the USA) coincided with the group restructuring proceedings in Brazil. But courts in the Netherlands found the same company’s COMI there. The second COMI (accepted in the Netherlands) of that same company was found to be in the Netherlands, the jurisdiction of its registered office.
We come to the conclusion. The High Court in Zetta Jet noted that Singapore courts “have not had the occasion yet, at least in a written judgment, to consider the interpretation of COMI under the Singapore Model Law.” In light of this, the case of Zetta Jet is particularly significant, as it contains guidance on such important issues as the relevant date for allocating COMI (COMI date as reference time) and factors to be considered in determining COMI (COMI test).
It is rather disappointing that in some respects, the court’s position taken by the court manifests a detachment form the original intention of introducing COMI as the decisive norm and with that a further drift from the European approach. The purpose of the UNCITRAL Model Law is to promote the objectives of fair and efficient administration of cross-border insolvencies and greater legal certainty for trade and investment (see Preamble). However,But this purpose cannot be achieved where enacting states “compete” for better interpretations of the Model Law and so sideline its international origin and the need to promote uniformity in its application.
- Re: Zetta Jet Ptd and others (Asia Aviation Holding Pte Ltd, intervener)  SGHC 53
- Landesgericht Berlin, 84 T 2/18, Jan. 8, 2018, ZIP, 2018, 140 (NIKI Luftfahrt).
- Creative Fin. Ltd. (In Liquidation), 543 B.R. 514-15, Bankr. S.D.N.Y. 2016.
- CJEU, Case C‑396/09, 20 October 2011, ECLI:EU:C:2011:671 (Interedil Srl)
This is a slightly adapted version of a regular column Bob Wessels is writing for Global Restructuring Review (GRR) on the topic of cross-border restructuring and insolvency in a European context. This time he is assisted by Ilya Kokorin, a PhD-researcher and lecturer at University of Leiden. GRR is a subscription-only publication, but here is a link to the full piece, which appeared in March 2019, on GRR’s website at http://globalrestructuringreview.com
Op 24 mei 2019 vindt in Leiden het congres van Suum Cuique plaats, met het thema 'Kunst en Recht'. Suum Cuique is de mastervereniging voor Civiel Recht van de Universiteit Leiden.
13.00 Welkom door dagvoorzitter, professor Egbert Koops
13.30 - 14.15 mr. Paul Russell (Russell Advocaten) - aspecten van de kunst & recht praktijk
14:15 - 15:00 prof. Pieter ter Keurs (Rijksmuseum van Oudheden) - museale praktijk en lokale visies op eigendom
15:00 - 15:30 pauze
15:30 - 16:15 mr. Marguerite Duynstee (Universiteit Leiden) - teruggave van roofkunst, meer specifiek de collectie Goudstikker
16:15 - 17:00 prof. em. Bob Wessels (Universiteit Leiden) - enige privaatrechtelijke aspecten in het juridische en financiele leven van Rembrandt.
Afsluiting door prof. Egbert Koops, gevolgd door een borrel
Locatie: zaal A1.44 Kamerlingh Onnes Gebouw, Steenschuur 25, Leiden
Opgave via Marco Moeskops | Assessor Acquisitie & Congres
Namens het bestuur van Suum Cuique 2018-2019
T: +31 6 28 06 73 45
With Gert-Jan Boon, PhD researcher and lecurer at Leiden University, I wrote 'Soft law instruments in restructuring and insolvency law: exploring its rise and impact, published in the TvOB (Law review on company law and corporate governmant and management, published by Paris publishers in the Netherlands) 2019, nr. 2 (May 2019). In our aticle we provided an overview of the role of soft law instruments in the field of restructuring and insolvency law. We made a study of the literature on the phenomenon of ‘soft law’, the pros and cons of using soft law and the impact it has has and still has in the field of restructuring and insolvency. After developing a working definition of 'soft law instruments', and the ambivalent term of 'standard-setting organisations', we review which of these organisations are active in the area of international restructuring and insolvency law and what soft law instruments they have developed. We introduced over ten standard-setting organisations and present the instruments they have developed in the past decades. We found international intergovernmental standard-setting organisations such as UNCITRAL and the World Bank, but, also other global standard-setting organisations such as INSOL Europe, IAIR and International Insolvency Institute (III). Furthermore, there are other regional standard-setting organisations, such as the American Law Institute), the rather new Conference on Restructuring and Insolvency Law (CERIL), European Law Institute (ELI), INSOL Europe and the Nordic-Baltic Insolvency Network. We also noted several informal standard-setters, which for instance developed non-binding rules in the second decade of this century worked on within the latter Network, the EU JudgeCo Project (http://www.bobwessels.nl/blog/2015-02-doc13/) and the CoDiRe Project (https://www.codire.eu/wp-content/uploads/2018/11/Stanghellini-Mokal-Paulus-Tirado-Best-practices-in-European-restructuring.-Contractualised-distress-resolution-in-the-shadow-of-the-law-2018-1.pd). This shows the great diversity of standard-setting organisations continuing to be active all over the world. Increasingly regional standard-setting organisation and informal standard-setters have become active in the area of restructuring and insolvency law that are contributing to a process of convergence of insolvency laws and practices. Specific attention is given also to restructuring (besides liquidation) and to guidance for courts and insolvency practitioners, on matters of cross-border cooperation and communication.
Evidently, we then reviewed the various advantages and disadvantages of using soft law instruments. We showed that soft law instruments on restructuring and insolvency law lead to less politicised compromises, they provide for more flexibility (compared to hard law), and are developed more quickly and at lower cost. Also, soft law instruments are very suitable for developing ethical (and professional) standards and their use does not diminish a states’ sovereignty. On the other hand, soft law instruments may face a serious problem when interpreting their provisions, they may be hard to find and are non-binding. The soft law instruments usually do not provide for a revision procedure and may risk a lack of due process when the drafting and adoption process is not carefully performed. Furthermore, it may take considerable time before the impact of soft law instruments becomes visible, and when they are used, they may face the problem of ‘incomplete contracts’, such as regarding monitoring and conflict resolution. Also based on this, we emphasise that soft law instruments can have several roles with respect to hard law instruments. They can (i) complement existing hard law, (ii) be an alternative to hard law, or (iii) conflict with hard law (or even soft law). Still, it must be considered that despite their disadvantages, there has been a significant increase in the number of soft law instruments dealing with international restructuring and insolvency law, more than fifty instruments to date. The sheer number already signals both the interest in soft law (by organisations and by addressees, such as insolvency practitioners and courts) and their relevance. We elaborate on two significant global instruments of UNCITRAL on restructuring and insolvency law: (i) the Model Law (1997), and (ii) the UNCITRAL Legislative Guide (2004, 2010, 2013). The discussion of these instruments shows the broad scope of these soft law instruments in this area and highlights the enormous impact they have had on legal reforms in the past twenty years, globally. For the study of soft law instruments in the area of international restructuring and insolvency law, time is ripe to add an additional layer to the presence and availability of these instruments. Study of the full body of these soft law instruments is complicated given the practical difficulties to find them and further difficulties to assess their practical impact and relevance. Therefore, we suggest two questions for further research, in particular addressed to (insolvency) practitioners and judges. First, what are the experiences with regard to the advantages and disadvantages of soft law instruments in practice? Second, to what extent are soft law instruments used, more specifically, to what extent is there awareness of the growing body of soft law instruments and to what extent are they used in practice and or implemented? Responses to these questions will certainly add practical and considerate arguments to a better use of soft law instruments in this area. This will support a better understanding of the development and use of soft law instruments on international restructuring and insolvency law. Let me hear form you at firstname.lastname@example.org.