Oxford University Press is presenting itself as market leader in publications on the European Insolvency Regulation (Recast). After the books of Moss et al. and Bork/Mangano (shortly reviewed by me, see http://bobwessels.nl/2016/09/2016-10-doc7-book-reviews-eir-recast/), last week of September saw the publication of Commentary of the European Insolvency Regulation, edited by Reinhard Bork and Kristin van Zwieten. I acted as one of the 14 authors. They represent around 10 different Member States, which obviously provides an article-by-article commentary, with views and practical insights from a broad European insolvency practice. For more information see https://global.oup.com/academic/product/commentary-on-the-european-insolvency-regulation-9780198727286?q=bork&lang=en&cc=nl#. For a promotion discount of 20%, use the attachment. From the Forword of Prof. Dr. Heinz Vallender, Executive Director of the Department of International and European Insolvency Law at the University of Cologne, Germany and retired insolvency judge in the District Court in Cologne I quote (with consent :)): 'It is to be hoped that this ambitious work will find a wide range of readers. Not only should it become a standard work at courts and universities, it should also be on the desks of everyone involved in transnational insolvency proceedings'. bork-van-zwieten-commentary-flyer
On Friday October 7, 2016, in The Grant in Amsterdam, the 12th International Insolvency Symposium of the American Bankruptcy Institute (ABI) takes place. The programme includes panels on developments in restructuring and insolvency in Europe, as well as the state of affairs in the USA. See for the programme http://www.abi.org/events/12th-annual-international-insolvency-restructuring-symposium. I have been informed that ABI is allowing local academics (scholars, students) to participate without costs. Are you interested, let one of the speakers (Lucas Kortmann) know via firstname.lastname@example.org (www.resor.nl; M +31 65 397 84 20).
Although one would expect that under the EU Insolvency Regulation (EIR) after some fifteen years the concept of center of main interest (COMI) would be rather be clear, time and again a COMI controversy pops up. In a Dutch case, decided by the Court of Appeal Arnhem-Leeuwarden 15 August 2016, ECLI:NL:GHARL:2016:6546, this Court and the District Court of Gelderland (location Zutphen) drew different conclusions from the same facts. The first instance court dealt with a request of the debtor itself, Cloudiax B.V., incorporated in the Netherlands. Court Gelderland declined jurisdiction to open insolvency proceedings. Cloudiax subsequently appealed and asked the Court of Appeal to annul the decision and to have Cloudiax declared insolvent. The Court of Appeal applies, quite rightly, Article 3(1) EIR and the related judgments of the Court of Justice of the European Union (CJEU 15 December 2011, C-191/10, Rastelli v Hidoux qq) and CJEU 20 October 2011, C-396/09, Interedil). And because the registered office of Cloudiax, is Apeldoorn in the Netherlands, COMI is presumed to be Apeldoorn, concludes the Court. In result this is fine. It is however noted that Article 3(1) EIR determines international jurisdiction and connects COMI to a Member State. Territorial jurisdiction in that Member State itself must be established by the national law of the Member State itself, therefore in the Netherlands via the Civil Procedural Code (Wetboek van Burgerlijke Rechtsvordering). The Court took two phases in one go. At issue, however, is whether this presumption may be rebutted. The Court of Appeal then embarks upon a trip of specifying and evaluating the basis of objective and verifiable factors, ascertainable by third parties to determine whether the real situation is different from that which the connecting factor (the registered office) is deemed to be, taking into account the individual circumstances of each case. It does so with a precision one sometimes sees in judgments from American bankruptcy courts. The Appeal court sets forth: - Cloudiax is a wholly owned subsidiary of the German company Variatec AG, which has an office in Emmerich (Germany) and which is the only statutory director of Cloudiax; - Records of Cloudiax and Variatec are intermingled in the sense that they use the same (privatly developped) software program within which Cloudiax and Variatec are distinguished; - Cloudiax charges its costs (particularly wages of staff and administrative costs) to Variatec, which then reimbursed these to Cloudiax; - Statutory directors A and B each have approximately 5% of the shares of Variatec and A is also one of the statutory directors of Variatec. This seems to indicate (the Court is silent) that COMI is in Germany. On the other hand, however, the Appeal Court notes over ten factors that generally confrims the presumption, such as: - Cloudiax, founded on March 31, 2011, is registered in the Dutch commercial register; - Variatec and Cloudiax have developed by using SAP software IT applications, which focuses Variatec on the German market and Cloudiax on the international market; - A and B both are, since April 2011, authorized signatories of Cloudiax with a full proxy; - Until the end of 2014 / early 2015 Cloudiax employed three Dutch persons, with compensation under Dutch law, being A, B and a third employee; - Cloudiax is both for the payroll tax and social security contributions as the sales tax and corporation tax a subject to Dutch law and also has a RSIN number; - Cloudiax has a Dutch phone number; - Visiting and mailing address of Cloudiax is Apeldoorn (the address of director A); - The actual control of the business of Cloudiax takes place from Apeldoorn, from a modest office; - The business of Cloudiax is developed in the Netherlands, mainly by phone / mail / internet with foreign customers; - The files of the underlying documents of the administration are located in Apeldoorn; - Cloudiax contracted with Dutch companies (inter alia for telephony and administration) - Cloudiax has Dutch creditors (Rabobank Apeldoorn, Vodafone, the Dutch Tax authorities and Flynth consultants and accountants); - Cloudiax has just a little equity, but this is located in the Netherlands. These factors and circumstances evaluated in the light of the COMI interpretation rule, the Appeal Court ruled that the presumption is not rebutted and ‘Apeldoorn’ is the COMI of Cloudiax. This implies that the Court under Article 3(1) EIR, read in conjunction with Article 2(1) of the Dutch Bankruptcy Act (which provides that the bankruptcy liquidation (faillissement) order is made by the court of the domicile of the debtor) has jurisdiction to open insolvency proceedings. It annulls the Court Gelderland judgment.
A tip of the veil lifted: instrument on harmonisation of insolvency is not a straightjacket. In a speech in Berlin, on 26 September 2016, European Commissioner Jourová spoke to the Legal Affairs Committee and EU Affairs Committee in the Bundestag on Anti-money Laundering, European Public Prosecutor's Office, Digital Contracts, and on Insolvency. She confirmed that a new initiative on business insolvency will soon be adopted. Commissioner Jourová said: 'We have already revised the EU Insolvency Regulation that will apply from June 2017. That Regulation deals with cross-border procedural law aspects. Our aim is to harmonise now key principles and deliver minimum standards of substantive insolvency law across the EU. This will not be a tight jacket to regulate the details of national law procedures. We leave the concrete implementation of the principles to Member States in full respect of subsidiarity.' As Ian Fletcher and I have explained in our 2012 report 'Harmonisation of Insolvency Law in Europe', in literature ít is submitted that harmonisation referes to the goal to remove disparities, to reach certain purposes. Indeed 'subsidiarity' aims to guarantee a degree of independence for the Member States. Following the Report from the Commission on Subsidiarity and Proportionality (COM(2011) 344 final) the future instrument does not contin centrally-dominated, detailed prescriptive provisions, but rules that are just as open as guidelines and recommendations which are used by global institutions, such as the World Bank and UNCITRAL, be it more focused, in two ways: (i) as these rules should add to the further strengthening of the internal market, and (ii) they works towards the same goals of shaping a better restructuring framework for viable businesses. The Commissioner continues: ' Our initiative builds on the Recommendation of March 2014 on a new approach to business failure and insolvency. Its implementation has been patchy, even in Member States that started reforming their insolvency laws. We have worked with Member States to improve their insolvency frameworks also under the European Semester. However, there are limits to how much can be achieved through these methods. Converged restructuring laws would give greater legal certainty to cross-border investors in the EU. It would encourage timely restructuring of viable companies in financial distress. In our preparatory work, we paid attention to the opinions of all stakeholders, including national parliaments. We also assessed recent insolvency reforms undertaken in the Member States'. An open eye and ear for the market and all its interests has been guiding. This makes sense as 'restructuring' is generally a market problem and legislation should express that support of governments, including courts, should be limited to a minimum. It also allows to reflect on what has been presented by all these 'stakeholders' as a best practice in all different areas. The Commissioner end with a feather in the hat of Germany: 'I was pleased to see that both the objectives and methods of the insolvency law reforms carried out in Germany coincide with the ones of our upcoming EU initiative. The amendment of the reorganisation law which entered into force in 2012 in Germany contains vital elements commonly appreciated as features of an efficient restructuring EU framework. And as in the reform in Germany, I believe that honest entrepreneurs should be discharged of their debts after a reasonable period of time. The shorter this period is the higher the likelihood of restarting business and ensuring innovation.' No mentioning of any 'implementation time', by the way. Still 4 weeks to go before the 'initiative' will be published. See for the full speech http://europa.eu/rapid/press-release_SPEECH-16-3189_en.htm
A doctorat for Xinyi Gong, that was the result after the defense of her PhD ‘A Balanced Way for China’s Inter-Regional Cross-Border Insolvency Cooperation’. This all took place at the University of Leiden, last Tuesday. I acted as her supervisor (promotor). Earlier on this blog (2016-09-doc8) I explained that her research analyses the rather peculiar situation that the People’s Republic of China is one ‘State’, however within that entity three administrative regions have their own form of sovereignty (Taiwan, Macao, Hong Kong) in such a way that insolvency judgements have to be recognised in the other region where it should have effect. Miss Gong (with a research grant from China Scholarship Council) went a long road in understanding hte system and seeking solutions to establish and/or improve China’s inter-regional cross-border insolvency cooperation. It is obvious that in the field of cross-border insolvency cooperation, China presents a set of unique questions arising from its ‘one country, two systems’ policy and its historic separation between the Mainland and Taiwan. Against this political background the topic indeed needed further study. Now, some six years after the start of her reserch, with ongoing economic integration efforts in the area, it is not hard to understand the importance of her topic. In her study Ms Gong has assessed the four domestic insolvency systems and compared their quality with two larger frameworks, from the EU and UNCITRAL. She has been doing so in an independent and thorough way, collecting abundant and most recent materials in the field. Some of her ideas were already tested in peer-reviewed insolvency law journals in the USA and in Europe. She compiled a list of recommendations for gradual future development of systemic cooperation within the Chinese inter-regional context. It is named List of Recommendations to CICIA (China’s Inter-regional Cross-Border Insolvency Arrangement) and, with her permission, it is attached to this blog. The PhD Commission as well as the Oppostition Commission agreed that CICIA is a commendable contribution to the process of building towards a workable framework of cross-border practice. As supervisor it was allowed to make use of the public opportunity of Ms Gong's defense, to thank the opponents, professors Yuwen Li (Erasmus Rotterdam) and Josie Shi (China University of International Business and Economics, Beijing), professors Ian Fletcher QC (University College London), Reinout Vriesendorp and Niels Blokker (both University of Leiden) and Dr André Berends (Ministry of Finance, The Hague) and Dr Van der Weide (assistent professor Leiden) for reading and assessing her work and for their oppositions last Tuesday. I concluded, evidently, with my congratulations with the acquired doctorate and - as I have always done - my call to appreciate a doctoral degree obtained as an honorable award and a well-earned privilege, but thereby never forgetting the obligations it imposes on the young doctor towards science and towards society. gong-cicia-2016