Welcome / Blog Archive / English / 2020-02-doc2 Creating a reliable cross-border insolvency system after Brexit

2020-02-doc2 Creating a reliable cross-border insolvency system after Brexit

Recognition and enforcement of civil judgments is an important tool in effective and reliable cross-border business. The guillotine-effect of Brexit would result in an uncertain, unpredictable, costly and undignified commercial battle without such a tool. A first sign for looking for providing certainty on which country’s courts may hear a civil or commercial cross-border dispute and that ensures that the resulting judgment can be recognised and enforced across borders has been given last week. Overshadowed by the Brexit-fest on Friday 31st January 2020, when the UK left the EU, was the announcement of a sensible message by the UK Government. It has the intention to join the Lugano Convention 2007 which mitigates the cut off effect from the UK with the EU. This will also help to prevent multiple court cases taking place on the same subject matter in different countries reducing confusion, time and expenses for the parties involved, see the webpost www.gov.uk/government/news/support-for-the-uks-intent-to-accede-to-the-lugano-convention-2007).

The posting records that the UK has secured statements in support of it joining the 2007 Convention from Switzerland, Norway and Iceland. Where the EEA EFTA Separation Agreement does not cover civil judicial cooperation (or matters of private international law), the latter subject between Norway, Iceland and Switzerland are governed by this Lugano Convention 2007. Is is an international agreement which sits outside of the EEA legal framework. The UK welcomes the statements of support it is has received from its EFTA partners on its intention to accede in its own right to the Lugano Convention 2007 at the end of the transition period, ie 31 December 2020.

The result will indeed be welcome, however, it does not provide a solution for ‘insolvency’ judgements. A certain relationship between the EU and the UK after Brexit in the area of restructuring and insolvency is just as important. At the end of 2018 a group of experts and practitioners, chaired by Prof. Francisco Garcimartin (University Autónoma of Madrid and Linklaters) and Prof. Michael Veder (Radboud University Nijmegen and RESOR), investigated the possible consequences of Brexit on cross-border restructuring and insolvency in relation to the remaining EU. The group worked as one of the working parties of the Conference on European International and Restructuring Law (CERIL). CERIL is an independent non-profit, non-partisan, self-supporting organisation of lawyers and other restructuring and insolvency practitioners, law professors and (insolvency) judges committed to the improvement of restructuring and insolvency laws and practices in the EU.

In the report, published at the end of 2018, the group formulates a position on the nature and content of a possible future instrument governing the relationships between the EU and the UK after Brexit in the area of restructuring and insolvency law. CERIL argues for the development of a bilateral agreement which would mirror, with certain safeguards, the structure and content of the European Insolvency Regulation (Recast). It would cover international jurisdiction of courts, applicable law, a mutual system of recognition and enforcement and rules on cooperation and communication between the UK and the EU insolvency practitioners and courts. CERIL submits that a future agreement should be developed as a “parallel instrument” and suggested at that time that the Lugano Convention, which basically extends the framework of the Brussels I Regulation vis à vis EFTA States, or the bilateral agreement extending the Brussels I Regulation to Denmark, may be used as a model.

If the guillotine has moved to 31 December 2020 it’s time to act swiftly to prevent the ax from beheading an extremely useful legal system that has been in place for insolvency matters for close to twenty years.

The CERIL Report can assist in developing a solution. The entire CERIL Report 2018-2 can be read on www.ceril.eu/uploads/files/20181212-ceril-report-2018-2.pdf