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2020-04-doc3 Improving the EU Insolvency Regulation (Recast)

Early this year the book Recasting the Insolvency Regulation – Improvements and Missed Opportunities was published. Its editors are Vesna Lazić (T.M.C. Asser Institute; University of Utrecht) and Steven Stuij (Erasmus School of Law). The book contains five contributions, covering 130 pages, and is published by Asser Press as number 3 in a Short Studies in Private International Law Series. Three contributions are related to matters of international jurisdiction, the other two cover issues of law applicable and cross-border judicial cooperation.

The publication starts off with an article of Ringe on insolvency forum shopping ‘revisited’. As the author explains, it draws heavily on his commentary to article 3 of the EIR Recast in the well-known Bork/Van Zwieten Commentary of 2016. As a matter of fact, I only saw one new 2017 German source. His argument is known: the EIR Recast missed the opportunity to connect international jurisdiction to a company’s registered office (therefore not to COMI), allowing third parties to price insolvency risk. It is an academic view. In practice, however, I have not seen any signs in legislation or soft law guidelines from standard setting organisations worldwide that the idea is even contemplated. The book here offers rather an old hat.

Kokorin offers a horse with different colour with his chapter on contracting around insolvency and setting out private ordening in European international insolvency jurisdiction and practices. With over 100 footnotes I had read his contribution before its publication. In short, it presents a wide and recent overview of literature and cases, with a focus on multinational enterprise groups, including what new business models (including blockchain-based companies with decentralised management) mean for COMI-determination. A specific contractual choice for an insolvency forum is discussed, as well as the ‘synthetic’ insolvency proceedings with its basis in article 36 of the EIR Recast (firmly denying a ‘reverse’ synthetic proceeding, ie in a secondary proceeding request for the refusal of opening main proceedings elsewhere) and the selection of a group coordination forum. In all, many fresh flowers offering new insights for thinking about the relationship beteen corporate law and insolvency law.

Even more, and as an aside – evidently the author could not foresee it – the global spread of the COVID-19-crisis may have a severe impact for the themes discussed in the book. With an expected stonger role for national states, it may certainly be the case that they will enlarge protection offered to national interests. The pandemic and its consequences distrupt globalisation as we know (knew?) it, especially a company’s dependence of supplies coming from other countries. In the process of ongoing globalization, many companies have become too dependent on just one key supplier, often in a very low-wages country. That breaks up. In order to have a future view of a financial and operational future, companies cannot afford large transport movements anymore. Due to the pandemic, many companies are experiencing the downside of globalization. Not only do companies have to think about the structure of their supplier and production processes, there is also a challenge for the methodologies of international insolvency law: will it lead to the emergence of territorialism+, especially territoriality of entities that are part of a corporate group, where the plus stands for smooth and uninterrupted cooperation and communication between several independent territorial proceedings? Now that it appears that COVID-19 is something of a long-standing nature, it is necessary to consider this and discuss it.

Back to the book. Harten touches upon the jurisdiction rules that determine a specific court approval with the examples of articles 11(2) and 13(2) of the EIR Recast with regard to contracts relating to immovable property and with regard to contracts of employment. She notices – rightly – that the development of these two provisions cannot be supported by extensive case law. I may give away that in cross-border international practice advisors (from Spain and the Netherlands) to the European Commission could draw on their day-to-day practice at that time advising in these type of cases, and conclude that such cases were typically solved before going to a court. The EIR Recast now has solved that uncertainty in the former regulation.

Oprea discusses the question of the law applicable to avoidance actions in a cross-border context. She explains the well-know cases of the CJEU re Lutz, Nike and Vinyls Italy. She concludes that the present solution in the EIR Recast dealing with transaction avoidance is a ‘… compromise designed to equilibate the different interests at stake in the light of the widely differing substantive laws on the matter’. She is right and her finding applies to many of the rules in the EIR Recast, the draft of which in the end has to be approved by the European Parliament and the Council, representing all Member States. She concludes by presenting herself as a strong proponent of a harmonised rule on transaction avoidance in Europe. She is not the only one here.

Also Queirolo and Dominelli (‘Cooperation and Communication Between Parties in the Management of Cross-Border Parallel Proceedings under the European Insolvency Regulation Recast’) build a bit further on views attractively elaborated in a 2017 book, edited by the authors, and reviewed by me earlier, see it suffices to mention their contribution.

To the book once more. I do not read why these contribution were brought together and selected. There certainly may have been other challenging improvements or opportunities. All contributions end with a list of references. The book misses an index with a list of cases. Intriguing too is the text blurb at the backside of the cover, stating that the book will also prove useful to those specialised in financial and fiscal law. Question mark?

To conclude, the book covers a mix of heated-up earlier brewings and intriguing and well elaborated themes. The latter ones serve refreshments to the academic community.

Vesna Lazić and Steven Stuij (eds.), Recasting the Insolvency Regulation – Improvements and Missed Opportunities, Short Studies in Private International Law, Asser Press 2020, distributed by Springer Verlag. ISBN: 978-94-6265-362-7

Note: this book I received free of charge from the publisher.