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2020-06-doc4 High Level Forum-CMU report misses the mark


Today I have given feedback to the report ‘A new Vision for Europe’s capital markets’, the Final Report of the High Level Forum (HLF) on the Capital Markets Union (CMU), published 10 June 2020. For the report, see For my full 7 pages feedback, see the link at the bottom.

The report sets out a series of recommendations aimed at moving the EU’s capital markets forward. The press release says: ‘Completing the CMU has now become particularly urgent in order to speed up the EU’s recovery from the coronavirus pandemic. A fully-fledged CMU would help rebuild the EU’s economy, by providing new funding sources for businesses and investment opportunities for Europeans. It will be vital for mobilising much-needed long-term investments in new technologies and infrastructure, to tackle climate change and to deliver Europe’s New Green Deal and Digital Agenda. In today’s final report, the HLF proposes 17 inter-connected ‘game changers’ – measures the EU needs to urgently implement in order to remove the biggest barriers in its capital markets.’

As an aside: do we need such bragging and overblown language?

Recommendations on Insolvency

The High-Level Forum on CMU, in its final report (pages 114 and 115), sets out its ‘Recommendation on Insolvency’. It invites the European Commission

A – Adopt a legislative proposal for minimum harmonisation of certain targeted elements of core nonbank corporate insolvency laws, including a definition of triggers for insolvency proceedings, harmonised rules for the ranking of claims (which comprises legal convergence on the position of secured creditors in insolvency), and further core elements such as avoidance actions.

B – Set up an expert group tasked with elaborating common terminology for principal features of the various national insolvency laws.

C – In cooperation with the EBA, analyse how the current bank supervisory reporting framework should be modified so that banks provide to supervisors the data on non-performing exposures that allows an analysis of the effectiveness of Member States’ national insolvency systems. On the basis of this supervisory reporting data, EBA should start providing the Commission with bi-annual monitoring reports on the effectiveness of Member States’ national insolvency systems.

A – Minimum harmonisation of certain targeted elements

The report itself, to my regret, does not take into account (or does not demonstrate to do so) the Commission’s regulatory actions in the area of (cross-border) insolvency and restructuring taken in the second decade of this century, especially the European Insolvency Regulation (EIR 2015) and the Restructuring Directive 2019, to be implemented in 2012. The HLF’s view is based on the well-know, but rather worn idea of (among other topics) ‘insolvency’ as being one of the obstacles for Capital markets integration without substantiating or solidly evidencing its view. The drafters of the report do not seem to have taken notice of the present status of insolvency and restructuring law in in the EU.

As to the issue of ‘capital markets’, the policy goal of establishing a CMU (Launched with the so-called Five Presidents Report mid 2015, see my blog on has been included during the progress of the discussions leading to the Restructuring Directive. For my views of January 2017 on “Capital Markets Union (CMU): Insolvency Law Chapter”,  given for the European Parliamentary Financial Services Forum (EPFSF) (see, see

If I see it well recitals 8 and 11 of the Restructuring Directive refer to CMU, whilst – as mentioned under the HLF recommendation under A – ‘the position of secured creditors’ and ‘ranking of claims’ will experience influences from the national implementation of the frameworks included in the Restructuring Directive. The HLF does not provide its view on which elements are ‘core’, ‘triggers for insolvency proceedings’ or ‘avoidance actions’, where at least the last two are in many jurisdictions an intrinsic part of national laws related to civil, commercial or procedural law, as such in many respects are hard to compare, let alone that Member States until now have not demonstrated the willingness to give any room for non-national legislative proposals. It would have been helpful to have the HFL’s views as to the desired minimum harmonisation in more detail in the light of the current status of EU insolvency and restructuring laws. The same applies for (HFL’s ‘Feasibility’, 5th bullet) the desired ‘flanked measures’ to incentivise Member States to enhance judicial capacity in the field of insolvency through training and specialisation, as the Restructuring Directive explicitly addresses that issue.

B – Common terminology

Beyond these vibrant legislative developments, the European Law Institute (ELI) initiated a study on ‘Business Rescue in Insolvency Law’ in 2013, published its key results in 2017 and its full study in 2020. I am the study’s co-author and elsewhere (and on my blog) I have published several times about it. The ELI Business Rescue Report was unanimously approved by ELI in 2017. It consists of 115 recommendations which are developed on some 400 pages. See Bob Wessels and Stephan Madaus, Business Rescue in Insolvency Law – an Instrument of the European Law Institute (September 6, 2017). Available at SSRN:, or alternatively: For the full report, including national reports, see Bob Wessels and Stephan Madaus (reporters and editors), Rescue of Business in Europe – A European Law Institute Instrument, Oxford University Press 2020, 1434 pp. ISBN 978-0-19-882652-1. See

The Report also contains a Glossary of Terms and Expressions has been developed with the aim of promoting the development of a uniform European legal terminology in matters relating to restructuring and insolvency. The Glossary contains around 160 terms serving the homogeneity of workout, pre-insolvency (restructuring) and insolvency processes and should assist insolvency practitioners, courts and legislators in their work. The HLF’s suggestion to arrive at a common terminology that allows for a meaningful comparison between various jurisdictions and which could prepare long-term discussions about future harmonisation, therefore, is a valuable one. Its recommendation could have been taken at heart by HLF itself, as presently it may be doubted which meaning of ‘insolvency’ is laid down in the report, and it seems (see ‘Issue at stake’ and ‘Justification’) that the terms ‘creditor’ and ‘investor’ are used as having a similar meaning.

C – Analysis of the effectiveness of Member States’ national insolvency systems

A popular way at evaluating insolvency laws is looking at the pay out in actual procedures. The higher (and faster) the average pay-out, the better the regime performs. I think that recommendation C is based on this premise. This approach, however, overlooks that insolvency procedures – even more after the implementation of the Restructuring Directive as per 2021 – increasingly are a viable business strategy and thereby one of the alternatives on the table in thinking about the future of the business. I therefore have my reservations in a reporting system based on measuring effectiveness of national insolvency systems.

To conclude my limited feedback: ‘Harmonisation of certain core areas will increase legal certainty in areas which are significant to investors when pricing the risks of cross-border investments’, is described as the main expected benefit of the HLF’s ‘Recommendation on insolvency’.

It is unfortunate and a missed chance that the HLF does not sufficiently align its proposals with the current status of European insolvency law. It is also difficult to determine whether the HLF is been able to appreciate the extremely difficult harmonization process in the area of law. The challenge for the Commission will, however, primarily be how to convert the unilaterally presented one-sided interest of investors in case of a debtor’s default in an efficient CMU into an instrument of European insolvency law, as insolvency law inherently takes into account all interests involved.

2020-06-18 HLF report – Wessels.pdf