Welcome / Blog Archive / 2021-06-doc5 To protocol or not to protocol insolvency law

2021-06-doc5 To protocol or not to protocol insolvency law

Last week, a research project that started in 2017 came to its formal conclusion: the development of a European Model Protocol. It is an instrument aimed at fostering cooperation among practitioners and courts in multiple concurrent insolvency proceedings in several EU jurisdictions. The project has been realised by a group of some 15 researchers from four universities in Italy, Spain and Germany and was funded with a grant in the context of the Justice Programme of the EU.

Cooperation duties for IPs and courts in the EU Insolvency Regulation. The European Model Protocol takes as its starting point special provisions of the European Insolvency Regulation (Recast), which since 2017 provide for general cooperation duties for main and secondary insolvency proceedings, specifically those in Articles 41-44. These duties apply not only to the insolvency practitioners involved, but also to the courts. On the basis of a detailed dogmatic analysis of the resulting mandatory legal requirements, the research group presented two separate models.

Model Protocol between parties. These parties could be either appointed IPs or debtors in possession (DIP). Part one of the European Model Protocol is aimed at these parties who want to concretize the content, the forms and the limits of their cooperation and thus make their collaboration manageable and predictable. In 24 model clauses, the model offers solutions for the various topics of cooperation: from the provision of information, investigation and realization of assets to the handling of controversial topics to the joint development of plans and costs and fees. These protocols would be negotiated, adapted and agreed between these parties.

Model Protocol between courts. Part two of the European Model Protocol concerns the courts involved. The empirical findings the research group gained suggest that judges in EU member states have strong reservations about personally signing agreements with foreign courts, so that it would be impossible to promote cooperation by means of classic court-to-court protocols. It should take place via the statutory procedural rules or – where possible – via procedural principles or guidelines of the courts concerned. These can be established on the occasion of insolvency proceedings, but are then allowed to function beyond the individual insolvency case. For this purpose, the research group has drawn up 20 model rules in which courts can determine the forms and limits of judicial cooperation and thus make it possible to plan in a legally secure manner.

To establish an EU protocol cooperation culture. The two-part European Model Protocol (EMP) offers parties who are obliged to cooperate in cross-border insolvency proceedings a point of reference and a basis for negotiation for the specific fulfilment of their duties. For the courts, the court administrations and also the legislator, perhaps even the EU legislator, are called upon to implement these principles. IPs are encouraged to use the EMP as a basis for negotiations. The research group submits that these model rules not only allow a legally secure handling of the cooperation duties in the EIR. They also serve to make the culture of cooperation in the EU member states, which has so far tended to be found in common law, practicable and thus a positive experience. Perhaps over time, a culture of protocol-based cooperation will develop among those involved in EU insolvency proceedings.

Information: See Vattermoli, D., S. Madaus, F. Pasquariello, A.R. Castells (eds), Transnational Protocols: A Cooperative Tool for Managing Cross-Border Insolvency, Wolters Kluwer/CEDAM, 2021. ISBN 9 788813 376260. See https://shop.wki.it/libri/transnational-protocols-a-cooperative-tool-for-managing-cross-border-insolvency-s743521/#. Further details on the project, in particular on the universities involved, can be found via the website of one of the professors involved, from which site the EMP also can be downloaded in English, German, French, Italian and Spanish. See https://stephanmadaus.de/2021/06/22/european-model-protocols-abschluss-des-eu-forschungsprojekts/

A word on group protocols. Ilya Kokorin and I have studied insolvency protocols in a different context, concentrating on protocols in restructurings and insolvency of corporate groups, also beyond the EU. Our analysis relates to a dataset including over 40 protocols available in a Database of Insolvency Protocols, maintained and updated by the International Insolvency Institute (III) at https://www.iiiglobal.org/international-resource-library (go to heading ‘Insolvency Topics’, and then to ‘Insolvency protocols’). We provide recommendations for protocols in group insolvencies and present a Group Insolvency Protocol design. See https://bobwessels.nl/blog/2021-05-doc2-cross-border-insolvency-protocols/. Our book: Ilya Kokorin and Bob Wessels, Cross-Border Protocols in Insolvencies of Multinational Enterprise Groups, Edward Elgar Publishing, Cheltenham, UK / Northampton, MA, USA, 2021, xxvii + 343, ISBN 978 1 80088 053 5. For information, see https://www.e-elgar.com/shop/isbn/9781800880535

It’s up to insolvency practice. On a first reading, several model clauses in the EMP could certainly be of use for group protocols in the EU context. Two things are certain. Creative parties looking for practical solutions should not wait till the moment a legislator acts. Since two decades, insolvency law is in a mode of shifting from being legislator’s monopoly of hard law to (with legislator’s blessing) instrumentalization and contractualisation of insolvency (soft law, guidelines for cross-border aligning of proceedings, protocols). And: IPs and courts have all the tools to engage in practical, focused and tailor-made solutions in cross-border insolvency cooperation.