Recently, the second edition of ‘European Cross-Border Insolvency Law’, written by professors Reinhard Bork and Renato Mangano was published. It is an up-dated version of the first edition, published in 2016. I refer to the comparative review I published on https://bobwessels.nl/blog/2016-10-doc7-book-reviews-eir-recast/, comparing Bork/Mangano with the 2016 version on the same topic of Gabriel Moss, Ian F. Fletcher and Stuart Isaacs (eds.), The EU Regulation on Insolvency Proceedings, 3rd. ed, also published by Oxford University Press.
Wave of literature. After some three years of fresh literature commenting on the European Insolvency Regulation in its Recast version, a new wave of literature has started in 2000, each with its own form and style. For a short overview, see https://bobwessels.nl/blog/2020-12-doc4-new-books-on-european-insolvency-regulation-recast-2015-848/. I am pleased to say that my book, now written together with prof. Stephan Madaus, International Insolvency Law Part II: European Insolvency Law, 5th ed., 2022, is due to be published the end of November by Wolters Kluwer.
Second edition. Bork/Mangano in this second edition remains a leading book on the recast Regulation on Insolvency Proceedings (EIR 2015). Differences with the earlier edition are the growth of footnotes, with references to recent case law and an ever growing body of scholarly writings and reports (such as those published via www.ceril.eu). This has led to some rearranging of paragraph’s. The book is now ‘one’, as the individual authors are not mentioned on the separate book pages anymore. Also, in this edition the authors distil the system, rules, and issues of EU insolvency law and examine the law more fundamentally in the context of European strategy and practice. Interestingly, on several places they discuss the alignment or the friction with the text of the Preventive Restructuring Directive (EU) 2019/1023. In this edition they highlight two ‘game-changers’, being Brexit and the PRD 2019/1023.
Brexit. The autors, evidently, discuss the changes caused by Brexit and the remaining value of the EIR 2015 for the UK. The original EIR 2000 only covers the ‘intra-Community effects’ of insolvency proceedings and governs only ‘intra-Community conflict,’ thus Virgós/Garcimartín (2004), 21, referring to the characterization of ‘Community connection.’ As the authors note, the EIR 2015 does not govern all intra-Union conflicts, but only cases where the COMI of the debtor is located in a Member State (Article 3(1) EIR 2015). When this COMI is outside the territory of a Member State the EIR does not apply. See Recital 25: ‘This Regulation applies only to proceedings in respect of a debtor whose centre of main interests is located in the Union.’ I read the related passages in the book as that it is not a requirement that the EIR only applies when at least two Member States are involved. Where the COMI is located outside the EU, the private international law of Member States is decisive on the question of whether insolvency proceedings may be opened against the debtor and which rules and conditions are to be applied. This will also be the case where a debtor has assets in one or two Member States (but no COMI within the Union). Even when the debtor’s COMI is in a Member State and the Regulation therefore applies, many of its provisions are restricted to relations with other Member States. The EIR 2015 only applies as far as its provisions do not require such a qualified connection in between Member States, e.g. Art. 3 applies and provides international jurisdiction also in proceedings with third country effects. See CJEU 16 January 2014, Case C-328/12; ECLI:EU:C:2014:6 (Ralph Schmid v Lilly Hertel). The EIR 2015 does not contain any material rules with regard to non-EU States except for the provision in Article 85 EIR 2015 which concerns the relationship of such a State, when it is a party to a Convention. Article 85 EIR 2015 applies in this situation. I would like to mention here, that the reaming gap between UK and EU could be filled by a Lugano-anology type of regulation, as suggested by professors Garccimartín and Veder, see https://www.ceril.eu/statements-and-reports. The rather overwhelming policy-drenched approach to the UK as well as the collapse of a framework agreement between EU and Switzerland, however, are not encouraging in expecting any promising steps.
PRD 2019/1023. The authors, rightly, see a second game-changer for the impact on cross-border insolvency law in the PRD 2019/1023. Apart from the fact that the EIR 2015 does not apply to Denmark, and the PRD 2019/1023 does, they are worried that national restructuring proceedings implemented as a result of the PRD 2019/1023 might not be included in Annex A (e.g. they cannot not be viewed as ‘insolvency proceeding’ ex Article 1 EUR 2015 or these proceedings have not been notified to the Commission with the request to be listed or it is a country’s deliberate policy the not list them, as the Scheme of Arrangement from the times UK was a Member-State). The authors observe that other countries (Ireland, Netherlands) adopt this policy to attract foreign companies to their jurisdiction, only based on a slim ‘connection’ criterion. What happens when these national proceeding are not listed in Annex A. ‘Will they be penalised’ (?). How will these be recognised in other Member-States? What about proceeding that would fit in Annex A but are deliberately not included? The authors provide good themes for further discussion and just the beginning of answers to these questions.
A new wave of forum shopping? The erosion of the scope of the EIR? The authors also express concerns. A structural one where the PRD 2019/1023 has around 70 options to implement its text into national legislation which would lead ‘… actually disharmonising’ restructuring law. The term ‘disharmonising’ seems odd as it probably based on the idea of a certain basic or minimum harmonisation. In another short subparagraph the authors are getting gloomy where they express concerns that certain implemented frameworks (Scheme of Arrangement in Ireland, the ‘confidential’ version of the Dutch Scheme) are results of national competitive thinking, whilst in the meanwhile doubting that by not including these proceedings under the Regulation ‘… whether this … is also compliant with the spirit of the EIR’. They also signal another tendency ‘… to de facto reduce the scope of the EIR’. They point at two tendencies. First, the use of a very strict interpretation of ‘collective insolvency proceeding’ with as a result leaving out proceedings which do not impair all the creditors (Eidenmüller, however overlooking that e.g. the Dutch ‘surseance’ proceeding, only affecting unsecured creditors, has been listed since 2002. Second, the theory with the result of ‘… detaching the field of pre-insolvency proceedings from the field of formal insolvency proceedings’ (Madaus). At this juncture, I think the authors are not yet there that any ‘pre-insolvency’ proceeding in its core a muti-party contract, with some special characteristics, indeed preventing insolvency and therefore, automatically (even in its sheer terminology), both in practice and in theory reflect the domain of contract law. A next question is whether the product of multi-party negotiating would fall in the area of insolvency law’. I have always defended this, meaning – in short – that restructuring should be treated with core principles of ‘formal’ insolvency law, such as paritas creditorum, fixation or publicity.
All these thoughts would be wonderful themes for a cross-border discussion. Is one of the organisations picking up these themes?
The book truly is an asset for legal practice (insolvency practitioners, accountants, judges, academics) who wish to read an updated commentary of rules in European cross-border restructuring and insolvency law. The book offers a clear and comprehensive overview of its present application, and the authors should be congratulated with their new publication.
Reinhard Bork and Renato Mangano, European Cross-Border Insolvency Law, Oxford University Press, 2nd ed. 2022. ISBN 978-0-19-885409-8.
Note: this book I received free of charge from the publisher with the request to announce it or to review it on my blog at www.bobwessels.nl.