In the European Union (EU), to have an insolvency proceeding recognised in another member state, everything comes down to having the specific proceeding listed in Annex A of the Insolvency Regulation (Recast). The system has grown to become a mockery of a sound and efficient system of European insolvency law.
The structure of international insolvency law within the EU (with the exception of Denmark) is known. The European Insolvency Regulation (Recast) (EIR 2015) contains four Annexes. Of these, Annex A lists all the national terms of the laws of the EU member states for ‘public collective proceedings’ in the meaning of Article 1(1) EIR 2015 (in normal jargon: insolvency proceedings) falling under the scope of EIR 2015. Annex B lists all the national terms for insolvency practitioners.
From the recitals, we know that Annex A only has a defensive function: if a proceeding is not listed in Annex A, it does not automatically mean that it falls under the scope of Brussels I Regulation, the regulation relating to general civil law judgments.
In short, the European Insolvency Regulation applies (i) to insolvency proceedings that meet the conditions set out in it, irrespective of whether the debtor is a natural person or a legal person, a trader or an individual (financial institutions excluded), (ii) those insolvency proceedings are listed exhaustively in Annex A, (iii) in respect of the national procedures contained in Annex A, the EIR 2015 applies without any further examination by the courts of another member state as to whether the conditions set out in the regulation are met (the system of ‘automatic recognition’), and (iv) national insolvency procedures not listed in Annex A are not covered by the EIR 2015. There is no mistake about it: Annex A is exclusive and decisive. In literature, this system has been criticised, but without any effect.
How to amend the Annexes?
With the renewed text of the successor of the former, old Insolvency Regulation of 2002, in 2016, the Council Implementation Regulation (EU) 2016/1792 of 29 September 2016 was published. It replaced the ‘old’ Annexes and introduced the ‘new’ ones. The Implementation Regulation confirmed the experience of some twelve years that it generally takes 12 to 18 months to have an amendment in an Annex entered into force. In a 2017 regulation, all Annexes, including the latest national insolvency proceedings, were published.
In January 2022, a revised Annex A (and B, mentioning IPs) entered into force, updating the number of listed insolvency proceedings and insolvency practitioners that fall within the scope of the EIR 2015. Evidently, some countries were rather swift in implementing the EU Preventive Restructuring Directive 2019/1023. Any cross-border uncertainty has to be addressed with the question of which national (implemented) preventive restructuring proceedings can be given European effect, by listing them in Annex A of the Insolvency Regulation. And the frontrunners wanted to play in the European insolvency premier league.
The Restructuring Directive aimed to bring about a degree of minimum harmonisation of substantive restructuring law across the EU. Some countries revised existing domestic legal insolvency proceedings, including such ‘preventive restructuring frameworks’ in new legislation. In October 2020, the Netherlands notified the European Commission of recent changes in its national insolvency law, which introduced a new preventive insolvency scheme (the ‘public’ WHOA-proceeding), as well as new types of insolvency practitioners. In December 2020 notifications followed from Italy, Lithuania, Cyprus and Poland relating to recent changes in their national law, which introduced new types of insolvency proceedings or insolvency practitioners. Later, further notifications were received from Germany (StaRug), Hungary and Austria relating to recent changes in their national law, which introduced new types of insolvency proceedings or insolvency practitioners.
The Commission submitted, without further explanation, that all those new types of insolvency proceedings and insolvency practitioners complied with the requirements set out in the EIR 2015, which made it necessary to amend Annexes A and B to the regulation. In the EUMonitor, one also can read that the European Insolvency Regulation does not apply anymore to the UK and that the EU legislator has now removed their insolvency proceedings and practitioners from the Annexes. No goodbyes.
In my column of 20 January, I summarised a report from independent European think tank CERIL, about the transposition of the EU Preventive Restructuring Directive 2019/1023, in all 27 EU member states. That, by the way, is a hugely complex job and the rapporteurs and their staff deserve every compliment.
But I looked at it again with different glasses. Since mid-2022, around 10 EU member states have implemented their own domestic laws that set out a national version of a ‘preventive restructuring framework’. These countries include Belgium, Croatia, Finland, Latvia, Poland, Romania, Slovakia, Slovenia, Spain and Sweden.
For eligible cases, restructuring plans set up in these countries should be effective for assets, creditors, shareholders, etc. located outside the country. But I have not been able to find a renewed Annex, which replaces the Annex of over two years ago, anywhere. In this review I have previously signalled my concern about the inefficiency of the system for working with an Annex on which no checks take place. It is even more worrying if countries do not place their new restructuring ‘procedures’, consciously or not, in Annex A.
Leaving aside the fact that the EIR 2015 is not or not entirely tailored to restructuring, but that is not the point today. It is more of a principle now that a large group of countries do not list their procedure(s) for whatever reason. Why? Should the alarm bell be sounded? It seems to me that it is important that the business community and their lawyers and financial specialists take this limited system into account in their plans and, if necessary, look for ways to realise cross-border effects of restructuring plans.
References
Council Implementation Regulation, Official Journal 11 October 2016, L 274/35.
Regulation (EU) 2017/353 of 15 February 2017 replacing Annexes A and B to Regulation (EU) 2015/848 on insolvency proceedings, Official Journal 3 March 2017, L 57/29.
https://globalrestructuringreview.com/article/eir-recast-whos-in-charge-of-annex
EUMonitor, https://www.eumonitor.eu/9353000/1/j4nvhdlglbmvdzx_j9vvik7m1c3gyxp/vlipi0eaizqj
CERIL – Conference on European Restructuring and Insolvency Law, Report 2024-1, Transposition of the EU Preventive Restructuring Directive 2019/1023 (professors Reinout Vriesendorp, Stephan Madaus, and Ignacio Tirado; Research Associates Defne Taşman and Guillem Gabriel-Pizarro).
This is a slightly adapted version of a regular column Bob Wessels is writing for Global Restructuring Review (GRR) on the topic of cross-border restructuring and insolvency in a European context. GRR is a subscription-only publication and the column appeared in GRR on 25 February 2025. See www.globalrestructuringreview.com.