In December 2024, the EU and Mercosur finalised negotiations for a groundbreaking EU-Mercosur partnership agreement. Mercosur stands for ‘El Mercado Común del Sur’ (Common Market of the Southern Cone or The Southern Common Market) and was established in 1991. Its members are Argentina, Brazil, Paraguay and Uruguay. The central goal of Mercosur is to create a common economic market. President of the European Commission Ursula von der Leyen and her counterparts from Mercosur (the presidents of the four countries) congratulated each other and themselves on the results achieved.
The EU-Mercosur partnership agreement is the biggest agreement ever, mainly covering food and drink products. Over 350 EU products now are protected by a geographical indication and should align with existing European health and food standards. “This is the reality of an agreement that will save EU companies €4 billion worth of export duties per year,” von der Leyen said when the deal was announced.
In all, it provides a boost for the EU’s and Mercosur’s competitiveness and economic security, creating new opportunities for all kind of businesses, by removing often prohibitive tariffs on EU exports to Mercosur. The proposed EU-Mercosur agreement is composed of a political and cooperation pillar, and a trade pillar. The end of negotiations constitutes the first step in the process towards conclusion of the agreement. The official documents have been published as an enormous package with legal and trade documents and two hands full of detailed annexes. But the agreement still has to be approved by the European Parliament and the EU member states themselves.
The aim of the EU-Mercosur agreement is to promote mutual trade by concluding trade agreements, for example. Recent figures on the flow of goods show that the Netherlands will receive €1.7 billion from Argentina in 2024 and €11.2 billion from Brazil. The port of Rotterdam is the largest receiving harbour. The goods are set to include crude oil and soybeans from Brazil, cattle feed from Argentina, peanuts from Argentina and Paraguay, wood cellulose for insulation material from Uruguay and beef from Argentina and Uruguay, according to the Dutch Central Bureau of Statistics.
Cross-border trade has always been seen as an ideal worth pursuing. But the reality of everyday life also teaches us that disappointments can occur: disagreements about the quality of goods or delivery dates. Discussions between individual contracting parties about such disagreements can lead to dispute resolution, mediation and of course arbitration. The idea behind the EU-Mercosur agreement is to establish a Multilateral Investment Court, a permanent body to decide investment disputes arising from Free Trade Agreements (FTAs). An FTA is an agreement between two or more countries in which these countries agree on certain obligations that affect trade in goods and services, and on investor protection and intellectual property rights, among other subjects. The new agreement is seen as a major departure from the system of investor-to-state dispute settlement (ISDS) based on ad hoc commercial arbitration, supporting the EU’s groundbreaking approach to its bilateral FTAs. A Multilateral Investment Court, like the approach in the FTAs, would bring the key features of domestic and international courts to investment adjudication.
I gave the example of the Netherlands, because this country is the largest importer of goods from Argentina, Brazil, Paraguay and Uruguay compared to all the other EU member states. This is evident from figures presented in the last week of March by the Dutch Central Bureau of Statistics. They show that in 2024 the Netherlands imported €13.6 billion worth of mainly raw materials and fuels, food and drinks from these countries.
On the export side, the Netherlands also plays its part. Dutch export to Mercosur countries is relatively high. The Netherlands exported chemical products and pharmaceutical products, ships, machines and aircraft parts to those countries for a volume of €6 billion. Incidentally, the Netherlands is only the third largest EU exporter of these countries, with Germany (€16.1 billion) and Italy (€7.5 billion) in first and second place. It should be noted that many goods imported are intended for transit to other countries. As a result, only 16% or less of the imported goods from these countries remain in the Netherlands.
But there is a challenging side of cross-border trade, including the rules of non-payment and ultimately restructuring or insolvency of the exporting or importing company. Unlike the global trade regime, insolvency involves a country-by-country approach. There is an intra-Mercosur system, an EU system and the mutual relation to both trade blocs.
The intra-Mercosur system is governed by the Treaty of Montevideo from 1940, revising a much older Treaty between Argentina, Paraguay and Uruguay. These states, as ratifying countries, are bound by Title VIII of the treaty, on bankruptcies, which comprises 14 articles. The Treaty contains so many exclusions to the guiding principle of one universal set of proceedings with universal effect, it is almost totally undermined. There is only a modest attempt to impose a unified, regional approach to the process of administration and distribution of a multi-jurisdictional estate. The treaty, in practice, is hardly used. I have not seen any sign whatsoever of an intention to harmonise or provide a uniform (international) insolvency law, let alone that Mercosur as an organisation itself has rules in its legal relations with third countries outside these four countries. Since 2021, Brazil has had a system based on the UNCITRAL Model Law on Cross-Border Insolvency (MLCBI).
In the EU, it is not much better. The Insolvency Regulation (recast), useful as it is, in principle has only intra-EU effect. Only a few European countries follow a system based on the MLCBI, such as Poland and Greece. In addition, there are countries that have rules that have the same effect as the MLCBI (Germany, Spain) or where courts pursue similar results based on case law (Netherlands). In all, between the two trade blocs, the field of cross-border insolvency and restructuring rules resembles a quilt type of wasteland.
I hear you thinking, who cares, even if it is 5% or 10% of the total volume of exports to the EU. My view: that is not the point. The point is that businesses need predictability and legal certainty in their commercial dealings in a stable economic environment, and in situations where one of the commercial parties is in financial difficulties. That is the real background of a proper system of international insolvency law that could be negotiated between the EU and Mercosur. Such a system could be fed by the topics arranged in the MLCBI and engrained with the specifics of mutual trade and investment. It could include issues pertaining to the ownership of transported good, the transfer of ownership, the operation of retention of title and more specific commercial law issues. These are self-evident, given the goods that go back and forth and all the water over which they have to be transported.
Isn’t it time to seriously think about developing an instrument on cross-border commercial insolvency that is not territorial bound on a country-by-country basis. The EU-Mercosur agreement comes at a critical time for both sides, with benefits through strengthened geopolitical, economic, sustainability and security cooperation. Other trade agreements (with organisations in Asia and Africa) may be on the agenda. An efficient and professional system of cross-border commercial insolvency should be an inherent element of such an agreement between these organisations.
References
https://ec.europa.eu/commission/presscorner/detail/en/ip_24_6244
https://policy.trade.ec.europa.eu/enforcement-and-protection/multilateral-investment-court-project_en
https://www.cbs.nl/en-gb/news/2025/13/netherlands-is-eu-s-largest-importer-of-goods-from-mercosur-countries [28 March 2025]
Bob Wessels, International Insolvency Law Part I. Global Perspectives on Cross-Border Insolvency Law (Wessels Insolvency Law Volume X), Deventer: Wolters Kluwer, 5th ed. 2022.
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 of 8 April 2025. See www.globalrestructuringreview.com.