Early June, in my regular column in Global Restructuring Review (GRR), I suggested seven changes that could make the EU Insolvency Regulation more equitable, efficient, and suited to the evolving needs of the global economy. Here’s the column.
The original EU Insolvency Regulation of 2000 was replaced in 2015 by the Insolvency Regulation (recast) (EIR 2015). This EIR 2015 entered into force in mid-2017. Ten years later, it is time to take stock of the current situation in the field of EU cross-border insolvency law. There is more reason to do so because time is running out for the European Commission. The EIR 2015 contains a review clause (Article 90) that, among other things, obliges the Commission to present a report on the application of the regulation to the European Parliament, the Council and the European Economic and Social Committee no later than 27 June 2027 (and every 5 years thereafter): “The report shall be accompanied where necessary by a proposal for adaptation of this Regulation.”
Where would changes be necessary? I will provide a list, without any specific preference, and partly based on what I have heard, read or experienced in practice in recent years. For the sake of convenience, I will follow the order in which the relevant themes are regulated in the regulation. The specialised reader will have no difficulty with that.
1 Public collective proceeding
The text of the definition for an “insolvency proceeding”, in the EIR 2015 named a “public, collective proceeding”, has doubled in size. The idea was to have a large group of preventive restructuring frameworks, following the implementation of Directive 2019/1023, fall under the scope of the EIR 2015. It is not surprising that this attempt has only been partly successful, because quite a few “frameworks” are not “public”.
The question remains whether in a case where a framework is known to all affected creditors and shareholders, this means that they are “public”. It is a given that “collective” can mean “for a large part” collective. But what is the position of a framework that just misses the line of relating to “a significant part of the creditors to whom a debtor owes all or a substantial proportion of the debtor’s outstanding debts”? And when does a contractually negotiated restructuring plan actually become a “proceeding”? At the moment a debtor applies for a stay? Earlier? At the moment he expresses his wish to start negotiations with creditors and shareholders on how to solve his financial distress? Later, only in the judicial confirmation phase? In short, there are many open questions.
More problematic is the relationship of the definition of “public collective proceeding” with Annex A, which lists all the national terms of the laws of the EU member states falling under the scope of EIR 2015. Listing by a member state of national procedures contained in Annex A means that the EIR 2015 applies without any further examination by the courts of another member state as to whether the conditions set out in the EIR 2015 are met, under the system of “automatic recognition”. National insolvency procedures not listed in Annex A are not covered by the EIR 2015. Annex A is exclusive and decisive, but who checks whether member states promote “procedures” to the European top league or Annex A on good grounds?
2 International jurisdiction
The concept of the centre of main interests (COMI), necessary to open main insolvency proceedings, remains ambiguous and still is vague enough to lead to potential forum shopping. Despite clarifications included in the EIR 2015 – including stricter definitions, presumptions that COMI has not been moved during a certain period of 3 or 6 months, examination of international jurisdiction and judicial reviews – interpreting COMI still varies among member states.
A clearer, uniform definition and more robust mechanisms to verify COMI declarations would reduce jurisdictional conflicts. For preventive restructuring frameworks, for instance, isn’t it time to skip the requirement that the debtor’s COMI is the place where the debtor conducts the administration of its business on a regular basis and is therefore “ascertainable by third parties”? Creditors agreeing with a preventive restructuring plan will surely know where the debtor has its COMI. Is it time to allow a contractual choice for jurisdiction?
3 Main and secondary proceedings
If main proceedings are opened in other member states when the debtor has an establishment there, secondary proceedings can be opened. These have a territorial scope. Secondary proceedings are often used as a defensive tool to protect local creditors, which can conflict with the efficient administration of main proceedings. The scope and initiation criteria for secondary proceedings needs refining to ensure they serve as a support mechanism for the main proceeding rather than as a hindrance. The idea that the main proceeding is dominant is not sufficiently developed. Should a creditor who is an affected party to a national restructuring framework – prior to a court’s confirmation – indeed have the right to initiate secondary proceedings in another member state? Isn’t that just creating nuisance? To raise the question is to answer it.
4 Undertaking
Where secondary proceedings may hamper the efficient administration of an insolvency estate, the EIR 2015 sets out two specific situations in which a court seized with a request to open secondary proceedings should be able, at the request of the insolvency practitioner in a main proceeding, to postpone or refuse the opening of such proceedings.
These are: (i) the insolvency practitioner in the main proceedings can give an undertaking to local creditors in which they promise to treat them as if secondary proceedings had been opened, and (ii) the court can temporarily stay the opening of secondary proceedings. As to the latter, it could be used for those creditors who would be using the right to file secondary proceedings to jeopardise a preventive restructuring framework. In the case that such a creditor is an affected party, and has agreed to the restructuring plan, is that right then automatically excluded? Is it possible that the EIR 2015 rules regarding international jurisdiction are a subject for a contract? Doesn’t the right to start secondary proceedings belong to the area of public law?
The “undertaking” is an English phenomenon and – pre-Brexit – during the drafting of the EIR 2015, was considered an extremely useful practical tool. The very effective English practice – used in cases such as Rover Car, Collins & Aikman and Nortel Networks in the 2000s – was codified in the EIR 2015, with the right of a main insolvency practitioner (IP) to give an undertaking to avoid the opening of secondary proceedings in another member state.
During the drafting process the topic has become the victim of political debate (between the Commission, the European Parliament and the Council), in which a practical tool (in a draft version with only two draft provisions) grew into a complex instrument in its own right, with an overwhelming eleven provisions containing formalities and requirements that created unknown legal effects. Eight year later we know, in practice, such an undertaking is hardly used. Or is the undertaking not used because IPs fear the rules in the provision regarding liability?
5 Interconnection of insolvency registers
It is not really an exciting topic, but it is certainly necessary in practice. The EIR 2015 provides that the European Commission shall establish a decentralised system for the interconnection of insolvency registers. The central public platform is the European e-Justice Portal. Its establishment and assembling of necessary information are a slow process. Some specified information needs to be available free of charge. As far as I could access, eight years after the EIR 2015’s entry into legal force, only 18 of 27 registers were listed on the portal.
There is no interconnection of registers yet in Austria, Bulgaria, Cyprus, Czech Republic, Greece, Italy, Portugal and Slovenia. A reader is welcome to prove I am wrong. The latest update is only from March 2024 and, at that time, some ten member states were at the brink of implementing their version of the Preventive Restructuring Directive 2019/1023. There is currently no information available about these member states, and some links provided by member states only connect to materials in their domestic languages.
The availability of information concerning the legal system in another country may be helpful, but is there any where to find information on national and EU insolvency law, as indicated in the EIR 2015? The EIR Recast has made strides in requiring interconnected insolvency registers, but full integration and use of advanced digital tools for real-time updates, filings, and cross-border communication would enhance efficiency.
6 Duties to cooperate and communicate cross-border
Duties for IPs and courts to communicate and cooperate, court-to-court communication in cases of individual debtors and proceedings for members of groups still create uncertainties, for instance as to whether the obligations apply to courts and administrative authorities in an institutional sense or whether the obligations are intended to apply to individual judges.
Would it be the latter, the question then is whether in such a scenario it is possible to have the judge be sanctioned for a failure to cooperate? Or be liable in some way for losses caused by a failure to cooperate? Or, if there is a failure to cooperate, may a party complain about inadequate or improper procedure and invalidate proceedings on that ground?
7 Building on the existing structure of national civil procedural law
It is a known fact that not all courts and IPs in member states, regardless of the size of their economy, fully understand the concept of communication and coordination. Mostly courts, but sometimes insolvency practitioners, have an inward culture and therefore won’t constructively look to carry out cross-border solutions. Evidently, there are language problems. Judges and insolvency practitioners remain reluctant to, simply, cooperate.
Moreover, courts can adopt a rather passive attitude; they only act within the constraints of specific rules in law and their know-how of the regulation. The EU “group coordination proceedings”, including its cross-border coordination system, is not used in practice, resulting in the inefficient administration of insolvency proceedings relating to different companies forming part of a group. Uncertainties, unfamiliarity, passiveness, even sometimes unwillingness are certainly setbacks to the ambition to create a true European judiciary. There is not only substantial repair work required for the EIR 2015 but there is also a need for an open cross-border attitude to cooperation. This should be significantly less dependent on persons who, with a change of attitude, feel they are losing control of insolvency cases and – partly as a result – are missing out on a part of their fees.
European rules of conduct for IPs should oppose this. And the courts? For the EIR 2015 to really work well, is it still an unshakable fact that cross-border cooperation will continue to happen in the system that was chosen twenty-five years ago? In the EU member states there are many hundreds of first instance courts, maybe even a thousand in all, and many thousands of IPs deal with cross-border cases using different languages. Some will have one cross-border case in three of five years, maybe only once in a decade. It seems to me that the time is ripe to think seriously and structurally about the concentration of these essential legal functions.
Other suggestons?
Don’t get me wrong, as far as the EIR 2015 is concerned, the situation is not deplorable. The core of the carcass is present, and its functions of automatic recognition and applicable law are generally accepted. The new achievements in the EIR 2015, however, are too complicated or are regarded as too complicated. The unfamiliar, reserved attitude in practice is currently providing insufficiently fertile ground for effective instruments to flourish in themselves. These flowers need a lot of water. It is fairly easy to list and elaborate on seven more points to enhance the 2015 EIR.
I mention, relatively arbitrarily, the better coordination with the Brussels Ibis Regulation and, in the light of increasing use of the preventive restructuring plan, the Rome I Regulation on the law applicable to contractual obligations. It is also worth thinking about how the gap in the EIR 2015 does not adequately address how to handle insolvencies involving non-EU countries, how national and cross-border proceedings could benefit from further digitalisation, and whether SMEs need specific provisions targeting cross-border insolvencies, with simplified procedures and tailored support mechanisms, where real harmonisation of substantive insolvency topics across member states does not justify any longer or should lessen the specific conflict-of-law rules. And is the EIR 2015 appropriate place to incorporate environmental or climate considerations, in alignment with upcoming contemporary business priorities?
The EIR 2015 has made significant strides in improving cross-border insolvency proceedings, but there is room for growth in areas such as jurisdictional clarity, group insolvency coordination, third-party state relations, and reconsidering the rules concerning its present actors. Addressing these gaps and concerns would make the framework more equitable, efficient, and suited to the evolving needs of the global economy.
References
https://e-justice.europa.eu/topics/registers-business-insolvency-land/bankruptcy-and-insolvency-registers_en
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 6 June 2025. See www.globalrestructuringreview.com.