Revision of the European Union Regulation on Insolvency Proceedings

by Sabrina I. Pacifici on January 20, 2014

Revision of the European Union Regulation on Insolvency Proceedings – RecommendationSamuel Bufford. Penn State Law, January 20, 2014, Penn State Law Research Paper 2-2014

“The European Union is about to launch on a project to revise its ten year old Regulation on Insolvency, which is designed to coordinate international insolvency (bankruptcy) cases in European countries. This article recommends four major revisions, which will vastly improve the regime for coordinating insolvency cases in the European Union, and add a regime for coordinating such cases with cases for related entities commenced in other countries of the world.  First, it recommends that the international coordination provided by the Regulation be expanded to include the coordination of insolvency cases commenced in European Union countries with related insolvency cases commenced in other countries. There has been a huge growth in such cases since the drafting of the Regulation, such as Lehman Brothers, Nortel, Parmalat and Adelphia. The paper recommends that the European Union adopt the UNCITRAL Model Law on Cross-Border Insolvency (promulgated shortly after the original drafting of the Regulation) and integrate it with the Regulation. Second, the paper recommends a very substantial increase in the Of European Union courts, bankruptcy administrators and other parties in interest to communicate and cooperate on international insolvency cases. This expansion would align these obligations with those imposed by the UNCITRAL Model Law on Cross Border Insolvency. Third, the paper recommends the formation of a regime for coordination and communication with respect to groups of companies or enterprise groups. Such a regime does not exist in the world today: both the Regulation and the UNCITRAL Model Law are based on the counterfactual assumption that international insolvency cases involve single entities, not groups of companies. Fourth, the paper recommends the enlargement of the international regime for coordination of insolvency cases to permit the recognition of restructuring of businesses through the use of the debtor in possession model adopted in chapter 11 of the U.S. bankruptcy code and in the laws of several other countries such as France, Germany and Japan.”

Previous post:

Next post: