Encyclopedia of Private International Law
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Encyclopedia of Private International Law

Edited by Jürgen Basedow, Giesela Rühl, Franco Ferrari and Pedro de Miguel Asensio

The role and character of Private International Law has changed tremendously over the past decades. With the steady increase of global and regional inter-connectedness the practical significance of the discipline has grown. Equally, so has the number of legislative activities on the national, international and, most importantly, the European level. With a world-class editor team, 500 content items and authorship from almost 200 of the world’s foremost scholars, the Encyclopedia of Private International Law is the definitive reference work in the field. 57 different countries are represented by authors who shed light on the current state of Private International Law around the globe, providing unique insights into the discipline and how it is affected by globalization and increased regional integration. The Encyclopedia consists of three inter-linked pillars, enhanced by sophisticated search and cross-linking functionality. The first pillar consists of A-Z coverage of the scope and substance of Private International Law in the form of 247 entries. The second pillar comprises detailed overviews of the Private International Law regimes of 80 countries. The third pillar presents valuable, and often unique, English language translations of the national codifications and Private International Law provisions of those countries. This invaluable combination represents a powerful research tool and an indispensable reference resource.
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Chapter I.8: Insolvency, cooperation and recognition

Antonio Leandro

I. Overview of national and international approaches

When aiming to solve cross-border crises, insolvency proceedings are often designed in national legal systems with a view to realizing liquidation and distribution, or implementing a rescue plan including assets located abroad.

The so-called principle of universality serves these purposes, by virtue of its rationale to conceive the insolvency proceedings as producing effects wherever the debtor’s assets are located. On the contrary, according to the principle of →territoriality the insolvency proceedings confine their effects within the state of the opening.

When the national law takes inspiration from universality stricto sensu, the state of the proceedings will not recognize foreign bankruptcy judgments and the effects of the proceedings over the debtor and third parties. Nor will the foreign representative’s, eg the liquidator’s, powers be recognized, due to the assumption that only national proceedings may produce effects. On the contrary, territoriality stricto sensu implies that the effects of both national and foreign proceedings are confined to the country where they have been opened.

It seems clear that, unless coordinated, these approaches run counter to the reciprocal recognition of proceedings as well as to cooperation between the authorities involved in individual proceedings, thereby adversely affecting the unity and efficiency of the insolvency administration whenever several proceedings are opened in different states against the same debtor. As a matter of principle, it makes no difference in this regard whether those proceedings aim at winding-up or rescue purposes, even though the major problems arise as to the liquidation of disseminated assets and to the distribution of proceeds.

To date, indeed, also against the background of the UNCITRAL work on cross-border insolvency (namely the Model Law on Cross-Border Insolvency (UNCITRAL (ed), Model Law (1997) on Cross-Border Insolvency with Guide to Enactment (2013): Model Law on Cross-Border Insolvency of the United Commission on International Trade Law, Resolution 52/158 adopted by the General Assembly, 30 p. 940January 1998, No E.99.V.3., General Assembly Resolution 52/158 of 15 December 1997) and the Practical Guide on Cross-border Insolvency Cooperation (UNCITRAL (ed), UNCITRAL Practice Guide on Cross-Border Insolvency Cooperation (1 July 2009)), numerous states have endorsed a combination of universality and territoriality so as to allow foreign opening judgments and proceedings to be recognized in their territory, without preventing their own courts from opening insolvency proceedings against the same debtor.

The UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment and the Insolvency Regulation (Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings, [2000] OJ L 160/1), as well as earlier the 1990 European Convention on Certain International Aspects of Bankruptcy (Council of Europe, Istanbul 5 June 1990, ETS No 136; 30 ILM 165) and the 1995 Brussels Convention on Insolvency Proceedings ((1996) 35 ILM 1236), all classify proceedings commenced where the debtor has its centre of main interests (COMI) as universal proceedings, and those taking place where the debtor has an establishment as territorial proceedings. Accordingly, if universality admits that other proceedings can be opened abroad, it ultimately conceives of itself as limited. On the other hand, states oriented to territoriality ultimately deem national proceedings as a device that the foreign authorities, and in the first place liquidators (or other insolvency practitioners), may employ to achieve the aims of the proceedings in which they have been appointed.

The openness towards foreign insolvency proceedings that run parallel to national proceedings leads courts and liquidators to shape practical methods to seek effective and efficient cooperation. Article 27 UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment sets out forms of cooperation such as entering into insolvency agreements subject to court approval, or communicating information among the liquidators appointed in each proceedings.

Naturally, the more states enact the UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment, or generically share a similar approach, the more effortless recognition and coordination become. This also occurs between states which enter into multilateral or bilateral treaties providing them with a common recognition and cooperation framework. This happens in particular among EU Member States as a result of the recognition and cooperation system enshrined in the Insolvency Regulation, which operates as follows.

II. Preliminary remarks on the Insolvency Regulation cooperation and recognition regime

As noted elsewhere (→Insolvency, jurisdiction and vis attractiva), the Insolvency Regulation allows for the opening of insolvency proceedings whose features and effects differ. Main proceedings are to be opened in the Member State where the debtor has its COMI, while secondary proceedings are to be opened in the Member State where the debtor, whose COMI is in another Member State, has an establishment. Secondary proceedings may even be opened prior to main ones in compliance with art 3(4), although in this case they are properly referred to as ‘territorial proceedings’.

Main proceedings produce effects across the EU (excluding →Denmark) according to the principle of universality, while secondary proceedings have local/territorial effects, restricted to assets situated in the Member State where they have been opened. As a consequence, the principle of universality stricto sensu characterizes the main proceedings, as long as no secondary proceedings have been opened (Case C-444/07 MG Probud Gdynia sp. z o.o. [2010] ECR I-0417, para 24).

Since a debtor may have only one COMI and an indefinite number of establishments, the Insolvency Regulation admits that a single main proceeding and several secondary proceedings may coexist against the same debtor. The coordination between such proceedings amounts to a crucial objective of the Insolvency Regulation, given that opening more than one proceeding entails that the debtor’s crisis covers more than one state, and that accordingly the EU interest in a smooth, efficient and time-costs-oriented insolvency administration intensifies.

In this regard, Recital (20) stresses that ‘main insolvency proceedings and secondary proceedings can . . . contribute to the effective realization of the total assets only if all the concurrent proceedings pending are coordinated’.

However, since cooperation implies that the proceedings have been opened and have effects abroad, it is necessary to evaluate the p. 941Insolvency Regulation regime of recognition of judgments and proceedings.

III. Recognition and enforcement framework

1. Recognition and enforcement of judgments/recognition of proceedings

The Insolvency Regulation provides for a recognition regime concerning both the judgments handed down within the proceedings and the proceedings themselves.

Judgments opening the proceedings, whether main or secondary/territorial, rendered by courts competent according to art 3, are recognized in other Member States as soon as they become effective in the state of the opening. In this regard arts 16 and 17 endorse the principle of automatic recognition, which matches that of mutual trust, and that governs the relationships between the courts of Member States from the EU private international law perspective (Case C-341/04 Eurofood IFSC Ltd [2006] ECR I-3813, para 39; Case C-444/07 MG Probud [2010] ECR I-0417, paras 27–9).

Such principles also encompass judgments concerning the course and closing of the proceedings, as well as any composition approved by courts (art 25; Case C-444/07 MG Probud [2010] ECR I-0417, para 26). The same treatment applies to ‘ancillary’ judgments, ie those deriving directly from the insolvency proceedings and which are closely linked to them.

As regards enforcement, the Insolvency Regulation provides for the application of the Brussels Convention (Brussels Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters, [1972] OJ L 299/32, consolidated version, [1998] OJ C 27/1), with the exception of the provision establishing the grounds for refusal that are established directly by the Insolvency Regulation. The reference to the Convention has to be interpreted as reference to the Brussels I Regulation (Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, [2001] OJ L 12/1) and, as of 10 January 2015, to the Brussels I Regulation (recast) (Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast), [2012] OJ L 351/1; →Brussels I (Convention and Regulation)), whereby the enforcement will become even easier due to the removal of the exequatur.

While mutual recognition applies to both main and secondary proceedings, the effects of the judgments are to be determined separately from the effects of the proceedings. In this regard the distinction between main and secondary proceedings is again of the utmost importance. Indeed, while the judgment opening the insolvency proceedings benefits from the mutual recognition irrespective of whether it opens main or secondary proceedings, the effects of the secondary proceedings judgment are limited to the Member State of the court. The Insolvency Regulation only preserves territoriality whenever third parties intend to challenge the effects of secondary proceedings. To this end, art 17(2) prevents third parties from challenging the decision opening secondary proceedings in any other Member State.

In compliance with the limited universality approach, the judgment opening main proceedings has effects in other Member States as long as no secondary proceedings are opened there. Once secondary proceedings have been opened, the courts which provide the opening has jurisdiction, concurrently with the courts of the main proceedings, to determine which debtor’s assets fall within the secondary proceedings (Case C-649/13 Comité d’entreprise de Nortel Networks SA and others v Cosme Rogeau (11 June 2015), paras 39–46).

2. The concepts of ‘opening judgment’ and ‘opening time’

The effects of the judgments abroad are mainly determined by the lex concursus of the state where insolvency proceedings have been opened (art 17(1)). Such effects depend logically on the nature and features of the proceedings opened.

Articles 1 and 2 supported by Annexes A and B provide directives on how to assess when courts pronounce a judgment aimed at opening insolvency proceedings falling within the Insolvency Regulation (Case C-341/04 Eurofood IFSC Ltd [2006] ECR I-3813, paras 53 ff; Case C-247/12 Meliha Veli Mustafa v Direktor na fond ‘Garantirani vzemania na rabotnitsite i sluzhitelite’ kam Natsionalnia osiguritelen institut [2013] OJ C 164/7, para 36; Case C-461/11 Ulf Kazimierz Radziejewski v Kronofogdemyndigheten i Stockholm (8 November 2012), paras 23–4). For the sake of brevity, it should be borne in mind p. 942that, following art 1, the Insolvency Regulation applies to collective insolvency proceedings which entail the partial or total divestment of a debtor and the appointment of a liquidator. Annex A lists which proceedings have such material scope, while Annex B lists those of a winding-up nature (which in several cases match those listed in Annex A).

While non-listed proceedings should be governed by the Insolvency Regulation insofar as they meet the requirements defined in art 1, the ECJ seems inclined to exclude proceedings not listed in the aforementioned Annexes (Case C-461/11 Ulf Kazimierz Radziejewski v Kronofogdemyndigheten i Stockholm (8 November 2012), para 24). The Insolvency Regulation (recast) (Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast) [2015] OJ L 141/19) upholds this approach: new Annex A ‘exhaustively’ lists national insolvency procedures falling within the Regulation (see Recital (9)).

In any case, according to the ECJ, the concept of ‘opening judgment’ ‘must be regarded as including not only a decision which is formally described as an opening decision by the legislation of the Member State of the court that handed it down, but also a decision handed down following an application, based on the debtor’s insolvency, seeking the opening of proceedings referred to in’ the aforementioned Annexes (Case C-341/04 Eurofood IFSC Ltd [2006] ECR I-3813, para 54).

Appraising the ‘opening time’ is also of the utmost importance especially with respect to main proceedings, since the Insolvency Regulation allows for only one main proceedings: the issue of which judgment in the case of multiple openings in different states prevails must be, in fact, resolved in favour of the judgment first rendered (see Case C-341/04 Eurofood IFSC Ltd [2006] ECR I-3813, para 49; Case C-116/11 Bank Handlowy w Warszawie SA and PPHU «ADAX»/Ryszard Adamiak v Christianapol sp. z o.o. (22 November 2012), para 51).

The ‘opening time’ consists in the time ‘at which the judgment opening the proceedings becomes effective, whether it is a final judgment or not’ (art 2(f)). Elements such as effectiveness and finality depend heavily on the lex concursus, so that the ‘opening time’ concept is to be appraised on the basis of national law. This time appraisal applies to the opening of both main and secondary proceedings since, according to arts 4 and 28, the substantive scope of the lex concursus does not vary in this regard by reason of the nature of the proceedings.

3. Public policy as ground for refusing recognition and enforcement

The Insolvency Regulation provides for only two grounds for refusing recognition and enforcement.

First, judgments directly deriving from the proceedings or closely linked to them as well as judgments concerning the course or closure of proceedings and preservation measures granted pending the request of opening which result in a limitation of personal freedom or postal secrecy may not be recognized (art 25(3)).

Second, Member States may refuse to recognize insolvency proceedings opened in another Member State, or to enforce a judgment rendered in the context of such proceedings, where the effects of such recognition or enforcement would be manifestly contrary to their public policy, ‘in particular [their] fundamental principles or the constitutional rights and liberties of the individual’ (art 26).

With regard to the →public policy (ordre public) exception, art 26 is concerned with the substantive differences among national laws in matters of the effects of proceedings, in order to prevent them infringing the requested state’s fundamental principles. Many of the principles thus invoked derive from EU law and international law, such as the procedural rights and freedoms stemming from the Charter of Fundamental Rights of the European Union (of 18 December 2000, [2000] OJ C 364/1) and the European Convention on Human Rights (European Convention of 4 November 1950 for the Protection of Human Rights and Fundamental Freedoms, 213 UNTS 221) (Case C-341/04 Eurofood IFSC Ltd [2006] ECR I-3813, para 65).

However, since recognition and enforcement are informed by the principle of mutual trust between Member States, public policy, as a potential obstacle to such trust, should be interpreted restrictively. This is demonstrated by the adverb ‘manifestly’ appearing in art 26 (Case C-341/04 Eurofood IFSC Ltd [2006] ECR I-3813, paras 62–3; Case C-444/07 MG Probud [2010] ECR I-0417, para 34).

p. 943Nor should it be overlooked that public policy may work differently between states. Accordingly, given that judgments and proceedings banned in one state may be recognized in other states, the entire treatment of an insolvency could lack harmony and coherence within the European judicial space.

As a result, even wide divergences among national insolvency laws should not in principle lead to the refusal of recognition and enforcement of judgments rendered in the other Member States.

In this regard, it must be borne in mind that, even though the Insolvency Regulation was not adopted with the view to harmonizing national laws in insolvency matters, diversity among national laws cannot undermine its effet utile as regards the recognition of the effects of insolvency proceedings. It is sufficient to point out that the Insolvency Regulation obliges Member States to recognize foreign opening judgments also ‘where, on account of its capacity, insolvency proceedings cannot be brought against the debtor’ in their territory (art 16(1)), ie also when a long-established ground for refusing recognition in terms of public policy arises, due to the divergence among national laws concerning the substantive conditions for opening insolvency proceedings.

IV. Cooperation framework

1. The liquidators’ tasks, powers and duties between lex concursus and uniform rules

Among extraterritorial effects, those concerning the liquidator’s powers deserve close attention.

It is preferable to consider separately liquidators appointed in main proceedings as opposed to those appointed in secondary proceedings (referred to below as ‘main liquidator’ and ‘secondary liquidator’, respectively), in view of the differing tasks they carry out according to the distinctions between main and secondary proceedings.

Starting with the main liquidator, he may ‘exercise all the powers conferred on him by the law of the State of the opening’ (art 18(1); Case C-444/07 MG Probud [2010] ECR I-0417, para 23). In other words, the liquidator acts by virtue of this rule as an organ entitled to exercise its powers in any other Member State in the interest of the proceedings. In particular, he may attach and recover all the debtor’s assets located in Member States other than that of the proceedings, as well as employ juridical devices offered by laws different from the lex concursus so as to achieve the best insolvency administration and creditors’ satisfaction. For instance, he may (i) bring actions in rem out of the Member State of the opening, (ii) realize the debtor’s assets or (iii) request provisional measures to prevent removal of assets from the territory of the proceedings. Similar powers also pertain to the temporary liquidator, which should prevent removal of assets between the application for opening and the actual judgment opening the proceedings (art 38).

Apart from the powers determined by the lex concursus, the main liquidator may employ powers directly stemming from the Insolvency Regulation’s uniform rules. The liquidator may exercise powers abroad, provided that no secondary proceedings have been opened in the relevant Member State (Case C-444/07 MG Probud [2010] ECR I-0417, para 23), and that no contrary preservation measures have been taken there following an application to open insolvency proceedings (art 18(1)). In particular, the main liquidator may remove the debtor’s assets from the territory of a state. However, he will be barred from doing so if third parties with a right in rem request a preservation measure on the same assets, this under a ‘safeguard clause’ which allows that assets are excluded from the proceedings. This provision shares the purpose of art 5 of protecting those rights in rem that third parties intend to exercise within the insolvency proceedings in relation to tangible, intangible, moveable and immoveable assets situated at the time of opening in another Member State (→Insolvency, applicable law).

Other limitations to the main liquidator’s powers arise whenever the debtor’s assets are located abroad and the liquidator aims to recover and realize them. In such circumstances, he must comply with the lex loci as regards the procedure to be followed (art 18(3)).

Finally, the main liquidator may request to open secondary proceedings in another Member State (art 29(a)).

The powers of the secondary liquidator are as follows. On the one hand the Insolvency Regulation enables him to claim in any other Member State, whether by judicial or extrajudicial means, that moveable property has been removed after the opening of secondary proceedings from the territory of the state of the opening to the territory of that other Member State. On the other hand, he may bring any p. 944action to set aside which is in the interests of the creditors (art 18(2)). In other words, secondary liquidators may recover assets pertaining to the proceedings (i) by way of judicial claims brought before the courts of the Member State where the assets are located, (ii) by seeking enforcement of judgments obtained in the proceedings or (iii) by extrajudicial means such as contracts or other transactions.

The secondary liquidator is also entitled, within the territory of the proceedings, to carry out all the tasks provided for him by the lex concursus (art 28). Therefore, arts 28 and 18(2) aim to strike a balance, in the event of a transfer of assets subsequent to the opening of secondary proceedings, between the creditors’ interest to rely on the integrity of the debtor’s assets located in the Member State of the establishment and the principle whereby the effects of the secondary proceedings as well as the secondary liquidator’s powers are territorial. In other words, art 18 provides the secondary liquidator with extraterritorial powers exclusively to protect local creditors.

2. Cooperation between liquidators

Main and secondary liquidators must act in compliance with the duty of cooperation to attain an efficient cross-border insolvency administration. Cooperation requirement involves communicating information to each other.

Many aspects of these duties are governed by the Insolvency Regulation irrespective of the liquidators’ roles, tasks and powers stemming from the lex concursus. Indeed, the liquidators again hold a distinct position with respect to the cooperation requirement as a result of scope and purposes of the proceedings, as well as of the general aim to ‘ensure the dominant role of the main proceedings’ (Recital (20)). As a matter of principle, the main burden of cooperation rests on the primacy of the main liquidator.

As just noted, the main liquidator may decide as a useful strategy to apply for the opening of secondary proceedings, which may for instance be suitable to liquidate the local debtor’s assets or when handling the insolvency appears so complex to call for specific local proceedings. According to the ECJ, ‘[a]‌lthough secondary proceedings are intended, inter alia, to protect local interests, they may also . . . serve other purposes, which is why they may be opened at the request of the liquidator in the main proceedings, when the efficient administration of the estate so requires’ (Case C-116/11 Bank Handlowy (22 November 2012), para 72).

Accordingly, although conceived of initially as a protection for local creditors, secondary proceedings may prove to be useful tools for achieving the optimum insolvency management of the main proceedings, thereby acting as ‘auxiliary proceedings to the main proceedings’.

Once secondary proceedings have been opened, the Insolvency Regulation binds the secondary liquidator to give precedence to the main liquidator in submitting proposals on the liquidation or use of the local assets (art 31(3)). The main liquidator may request the court opening secondary proceedings to stay the process of liquidation, entirely or in part, if this is in the interest of creditors (art 33). He may suggest closing secondary proceedings without liquidation through alternative measures, such as rescue plans or composition, as provided in the local lex concursus (art 34).

After winding-up and distribution of the local assets to satisfy the claims lodged in the local proceedings, the secondary liquidator must immediately transfer any remaining assets to the main liquidator (art 35).

The duty of cooperation also applies in cases of ‘territorial proceedings’, although art 36, once the main proceedings have been opened, makes the application of the provisions safeguarding the primacy of the main liquidator conditional upon the progress of the ‘former territorial’ proceedings.

The primacy of the main liquidator clearly arises out of art 37, which entitles him to request the conversion of territorial proceedings into winding-up proceedings if this proves to be in the interest of creditors lodging claims in the main proceedings. This particularly occurs with respect to claims whose rank would be best satisfied by transferring the residual liquidated assets from secondary to main proceedings (art 35).

3. Cooperation between courts

The Insolvency Regulation lacks an analogous scheme of cooperation as regards the courts, which nevertheless have to comply with the effects of the proceedings.

This gap reveals its drawbacks whenever an application to open secondary proceedings is brought by local creditors after main proceedings have been opened. In particular, nothing in the Insolvency Regulation clearly binds the courts of the Member State of the establishment to rule on the application taking account of the features and purposes of the main proceedings. Moreover, it follows from ECJ case-law that the issue of whether such features and p. 945purposes may debar the opening of secondary proceedings for ‘criteria as to appropriateness’ depends on the law of the establishment (Case C-327/13 Burgo Group SpA v Illochroma SA, in liquidation, Jérôme Theetten, acting in his capacity as liquidator of Illochroma SA (4 September 2014), paras 52–67, with respect to winding-up insolvency proceedings).

However, the ECJ has emphasized that (i) ‘the Regulation provides for a certain number of mandatory rules of coordination intended to ensure . .. the need for unity in the Community’, that (ii) ‘main proceedings have a dominant role in relation to the secondary proceedings’, and that (iii) the principle of sincere cooperation laid down in art 4(3) of the EU Treaty requires the court having jurisdiction to open secondary proceedings ‘to have regard to the objectives of the main proceedings and to take account of the scheme of the Regulation, which . . . aims to ensure efficient and effective cross-border insolvency proceedings through mandatory coordination of the main and secondary proceedings guaranteeing the priority of the main proceedings’ (Case C-116/11 Bank Handlowy (22 November 2012), paras 60 ff; see also Case C-327/13 Burgo Group SpA v Illochroma SA, in liquidation, Jérôme Theetten, acting in his capacity as liquidator of Illochroma SA (4 September 2014), para 60; Case C‑212/15 ENEFI Energiahatékonysági Nyrt v Direcția Generală Regională a Finanțelor Publice Brașov (DGRFP) (9 November 2016), para 26).

Thus the lack of coordination and sensitivity as to features and purposes of the main proceedings arises when local creditors seek the opening of secondary proceedings. This threatens the efficient insolvency administration, particularly when the main liquidator aims at restructuring without using the secondary proceedings that the local creditors conversely seek to open. The threat to the efficient insolvency administration intensifies when several secondary proceedings are opened in different Member States where the national laws governing the liquidation process diverge or lack provision for measures alternative to the liquidation.

V. The revision of the Insolvency Regulation

The Insolvency Regulation (recast), which will almost entirely apply from 26 June 2017, aims among others to improve both the coordination between several insolvency proceedings opened against the same debtor and the balancing between efficient insolvency administration and protection of local creditors.

In this regard, the Insolvency Regulation (recast) stresses, on the one hand, that the opening of secondary proceedings serves the protection of local creditors and in certain complex cases the main proceedings’ purposes (Recital (40)), but, on the other hand, that secondary proceedings may ‘hamper the efficient administration of the insolvency estate’ (Recital (41)).

As a consequence, the Insolvency Regulation (recast), will in the first place render the opening of secondary proceedings conditional upon both the interests of local creditors and the objectives of the main proceedings, and accordingly, strengthen the main liquidator’s (referred to as ‘insolvency practitioner’) role in this regard.

Unlike the current regime, the Insolvency Regulation (recast) will enable the court of the establishment, on request of the insolvency practitioner, to refuse or to postpone the opening of secondary proceedings whenever this is not necessary to protect the interest of local creditors. This may be the case of an investor making an offer to buy an insolvent company on a ‘going-concern’ basis and the offer appears more advantageous for the creditors than liquidation of the company assets.

When ruling on the request for opening brought by local creditors, the court of the establishment should give the main insolvency practitioner both notice and the opportunity to be heard before deciding (art 38). As a consequence, as the main insolvency practitioner could apply for refusal or postponement of the opening of secondary proceedings, the court of the establishment would be wholly ‘aware of any rescue or reorganization options explored by the liquidator’, and it would be able ‘to properly assess the consequences of the opening’ prior to handing down its judgment (see Proposal for a Regulation of the European Parliament and of the Council amending Council Regulation (EC) No 1346/2000 on insolvency proceedings, COM(2012) 744 final, para 3.1.3).

Such awareness may lead the court either to refuse the opening or to select proceedings different from winding-up. This contrasts with the current regime, which allows for the alternative proceedings option only for territorial proceedings, whereas the Insolvency Regulation (recast) will do so even for secondary proceedings, ie after the opening of main proceedings.

p. 946In line with this new broadened role in evaluating whether and to what extent secondary proceedings might affect the centralized rescue or the estate administration, the main insolvency practitioner will be entitled to challenge the decision opening secondary proceedings.

More in detail, in order to avoid the opening of secondary proceedings without hampering local creditors, the main insolvency practitioner will be empowered to undertake within the main proceedings ‘that he will comply with the distribution and priority rights under national law which [the local creditors] would have if secondary proceedings were opened’ (art 36(1) and Recital (42)). That undertaking has to be approved by a qualified majority of known local creditors (the local rules concerning the adoption of restructuring plans will apply: art 36 (5)) and it should remove the local creditors’ concern over seeing themselves deprived of interests and preferential rights based on the local lex concursus by the opening of the sole main proceedings and by the applicability of the COMI’s lex concursus. At the same time, the undertaking should avoid the opening of secondary proceedings which may adversely affect the outcome of the main insolvency proceedings, in particular where the latter are aimed at rescue and restructuring. In stating so, the Insolvency Regulation (recast) draws inspiration from the ‘synthetic secondary proceedings’, a practice followed in certain English administrations of groups of companies (see, among others, High Court, Chancery Division, Re Collins & Aikman III [2006] EWHC 1343 (Ch) (9 June 2006)).

All the advantages of the undertaking depend mainly on the fact that local creditors and courts know both that main proceedings have been opened and that the main insolvency practitioner has given the undertaking. The Insolvency Regulation (recast) seems to cope with these requirements by generically improving the system of information to foreign creditors and courts (see arts 24–30, ch IV and the strictly related data protection rules of ch VI).

As a further means to balance main proceedings’ purposes and interests of local creditors, the Insolvency Regulation (recast) allows the court of establishment temporarily to stay the opening of secondary proceedings. The stay, requested by the main insolvency practitioner or the debtor in possession, should follow the stay of individual enforcement proceedings which the courts of the main proceedings granted to facilitate negotiations in process between debtor and creditors, as long as ‘suitable means are in place to protect the interests of local creditors’ (art 38 (3) and Recital (45)).

Should secondary proceedings be opened or the request of opening be still pending, the Insolvency Regulation (recast) extends the duty to cooperate both to the courts involved and between courts and insolvency practitioners (arts 41–4). Courts and insolvency practitioners are also required to take account of principles and guidelines adopted by European and international organizations active in the area of insolvency law (Recital (48)). For instance, the courts may coordinate with each other to appoint the insolvency practitioners, while courts and insolvency practitioners may enter into generic or detailed protocols and agreements both to facilitate cross-border cooperation and to coordinate the administration of the debtor’s assets and affairs.

The revision also addresses the management of multiple insolvency proceedings relating to groups of companies, introducing new rules which ‘strive to ensure the efficiency of the coordination, whilst at the same time respecting each group member’s separate legal personality’ (Recital (54); see also →Insolvency, jurisdiction and vis attractiva).

In this regard, the Insolvency Regulation (recast) fills in the gap of the current regime, drawing inspiration from the UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment and related Legislative and Practice Guides.

In particular, when more proceedings are opened in different Member States, the Insolvency Regulation (recast) requires all the actors involved (insolvency practitioners and courts) to comply with the duties of cooperation and communication applicable in case main and secondary insolvency proceedings are opened against the same debtor (ch V, s 1).

Besides, an insolvency practitioner may request – before any court having jurisdiction over the insolvency proceedings of a member – the opening of a ‘group coordination proceeding’, which should further facilitate the restructuring of the entire group (ch V, s 2). Such a court may also be selected by means of a choice-of-court agreement (art 66).

The request should include the proposal of the person to be appointed as the ‘coordinator’, an outline of the coordination plan, the list of all insolvency practitioners appointed in p. 947the proceedings concerning the members and an outline of the estimated costs (art 61). The participation of other insolvency practitioners (and, hence, other proceedings) rests on a voluntary basis (see the regime of the ‘objections’ enshrined in arts 64, 65, 67 – even applicable as regards the proposed coordinator – and that of subsequent ‘opt-in’ (art 69(a)).

The main tasks of the coordinator consist in proposing a group coordination plan and recommending the suitable conducts of all the insolvency proceedings involved, even by acting therein (arts 71–2). The coordinator may be removed from its tasks under certain circumstances (art 75).

The advantages of the ‘coordination proceedings’ should be worth the costs. That means that costs of the coordination should be sustainable and adequate having regard to the purpose of each proceeding involved (Recital (58)).

As noted elsewhere (see →Insolvency, jurisdiction and vis attractiva), the group-of-companies-oriented rules will not prevent a court from opening insolvency proceedings for several companies in a single state whenever it finds a common COMI therein (Recital (53)).


  • Edward S Adams and Jason K Fincke, ‘Coordinating Cross-border Bankruptcy: How Territorialism Saves Universalism’ (2008) 15 Colum.J.Eur.L. 43;

  • Stefania Bariatti, ‘Recent Case-Law Concerning Jurisdiction and the Recognition of Judgment under the EC European Insolvency Regulation’ (2009) 73 RabelsZ 629;

  • Stefania Bariatti and Paul Omar (eds), The Grand Project: Reform of the European Insolvency Regulation (INSOL Europe 2014); Reinhard Bork, Principles of Cross-Border Insolvency Law (Intersentia 2017); Reinhard Bork and Renato Mangano, European Cross-Border Insolvency Law (OUP 2016);

  • Horst Eidenmüller, ‘A New Framework for Business Restructuring in Europe: The EU Commission’s Proposals for a Reform of the European Insolvency Regulation and Beyond’ (2013) 20 MJ 133;

  • Ian Fletcher, Insolvency in Private International Law (2nd edn, OUP 2005);

  • Luigi Fumagalli, ‘Il regolamento comunitario sulle procedure di insolvenza’ (2001) 56 Riv Dir Proc 677;

  • Giulio Cesare Giorgini, Méthodes conflictuelles et règles matérielles dans l’application des ‘nouveaux instruments’ de règlement de la faillite internationale (Dalloz 2006);

  • Burkhard Hess, Paul Oberhammer and Thomas Pfeiffer (eds), European Insolvency Regulation: Heidelberg–Luxembourg–Vienna Report (Beck-Hart-Nomos 2013);

  • Antonio Leandro, Il ruolo della lex concursus nel regolamento comunitario sulle procedure di insolvenza (Cacucci 2008);

  • Antonio Leandro, ‘Amending the European Insolvency Regulation to Strengthen Main Proceedings’ (2014) 50 Riv.Dir.Int’le Priv. & Proc. 317;

  • Antonio Leandro, ‘A First Critical Appraisal of The New European Insolvency Regulation’ (2016) Il Diritto dell’Unione Europea 215; Peter Mankowski, Michael F. Müller and Jessica Schmidt, EuInsVO 2015. Europäische Insolvenzverordnung 2015. Kommentar (Beck 2016); Gerard McCormack, ‘Universalism in Insolvency Proceedings and Common Law’ (2012) 32 Oxford J.Leg.Stud. 325;

  • Gerard McCormack, ‘Reforming the European Insolvency Regulation: A Legal and Policy Perspective’ (2014) 10 J Priv Int L 41;

  • Gabriel Moss, ‘Group Insolvency – Choice of Forum and Law: The European Experience under the Influence of English Pragmatism’ (2007) 32 Brooklyn J.Int’l L. 1005;

  • Gabriel Moss, Ian Fletcher and Stuart Isaacs (eds), Moss, Fletcher and Isaacs on the EU Regulation on Insolvency Proceedings (3rd edn, OUP 2016);

  • Paul Omar, International Insolvency Law: Themes and Perspectives (Ashgate 2010);

  • Klaus Pannen, European Insolvency Regulation (De Gruyter Recht 2007);

  • Ilaria Queirolo, Le procedure di insolvenza nella disciplina comunitaria. Modelli di riferimento e diritto interno (Giappichelli 2007);

  • Michaël Raimon, Le règlement communautaire 1346/2000 du 29 mai 2000 relatif aux procèdures d’insolvabilité (LGDJ 2007);

  • Christoph Thole, ‘Die Reform der Europäischen Insolvenzordnung: Zentrale Aspekte des Kommissionsvorschlags und offene Fragen’ (2014) 22 ZEuP 39;

  • Miguel Virgós Soriano and Francisco Garcimartín Alférez, The European Insolvency Regulation: Law and Practice (Kluwer 2004);

  • Bob Wessels, International Insolvency Law (3rd edn, Kluwer 2012);

  • Bob Wessels, Bruce A Markell and Jason J Kilborn, International Cooperation in Bankruptcy and Insolvency Matters (OUP 2009), Bob Wessels, International Insolvency Law Part I. Global Perspectives on Cross-border Insolvency Law (4th edn, Wolters Kluwer 2015).