cross-border insolvency proceedings
(main problem areas)
Introduction.
EU Regulation 1346/2000 (EU Official Journal, June 30, 2000, n. 160), concerning cross-border insolvency proceedings, is an interesting legal text, which replaces not only the EU Convention of 1995, but also bilateral and multilateral conventions existing between EU member states.
Apart from the analysis of laws and new elements that EU Regulation introduces in the field of insolvency proceedings, then we will only indicate the main gaps, critical points and application problems of that discipline.
Since hours is important to say that the Regulation, despite some criticism that certainly can be moved, is a good law, which establishes a acceptable point of balance between opposing needs, sometimes very difficult to reconcile.
The first gaps of Regulation concern, on the one hand, the identification of collective insolvency proceedings that can be used in relation to cross-border insolvency (which, it is good to say, is that already existing in the several bankruptcy laws) and, secondly, a description of subjective and objective elements that consent to give them start.This from the essential requirement for the identification of jurisdiction, i.e. the notion of “centre of main interests”.
Cross-border insolvency proceedings.
First of all, the characteristics that national procedures should have to be used as cross-border proceedings are not determined with precision. The Regulation merely indicate four elements useful to identify the procedure: it must have the nature of collective insolvency proceedings, must be based on insolvency, should lead to the divestmentof the debtor and ultimately must provide for the presence of a liquidator. Then the member states indicate the internal procedures that can be used for this aim (which are so included in the lists annexed to Regulation), with the clarification that – as is clearly provided in the Regulation – the procedures may also be non-judicial nature. This is not in itself a problem, but gives rise to two questions. In fact an essential point of the Regulation consists in the automatic recognition of decisions taken during the main proceedings in all member states, without any formalities: this provision not give rise to particular problems in relation to decisions taken by courts, but it isobjectionable in relation to administrative measures adopted by non-judicial authorities more or less independent.
However, the problems are not represented only by the recognition of administrative measures, since every time the procedure is entrusted to non-judicial organs there are also operational difficulties. Just to mention one, is therethe possibility to promote the preliminary reference procedure ex art. 234 EU Treaty (which, as we know, is proposed only by courts and, until now, has already been used twice in areas addressed under the Regulation 1346/2000, i.e. in the case Staubiz-Schreiber, decided by the German Bundesgerichtshof on November 27, 2003, and in the case Eurofood,decided by the Irish Supreme Court on July 27, 2004)? If so, to whom the active legitimacy?
Condition for opening insolvency proceedings.
As has been mentioned, subjective and objective elements in order to access to insolvency proceedings are not determined. To this end, according to the prevailing view, it is necessary to consider the internal lawfixed with regard to the single procedure. This fact, if on the one hand makes the definition of conditions for the opening of insolvency proceedings less abstract, for the other creates – or rather perpetuates – the risk that the differences, sometimes very deep, between the various systems generate forum shoppingphenomena.As an example, many countries – and the same European standard – consider all the people who exercise any business activity liable to collective insolvency proceedings, except Italy, which limits the application area only to traders. Not to mention that some jurisdictions - such as the United Kingdom in which the Insolvency Act of 1986 is in force - extend the possibility to open insolvency proceedings (bankruptcy), even with regard to subjects that do not play at all business activity.
However, more problems may arise from diversity in defining key concepts as "crisis" and "insolvency". This should worry more if we consider that in order to open a secondary proceedings, no need to show any objectively element, but only that there is a main proceedings. It is not unreal to find local procedures that open although the debtor is not considered insolvent according to national law.
The notion of “centre of main interests”.
As was mentioned, the concept of “centre of main interests”, which is essential not only for the applicability of the Regulation but also – and above all – for the identification of the jurisdiction, is not well defined[1]. Although some jurisdictions also considersimilar criteria (think aboutSpain, where Art. 10 of law on July 9, 2003, n. 22 refers to the centre of the main interests of the debtor), the notion of "main interests" is rather vague and indefinite and can be interpreted in various ways.However, since the Regulation does not provide any supranational instrument for regulating the relations between the jurisdictions of member states, it is well possible that more jurisdictions open cross-border insolvency proceedings, creating a positive conflict of jurisdiction, or that - though this will certainly rare –no jurisdiction intends to open insolvency proceedings, giving rise to a negative conflict of jurisdiction.
Continue: the conflicts of jurisdiction between member states. The positive conflict.
The Regulation does not provide adequate answers to these questions, creating very serious difficulties in terms of the relationship between national laws.Specifically, cases of (positive) conflict of jurisdiction occurred several times: think about the case Daisytek-ISA Ltd., which has generated a conflict between the High Court of Justice in Leeds, who had subjected the company to Administrative order, and the Tribunal de Commerce in Pontoise, who had opened a procedure of redressement judiciarie (then this conflict was recomposed by the Cour d'Appel in Versailles, which annulled the decision of the Tribunal de Commerce); or think about the case Eurofood IFSC Ltd., a company controlled by Parmalat s.p.a., which was subjected to a procedure for winding up by the Irish High Court, with the appointment of a provisional liquidator, and simultaneously to extraordinary administration ex Art. 3, third paragraph, d.l. 347/2003 by the Minister for Productive Activities of Italy, in connection with the bankruptcy of Parmalat group, and after the declaration of insolvency by the court of Parma. The High Court, arguing that the decision of the Italian court were incorrect, opened the winding up procedure and its decision was upheld by the Supreme Court, which however decided to promote the preliminary reference procedure ex art. 234 EU Treaty.
Furthermore, the notion of centre of main interests is combined with another criterion, which must be used when the request for opening of insolvency proceedings is proposed to several States which may be considered abstractly competent. In such cases, the Regulation accounts as main proceedings what is open for the first, even if the request is submitted later.
Clearly this solution can generate distortions in the system, because it does not privilege the country where there is actually the "centre of main interests", but one that opens the insolvency proceedings more readily. Obviously needs for speed are considered by EU Regulation most deserving of consideration even compared with those instrumental efficiency. However, it is legitimate to ask why a country in which the company has its centre of main interests and in which the proceedings have a long pre-procedural phase (perhaps because it was preferred restructuring to liquidation) should be postponed to another simply because that is able to open the procedure as soon as possible.
In practice, the choice of jurisdiction lies with the parties, which can chose the court also in relation to the perspectives of greater or lesser speed in the decision and in the opening of proceedings: in a word, it is possible that forum shopping phenomena still occur[2].
Continue: the negative conflict of jurisdiction between member states.
Unlike the conflict positive, negative conflict of jurisdiction is not considered by the Regulation. So if no court intends to open the cross-border insolvency proceedings, there is a clear problem of emptiness of protection, because there is no possibility of interference by other member states or EU institutions, since the decision concerning the opening of the procedure lies only with the judicial or administrative authority in the single state.
The notion of liquidator.
There isn’t an analytical description of the concept of liquidator, so the figures necessary for the implementation of the Regulation will be designated by member states with regard to their national legislation.This includes the possibility to put on an equal footing figures of liquidator with very differentcharacteristics. For example, we could consider the Art. 38 of the EU Regulationwhich allows the provisional liquidatorto adopt precautionary measures, while in Italythis is a prerogative of the court.
These difficulties can be partly overcome or reduced thanks to "virtuous" practice of the courts and careful interpretation and application of Regulation: if the harmonization of community law was not reached by the legislator, it may be pursued through the courts, especially that of Strasbourg, which could fill up gaps with its decisions.
The coordination of main and secondary proceedings.
From now, we’ll deal with more structural problems, which can hardly be solved through interpretative and applicative practices.
The main difficulties arise when secondary proceedings (which, is good to say, with rare exceptions, may reach only aims of liquidation) are opened next to the main proceedings.As mentioned above, the condition for opening the secondary proceedings is only the presence in another country of a main procedure, so there is no need for verifying the insolvency in the state that intends to open the secondary proceedings. In addition, the opening of secondary proceedings may be promoted not only by the liquidator in the main proceedings (as it should be to promote a harmonious coordination of the objectives pursued in the restructuring and/or in the liquidation of the company in crisis), but by whoever is interested. In practice this may lead to a distortion of the system: in fact, secondary proceedings should be only instrumental to the achievement of the same purposes which seeks the main proceedings[3]. Instead it is impossible denying that secondary proceedings may weaken the main proceedings because of how they are structured and coordinated with it. Indeed, if we consider the possibility of opening an indefinite number of secondary proceedings and that any proceedings follow the rules of each country, is not difficult to imagine the violation of the par condicio creditorum, since the creditors could get a different satisfaction of their claims in according to the country in which they reside. Bringing the concept to the extreme, if all the countries in which operated the debtor open secondary proceedings, what role can have the main procedure X?
These problems can be solved through the use of a strong coordination between the various proceedings, especially with regard to relations between different liquidators.
However, even with regard to this, the Regulationis incomplete, since its rules are not sufficient to overcome the difficulties we have mentioned.
Besides, it is not easy coordinating the main procedure, which aims to the restructuring of a company, with secondary proceedings, which may have only purposes of liquidation.
Finally there is no rule that determines what happens when the main proceedings closes: probably the secondary proceedings can go ahead safely, even without the only condition of its openness, i.e. the presence in the main proceedings.
Revocatory actions.
With regard to relations between the different procedures, revocatory actions deserve special attention. The Regulation does not contain any reference to these actions. So, better coordination would have been desirable, since the various ways in which these actions are carried out in different countries can generate conflicts and forum shopping phenomena.
The enforcement of judgments issued in other member states.
A final point concerns the enforcement in other countries of the judgments adopted during the main proceedings.Although the Regulation provides for the automatic recognition of all decisions issued during the main proceedings, this concerns only declarative and constitutive effects, but not executive effects.Every time we need to give enforcement to these decisions, art. 35 of EU Regulation refers to the Brussels Convention of 1968 (now replaced by Regulation 44/2001 of December 22, 2000); according to this, in order to obtain the enforcement of a judgment issued in a foreign law, it is necessary to apply to local court, which opens a procedure characterized by potential and deferred contradictory.Moreover, in some jurisdictions (like ours), the court of enforcement is not the same court of the proceedings, so that delays and difficulties become possible.
The regulation can be applied to purely internal proceedings?
According to an opinion, the Regulation also innovates partially bankruptcy laws of the member states in the sense that some rules may also apply to purely internal procedures. Indeed, Artt. 5-15 of the EC Regulation 1346/2000 provide exceptions to the application of law in force in the jurisdiction in which the main proceedings is opened and favour the application of law in force in other states;however, it seems that these exceptions are applicable even if the proceedings has not cross-border nature, but is purely internal[4].
Beyond this, the problem also arises in more general termsin relation to the concept of cross-border insolvency. The criticism that some authors have turned to a restrictive concept of cross-border insolvency (cross-border insolvency proceedings would be only those involving companies with headquarters or creditors located in different countries) is due to the impossibility of identifying ex antethe impact of insolvency and of distinguishing ex-ante the cases in which the centre of interest of the company is "main" or rather the only one[5].In this perspective, when the insolvency proceedings opens, the national court may not be able to chose between enforcing domestic or EU legislation, so, it is believed, it is inevitable to apply community law.Of course, this solution causes not simple questions, particularly in relation to the need for the national court to apply the internal law of other countries in order to regulate some legal relationships affected by the insolvency proceedings.
Ultimately, it would have been preferable to create a model of cross-border insolvency proceedings ad hoc, with its own rules and used without differences in the various States. Instead, the choice to use measures of domestic law for situations involving various jurisdictions creates difficulties whose resolution will require still continuing commitment of EU legislator.
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ESSENTIAL ITALIAN BIBLIOGRAPHY ON CROSS-BORDER INSOLVENCY
BACCAGLINI L., Il caso «Eurofood»: giurisdizione e litispendenza nell’insolvenza transfrontaliera, in Int’l Lis, 2006, 123
BARIATTI S., L’applicazione del regolamento Ce n. 1346/2000 nella giurisprudenza, in Riv. dir. proc., 2005, 673
BARIATTI S., Il regolamento n. 1346/2000 davanti alla corte di giustizia: il caso «Eurofood», in Riv. dir. proc., 2007, 203
BARIATTI S., Le garanzie finanziarie nell’insolvenza transnazionale: l’attuazione della direttiva 2002/47/Ce, in Riv. dir. internaz. privato e proc., 2004, 841
BATTAGLIA R., Brevi note sul regolamento comunitario relativo alle procedure di insolvenza, in Dir. fallim., 2002, I, 22
BENEDETTELLI M.V., «Centro degli interessi principali» del debitore e forum shopping nella disciplina comunitaria delle procedure di insolvenza transfrontaliera, in Riv. dir. internaz. privato e proc., 2004, 499
BISCARETTI DI RUFFIA C., Compatibilità dell’amministrazione straordinaria delle grandi imprese in stato di insolvenza con l’ordinamento comunitario, in Dir. Unione europea, 2005, 485
BOGGIO L., Direzione e coordinamento di società, società «strumentali», sede legale, insolvenza e giurisdizione italiana alla luce del regolamento Ce n. 1346/2000, in Giur. it., 2005, 1202
BONFANTI A., Le procedure concorsuali internazionali tra il regolamento 1346/2000 e la disciplina italiana di diritto internazionale privato, in Dir. comm. internaz., 2003, 407
CANDELARIO MACÍAS I., Un examen sobre el reglamento 1346/2000, del consejo de Europa de 29 de mayo, sobre procedimientos de insolvencia comunitaria, in Dir. fallim., 2002, I, 32
CAPONI R., Il regolamento comunitario sulle procedure di insolvenza, in Foro it., 2002, V, 220
CATALDO M., Amministrazione straordinaria delle grandi imprese in stato di insolvenza e disciplina della concorrenza nella Comunità europea, in Fallimento, 2006, 790
CATALLOZZI P., Il regolamento europeo e il criterio del Comi (centre of main interests): la parola alla corte, in Fallimento, 2006, 1256
CATALLOZZI P., Giurisdizione e legge applicabile nelle revocatorie fallimentari transnazionali, in Fallimento, 2007, 635
CHERUBINI G., Regolamento Ue sulle procedure di insolvenza: prime esperienze applicative italiane, in Dir. e pratica fallim., 2007, fasc. 5, 27
CORNO G., La disciplina comunitaria dell’insolvenza, in Dir. fallim., 2002, I, 272
DANIELE L., Il regolamento n. 1346/2000 relativo alle procedure di insolvenza: spunti critici, in Dir. fallim., 2004, I, 593
DANIELE L., Legge applicabile e diritto uniforme nel regolamento comunitario relativo alle procedure di insolvenza, in Riv. dir. internaz. privato e proc., 2002, 33
DE CESARI P., Giurisdizione, riconoscimento ed esecuzione delle decisioni nel regolamento comunitario relativo alle procedure di insolvenza, in Riv. dir. internaz. privato e proc., 2003, 55
DE CESARI P. e MONTELLA G., Le procedure di insolvenza nella nuova disciplina comunitaria - Commentario articolo per articolo del regolamento Ce n. 1346/2000, Milano, 2004
DE CESARI P. e MONTELLA G., Il «giudice» nel regolamento 1346/2000: una nuova nozione autonoma di diritto comunitario, in Fallimento, 2007, 263
DELL’ARTE S., Alvia il regolamento comunitario sulle procedure di insolvenza, in Dir. e pratica società, 2002, fasc. 18, 32
DE SANTIS F., La normativa comunitaria relativa alle procedure di insolvenza transfrontaliere e il diritto processuale interno: dialoghi tra i formanti, in Dir. fallim., 2004, I, 91
DIALTI F., Trasferimento del centro degli interessi principali del debitore nel territorio di un altro stato membro successivamente alla proposizione della domanda di apertura di una procedura di insolvenza, in Dir. fallim., 2006, II, 413
DI AMATO S., Le procedure di insolvenza nell’Unione europea: competenza, legge applicabile ed efficacia transfrontaliera, in Fallimento, 2002, 693