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THE HARMONIZATION OF THE AVOIDANCE RULES IN EUROPEAN UNION INSOLVENCIES

Published online by Cambridge University Press:  16 November 2016

Andrew Keay
Andrew Keay*
Affiliation:
Professor of Corporate and Commercial Law, Centre for Business Law and Practice, School of Law, University of Leeds, Professorial Research Fellow, Deakin Law School, Deakin University, Australia, and Barrister, Kings Chambers, England, [email protected].
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Abstract

Cross-border transactions and resultant legal proceedings often cause problems. One major problem is knowing which law should govern the transaction and any legal proceedings. Cross-border insolvencies in the EU are subject to the European Regulation on Insolvency Proceedings (EIR) but this legislation does not determine which substantive insolvency law rules apply in a given insolvency. There are many differences in the insolvency rules applicable in the various EU Member States and this has caused concern in relation to the avoidance of transactions entered into by an insolvent prior to the opening of insolvency proceedings. In light of this, the paper examines options to address divergence between national avoidance rules. One option, harmonization, is analysed as well as its possible benefits and drawbacks.

Keywords

avoidance rulesEuropean Unionharmonizationinsolvency
Type
Articles
Information
International & Comparative Law Quarterly , Volume 66 , Issue 1 , January 2017 , pp. 79 - 105
Copyright
Copyright © British Institute of International and Comparative Law 2016 

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References

1 Council Regulation on Insolvency Regulations (EC) (1346/2000), 29 May 2000, Recital 5 (recast).

2 Although Tung referred to the Regulation as providing for a territorialist scheme with universalist pretentions: Tung, F, ‘Is International Bankruptcy Possible?’ (2001) 23 MichJIntlL 31, 77Google Scholar.

3 Council Regulation on Insolvency Regulations (EC) (1346/2000), 29 May 2000, Recital 8.

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5 Described by Eidenmüller, Horst as making overly modest changes: ‘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, 150Google Scholar. For a recent discussion of the recast regulation, see Weiss, M, ‘Bridge over Troubled Water: The Revised Insolvency Regulation’ (2015) 24 International Insolvency Review 192 Google Scholar; McCormack, G, ‘Something Old, Something New: Recasting the European Insolvency Regulation’ (2016) 79 MLR 121 CrossRefGoogle Scholar.

6 See art 16 of Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast) Official Journal of the European Union, L141/19, 5 June 2015.

7 Seagon v Deko Marty Belgium NV (Case C-339/07) [2009] BCC 347, [59].

8 McCormack (n 5).

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13 This is not meant to refer only to those who wind up companies in liquidation but to all those qualified to oversee the affairs of an insolvent company. The use of ‘liquidator’ as in the EC Regulation on Insolvency Proceedings is adopted. The Regulation provides in art 2(b) that a liquidator is a person or body whose function is to administer or liquidate assets of which a debtor has been divested or to supervise the administration of the debtor's affairs. In Annex C ‘liquidator’ covers a host of roles that are played by those who administer the estates of insolvents. The recast of the Regulation omits reference to liquidator and substitutes the more neutral term, ‘insolvency practitioner’. See art 2(5) (Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast) Official Journal of the European Union, L141/19, 5 June 2015.

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15 Seagon v Deko Marty Belgium NV (Case C-339/07) [2009] BCC 347, [39].

16 For example, see European Commission, DG Justice and Consumer Affairs (n 12) 168–77.

17 Art 13 of the EIR that is presently in effect (until June 2017).

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19 Seagon v Deko Marty Belgium NV (Case C-339/07) [2009] BCC 347, [26].

20 See J Moyle, Imperatoris Iustiniani Institutiones (Clarendon Press 1949) 547. Other writers demur to this viewpoint. For instance, see Roby (n 18).

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35 The law of the place where insolvency proceedings have been opened

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47 ibid [49].

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55 ibid [44].

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64 Alexander (n 40) 25.

65 In private international law, the system of law applicable to the case in dispute. In the context of this article it would be the law that is applicable to the transaction that is under challenge.

66 P Pfeiffer, ‘Article 13 EIR: Avoidance, Avoidability and Voidness’ in External Evaluations of Regulation No 1346/2000/EC on Insolvency Proceedings, JUST/2011/JVC/PR/0049/A4, para 6.10.3.

67 ibid.

68 ibid.

69 Piñeiro (n 31) 212.

70 McCormack (n 60) 146.

71 ibid.

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75 Art 99.

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83 Wessels (n 11).

84 Accessible at: <http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A12008E>. It might be argued that harmonization of avoidance rules might not be able to be seen as promoting rules on civil procedure.

85 Parry, R, ‘The Rationale of the Transaction Avoidance Provisions of the Insolvency Act 1986’ in Parry, R, Ayliffe, J and Shivji, S (eds), Transaction Avoidance in Insolvencies (2nd edn, OUP 2011) 15Google Scholar and referring to Jackson, T, ‘Avoiding Powers in Bankruptcy’ (1984) 36 StanLRev 725, 726Google Scholar.

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88 FAQ – Origin, Mandate and Composition of UNCITRAL and quoted in in Block-Lieb and Halliday (n 72) 493.

89 Slot (n 77) 379.

90 ibid 382.

91 M Haentjens, ‘Harmonisation of Securities Law: custody and transfer of securities in European private law’ (2007) unpublished PhD thesis submitted to the University of Amsterdam, 240.

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105 The European Association of Insolvency Practitioners and Scholars.

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107 ibid 27.

108 <www.ilauk.org/docs/ila/ila_response_insolvency_regulation_copy.pdf>.

109 Consultation on the future of European Insolvency Law <http://ec.europa.eu/justice/newsroom/files/insolvency_en.pdf>.

110 For example, Cohen, A and Ruiz, G, ‘Living in perfect harmony? A new European approach to business failure and insolvency’ (2013) CRI 151 Google Scholar, 151.

111 RJ de Weijs, ‘Harmonization of European Insolvency Law and the Need to Tackle Two Common Problems: Common Pool & Anticommons’ (19 October 2011) <http://ssrn.com/abstract=1950100> 1.

112 European Parliament resolution of 15 November 2011 with recommendations to the Commission on insolvency proceedings in the context of EU company law (2011/2006(INI)) at recital C, <http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P7-TA-2011-0484+0+DOC+XML+V0//EN>.

113 ibid recitals A and B.

114 Annex to European Parliament resolution of 15 November 2011 with recommendations to the Commission on insolvency proceedings in the context of EU company law (2011/2006(INI)), para 1.3 and available at  <http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P7-TA-2011-0484+0+DOC+XML+V0//EN>.

115 At 3.

116 C(2014) 1500 final and available at <http://ec.europa.eu/justice/civil/files/c_2014_1500_en.pdf>.

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118 European Commission, DG Justice and Consumer Affairs, ‘Study on a new approach to business failure and insolvency’ (n 12).

119 McCormack (n 60) 143.

120 The Secretary-General, ‘Report of the Secretary-General’ delivered to the General Assembly, UN doc A/6396 & Add.1 and Add.2 (23 September 1966) at para 8 and referred to in Block-Lieb and Halliday (n 70) 493.

121 Alexander (n 40) 38.

122 COM(2012) 742 final and accessible at <http://ec.europa.eu/justice/civil/files/insolvency-comm_en.pdf>.

123 INSOL Europe, ‘Harmonization of Insolvency Law at EU Level’ PE 419.633.

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134 Section 239(5) of the Insolvency Act 1986. But not in Scotland. The issue of desire is not so relevant in England and Wales where the creditor who received the benefit is a connected person.

135 de Weijs (n 111) 1.

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