Presentatie EU Insolventieverordening Wessels

1. JIRA 23-06-2011
EU Insolvency Regulation
Introduction
“Jurisdiction”
Bob Wessels
University of Leiden Law School
St. John’s University School of Law, New York
www.bobwessels.nl

2. Themes of Today
• EU Private Int’l Insolvency Law Framework
• Goals and Scope of InsReg
• Cases:
– Daisytek
– Staubitz-Schreiber
– Parmalat Eurofood
– Deko Marty
– Probud
• Focus:
– Int.’l jurisdiction
– Coordination of proceedings
• Nortel Networks
• Lehman Brothers
www.bobwessels.nl

3. EU PRIVATE INT’L INSOLVENCY LAW FRAMEWORK
1. Int’l Jurisdiction and Enforcement of Judgments in Civil and Commercial
Matters
• 1968 Brussels Convention - now: 2002 Brussels Regulation (44/2001)
• Art. 1(2) excludes from its scope:
(b) “bankruptcy” and analogous proceedings;
2. Int’l Jurisdiction, Recognition and Applicable Law in Insolvency Matters
• Regulation 1346/2000 on Insolvency Proceedings - Entry into force: 31 May 2002
• Art. 1(2) excludes “financial institutions” from its scope
www.bobwessels.nl

4. EU PRIVATE IIL FRAMEWORK (Cont’d)
3.
Insurance Undertakings / Credit Institutions
•
“Insurance undertaking” Directive 2001/17 of 19th March 2001
[implementation date: 20 04 2003] (Art. 213 - 213kk Neth. BA)
•
“Credit institution” Directive 2001/24 of 4th April 2001
[impl. date 05 05 2004] (Art. 212g – 212nn Neth. BA)
•
Within context of Credit Institutions:
– Directive 94/19/EC on Deposit-guarantee Schemes
•
–
–
Dir. 2009/14 (O.J. L 68/3 of 13 March 2009)
EU Directive 98/26 on Netting and Securities settlement Systems
EU Directive 2002/47 on Financial Collateral Arrangements
(Implementation date: 27 December 2003)
www.bobwessels.nl

5. EU PRIVATE ILL FRAMEWORK (Cont’d)
4. Other provisions re ‘insolvency’, e.g.
• Dir. 77/187/EC re Safeguarding of Empoyees’ Rights in the event
of Tranfer of Undertakings
• Dir. 90/314/EC re Package Travel / Holidays / Tours
• Dir. 97/9/EC re Investor Compensation Schemes
• Dir. 2000/35 Late Payments in Commercial Transactions
• Dir. 2000/74 Protection Employees in the Event of Insolvency
of their Employer (updating Dir. 77/187 and Dir. 80/987)
• EU Reg. 2001/2157 re European Company Statute (Art. 67)
• August 2008 - Proposal EU Reg. on the Statute for a European
Private Company (Societas Privata Europaea) (Art. 40)
www.bobwessels.nl

6. Any System ?
• “Framework or mess?
• Title V TFEU
“Area of Freedom,
Security and Justice”
> “Judicial cooperation”
www.bobwessels.nl

7. www.bobwessels.nl

8. Basis in TFEU (replaced TEC as of 1 December 2009 – O.J. C 115/171 (9.5.2008)
Title V (“Area of Freedom, Security and Justice”)
Art. 67 TFEU (ex Art. 61 TEC):
1. The Union shall constitute an area of freedom, security and justice with
respect for fundamental rights and the different legal systems and
traditions of the Member States.
2. It shall ensure the absence of internal border controls for persons and
shall frame a common policy on asylum, immigration and external border
control,…..
3. The Union shall endeavour to ensure a high level of security through
measures to prevent and combat crime, racism and xenophobia …., as
well as through the mutual recognition of judgments in criminal matters
and, if necessary, through the approximation of criminal laws.
4. The Union shall facilitate access to justice, in particular through the
principle of mutual recognition of judicial and extrajudicial decisions in
civil matters.
www.bobwessels.nl

9. Chapter 3 “Judicial Cooperation in Civil Matters”
Art. 81 TFEU (ex Art. 65 TEC):
1. The Union shall develop judicial cooperation in civil
matters having cross-border implications, based on the
principle of mutual recognition of judgments and of
decisions in extrajudicial cases. Such cooperation may
include the adoption of measures for the approximation of
the laws and regulations of the Member States.
2. …………..
versus Title IV “Free Movement of Persons, Services and
Capital””;
Art. 49 TFEU (ex Art. 43 TEC) “Right of Establishment”
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10. GOALS of EU INSOLVENCY REGULATION
• Convention 1995 (Report Virgós / Schmit) > InsReg 2002
• Rationale (object):
EU wishes to coordinate measures to be taken regarding an
insolvent debtor’s assets, while the proper functioning of the
internal market requires that cross-border insolvency proceedings
should operate efficiently and effectively
• InsReg aims to achieve this objective within the scope of judicial
cooperation in civil matters within the meaning of Art. 81 (TFEU)
(was Art. 65 TEC) (“Freedom, Security and Justice”), so:
www.bobwessels.nl

11. GOALS of EU INSOLVENCY REGULATION
• a. To determine the international jurisdiction of the courts or
authorities with regard to the intra-Community effects of main
insolvency proceedings
• b. To create certain uniform conflict-of-laws rules for such
proceedings
• c. To ensure the recognition and enforcement of judgments
given in such matters
• d. To make provisions for the possibility of opening secondary
insolvency proceedings
• e. To ensure mutual coordination and communication between
liquidators in main and secondary proceedings
• f. To guarantee information for creditors and a right to lodge
claims
www.bobwessels.nl

12. SCOPE IN SUBSTANCE
EU InsReg is applicable to proceedings (Art. 1(1)):
• 1. That are “collective” : all creditors concerned may seek
satisfaction only through these insolvency proceedings, as
individual actions will be precluded
• 2. Based on “the debtors insolvency’” and not on other grounds
• the insolvency-test itself is rooted in the legislation of the lex concursus
• 3. The proceedings must entail the total or partial divestment of
the debtor, and
• 4. The appointment of a ‘liquidator’.
www.bobwessels.nl

13. SCOPE IN SUBSTANCE
Limited framework:
>
“proceeding” and “liquidator” should be mentioned in
one of the applicable Lists in the Annexes:
A.
Insolvency proceedings, referred to in Art. 2(a);
B.
Winding up proceedings, referred to in Art. 2(b), and
C.
“Liquidator”, as referred to in Article 2(c).
www.bobwessels.nl

14. Check proceedings
• Parmalat SpA:
December 03
Amministrazione
straordinaria delle
grandi impressi in stato
di insolvenza
www.bobwessels.nl

15. Belgium
• Act concerning continuity of
undertakings
In force 1 April 2009
In Annex A?
www.bobwessels.nl

16. “Not (yet) in Annex”
• 01-04-2009 Belgium “Act of Continuity of businesses” >
Gerechtelijke reorganisatie, only since March 2010 in
Annex A
• 01-07-2010 Austria “Sanierungsverfahren mit
Eigenverwaltung unter Aufsicht eines Verwalters” >
proposal April 2011
• Latvia - Annex A lists 6 proceedings, but one misses the
word “Ārpustiêsas” and three do not exist any more since 1
November 2010. The Annex A proposal of April 2011 only
mentions three proceedings, but the cited word is still
missing
www.bobwessels.nl

17. IMPACT
The EU Insolvency Regulation applies
• to all (app. 100) listed insolvency proceedings
• in which a person/body (acting as “liquidator”) is appointed
• in 26 EU countries, whether the debtor is a natural person or
a legal person, a trader, a merchant or an individual but not
to insolvency proceedings concerning financial institutions
(Art. 1(2))
• ! 22 official EC languages !
www.bobwessels.nl

18. FORMAL SCOPE
Main proceedings (Art. 3(1)):
• The courts of a Member State where the “centre of the debtor’s
main interests” (COMI) is situated
• Universal scope and aim at encompassing all the debtor’s assets
• Recital 13: The ‘centre of main interests’ should correspond to
“…. the place where the debtor conducts the administration of
his interests on a regular basis and is therefore ascertainable
by third parties”
• For a company or legal person COMI is the place of its registered
office (rebuttable presumption)
www.bobwessels.nl

19. FORMAL SCOPE
Secondary proceedings (Art. 3(2) and Art. 27)
• The court of another Member State shall have only jurisdiction,
if the debtor possesses an establishment within the territory
of that other Member State (Art. 3(2))
• Art. 2(h) – …. any place of operations where the debtor carries
out a non-transitory economic activity with human means
and goods
• Effects restricted to the assets of the debtor situated in the
territory of the other Member State (Art. 3(2))
www.bobwessels.nl

20. FORMAL SCOPE
Secondary proceedings (Art. 3(2) + Art. 27):
• Purposes:
– (a) Protect – usually – local creditors from the main
proceedings
– (b) Assist and support the main proceedings
• Opened after opening main proceedings:
– No “insolvency test” in other State
– Nature must be winding up proceedings (Annex B)
(Art. (3)(3) and 27)
– Territorial scope
www.bobwessels.nl

21. Impact of COMI decision
•
•
•
•
Art. 16 - recognition
Art. 4 - applicable law
Art. 18 - powers IOH
Art. 29(a) – request opening of sec. proc. in
other MSs
• Art. 31 - coordination main/secondary proc.
• Art. 40 - duty to inform creditors
www.bobwessels.nl

22. Theme 1
• Int’l Jurisdiction
– Main – COMI – Recital 13
• Nature: Annex A
• Universalism: lex concursus
• COMI Presumption - companies
– Secondary – establishment – 2(h)
• Nature: liquidation - Annex B
• No examination of debtor’s insolvency
• Effects restricted to territory
www.bobwessels.nl

23. Cases
www.bobwessels.nl

24. Daisytek Int.
Corp. USA
ISA Int.l
plc UK
“Bradford”
Hundleby
Scotland
Source Ltd
North. Ireland
ISA Wholesale
Plc UK
450 p.
10 other subs
Par beteiligungs
GmbH
B+P
ISA Daisytek
SAS
150 p.
Isa Deutschland
GmbH
Supplies team
GmbH
P
P
www.bobwessels.nl

25. www.bobwessels.nl

26. Daisytek
• High Court of Justice
Chancery Division – Leeds District Registry
– Administration Order 16 May 2003
– Judgment 6 July 2003
www.bobwessels.nl

27. www.bobwessels.nl

28. www.bobwessels.nl

29. AG Düsseldorf 6 June 2003
In three nearly similar judgments of 6 June 2003 AG
Düsseldorf considers that the court is aware that the Leeds
judgment has to be respected, because it was first in time.
Then follows:
“The decision does not bring forward any legal effect towards
the debtor-company. For the aforementioned decision has
not mentioned and not respected the provisions of the
Regulation. It is therefore rectified that the judgment of
May 16 has its limits there, were the provisions of the
German Insolvenzordnung have their own rules and insofar
limit these effects to the preservation measures according to
the decision of 19.5.2003.”
www.bobwessels.nl

30. Race to the Court House ?
Comments in Germany:
Britannia rules the waves
again!
www.bobwessels.nl

31. www.bobwessels.nl

32. High Court of Justice (Leeds)
12. The English Court has jurisdiction to open insolvency proceedings by making
administration orders in respect of the German and French companies if “the centre of
[the] debtor’s main interests” is centred in England or Wales (Article 3(1) of Council
Regulation 1346/2000 – “the Regulation”). Recital (13) of the Regulation reads: “(13) The
‘centre of main interests’ shall correspond to the place where the debtor conducts the
administration of his interests on a regular basis and is therefore ascertainable by third
parties.” Article 3(1) provides that in the case of companies, “the place of the registered
office shall be presumed to be the centre of its main interests in the absence of proof to
the contrary”. Accordingly, before the English Court can open insolvency proceedings in
respect of any of the German and French companies in the Group, the petitioning
company must provide sufficient proof that its centre of main interests is in England to
rebut the presumption in Article 3(1).
13. The three German companies have their registered offices in Neuss, Germany, but
they conduct their business from premises in Freilassing, Magdeburg and Mulheim. The
evidence was that the majority of the administration of the German companies is
conducted from the Bradford office of International. In particular:
www.bobwessels.nl

33. High Court of Justice (Leeds)
13.1. Although the German companies have separate bank accounts in
Germany, the finance function is operated from Bradford, their business
is funded by local subsidiaries of an English subsidiary of the Royal bank
of Scotland and by a factoring agreement through an English subsidiary
of the Royal Bank of Scotland, and their financial information is compiled
in accordance with English accountancy principles and reviewed and
approved by International in Bradford;
13.2. The German companies require the approval of International to buy
anything in excess of 5000 euros;
13.3. All senior employees of the German companies are recruited in
consultation with International;
13.4. All information technology and support are run from Bradford;
www.bobwessels.nl

34. High Court of Justice (Leeds)
13.5. All pan-European customers are serviced by International in
Bradford; contracts with such customers are negotiated by and entered
into by International. These account for 15% of sales of the German
companies;
13.6. 70% of purchases are under contracts negotiated and dealt with
from Bradford. Purchases for major suppliers are made under contracts
between the supplier and International;
13.7. All corporate identity and branding are run by International;
13.8. The German companies are required to carry out their business in
accordance with a management strategy plan drawn up by the Chief
Executive Officer of Daisytek-ISA Limited. He visits the German
companies two days per month and spends 30% of his time (mainly in
Bradford) on the management of the German companies.
www.bobwessels.nl

35. High Court of Justice (Leeds)
14. I am satisfied from this evidence that Bradford
is a place where each of the German Companies
conducts the administration of its interests on a
regular basis (Recital (13)). Recital (13) refers to
the place “where the debtor conducts the
administration of its interests on a regular basis
and is therefore ascertainable by third parties”,
while Article 3(1) requires that the centre of the
debtor’s “main” interests should be in this country
if an English Court is to have jurisdiction to open
insolvency proceedings. ………
www.bobwessels.nl

36. www.bobwessels.nl

37. Court of Pontoise 1 July 2003 (SAS ISA Daisytek)
The French company ISA Daisytek SAS is put into “redressement
judiciaire”. The Court considers:
“The fact that this French company is a subsidiary of the English
company Daisytek ISA Ltd did not give the courts in the UK
international jurisdiction to open insolvency proceedings towards
the French company, because the notion of “group” does not have
legal standing and that every legal person of the group has a
corporate legal standing in its own right; the decision of the English
court denies the separate legal existence of companies and could
not lead to the application of the EU Insolvency Regulation; the
High Court in Leeds could not base its jurisdiction on the fact that
ISA Daisytek SAS has an establishment within its jurisdiction,
because an establishment is not a separate corporation.”
www.bobwessels.nl

38. www.bobwessels.nl

39. Court of Appeal Versailles 4 September 2003
The High Court of Leeds’ way of reasoning is based on the
notion that it did have international jurisdiction as meant in art.
3(1) InsReg ISA Daisytek SAS, considering that its COMI was
in Bradford, England. It is untrue to argue that the High Court
in Leeds funded its decision on the notion of establishment,
group of companies or subsidiary. Art. 16 InsReg results in
recognition of the judgment opening the proceedings pursuant
to art. 3 InsReg and the administration order relating to ISA
Daisytek SAS should be recognized. Art. 17 InsReg means
that this administration order produces, with no further
formalities, the same effects in France as under English law.
The judgment of Commercial court Pontoise is overturned.
www.bobwessels.nl

40. Courts of Highest Instance - France and Germany
• Procureur General Court de Versailles
Court de Cassation 27 June 2006
• BGH 29 May 2008
• BUT First:
– Staubitz-Schreiber ECJ 17 January 2006 (C-1/04)
– Eurofood ECJ 2 May 2006 (C-341/04)
www.bobwessels.nl

41. www.bobwessels.nl

42. EUROPEAN COURT OF JUSTICE 17 January 2006 C-1/04
(Susanne Staubitz-Schreiber)
“The answer to be given to the national court must therefore
be that Article 3(1) of the Regulation must be interpreted as
meaning that the court of the Member State within the
territory of which the centre of the debtor’s main interests is
situated at the time when the debtor lodges the request to
open insolvency proceedings retains jurisdiction to open
those proceedings if the debtor moves the centre of his
main interests to the territory of another Member State after
lodging the request but before the proceedings are opened.”
www.bobwessels.nl
www.bobwessels.nl

43. Parmalat
www.bobwessels.nl

44. Parmalat: key features
A large insolvency
 7° largest Italian industrial company (Euro 2.5bn market
capitalisation, Euro 7.2bn turnover)
 Europe’s largest insolvency (restructured debt Euro 21.2bn)
 32,000+ employees
 40,000+ shareholders
 100,000+ creditors
International impact
 50%+ of turnover outside Italy
 Around 200 subsidiaries, mostly outside Italy (35
jurisdictions)
 32 countries of operations
 65% of creditors international, from 103 countries
www.bobwessels.nl

45. EUROFOOD / PARMALAT
www.bobwessels.nl

46. ECJ 2 May 2006 Case C-341/04 Eurofood IFSC Ltd
Main conclusions re COMI
1. Where a debtor is a subsidiary company whose
registered office and that of its parent company are
situated in two different Member States, the presumption
laid down in the second sentence of Article 3(1) of Council
Regulation (EC) No 1346/2000 of 29 May 2000 on
insolvency proceedings, whereby the centre of main
interests of that subsidiary is situated in the Member State
where its registered office is situated, can be rebutted only
if factors which are both objective and ascertainable by
third parties enable it to be established that an actual
situation exists which is different from that which location at
that registered office is deemed to reflect.
www.bobwessels.nl

47. ECJ 2 May 2006 Case C-341/04 (Cont’d)
>>> ... That could be so in particular in the case of a
company not carrying out any business in the territory of
the Member State in which its registered office is situated.
By contrast, where a company carries on its business in
the territory of the Member State where its registered
office is situated, the mere fact that its economic choices
are or can be controlled by a parent company in another
Member State is not enough to rebut the presumption laid
down by that Regulation.
www.bobwessels.nl

48. ECJ 2 May 2006 Case C-341/04 (Cont’d)
2. On a proper interpretation of the first subparagraph of
Article 16(1) of Regulation No 1346/2000, the main
insolvency proceedings opened by a court of a Member
State must be recognised by the courts of the other
Member States, without the latter being able to review the
jurisdiction of the court of the opening State.
www.bobwessels.nl
www.bobwessels.nl

49. ECJ 21 January 2010 Case-444/07 Probud
• ECJ confirms – with ample elucidation – Eurofood (C341/04) and adds:
• “…. after the main insolvency proceedings have been
opened in a Member State the competent authorities of
another Member State, in which no secondary insolvency
proceedings have been opened, are required, subject to the
grounds for refusal derived from Articles 25(3) and 26 of the
Regulation, to recognise and enforce all judgments relating
to the main insolvency proceedings and, therefore, are not
entitled to order, pursuant to the legislation of that other
Member State, enforcement measures relating to the
assets of the debtor declared insolvent that are situated in
its territory when the legislation of the State of the opening
of proceedings does not so permit and the conditions to
which application of Articles 5 and 10 of the Regulation is
subject are not met.”
www.bobwessels.nl

50. Some other jurisdiction complexities
www.bobwessels.nl

51. In light of Arts. 3, 16 and 25: types of judgments:
• a. opening insolvency proceedings;
• b. relating to the course and closure of insolvency
proceedings
– eg hearing of parties or dismissal liquidator
• c. deriving directly from the insolvency proceedings and
which are closely linked with them
– eg action to set aside detrimental act
– UK Insolvency court order to provide detailed info (NL Supreme
Court 18-03-11)
• d. relating to preservation measures taken after the request
for the opening of insolvency proceedings, and
• e. other judgments (Art. 25(2).
Note: defence against 25(1) judgments, see Art. 25(3).
www.bobwessels.nl

52. ECJ 12 February 2009 C-339/07
On 14 March 2002, Frick Teppichboden Supermärkte GmbH (seat in
Germany), transferred € 50 000 to an account with KBC Bank in
Düsseldorf in the name of Deko Marty Belgium N.V. (seat in Belgium).
Pursuant to an application made by Frick on 15 March 2002, the
AG Marburg (Local Court) opened insolvency proceedings on 1 June
2002 in respect of Frick’s assets. By application to the LG Marburg
(Regional Court), Mr Seagon, in his capacity as liquidator in respect of
Frick’s assets, requested that court, by way of an action to set a
transaction aside by virtue of the debtor’s insolvency, to order Deko to
repay the money.
LG Marburg dismissed that application as inadmissible on the ground
that it did not have international jurisdiction to hear and determine it.
Since the appeal brought by Mr Seagon was also dismissed he brought
an appeal on a point of law (‘Revision’) before the Federal Court of
Justice (Germany). >>
www.bobwessels.nl

53. German Supreme Court 21 June 2007 (Deko Marty)
• (i) will the courts of a Member State, in the territory of which
main insolvency proceedings against a debtor have been
opened, have international jurisdiction concerning an
avoidance action (Insolvenzanfechtungsklage) against a
third party, a Belgian company, who has its statutory seat in
Belgium, and
• (ii) in case the answer is negative, will the action fall within
the scope of the exclusion of Article 1 II b Brussels
Regulation 2000 or is the latter Regulation applicable?
www.bobwessels.nl

54. ECJ 12 February 2009 C-339/07 (Cont’d)
18. It is appropriate to examine whether these actions to set a
transaction aside are included within the scope of Art. 3(1) InsReg.
19. In that connection, it must be noted, as a preliminary point, that the
Court has held, in its case-law relating to the Convention of
27 September 1968 on jurisdiction and the enforcement of judgments in
civil and commercial matters, that an action similar to that at issue in the
main proceedings is related to bankruptcy or winding-up if it derives
directly from the bankruptcy or winding-up and is closely connected with
the proceedings for the ‘liquidation des biens’ or the ‘règlement judiciaire’
(see Case 133/78 Gourdain [1979] ECR 733, paragraph 4). An action
with such characteristics does not therefore fall within the scope of that
convention.
www.bobwessels.nl

55. ECJ 12 February 2009 C-339/07 (Cont’d)
20. It is exactly that criterion that is used by recital 6 in order to delimit
the purpose of the regulation. Thus, according to that recital, the
regulation should be confined to provisions governing jurisdiction for
opening insolvency proceedings and judgments which are delivered
directly on the basis of the insolvency proceedings and are closely
connected with such proceedings.
21. Taking into account that intention of the legislature and the
effectiveness of the regulation, Art. 3(1) thereof must be interpreted as
meaning that it also contributes international jurisdiction on the Member
State within the territory of which insolvency proceedings were opened in
order to hear and determine actions which derive directly from those
proceedings and which are closely connected to them.
www.bobwessels.nl

56. ECJ 12 February 2009 C-339/07 (Cont’d)
22. Concentrating all the actions directly related to the insolvency of an
undertaking before the courts of the MS with jurisdiction to open the
insolvency proceedings also appears consistent with the objective of
improving the effectiveness and efficiency of insolvency proceedings
having cross-border effects, referred to in recitals 2 and 8.
23. Furthermore, that interpretation is confirmed by recital 4, according
to which it is necessary for the proper functioning of the internal market
to avoid incentives for the parties to transfer assets or judicial
proceedings from one Member State to another, seeking to obtain a
more favourable legal position (forum shopping).
24. The possibility for more than one court to exercise jurisdiction as
regards actions to set a transaction aside by virtue of insolvency brought
in various Member States would undermine the pursuit of such an
objective.
www.bobwessels.nl

57. ECJ 12 February 2009 C-339/07 (Cont’d)
25. Finally, the interpretation of Art. 3(1), as set out in para. 21 above, is
supported by Art. 25(1). The first subparagraph of that provision imposes
an obligation to recognise judgments handed down by a court whose
judgment concerning the opening of proceedings is recognised in
accordance with Art. 16 and which concern the course and closure of
insolvency proceedings, that is to say, a court with jurisdiction under Art.
3(1).
www.bobwessels.nl

58. Coordination main and secondary proceeding(s)
www.bobwessels.nl

59. Recital 20
(20) Main insolvency proceedings and secondary
proceedings can, however, contribute to the effective
realisation of the total assets only if all the concurrent
proceedings pending are coordinated. The main condition
here is that the various liquidators must cooperate closely,
in particular by exchanging a sufficient amount of
information. In order to ensure the dominant role of the
main insolvency proceedings, the liquidator in such
proceedings should be given several possibilities for
intervening in secondary insolvency proceedings which are
pending at the same time. For example, he should be able
to propose a restructuring plan or composition or apply for
realisation of the assets in the secondary insolvency
proceedings to be suspended.
www.bobwessels.nl

60. Model: COORDINATION RE PROCEEDINGS
The liquidator in the main proceedings may:
• Exercise right ex art. 20 (creditor in other MS shall return what he
has obtained)
• Request publication of opening judgment or registration of
judgment in public registers kept in another MS (Art. 21, 22)
• Request opening of secondary proceedings in other MSs (art. 29)
• Participate in secondary proceedings (Art. 32(3))
• Request stay of the process of liquidation of sec. proc. (Art. 33(1))
and may request measures ex Art. 34.1 (see Art. 34(3))
• Request termination of this stay (Art. 33(2))
• Propose a rescue plan, when allowed (Art. 34(1))
• Dis-content with finalizing liquidation in sec. proc. (Art. 34(1))
• Claim the remaining assets (art. 35)
www.bobwessels.nl

61. COORDINATION RE PROCEEDINGS (Cont’d)
Key duties of liquidator in main and secondary proceedings:
• 1. To communicate information (Art. 31(1))
• 2. To cooperate (Art. 31(2))
• 3. To lodge all claims lodged in the main proceedings (Art. 32(2))
• 4. To immediately inform all known creditors (Art. 40(1)) by
individual notice (Art. 40(2))
Article 31
Duty to cooperate and communicate information: text does not
provide clear guidance > “CoCo Guidelines”
www.bobwessels.nl

62. Model of InsReg: Key to success?
Several parallel proceedings:
• Communication
• Cooperation
• Coordination
Text Art. 31 InsReg: vague
www.bobwessels.nl

63. www.insol-europe.org
www.bobwessels.nl

64. European Communication and Cooperation Guidelines For
Cross-border Insolvency
(CoCo Guidelines www.insol-europe.org // 2007-09 + 10)
• Aims Guidelines – Status
• Coordination, using ‘Protocols’
• Examples:
- Requirements for practitioners
- Language
- Fees and costs
- Role of courts
www.bobwessels.nl

65. Aim CoCo Guidelines
Guideline 1
Overriding objective
1.1. These Guidelines embody the overriding objective of enabling courts and
liquidators to operate efficiently and effectively in cross-border insolvency proceedings
within the context of the EC Insolvency Regulation.
1.2. In achieving the objective of Guideline 1.1., the interests of creditors are paramount and are
treated equally.
I.3. All interested parties in cross-border insolvency proceedings are required to further the
overriding objective as set out above in Guideline 1.1.
Guideline 2
Aim
2.1. The aim of these Guidelines is to facilitate the coordination of the administration of insolvency
proceedings involving the same debtor, including through the use of a governance protocol.
2.2. In particular, these Guidelines aim to promote:
(i) The orderly, effective, efficient and timely administration of proceedings;
(ii) The identification, preservation and maximisation of the value of the debtor’s assets (which
includes the debtor’s undertaking or business) on a world-wide basis;
(iii) The sharing of information in order to reduce the costs involved; and
(iv) The avoidance or minimization of litigation, costs and inconvenience to all parties affected by
proceedings.
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66. CoCo Guidelines - Guideline 4
4.2. A liquidator is required to act with the appropriate
knowledge of the EC Insolvency Regulation and its
application in practice.
4.3. A liquidator is required to act honestly, objectively,
fairly and expeditiously in dealing with all parties
concerned, including the courts.
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67. CoCo Guidelines - Guideline 10
10.1. Liquidators shall determine the language in which
communications take place on the basis of convenience and
the avoidance of costs. The court is advised to allow use of
other languages in all or part of the proceedings if no
prejudice to a party will result.
10.2. Courts are encouraged, to the maximum extent
permissible under national law, to accept any documents
related to those communications in language decided upon
under Guideline 10.1, without the need for a translation into
the language of proceedings before them.
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68. CoCo Guidelines - Guideline 11 Fees and costs
11.2. Obligations and fees incurred by the liquidator in
the main proceedings prior to the opening of any
secondary proceedings but concerning assets to be
included in the estate of these latter proceedings in
principle will be funded by the estate corresponding
to the secondary proceedings.
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69. CoCo Guidelines – Guideline 16 Courts
16.1. Courts are advised to seek to give effect to the
overriding objective of enabling courts and liquidators to
operate efficiently and effectively operate in cross-border
Insolvency proceedings within the context of the EC
Insolvency Regulation, in the meaning of Guideline 1.
16.2. Courts are advised to operate in a cooperative manner
to resolve any dispute relating to the intent or application of
the terms of any cooperation agreement or protocol.
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70. CoCo – A Useful Medicine?
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71. Co Co Guidelines in practice?
• 1. Literature: how to “include” in InsReg?
– Annex to InsReg?
– In a national “Kodex”?
– Standard / yardstick to measure “national” duties?
– A “European” standard for liquidators?
• 2. Practice:
– BenQ Holding 2007?
– Restructuring Committee Landsbanki – ICESAVE?
– Lehman Brothers Holdings Inc. (LBHI)
– High Court London 11 February 2009
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72. Nortel Networks
Workforce of 30,000 worldwide
- 12,000 R&D employees
- 3,200 Global sales force
- 9,700 Service organisation
Global scale of operations : 150
countries
More than half of Fortune 500
companies
Over 5,000 patents worldwide
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73. [2009] EWHC 206 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
THE HON MR JUSTICE PATTEN
Royal Courts of Justice
Strand, London, WC2A 2Ll
11th February 2009
Before:
THE HON MR JUSTICE PATTEN
IN THE MATTERS OF:
NORTEL NETWORK SA
NORTEL GMBH
NORTEL NETWORKS NV
NORTEL NETWORKS S.P.A.
NORTEL NETWORKS BV
NORTEL NETWORKS POLSKA SP. Z.O.O.
NORTEL NETWORKS HISPANIA SA
NORTEL NETWORKS INTERNATIONAL FINANCE&HOLDINGS BV
NORTEL NETWORKS (AUSTRIA) GMBH
NORTEL NETWORKS SRO
NORTEL NETWORKS ENGENEERING SERVICE KFT
NORTEL NETWORKS PORTUGAL SA
NORTEL NETWORKS SLOVENSKO
NORTEL NETWORKS FRANCE SAS
NORTEL NETWORKS OY
NORTEL NETWORKS ROMANIA SRL
NORTEL NETWORKS AB
NORTEL NETWORKS (IRELAND) LIMITED
(INDIVIDUALLY THE “COMPANY” AND TOGETHER THE “COMPANIES”)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
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74. Nortel Group (14 Jan. 2009)
- Administration orders based on COMI of 18 Nortel
Companies
- Blackburne J (by way of Day One Order) authorised the
Joint Administrators in their discretion to make payments
out of their assets to employees and preferential creditors
of the relevant Companies corresponding to the amounts
they would receive in the event that secondary insolvency
proceedings were to be commenced in other Member
States
- The court also authorised the Joint Administrators to
apply to the relevant judicial authorities in any other
country for such assistance as they consider they may
require in connection with the performance of their
functions as administrators
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75. Nortel Group (11 Febr. 2009)
Decision re an application by the Joint Administrators of the Nortel
group of companies for the court:
1. to send a letter of request to the courts of a number of Member
States in the EC asking those courts to put in place arrangements
under which the Joint Administrators will be given notice of any
request or application for the opening of secondary insolvency
proceedings in respect of any of the companies in administration,
2. this letter will also request the courts to which it is sent to permit
the Joint Administrators to make submissions on any such
applications in respect of the potential damage which secondary
proceedings might have on the interests of the estate and the
creditors of the relevant Companies.
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76. Nortel Group (cont’d)
The High Court has an inherent jurisdiction to issue a letter of request to
a foreign court in appropriate circumstances:
- the request for assistance stems from Art. 31(2)
- this duty reflects “a wider obligation which extends to the courts which
exercise control of insolvency procdures in their respective jurisdictions”
(see Re Stojevic, Vienna Higher Regional Court 9 November 2004)
- it is desirable that a court which is dealing with an application to open
insolvency proceedings to be provided with the reasons why such
proceedings might have an adverse impact on the main proceedings
(see Rover France SAS, Court of Appeal Versailles 15 December 2005)
- Art. 33(1) allows the stay of the process of liquidation, but it does not
prevent the continuation of winding-up prodeedings (Re Collins &
Aikman, Higher Regional Court Graz 20 October 2005)
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77. Nortel Group (final)
Hon mr Justice Patten:
In these circumstances, it seems to me highly
desirable that the assistance of the foreign courts
specified in the Schedule to the draft order should
be sought with a view to enabling the Joint
Administrators to be heard prior to the opening of
any secondary insolvency proceedings in these
jurisdictions and I will therefore authorise the
sending of appropriate letters of request to the
judicial authorities in those States
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78. Reaction?
• Domestic and x-border
calling / confusion
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79. www.insol-europe.org
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80. Cross-border Coordination
• “Contractual” approach - Protocol
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81. www.bobwessels.nl

82. Lehman Brothers
Over 1000 separate legal entities
4th largest investment banking group in world
Run on global product lines
Hubs in NYC, London, Hong Kong and Tokyo
Trading through and between group
companies for cost, taxation, geographical
and regulatory capital reasons
Enormous infrastructure, e.g. IT- 29 data
centres, 26,500 servers, 6,000 IT staff
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83. Lehman Brothers – Europe
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84. www.bobwessels.nl

85. Draft Int’l Protocol
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86. Lehman BHInc (Draft protocol - Appr. June 2009)
(Bankr. SDNY – Judge Peck)
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
2. Notice
3. Rights of Official Representatives and Creditors to Appear
4. Communication and Access to Data and Information Among Official Representatives
5. Communication Among Tribunals
5.1. The Guidelines Applicable to Court-to-Court Communication in CrossBorder Cases (the “Guidelines”) attached as Schedule “A” hereto, shall be incorporated by
reference and form part of this protocol in whatever form they are formally adopted by each
Tribunal, in whole or in part and with or without modifications (if any). Where there is any
discrepancy between the Protocol and the Guidelines, this Protocol shall prevail.
6. Communication Among Committees
7. Asset Preservation
8. Claims
9. Special Procedures for Intercompany Claims
10. Submission of Winding-Up Plan, Plan of Reorganization or Liquidation, or Deed of Company
Arrangement
11. Comity
12. Amendment
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87. www.bobwessels.nl

88. Int’l Jurisdiction of Courts?
• In InsReg (3; 25)
• In pratice: TCR 2011/2
• Gesetz zur weiteren Erleichterung der sanierung von
Unternehmen / Law for further flexibility of reorganisation of
businesses (February 2011), in a new proposed § 348(2) of
the German Insolvency Act, it is provided – in my
translation:
‘When the requirements for recognition of a foreign
insolvency proceeding have been met, the insolvency court
can cooperate with the foreign insolvency court, more
particularly provide information, which is meaningful for the
foreign proceeding”.
• Draft recomm. Eur. Parl.
• ALI-III Report
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89. Thank you for your attention!
Bob Wessels
info@bobwessels.nl
++31629577403
These are presentation slides only.
The information within these slides does not constitute
definitive advice and should not be used as the basis for
giving definitive advice without checking the primary sources.
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90. www.bobwessels.nl