Chapter 12 Communication and Cooperation in Insolvency

• Jurisdiction: United States

12. Communication and Cooperation in Insolvency

The system of the EIR Recast allows for the opening of several parallel insolvency proceedings against the same debtor. In this context, Recital 48 rightly points out that the efficient administration of the insolvency estate and the effective realization of the total assets require proper cooperation between the actors involved in all the concurrent proceedings. Proper cooperation means that the various insolvency practitioners and the courts involved are cooperating closely, in particular by exchanging a sufficient amount of information. Cooperation and communication within the EIR Recast framework stems from the general idea of mutual trust and sincere cooperation, indispensable for the functioning of the EU (Article 4 TEU, Article 81 TFEU).

It must be noted that the EIR 2000 contained only one article mandating insolvency practitioners in main and secondary proceedings to communicate information to each other (Article 31 EIR 2000). In contrast, the EIR Recast introduces a comprehensive framework for cooperation and communication between insolvency practitioners (Article 41 EIR Recast), between courts (Article 42 EIR Recast), and between insolvency practitioners and courts (Article 43 EIR Recast). Such a framework should enable the efficient and effective deployment of the debtor's assets and protection of creditors' rights. These articles have their match in Articles 56-59 EIR Recast in matters of cooperation and communication in insolvency proceedings relating to two or more members of a group of companies.

In addition to specific provisions addressing the issue of communication and cooperation in insolvency, the EIR Recast makes a reference to best practices. It notes that when cooperating, insolvency practitioners and courts should take into account best practices for cooperation in cross-border insolvency cases, as set out in principles and guidelines on communication and co-operation adopted by European and international organizations active in the area of insolvency law, and in particular the relevant guidelines prepared by the United Nations Commission on International Trade Law (UNCITRAL) (Recital 48 EIR Recast). Among such guidelines are European Communication and Cooperation Guidelines for Cross-Border Insolvency (CoCo Guidelines, October 2007; a revision is due in 2019), the EU Cross-Border Insolvency Court-to-Court Communications Principles and Guidelines (EU JudgeCo Principles and Guidelines, December 2014) and the UNCITRAL Practical Guide on Cross-Border Insolvency Cooperation (2009). These authoritative texts laid down the groundwork for the EIR Recast provisions on communication and cooperation.

12.1. Cooperation and Communication Between Insolvency Practitioners

According to Article 41 EIR Recast, the insolvency practitioner in the main insolvency proceedings and insolvency practitioner(s) in secondary proceedings concerning the same debtor shall cooperate with each other, as long as it is compatible with the rules applicable to the respective proceedings. Similar wording can be found in Article 31(2) EIR Recast. However, Article 41 EIR Recast adds that such cooperation may take any form, including the conclusion of agreements or protocols.

The practice of entering into such protocols dates back long before the adoption of the EIR Recast. One notable example is the Maxwell case (Maxwell Communications Corp., [1992] B.C.L.C. 465; 170 B.R. 800 (Bankr. S.D.N.Y. 1994); aff'd, B.R. 807 (Bankr. S.D.N.Y. 1995); 593 F.3d 1036 (2d Cir. 1996)). Maxwell Communication Corporation plc (Maxwell) was a U.K.-based media holding with a large U.S...