Preface

• Jurisdiction: United States

Preface

The first major instrument dealing with cross-border insolvencies in the European Union (EU) has been the European Insolvency Regulation (EIR 2000). It was adopted in 2000 and entered into force on 31 May 2002. Directly applicable in all Member States (except Denmark), it contained uniform rules on international jurisdiction, recognition of insolvency judgments and applicable law in insolvency matters. Most importantly, it established that (main) insolvency proceedings can be initiated at the place of the debtor's centre of main interest, or COMI. Such proceedings have universal scope and encompass the debtor's assets throughout the EU. The EIR 2000 also prescribed that the law of the state of the opening of insolvency proceedings, or the lex concursus, shall determine the effects of such proceedings. The system of the EIR 2000 was not purely universal, as it provided for the possibility of opening secondary (territorial) proceedings in a Member State where the debtor had an establishment, and for the coordination between main and secondary proceedings. However, unlike main insolvency proceedings, secondary proceedings could cover only assets falling under their limited geographical scope. The model of the EIR 2000 has been named "coordinated" or "modified" universality.

Despite initial doubts, the EIR 2000 turned out to be an effective tool in dealing with cross-border insolvencies within the EU. The Court of Justice of the EU (CJEU) has played an active role in ensuring its efficiency by clarifying many of its concepts, including "COMI" and "establishment." Nevertheless, as more than 10 years have passed since the EIR 2000 took effect, it became clear that further improvements were necessary to better suit current business and technological trends. This led to the adoption of a new European Insolvency Regulation (EIR Recast), which has been in effect since 26 June 2017. Although the EIR Recast does not change the fundamentals of the EIR 2000 (i.e., COMI, lex concursus, main and secondary proceedings), it elaborates on some of the existing rules and introduces new ones. For instance, the EIR Recast expanded in scope to cover various hybrid and pre-insolvency proceedings that entail the restructuring of a company, rather than its liquidation. It also enhanced the application of the COMI presumptions for the purpose of battling abusive insolvency forum-shopping. The EIR 2000 provisions on communication and cooperation have been extended to bind courts and insolvency practitioners dealing with them. Among the major changes brought by the EIR Recast is a whole new chapter related to groups of companies, which can now fall under the special "group coordination proceedings" regime.

The EIR Recast should make the lives of creditors easier in several respects. First, it mandates the creation of a central electronic access point to the information contained in national insolvency registers (whose establishment is now obligatory). This will allow creditors to monitor their debtors by searching in a single search engine at the European e-Justice Portal. Second, it sanctions the use of standard forms, such as standard notice and standard claims forms. These developments increase the openness and transparency of insolvency proceedings and reduce the costs of participating in them.

Although the EIR Recast applies only if the debtor's COMI is located in the EU, it can have direct effects on U.S...