The UK and EU Cross-Border Insolvency Recognition: From Empire to Europe to 'Going it Alone'
41 Pages Posted: 5 Sep 2017
Date Written: August 31, 2017
The conclusion of the EU Insolvency Regulation, after negotiations on earlier versions had languished for nearly forty years, has been described as “one of the finest achievements of European jurisprudence.” The success of the recent referendum in the United Kingdom to exit the European Union (Brexit) puts this important law at risk. That the United Kingdom initially declined to sign on to a draft convention on which the original EU Insolvency Reg was based might raise questions as to whether preservation of this Reg is consistent with British interests going forward. But the loss of Community-wide agreement on the recognition and treatment of insolvency proceedings would be a great tragedy, and not just a European tragedy. The loss of the EU Insolvency Reg would hurt the United Kingdom, as well.
This paper argues both that retention of the EU Insolvency Reg would strongly benefit the interests of the United Kingdom, and that its retention or replication will be exceedingly difficult to achieve. In building the case that the EU Reg serves important British interests, I retell the chronology of its adoption. The story of British accession to the terms of the original EU insolvency Regulation is complicated by the fact that the terms of the EU Reg are the product of negotiations on three earlier draft conventions on the same topic. The story of British implementation of the original EU Reg is further complicated and perhaps clarified by its denouement: this regulation included an obligation to study the effects of its implementation ten years after its entry into force and possibly to revise its terms after reflection on this study; as a result, the original EU Reg has recently been revised by the EU Parliament. British fingerprints on the contents of these revisions suggest that the United Kingdom should try, to the greatest extent possible, to remain committed to the core principles set out in the revised EU Insolvency Regulation. But it will be difficult for the United Kingdom to accomplish the core benefits of this Regulation – automatic recognition and enforcement across Europe – after Brexit and when going it alone. Cross-border recognition is possibly meaningless in the absence of enforcement, and enforcement sits in tension with complete “independence” from the European Union. In the text that follows, Part I describes negotiations over what subsequently became the original EU Insolvency Regulation. There are four subparts to this section because the EU Reg was adopted after three earlier tries to draft and implement a European-wide convention on the same topic. To supplement secondary literature, since little of this focuses explicitly on British involvement in the making of this regulation, I draw on reports from various British government and private actors analyzing whether accession to a cross-border insolvency convention or regulation was consistent with British interests. These reports highlight distinctly British concerns that were not always telegraphed in the secondary literature commenting on these drafts, including that written by British academics and practitioners. Part II considers the decisions of British courts when asked to implement the original EU Insolvency Regulation. Perhaps surprisingly, this case law shows that, from the moment the EU Reg entered into effect, British insolvency practitioners argued and courts agreed that the EU Reg allowed coordination of insolvency proceedings in ways that, before accession to the Reg, had been described as prohibited and thus a shortcoming of that regulation. British courts succeeded, in other words, in interpreting the EU Reg to resolve concerns that had been raised before accession and, with this construction, to further British interests. Next, Part III traces the influence of this British case law and insolvency practice on recent revision to the EU Insolvency Reg. It finds that the practical victories that had been achieved in British courts were successfully touted within the European Commission and later the European Parliament as time-tested and ready for implementation across the Continent. British implementation of the original EU Insolvency Reg got “codified” in the revised EU Reg. Part IV reflects on the implications of this experience for European cross-border insolvency practices post-Brexit.
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