Obstacles to Cross-Border Insolvency and Employment Protection Coordination in the European Union: Examples from the UK and France

Abstract

The coordination of legal systems is a concept that has occupied the minds of legislators, political leaders and legal academics for centuries, particularly with a view towards facilitating business across borders. Within the European Union, coordination has been achieved to some extent in those legal areas which deal with the free movement of goods and capital in pursuit of free trade within the Common Market. The EU Insolvency Regulation2 is one of many attempts to coordinate the way in which member states work together on commercial matters in cross border business relationships. While it has set out rules through which cross border insolvencies can be managed, there remain gaps between the individual insolvency systems of the member states which make it more difficult to coordinate insolvency procedures than if they were more closely aligned. Definitions, derogations, procedural purpose and even the fundamental aims of insolvency remain divergent among the legal systems of the EU. This disparity between the aims of insolvency is one obstacle to cross border cooperation but the disparities themselves are influenced by factors endemic to the jurisdictions within which they are found.

What is the source of the disparities between insolvency systems and is there any way that they can be aligned? Why is it that if all member states of the EU wish to promote effective and profitable cross border business transactions that aligning those systems under which such transactions operate is such a difficult problem to address and resolve? This may seem a naïve question, but trite answers will not assist on the way to better coordination. As such, a deeper analysis of the sources of the obstacles to legal coordination may help to raise an awareness of the reasons why such obstacles exist and in so doing, perhaps make it possible to take these into account when drafting or reforming coordinating legislation in such a way as to promote a closer alignment which accounts for systemic disparities rather than attempting to force them into a common perspective.

There are complex factors which exist within the social histories of each member state which contribute to the diversity of aims of legal regulation, among which are legal origin or regulatory style, the concept of freedom of contract, industrialization and collectivism, economics, politics and human rights. An examination of each of these themes among a number of others in relation to their effect on the development of legal rules and their fundamental aims are explored in detail in the thesis to which this paper is related.3 For the purpose of this paper, focus will be applied to the complexity of diverse legal development in the social policies and regulation of member states, which has an effect on the aims of insolvency law in the weight of protection given to creditors or other stakeholders such as employees. By way of example, the United Kingdom and France will be used as comparators.

Keywords: Insolvency, Employment Protection, Cross-Border Insolvency, Social Policy, European Union, United Kingdom, France

JEL Classification: G3