2011 06 jira wessels

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JIRA 23-06-2011

EU Insolvency Regulation

Introduction

“Jurisdiction”

Bob WesselsUniversity of Leiden Law School

St. John’s University School of Law, New York

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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

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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

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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)

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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)

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Any System ?

• “Framework or mess?

• Title V TFEU

“Area of Freedom, Security and Justice”

> “Judicial cooperation”

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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.

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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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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:

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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

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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’.

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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).

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Check proceedings

• Parmalat SpA: December 03

Amministrazione straordinaria delle grandi impressi in stato di insolvenza

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Belgium

• Act concerning continuity of undertakings

In force 1 April 2009

In Annex A?

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“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

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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 !

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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)

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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))

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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

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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

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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

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Cases

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Daisytek Int. Corp. USA

ISA Int.lplc UK

“Bradford”

HundlebyScotland

Par beteiligungsGmbHB + P

ISA WholesalePlc UK450 p.

ISA DaisytekSAS 150 p.

Isa DeutschlandGmbH

P

Supplies teamGmbH

P

10 other subs

Source LtdNorth. Ireland

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Daisytek

• High Court of Justice

Chancery Division – Leeds District Registry– Administration Order 16 May 2003

– Judgment 6 July 2003

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AG Düsseldorf 6 June 2003

In three nearly similar judgments of 6 June 2003 AGDüsseldorf considers that the court is aware that the Leedsjudgment 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.”

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Race to the Court House ?

Comments in Germany:

Britannia rules the waves

again!

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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:

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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;

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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.

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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. ………

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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.”

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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.

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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)

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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.”

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Parmalat

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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

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EUROFOOD / PARMALAT

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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.

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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.


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.

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ECJ 21 January 2010 Case-444/07 Probud• ECJ confirms – with ample elucidation – Eurofood (C-

341/04) 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.”


Some other jurisdiction complexities


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).


ECJ 12 February 2009 C-339/07On 14 March 2002, Frick Teppichboden Supermärkte GmbH (seat in Germany), transferred € 50 000 to an account with KBC Bank inDüsseldorf in the name of Deko Marty Belgium N.V. (seat in Belgium).Pursuant to an application made by Frick on 15 March 2002, theAG Marburg (Local Court) opened insolvency proceedings on 1 June2002 in respect of Frick’s assets. By application to the LG Marburg(Regional Court), Mr Seagon, in his capacity as liquidator in respect ofFrick’s assets, requested that court, by way of an action to set atransaction aside by virtue of the debtor’s insolvency, to order Deko torepay the money. LG Marburg dismissed that application as inadmissible on the groundthat it did not have international jurisdiction to hear and determine it.Since the appeal brought by Mr Seagon was also dismissed he broughtan appeal on a point of law (‘Revision’) before the Federal Court ofJustice (Germany). >>


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?


ECJ 12 February 2009 C-339/07 (Cont’d)

18. It is appropriate to examine whether these actions to set atransaction aside are included within the scope of Art. 3(1) InsReg.19. In that connection, it must be noted, as a preliminary point, that theCourt has held, in its case-law relating to the Convention of27 September 1968 on jurisdiction and the enforcement of judgments incivil and commercial matters, that an action similar to that at issue in themain proceedings is related to bankruptcy or winding-up if it derivesdirectly from the bankruptcy or winding-up and is closely connected withthe proceedings for the ‘liquidation des biens’ or the ‘règlement judiciaire’(see Case 133/78 Gourdain [1979] ECR 733, paragraph 4). An actionwith such characteristics does not therefore fall within the scope of thatconvention.



20. It is exactly that criterion that is used by recital 6 in order to delimitthe purpose of the regulation. Thus, according to that recital, theregulation should be confined to provisions governing jurisdiction foropening insolvency proceedings and judgments which are delivereddirectly on the basis of the insolvency proceedings and are closelyconnected with such proceedings. 21. Taking into account that intention of the legislature and theeffectiveness of the regulation, Art. 3(1) thereof must be interpreted asmeaning that it also contributes international jurisdiction on the MemberState within the territory of which insolvency proceedings were opened inorder to hear and determine actions which derive directly from thoseproceedings and which are closely connected to them.



22. Concentrating all the actions directly related to the insolvency of an undertaking before the courts of the MS with jurisdiction to open theinsolvency proceedings also appears consistent with the objective ofimproving the effectiveness and efficiency of insolvency proceedingshaving cross-border effects, referred to in recitals 2 and 8.23. Furthermore, that interpretation is confirmed by recital 4, accordingto which it is necessary for the proper functioning of the internal marketto avoid incentives for the parties to transfer assets or judicialproceedings from one Member State to another, seeking to obtain amore favourable legal position (forum shopping). 24. The possibility for more than one court to exercise jurisdiction asregards actions to set a transaction aside by virtue of insolvency broughtin various Member States would undermine the pursuit of such anobjective.



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 imposesan obligation to recognise judgments handed down by a court whosejudgment concerning the opening of proceedings is recognised inaccordance with Art. 16 and which concern the course and closure ofinsolvency proceedings, that is to say, a court with jurisdiction under Art.3(1).

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Coordination main and secondary proceeding(s)

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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.

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Model: COORDINATION RE PROCEEDINGSThe 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)

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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”

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Model of InsReg: Key to success?

Several parallel proceedings:

• Communication

• Cooperation

• Coordination

Text Art. 31 InsReg: vague

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www.insol-europe.org

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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

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Aim CoCo Guidelines

Guideline 1 Overriding objective1.1. These Guidelines embody the overriding objective of enabling courts andliquidators to operate efficiently and effectively in cross-border insolvency proceedingswithin the context of the EC Insolvency Regulation. 1.2. In achieving the objective of Guideline 1.1., the interests of creditors are paramount and aretreated equally.I.3. All interested parties in cross-border insolvency proceedings are required to further theoverriding objective as set out above in Guideline 1.1.Guideline 2 Aim2.1. The aim of these Guidelines is to facilitate the coordination of the administration of insolvencyproceedings 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 (whichincludes 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 byproceedings.

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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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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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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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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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CoCo – A Useful Medicine?

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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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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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[2009] EWHC 206 (Ch)IN THE HIGH COURT OF JUSTICE Royal Courts of Justice CHANCERY DIVISION Strand, London, WC2A

2LlCOMPANIES COURT 11th February 2009THE HON MR JUSTICE PATTEN

Before:THE HON MR JUSTICE PATTEN

IN THE MATTERS OF:NORTEL NETWORK SA

NORTEL GMBHNORTEL 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 BVNORTEL NETWORKS (AUSTRIA) GMBH

NORTEL NETWORKS SRONORTEL NETWORKS ENGENEERING SERVICE KFT

NORTEL NETWORKS PORTUGAL SANORTEL NETWORKS SLOVENSKONORTEL NETWORKS FRANCE SAS

NORTEL NETWORKS OYNORTEL NETWORKS ROMANIA SRL

NORTEL NETWORKS ABNORTEL NETWORKS (IRELAND) LIMITED

(INDIVIDUALLY THE “COMPANY” AND TOGETHER THE “COMPANIES”)AND IN THE MATTER OF THE INSOLVENCY ACT 1986

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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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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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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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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


Reaction?

• Domestic and x-border calling / confusion

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www.insol-europe.org

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Cross-border Coordination

• “Contractual” approach - Protocol

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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


Lehman Brothers – Europe

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Draft Int’l Protocol

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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 Cross-• Border 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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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


Thank you for your attention!

Bob Wessels

[email protected]

++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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2011 06 jira wessels

Economy & Finance

Transcript of 2011 06 jira wessels