Cross-border Court-to-Court Cooperation in Insolvency Cases Enters Next Phase Judges Verougstreate (Brussels), Vallender (Cologne), Richards (London), and Melissen (Amsterdam), with prof Paul Omar.

Cross-border Court-to-Court Cooperation in Insolvency Cases Enters Next Phase

Increasingly courts all over the world are involved in cross-border insolvency cases. These courts may be guided by the EU Cross-Border Insolvency Court-to-Court Cooperation Principles and Guidelines.

In 2013 the Turnaround, Rescue and Insolvency research group of Leiden Law School embarked on a large project, developing EU Cross-Border Insolvency Court-to-Court Cooperation Principles and Guidelines. In March 2014 the First Public Draft was published. These (non-binding) EU Cross-Border Insolvency Court-to-Court Cooperation Principles and Guidelines have been developed for application in furtherance of cross-border communication and cooperation in insolvency cases between courts in the European Union. Its result should ensure as far as possible that the EU Insolvency Regulation works in practice, to efficiently and effectively deal with a debtor’s estate, fit the current environment where solutions have been developed based on models reflecting cooperation and communication (such as in the global insolvency case of Lehman Brothers), as well as ensure to the best possible extent the organisation and conduct of a fair legal process, with a fair representation of stakeholders concerned in insolvency processes. The project (‘the JudgeCo-project’) is based on earlier initiatives.

As to the background of the project: the creation of the EU Cross-Border Insolvency Court-to-Court Cooperation Principles and Guidelines is part of a larger EU initiative called ‘European Cross-Border Insolvency: Promoting Judicial Cooperation’. The project, jointly developed by Leiden Law School and Nottingham Law School, is funded by the European Commission and the International Insolvency Institute (III). Within the JudgeCo-project developments in judicial cooperation in insolvency principles in general and, specifically, in court-to-court communication and coordination matters have been analysed. The need for the results of the project within the context of the European Union is clear: the December 2012 proposal of the European Commission for an amendment of the Insolvency Regulation emphasised court-to-court cooperation and called for a more concrete approach to judicial cross-border cooperation. The JudgeCo project started in early 2013. In its first nine months a text was drafted based on the results of two surveys which were sent out to a representative Review & Advisory Group of over forty experts – insolvency judges, senior insolvency court representatives, insolvency lawyers/trustees/practitioners and academics – located in the majority of EU Member States and some five non-EU jurisdictions. Based on further analysis and discussion between October 2013 and March 2014, three successive draft-texts have been reviewed by the Review & Advisory Group. Professor Bob Wessels of Leiden Law School served as the principle drafter. In mid March 2014, the EU Cross-Border Insolvency Court-to-Court Cooperation Principles and Guidelines were presented in the form of a first public draft, accessible for the general public, welcoming any observations, comments or criticism of its text. In these documents, the EU Cross-Border Insolvency Court-to-Court Cooperation Principles are 26 in number, contained in a document of (at present) some 65 pages. The Guidelines contain 18 Guidelines; in all, a document of some 25 pages.

We look forward to any observations, comments and criticism from interested organisations and professionals before the end of April 2014. Taking into account these comments, we aim to deliver a Final Public Draft of the JudgeCo Principles and the JudgeCo Guidelines by the end of May 2014. Readers of the Leiden Law Blog are invited to send their comments prior to 15 May 2014. Please send these to judgeco@law.leidenuniv.nl.

The last stage in the JudgeCo project, that runs till the end of 2014, focuses on a one and a half day training for around 60 judges, organised by Professor Paul Omar (Nottingham Law School) with the assistance of two Leiden Law School lecturers. Judges, working in all Member States in Europe, will be invited to express their interest in following the training sessions (three such sessions will take place in three different locations within Europe from about September to December 2014), the costs of which are for a large part covered by the available budget. If you are interested or would like to refer judges to take part in the training, please send your suggestions to judgeco@law.leidenuniv.nl.


Bob Wessels

Dear Carol Huang,

Please consult JudgeCo Principle 26 (‘Apply EU JudgeCo Principles by way of analogy’), which provides:
‘26. Courts and insolvency administrators should communicate and cooperate with each other in those international cases which do not fall under the application of the EU Insolvency Regulation and should apply the EU JudgeCo Principles by way of analogy.’

By way of comment: the overall objective of these EU JudgeCo Principles is to enabling courts and insolvency administrators to operate effectively and efficiently in international insolvency cases with the goals of maximising the value of the debtor's global assets, preserving where appropriate the debtor’s business, and furthering the just administration of the proceeding. See EU Judge Principle 3.1. It is felt that the value of this principle should not stop at the formal boundaries of the Insolvency Regulation. There are three groups of cases which indeed fall outside the scope on the Insolvency Regulation:
(i) International cases within the Member States (to which the Insolvency Regulation applies), but which cases are not covered because of the type of debtor (e.g. a consumer, non-merchant) or the type of insolvency proceeding (not listed in Annex A);
(ii) International cases in which the debtor’s centre of main interests is not located in the Union, but for instance in Norway, Switzerland, Turkey, CIS, USA or any other non-EU Member State (apart from Denmark). Application by analogy may serve in an international case where the opening of insolvency proceedings in a Member State has taken place towards debtor, who’s COMI is outside the EU, but where national legislation offers sufficient ground for the jurisdiction of that Member State’s court or in cases opened outside the EU regarding a debtor with its COMI outside the EU, who possesses an ‘establishment’ in a Member State. Support of the merits of EU JudgeCo Principle 26 to these type of international cases can be found the judgment of Court of Justice of the EU 14 January 2014 (Case C-328/12) ((Ralph Schmid (acting as liquidator of the assets of Aletta Zimmermann) v Lilly Hertel), deciding that that application of Article 3(1) EIR cannot as a general rule depend on the existence of a cross-border link involving another Member State. The Court follows the opinion of Advocate General Sharpston, delivered on 10 September 2013, in Case C 328/12: ‘… Holding that the competent court under Article 3(1) of the Regulation has jurisdiction to hear a claim brought by a liquidator to set aside a prior transaction between the debtor and a defendant domiciled in a third country [i.e. Switzerland] respects the principles of unity and universality and furthers the aims of the single market. The liquidator will be able to deal with the debtor’s estate more effectively and at lower cost, which will inure to the benefit of the creditors (many of whom are likely to be domiciled in the European Union). These advantages outweigh any disadvantage to the third country defendant of having to defend the claim in what is for him the ‘wrong’ jurisdiction; and – precisely because any judgment will not be granted automatic recognition and enforcement under the Regulation – he will in any event continue to enjoy a degree of protection from his local court’;
(iii) International cases with several insolvency proceedings relating to different companies forming part of a group of companies. It follows from existing European practice that in case insolvency proceedings have been opened for several companies of the same group, these proceedings should be properly coordinated: ‘The various liquidators and the courts involved should therefore be under the same obligation to cooperate and communicate with each other as those involved in main and secondary proceedings relating to the same debtor’. In such cases, therefore, the analogous application of the EU JudgeCo Principles is recommended.

Carol Huang

If EU Cross-Border Insolvency Court-to-Court Cooperation Principles can also apply to the insolvency of international corporate groups?

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