European Monetary Union and insolvency
What’s the relationship between the European Monetary Union and insolvency? That question recently came up.
What’s the relationship between the European Monetary Union and insolvency? That question recently came up. In the last week of June, the German Bar Association’s Section on Insolvency Law and Restructuring had organised a conference (4th European Insolvency & Restructuring Congress) in collaboration with Conseil National des Administrateurs Judiciares et des Mandataires Judiciaires (CNAJMJ, the French Insolvency Practitioners Association, in Brussels). The keynote speaker on behalf of Ms Michou (Director General of the DG Justice of the European Commission), addressed – evidently – the European Commission’s challenges in the area of business restructuring and insolvency. He referred to a ‘Five Presidents’ Report’ and its importance for the future of insolvency law. The What? The speaker meant the ‘Five Presidents Report – plans to strengthen Economic and Monetary Union’ as of 1 July 2015. The report was published on 22 June 2015. See http://www.eubusiness.com/topics/finance/5-presidents/. The number (5) discloses the specific persons, i.e. the EU Institutions’ five Presidents, being European Commission President Jean-Claude Juncker, together with the President of the Euro Summit, Donald Tusk, the President of the Eurogroup, Jeroen Dijsselbloem, the President of the European Central Bank, Mario Draghi, and the President of the European Parliament, Martin Schulz. They revealed ambitious plans on how to deepen the Economic and Monetary Union (EMU) as of 1 July 2015 and how to complete this by 2025 at the latest. They are not shy about comparing their plan to the Jacques Delors plans in 1985 to create one Single Market (on the basis of the Single European Act) and following its working method. The five presidents, in putting their vision for the future of EMU into reality, have put forward concrete measures to be implemented in three stages:
1. (or ‘Deepening by Doing’, set for 1 July 2015 – 30 June 2017): using existing instruments and the current Treaties to boost competitiveness and structural convergence, achieving responsible fiscal policies at national and euro area level, completing the Financial Union and enhancing democratic accountability;
2 (or ‘Completing EMU’): more far-reaching actions will be launched to make the convergence process more binding, through for example a set of commonly agreed benchmarks for convergence which would be of a legal nature, as well as a euro area treasury;
3. the final stage (at the latest by 2025): once all the steps are fully in place, ‘… a deep and genuine EMU would provide a stable and prosperous place for all citizens of the EU Member States that share the single currency, attractive for other EU Member States to join if they are ready to do so’.
To prepare the transition from Stage 1 to Stage 2, the Commission will present a White Paper in Spring 2017 outlining the next steps needed, including legal measures to complete EMU in Stage 2.
The Five disclose that some of the actions need to be front-loaded already in the coming years, such as introducing a European Deposit Insurance Scheme (EDIS), others go further as regards sharing sovereignty among the Member States that have the euro as their currency, such as creating a future euro area treasury: ‘This is part of the Five Presidents’ vision according to which the focus needs to move beyond rules to institutions in order to guarantee a rock-solid and transparent architecture of EMU’, which is regarded as being incomplete: ‘Divergence across the euro area is significant and the crisis of recent years has further highlighted existing shortcomings. It is clear that with 18 million unemployed and many within our societies exposed to risks of social exclusion, a lot more needs to be done to turn the euro area – the world’s second largest economy – into a rock-solid architecture. We need a lasting, fair and democratically legitimate basis for the future which contributes to more growth, jobs and prosperity for all citizens.’
From the Report it can be taken that the Five Presidents are aiming for a true Capital Markets Union (CMU), which requires improvements, some of which can only be achieved through legislation, such as: ‘… simplification of prospectus requirements; a revived EU market for high quality securitisation; greater harmonisation of accounting and auditing practices; as well as addressing the most important bottlenecks preventing the integration of capital markets in areas like insolvency law, company law, property rights and as regards the legal enforceability of cross-border claims.’
This is the only reference to insolvency in the Report, and we already knew that this topic – the national insolvency frameworks, more specifically – is seen as an obstacle to creating a CMU. See my blog at www.bobwessels.nl, at 2015-03-doc8. With the EU Financial Collateral Directive in place, the EU Insolvency Regulation (Recast) coming into effect in June 2017 and the March 2014 Recommendation for harmonisation on a new approach to business failure and insolvency in process, it is not easy to understand which areas will be on the minds of the (merry) Five. I would put my cards on (i) European standards for voting (and cram down) on a restructuring plan, (ii) a better transparency and accountability in pre-pack types of sales, (iii) a more uniform treatment of directors liability, (iv) more uniform standards to combat debtor’s fraud (including harmonised criteria for the treatment of detrimental (or ‘paulian’) actions), (v) measures to influence the rock-solid position of security rights holders, and (vi) build more trust in the European rescue practice by a more robust harmonised system for professional rules for Insolvency Office Holders. The planning is 10 years, so we’ll just wait and see.