On 3 October 2012, the European Commission expressed its wish for a strong, deep and integrated Single Market which creates growth, generates jobs and offers opportunities for its European citizens which were not there 20 years ago. The Commission, in its wish to address the current economic crisis, has adopted the “Single Market Act II”, putting forward twelve key actions for rapid adoption by the EU institutions.
Interestingly, one of the action points is to “modernise insolvency proceedings, starting with cross-border cases, and contribute to an environment that offers second chances to failing entrepreneurs.” The Commission states: “Europe needs modern insolvency laws that help basically sound companies to survive, encourage entrepreneurs to take reasonable risks and permit creditors to lend on more favourable terms. ….We need to ensure simple and efficient insolvency proceedings, whenever there are assets or debts in several Member States. Rules are needed for the insolvency of groups of companies that maximise their chances of survival. To this end, the Commission will table a legislative proposal modernising the European Insolvency Regulation.”
This proposal, to which I have been invited to contribute as an expert, is set to be published in December 2012. However, the Commission wants to go further: “….We need to set up the route towards measures and incentives for Member States to take away the stigma of failure associated with insolvency and to reduce overly long debt discharge periods. We also need to consider how the efficiency of national insolvency laws can be further improved with a view to creating a level playing field for companies, entrepreneurs and private persons within the internal market. To this end, the Commission will table a Communication together with the revision of the European Insolvency Regulation.”
So readers of this blog, you should take the opportunity to express your wishes! The Commission’s announcement of new steps aligns rather well with the European Parliament’s desire, expressed end 2011, to create “an EU corporate insolvency framework”, including the introduction of “corporate rescue as an alternative to liquidation”, whereas “insolvency law should be a tool for the rescue of companies at Union level”. The European Parliament also proposes to harmonise parts of national insolvency laws. Ten years ago the harmonisation of insolvency law was seen as sheer impossible. My colleague Fletcher (London) and I will present and discuss a report on that subject, December 14, 2012, in the buildings of the Supreme Court in The Hague, during the annual meeting of the Netherlands Association of Civil Law. We feel that the subject is only done justice when taking small incremental steps. In our report, we have developed seven criteria – not necessarily in this order and overlaps could occur – which may point towards a direction to take in the process of developing a legislative skeleton for the harmonisation of insolvency law: (i) consistency with international norms, (ii) goals for the EU, (iii) take stock, (iv) formulate overriding objectives, (v) draft flexible legislation, (vi) examine whether there is need for action, (vii) strive for a fair balance between the (often competing) interests of creditors and other parties concerned.
For some further thoughts on the future of EU Insolvency Law, see my 5th Edwin Coe lecture, Brussels, held last October.