A legal storm is blowing across Europe. In November 2011 the European Parliament requested the European Commission to submit solid proposals “….. relating to an EU corporate insolvency framework”, including proposals to harmonise parts of national insolvency laws. In March 2012 the evaluation of the EU Insolvency Regulation started. The Commission’s proposals were published in December 2012. The speed of this latter process does not warrant a well-balanced outcome. In June 2012 the Intervention Act was introduced in the Netherlands concerning a system of resolution for banks, leading to many legal changes, including some thirty amendments included in the Bankruptcy Act. It had its first test in February 2013 with the case of SNS Reaal, the Netherland’s fourth largest bank. In June 2012 the European Commission published a draft directive “…. establishing a framework for the recovery and resolution of credit institutions and investment firms.” “Resolution” means the “…… restructuring of an institution in order to ensure the continuity of its essential functions, preserve financial stability and restore the viability of all or part of that institution.” Resolution is presented as an alternative to “normal insolvency procedures”, the definition of which is nearly similar to the one in Article 1(1) of the EU Insolvency Regulation. In the Dutch legal language we will probably have “resolutie” as a new legal term. And it goes on. But that’s not all.
On 3 October 2012 EU Commissioner Barnier presented a new vision document, expressing a 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.” I quote: “The completion of the Single Market is a continuous exercise and is a central element of the European growth agenda to address the current economic crisis. This is why the European Commission has today adopted Single Market Act II, putting forward twelve key actions for rapid adoption by the EU institutions.” One of the “….. main drivers for growth, employment and confidence”, is “b) cross border mobility of citizens and businesses”, which includes the requirement to “….. (iii) modernise insolvency proceedings, starting with cross-border cases, and contribute to an environment that offers second chances to failing entrepreneurs.” Barnier refers to the expected amendments to the Regulation, but adds: “…. However, we need to go further. At present, in many Member States there is little tolerance for failure and current rules do not allow honest innovators to fail ‘quickly and cheaply’. 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.” In short, European changes will influence all our areas of practice.
In the Netherlands this is all different. There is hardly any wind blowing at all. Legislative changes presented by a Royal Committee in 2007 were halted by the Dutch Minister of Justice early 2011. They included a fair system for international insolvency cases. We still have to live with a Bankruptcy Act dated 1896, we do not have a reliable rescue procedure and we miss a system of international insolvency law relating to non-EU countries. The result is a legal thriller concerning Yukos Oil, where legal disputes have been in courts for close to six years. Foreign parties do not understand our system, as it is based on a small number of court cases. We do not have an efficient system of recognition. There is no certainty re applicable law. Our law does not provide a basis for the cross-border coordination of cases between insolvency office holders and courts. Political parties have no political desiderata on the topic. In November 2012 proposals by the Government for some modest adjustment to our insolvency system were suggested, but not a word about a solid framework for international insolvency law. So the ultimate question is: can Dutch insolvency law withstand the test of time? Seeing these European developments we may fear that our house of insolvency legislation is not globalisation proof. The current old building is already weak. Its architecture is insufficient to include international concepts. This legal status is bad for parties, like creditors, whose position should be adequately protected. It creates uncertainty, especially for foreign investors, resulting in caseloads of work for courts. This is bad for the reputation of the Netherlands, a country very much dependent on good international commercial relationships.