INSOLVENCY PROCEEDINGS
(20455)
9178/99
JUSTCIV 86
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Draft Council Regulation on Insolvency Proceedings.
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| Legal base:
| Article 65 EC; consultation; unanimity
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| Document originated:
| 5 July 1999 |
| Deposited in Parliament:
| 1 November 1999 |
| Department:
| Department of Trade and Industry
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| Basis of consideration:
| EM of 30 September 1999 and SEM of 22 November 1999
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| Previous Committee Report:
| None; but see (16291) — : HC 70-xxiii (1994-95), paragraph 3 (12 July 1995);
HC 51-xiv (1995-96), paragraph 4 (18 and 27 March 1996) and HC 51-xix (1995-96), paragraph 7 (15 May 1996)
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| To be discussed in Council:
| 2 December 1999 |
| Committee's assessment:
| Legally and politically important
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| Committee's decision:
| Cleared |
Background
9.1 This draft Regulation aims to secure
the simplification of formalities governing the reciprocal recognition
and enforcement of judgments of courts and tribunals in insolvency
proceedings which have an intra-Community dimension. In all material
aspects it is a replica of the draft EC Convention on Insolvency
Proceedings, negotiations on which were concluded in 1995 but
which was never ratified.
9.2 Our predecessors scrutinised the Convention
on three separate occasions between 1995 and 1996, and cleared
it.
9.3 The UK has now opted into the negotiations,
as it is entitled to do by virtue of Article 3 of the Protocol
on the position of the United Kingdom and Ireland.
The document
9.4 The simplification of formalities is
achieved in five ways:
(a) Establishing rules
to determine jurisdiction of Member States' courts or authorities
in insolvency proceedings having an intra-Community effect.
In brief, the Regulation
distinguishes between three types of jurisdiction. Primacy is
given to the courts of the Member State in which the debtor's
main interests are located, or in the case of a company, its registered
office. This is referred to as the 'main proceedings'. The second
type of proceedings, 'territorial proceedings', relate to the
situation where a debtor has an establishment in another Member
State separate from the State of his main interests and independent
proceedings have been launched in that Member State before the
main proceedings. The third type of proceedings similarly concern
secondary insolvency proceedings, the effects of which are limited
to liquidation, as opposed to rescue or rehabilitation measures.
(b) Creation of uniform conflict-of-laws rules
applicable in insolvency proceedings with cross-border elements.
The general principle is
that, in the case of conflicting jurisdiction, the law of the
Member State in which insolvency proceedings commence will govern
the insolvency administration in areas such as third party security
rights, set-off claims, reservation of title, contracts relating
to immovable property, contracts of employment, rights subject
to registration, Community patents and trade marks, action to
set aside transactions which took place before the opening of
insolvency proceedings, pending lawsuits, and protection to be
afforded to third parties to whom the debtor has disposed of specified
forms of property after the opening of insolvency proceedings.
(c) Providing for the recognition and enforcement
of judgments given in insolvency proceedings.
Measures under this section
provide that the judgment of a court of a Member State opening
insolvency proceedings against a debtor has to be recognised in
all other Member States. Similarly, a liquidator appointed in
main proceedings in one Member State is able to exercise all those
powers in another Member State, provided no contrary territorial
or secondary proceedings are opened in that other State.
(d) Providing for the possibility of opening
secondary insolvency proceedings.
(e) Guaranteeing information for creditors and
their right to lodge claims.
Creditors who have their
habitual residence, domicile or registered office in a Member
State must be given prompt notice of the opening of insolvency
proceedings and the requirements applicable in those proceedings
with regard to the lodging of cases.
The Government's view
9.5 The Parliamentary Under-Secretary of
State for Consumers and Corporate Affairs (Dr Howells) states
that the Regulation will have implications in three main areas
of UK law:
"a. The law relating
to recognition of insolvency proceedings and the recognition and
enforcement of judgments in insolvency proceedings.
"b. The law relating to the administration in
insolvency of companies and individuals who have their centre
of main interests not in the UK but elsewhere in the European
Community.
"c. Conflict of laws as they relate to insolvency
proceedings."
9.6 Moreover, the Government believes that:
"The Regulation is restricted
in scope to the Community and will not affect insolvency proceedings
commenced in the UK against insolvents who have their centre of
main interests outside the Community...
"We do not believe there are any major policy
implications in the proposal for the Regulation. The aim is to
facilitate the more efficient interaction of Member States' insolvency
procedures by removing barriers which currently exist to cross-border
recognition and enforcement of insolvency proceedings."
9.7 The Minister states that a limited consultation
is being undertaken on the Regulation with accountancy and legal
bodies. As of 30 September no responses had been received.
9.8 A SEM submitted by the Minister on 22
November covers changes made to the text since September. These
are of minor importance and do not affect the substantive issues
raised by the draft Regulation.
Conclusion
9.9 The Regulation is a replica of the
Convention which was previously cleared by our predecessors. It
appears to be a sensible attempt to simplify the procedures for
mutual recognition and enforcement of judgments, and we therefore
clear it.
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