27 Insolvency proceedings
| Committee's assessment
| Legally and politically important |
| Committee's decision | Cleared from scrutiny; further information requested
|
| Document details | Draft Regulation amending Regulation No. 1346/2000 on insolvency proceedings
|
| Legal base | Article 81 TFEU; co-decision; QMV
|
| Department | Business, Innovation and Skills
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| Document number | (36248), 10284/14 + ADD 1, —
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Summary and Committee's conclusions
27.1 Cooperation in the administration of EU cross-border insolvencies
and mutual recognition of the insolvency proceedings of Member
States is currently managed by the Insolvency Proceedings Regulation
(IPR). The IPR applies whenever a debtor, whether a natural or
legal person, has their centre of main interests (COMI) in an
EU Member State.
27.2 The IPR does not harmonise national insolvency laws; insolvency
proceedings are subject to the national law of the Member State
where the debtor has its COMI (with the possibility of any number
of secondary proceedings in any Member State where the debtor
has an establishment). The insolvency law of the Member State
of the main proceedings then applies throughout the EU except
where secondary proceedings have been opened in which case the
insolvency law of that Member State applies to the realisation
and distribution of assets to local creditors.
27.3 The Commission first sought to modernise the IPR to address
changes in the insolvency environment since 2002, by improving
coordination of main and secondary proceedings, promoting business
rescue and increasing legal certainty and transparency of proceedings
in a draft amending Regulation published on 12 December 2012 (the
original proposal).[132]
27.4 The UK's JHA opt-in applies to the proposal. The original
text was cleared from scrutiny on 12 June 2013 (following a debate
in European Committee on 4 March 2013) once it became clear that
the UK was opting in to the proposal (as notified on 10 April
2013) that participation was supported by the insurance industry
and other stakeholders. The need for the Government to update
the Committee on any developments adverse to UK interests was
a condition of clearance.
27.5 After a general approach was agreed in the Council in June
2014, the Government deposited the new compromise text together
with an Explanatory Memorandum. Overall, the Government was supportive
of the changes achieved at General Approach as they aligned with
the best interests of UK business and creditors. In response,
we asked about those aspects of the general approach text which
were less supported by stakeholders. We also requested to kept
informed of any adverse developments resulting from trilogue discussions,
such as mandatory group insolvency proceedings, "suspect
periods" (imposing a minimum three-month qualifying period
for COMI) or any lessening of the degree of Member State control
set out in the text over which national insolvency procedures
are to fall within the scope of the Regulation.
27.6 We commend the Minister and her officials for their efforts
in keeping us comprehensively informed of developments on the
current text.
27.7 Previously, in relation to a Commission implementing Regulation
amending the annexes to the current Insolvency Proceedings Regulation,[133]
we have asked for reassurance from the Government that there are
no adverse consequences for the UK from the inclusion of new insolvency
procedures of other Member States within the scope of that Regulation.
Although the Minister has voiced no concerns in this respect in
her letter about the new procedures being proposed for inclusion
in the current proposal, we ask her to inform us should that position
change.
27.8 We clear the current document from scrutiny but, for reasons
of transparency, ask that the Government deposit the recast
draft Regulation, with an Explanatory Memorandum, in good time
before its final adoption scheduled for the December JHA Council.
Full details of
the document: Draft
Regulation amending Council Regulation No. 1346/2000 on insolvency
proceedings: (36248), 10284/14 + ADD 1, —.
Background and previous scrutiny
27.9 The full background to the original proposal
and our previous scrutiny of that proposal is set out in our Fifth
Report of 2013-14, our Thirty-sixth and Thirtieth Reports of 2012-13.
We have also considered the general approach text agreed in June
in our 9th Report of 2014-15.
Minister's letter of 1 October 2014
27.10 The Minister for Employment Relations and Consumer
Affairs (Jo Swinson) first answers our request for further information
on aspects of the compromise text less favoured by stakeholders
as follows:
"Stakeholders support the compromise as
being in the best interests of the UK's insolvency regime. That
support is less enthusiastic than for the original Commission
proposals, but generally it is recognised that in negotiations
between 28 Member States there is a need for compromise. The principal
area they have expressed concern on is on group co-ordination
proceedings. Stakeholders do not feel that these would add value,
and could increase costs, whereas the initial Commission proposal
for enhanced co-operation and communication was suitably flexible
to add value without necessarily increasing costs. Stakeholders
do not believe that these proceedings are necessary, but welcome
the fact that participation will be voluntary and no member of
a group or its insolvency office holder will be compelled to take
part where there is little or no benefit to that entity."
27.11 The Minister next addresses developments since
the agreement of the General Approach. She says that there have
been two working group meetings in which there have been technical
discussions on recitals and annexes. New and amended recitals
are consequential amendments following the amendments to the articles
and were already footnoted in the general approach. The Minister
adds:
"Of particular importance to the UK, a recital
is included which clarifies that neither Debt Relief Orders nor
Schemes of Arrangement would be within the revised scope of the
Regulation. UK stakeholders were strongly against including schemes."
27.12 She also tells us about the inclusion of "interim
receiver" in annex C comprising the list of office holders
for each Member State:
"While the function of interim receiver
has been available since 1986, to date only the Official Receiver
(who is already listed in annex C) may undertake the role. The
Deregulation Bill currently progressing through Parliament will
allow the role to be undertaken by an authorised insolvency practitioner.
The Government believes that this should be expressly included
in the same manner as 'provisional liquidator' and although there
are only a handful of interim receiver appointments each year,
it is helpful that such appointments have EU-wide recognition.
The Commission agrees that it should be added and there has been
no objection from other Member States."
27.13 The Minister next turns to the question of
the addition of new insolvency procedures by 13 Member States
to annex A given the revised scope of the Regulation. She adds:
"The UK has not nominated any new procedures.
The Commission has undertaken a review of the processes available
to Member States and is satisfied that the nominated procedures
all meet the scope of the revised Regulation and can be added."
27.14 The next step in negotiations will be trilogues
beginning in October, following "technical level meetings"
between the Presidency and the European Parliament. However, first
the Presidency will present the draft recitals and annexes to
the JHA Council on 9th October "to finalise technical details
of the general approach agreed in June".
27.15 She also informs us that:
"It seems likely that the final Regulation
will be a recast which would replace the existing Regulation 1346/2000
with a consolidated Regulation, which will incorporate the unaltered
provisions of the original and the amended provisions. This appears
to be a sensible approach.
"The use of the recast technique will require
the agreement of the Council, Commission and the European Parliament.
The Presidency proposes to conclude negotiations with the European
Parliament before this is addressed, and to prepare a recast text
towards the end of negotiations for consideration by the December
Justice and Home Affairs Council.
"The Italian Presidency has now set out
its priorities on this proposal. They aim to conduct and complete
trialogue discussions in order to adopt the Regulation at the
December Justice and Home Affairs Council. This is an ambitious
target, and of course will depend on the progress of negotiations
with the European Parliament. It is important that the UK continues
to play a leading role in the negotiations."
27.16 The Minister concludes by saying that she hopes
that we can release the final text from scrutiny before the Council
is asked to vote on its adoption.
Previous Committee Reports
Ninth Report, HC 219-ix (2014-15), chapter 8 (3 September
2014); see also (34564) (17883/12): Fifth Report HC 83-v (2013-14),
chapter 11 (12 June 2013); Thirty-sixth Report HC 86-xxxvi (2012-13)
chapter 2 (20 March 2013); Thirtieth Report HC 86-xxx (2012-13)
chapter 1 (30 January 2013).
132 (34564), 17883/12, COM(12) 744: Draft Regulation
amending Regulation No. 1346/2000 on insolvency proceedings. Back
133
Draft Council Implementing Regulation replacing the lists of insolvency
proceedings, winding-up proceedings and liquidators in Annexes
A, B and C to Regulation (EC) No. 1346/2000 on insolvency proceedings.
See (35616), 16839/13: Forty-seventh Report, HC 83-xlii (2013-14),
chapter 16 (30 April 2014) and Thirtieth Report, HC 83-xxvii (2013-14),
chapter 2 (15 January 2014). Back
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