Documents considered by the Committee on 13 November 2017 Contents

8Coordination of insolvency proceedings in the EU

Committee’s assessment

Legally important

Committee’s decision

Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Energy and Industrial Strategy Committee

Document details

Proposal for a Regulation of the European Parliament and Council replacing Annex A to Regulation (EU) 2015/848 on insolvency proceedings

Legal base

Article 81(2)(a)(c) and (f) TFEU; ordinary legislative procedure; QMV


Business, Energy and Industrial Strategy

Document Number

(38963), 11667/17 + ADD 1, COM (17) 422

Summary and Committee’s conclusions

8.1Regulation (EU) No 2015/848 on insolvency proceedings came into force in June 2017 to provide for the efficient administration of insolvencies where the debtor’s centre of main interest (‘COMI’) is in the EU. The Regulation provides for exclusive jurisdiction for the “main” proceedings in the Member State where the debtor’s COMI is situated, with the possibility of other “secondary” or “territorial” proceedings in any other Member States where the debtor has an establishment. Regulation 2015/848 re-cast and superseded Regulation (EC) 2000/1346.

8.2Annex A to Regulation 2015/848 contains a list of insolvency procedures for each Member State which constitutes a definitive list of national proceedings which qualify as “insolvency proceedings” in the context of the Regulation.

8.3In January 2017 the Republic of Croatia asked the Commission to update the Regulation to reflect substantive reforms to their national insolvency laws. In particular, the Republic of Croatia requested changes to the list in Annex A to the Regulation.

8.4The amendments proposed to Annex A are considered necessary by the Commission to ensure that European domestic insolvency laws are reflected accurately in the Regulation. The Commission has proposed an amending regulation (2017/0189) to make these changes to the Regulation.

8.5The previous Committee scrutinised a similar amending proposal and cleared it after examining opt-in and competence issues which are now referred to in the following conclusions. As the opt-in similarly applies to this proposal which has Title V legal basis, the Government has until 15 November to make its decision. The eight week deadline for the Committee to consider the opt-in expired on 10 October, before we were formed.

8.6We thank the Minister for his timely Explanatory Memorandum. Although this is a technical proposal, we are grateful that he has observed the Government’s scrutiny obligations to Parliament in giving us plenty of notice of the opt-in deadlines. We note what the Minister says about the prospective opt-in decision but anticipate that for the sake of coherence and in view of the technical nature of the proposal, it seems likely that the UK will choose to opt into the proposal. We also welcome the change in the Commission position that proposals to amend the 2015 Regulation (2015/848), such as the current proposal and the one our predecessors recently scrutinised49 are a matter of shared competence. On these two legal grounds alone, we have deemed it worthwhile to report such a technical proposal to the House.

8.7We also think the House will be interested in the Minister’s very general comments about how jurisdiction and recognition and enforcement of orders in cross-border insolvencies involving the UK and EU Member States will operate after Brexit. For this reason, we draw the chapter to the attention of the Business, Energy and Industrial Strategy Committee. However, we do not think the Minister’s comments sufficiently convey the degree of uncertainty that could be introduced into the management of cross-border insolvencies when such matters cease to be governed by EU law. For example, once the 2015 Regulation no longer applies to the UK, there will be no automatic allocation of a “main” jurisdiction as between an EU Member State and the UK on the basis of COMI (a debtor’s Centre of Main Interests),50 possibly resulting in conflicting jurisdictions. There will no longer be automatic recognition and enforcement of judgments or orders as between the UK and EU Member States.

8.8In any event, we note that the Government has published a Future Partnership paper “Providing a cross-border judicial cooperation framework”.51 This outlines the Government’s ambition to seek “an agreement with the EU that allows for close and comprehensive cross-border civil judicial cooperation on a reciprocal basis which reflects closely the substantive principles of cooperation under the current EU framework”. This paper references the 2015/848 Insolvency Regulation. However, no specific detail is provided in relation to cross-border insolvency proceedings on how:

i)future cooperation with the EU would work other than to suggest that UK membership of UNCITRAL Model Law on Cross-Border Insolvency52 will somehow assist; and

ii)in default of an agreement on future cooperation, how “orderly completion” of ongoing civil and commercial cooperation matters will work on UK exit from the EU.

8.9We would therefore welcome the Minister’s further comments on both (i) and (ii) in due course. As the Minister’s Explanatory Memorandum predates the Prime Minister’s speech in Florence on 22 September, it would be very helpful if he could consider the possible impact of an implementation/transitional period when he responds.

8.10We await both those comments and the Government’s decision on the opt-in before we clear this proposal from scrutiny.

Full details of the documents

Proposal for a Regulation of the European Parliament and Council replacing Annex A to Regulation (EU) 2015/848 on insolvency proceedings: (38963), 11667/17 + ADD 1, COM (17) 422.

The Government’s view

8.11In an Explanatory Memorandum of 30 August, the Parliamentary Under Secretary of State and Minister for Energy and Industry (Richard Harrington) first comments on Brexit implications in relation to the 2015 Regulation:

“The Regulation provides a framework for dealing with cross-border insolvencies within the EU, establishing common rules relating to jurisdiction, recognition, cooperation and enforcement. It does not seek to regulate cross-border cases involving third states. Such cases are subject to provisions contained in national law including, in the UK, legislation implementing the UK’s adoption of the UNCITRAL Model Law on Cross-Border Insolvency.

“In the absence of any agreement to the contrary, the UK will not be subject to the Regulation following exit from the EU. Cross-border EU insolvencies with a UK element would be treated as insolvencies in third states under existing provisions. UK cross-border insolvencies with an EU element would be subject to the relevant Member State’s own national law provisions regulating jurisdiction, recognition, cooperation and enforcement with third states, which will vary from one Member State to another.”

8.12He then addresses the technical nature of the proposal and the opt-in:

“The amendments to the annexes of the Regulation are minor and do not have specific policy implications on insolvency law or practice in the UK.

“Updating the Regulation to ensure insolvency procedures in all Member States are included in the Regulation supports an efficient and ordered regime for cross border insolvency proceedings and provides increased legal certainty.

“Article 81 triggers the opt-in provision for this new Regulation. The UK Government will consider the amendments to the Regulation in due course. The Government is committed to taking all opt-in decisions on a case-by-case basis, putting the national interest at the heart of the decision making process. In making the opt-in decision on this proposal, the Government will have particular regard to the on-going operation of the Regulation and how it facilitates the smooth operation of cross-border insolvencies involving debtors with UK and EU interests, in particular where a debtor in Croatia has UK-based assets or UK-based creditors and vice versa”.

8.13On the timings relating to the opt-in, Minister says:

“The date of publication of the final language version of the amending regulation was 16 August 2017. Therefore, the 8 week deadline for the Scrutiny Committees to comment is 10 October 2017 and the deadline for the UK to opt in to the measure in accordance with Protocol 21 is 15 November 2017.”

8.14The Minister underlines the limited impact on the UK by explaining that there will be no need to make any consequential changes to the UK insolvency law including SI 2017/702 which made some changes to UK law in order to facilitate the smooth operation of the 2015 Regulation.

Previous Committee Reports

None; but see (37822), 9710/16: Thirty-Fourth Report HC 71–xxxii (2016–17), chapter 2 (8 March 2017); Tenth Report HC 71–viii (2016–17), chapter 9 (7 September 2016); Seventh Report HC 71–v (2016–17), chapter 6 (6 July 2016).

49 Proposal for a Regulation of the European Parliament and of the Council replacing the lists of insolvency proceedings and insolvency practitioners in Annexes A and B to Regulation (EU) 2015/848 on insolvency proceedings: 9710/16, COM(2016) 317. See Thirty-Fourth Report HC 71–xxxii (2016–17), chapter 2 (8 March 2017);Tenth Report HC 71–viii (2016–17), chapter 9 (7 September 2016); Seventh Report HC 71–v (2016–17), chapter 6 (6 July 2016).

50 Regulation No 2105/848.

52 Enacted into UK domestic law by the Cross Border Insolvency Regulations 2006.

20 November 2017