31 mars 2021
R&I update – April 2021 – 1 de 5 Publications
Although the UK left the EU on 31 January 2020, the impact of Brexit on cross-border insolvencies was largely postponed until the end of the transition period at 11pm on 31 December 2020.
The UK is now designated as a "third country" from the perspective of the EU, directly applicable EU laws and regulations no longer apply, and the Brexit Trade and Cooperation Agreement does not deal with cross-border insolvencies. As such, insolvency practitioners may now be left feeling that they are effectively in a "no-deal" scenario.
From 1 January 2021, EU insolvency proceedings no longer benefit from automatic recognition in the UK.
An insolvency officeholder may still be able to seek recognition under:
Reciprocity is not required under the above routes to recognition. The issue of recognition of EU insolvency proceedings is, however, distinct from recognition or enforcement of a compromise of creditor claims as a result of the EU insolvency proceedings. Following Brexit, under the (arguably controversial) English common law rule in Gibbs, English courts will not recognise a compromise of an English law governed debt unless the creditor submits to the EU insolvency proceedings.
From 1 January 2021, UK insolvency proceedings no longer benefit from automatic recognition in the EU.
An insolvency officeholder may be able to seek recognition under:
The UK Insolvency Service has recently published a guide providing insolvency officeholders with basic information regarding the applicable frameworks for recognition in the different EU member states, with some more detail for seven of the UK’s most significant EU trading partners.
Many of the EU Member States have a regime for recognition of foreign insolvency proceedings. Germany, for example, has adopted a broadly equivalent approach to that found in the Recast Insolvency Regulation to deal with the recognition of non-EU insolvency proceedings and it is expected that most insolvency proceedings will still be mutually recognised on the assumption that the company's COMI is in England. For a summary of Brexit's impact on insolvency proceedings in Germany see our recent article.
There will inevitably need to be more planning to ensure that the insolvency of a pan-European group is managed effectively and there will be a timing and cost implication to this. While the most effective routes to recognition in the EU become more clearly determined, the UK's ability to offer expert advice, flexible restructuring tools and a world-renowned judiciary is likely to continue to instil confidence in stakeholders and maintain its status as an attractive jurisdiction for international cross-border restructuring
We have experts with local knowledge of the effective routes to recognition across many EU jurisdictions. To discuss the issues raised in this article in more detail, please reach out to a member of our Restructuring & Insolvency team.
par Emilie Delacave
par Louise Jennings
par Louise Jennings