Königswinter/Melsungen, March 8, 2024: In early March, BRRS partner Jutta Rüdlin participated in the panel discussion “Current Developments in European Insolvency Law” at the Sanierung 2024 conference on Petersberg.
The conference was organized by the Federal Association of German Business Consultants (BDU) in cooperation with the Distressed Ladies e. V. – Women in Restructuring, an association for experts involved in corporate restructuring and recovery, of which Jutta Rüdlin is a member.
In addition to Jutta Rüdlin, the panel discussion featured Sylvia Fiebig, partner at White & Case, specialist lawyer for insolvency and restructuring law, and insolvency administrator, Alexander Bornemann, government director and department head at the Federal Ministry of Justice, and Oliver Kehren, managing director and board member of Morgan Stanley Bank AG, and chairman of the Society for Restructuring TMA Germany e. V.
The discussion was moderated by Burkhard Jung, chairman of the BDU specialist association, and Dr. Gesa Pantaleon gen. Stemberg, board member of Distressed Ladies e. V.
The expert panel discussed three topics related to the draft “Directive of the European Parliament and of the Council on the Harmonization of Certain Aspects of Insolvency Law”:
- Do we need a harmonization of insolvency law in Europe, and what interest does the EU pursue with it?
- Key points of the current draft directive COM (2022) 702
- The individual regulations in detail
Accepted: the European agenda for implementing the Capital Markets Union
In the reasoning of the European Commission on the draft directive, the lack of harmonized insolvency regulations is considered one of the significant obstacles to free capital movement in the EU and stronger integration of EU capital markets. The insolvency law has been jointly emphasized by the European Parliament, the Council, the Commission, and the European Central Bank as a fundamental basis for achieving a genuine Capital Markets Union—this objective is widely agreed upon in the insolvency sector.
Achieved: cross-border regulations for internationally active companies in insolvency
The experts on the BDU and Distressed Ladies panel also agreed that this European objective is understandable and that harmonizing insolvency law in Europe is necessary on the path to the Capital Markets Union.
With the EU Insolvency Regulation, rules on court jurisdiction for cross-border proceedings and their recognition in member states and the coordination of particular insolvency procedures have been created and implemented.
The preventive restructuring framework is intended to enable early restructuring in all countries. There was regulatory need for this, among other things, to curb so-called forum shopping—insolvency tourism. The rules of the preventive restructuring framework expand the restructuring toolkit and focus on creditor protection and employee protection. In Germany, the provisions from the EU directive on preventive restructuring frameworks, debt relief, and activity bans, as well as measures to increase the efficiency of restructuring, insolvency, and debt relief procedures, have been implemented through the StaRUG. The panel participants agreed that the regulations of the StaRUG are gaining increasing significance in national and European restructuring activities.
With the present harmonization directive, substantive aspects of insolvency law are now to be harmonized for the first time.
Missing: harmonization of grounds for insolvency and ranking of unsecured insolvency claims
The expert panel critically examined the emergence of the directive for the harmonization of certain aspects of insolvency law. The participants criticized that the regulations of the current draft directive partly contradict each other significantly and are partly impractical. In this context, Alexander Bornemann pointed out that, while an expert commission had worked on the draft, national authorities in the member states had not been involved in the preparation of the draft or consulted beforehand, as had been the case with the previous directive on preventive restructuring frameworks. Therefore, other panel participants Sylvia Fiebig, Oliver Kehren, and Jutta Rüdlin agreed that this could have avoided impractical proposals, particularly the regulations for micro-enterprises, Title VI of the draft directive. The rules on the pre-pack procedure, Title IV, even partially contradict the provisions of the directive on preventive restructuring procedures, which have only recently been implemented into national law in most member states.
A sensible harmonization of European insolvency law requires, to achieve a functioning Capital Markets Union, a harmonization of the entry requirements and procedural principles, including the ranking of unsecured insolvency claims. Without these, systemic breaks in the member states will be the result.
The participants of the panel discussion agreed that harmonizing these fundamental topics poses a significant challenge for Europe and its member states with their different insolvency regimes.
The quintessence of the expert panel was: A harmonization of grounds for insolvency and the ranking of claims is currently politically unfeasible in the member states. While a harmonization of European insolvency law is desirable, it requires a different approach than that chosen in the preparation of the current draft directive. Even if there are no fundamental concerns from a German perspective against the provisions also included in the draft directive, such as those concerning avoidance rights, managing director duties, asset tracing, and creditor committees, the implementation of the draft directive in its current form cannot be desired.