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Security rights, the European Insolvency Regulation and Concerns about the Non-application of Avoidance Rules

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Abstract

This paper addresses debtors who have entered insolvency proceedings in a Member State of the EU so that the European Regulation on Insolvency Proceedings applies, and before the opening of insolvency proceedings they granted some form of security to another party. The paper analyses the issues that are relevant to determining whether the granting of security prior to the advent of insolvency proceedings under the Regulation can be avoided and it examines the extent to which pre-insolvency transactions involving security would be protected by Articles 5 and 13 of the Regulation. It then analyses the concerns that might be articulated in relation to the application of Article 13 and what options are available to the EC to address these concerns.

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... Security and secured interests are treated differently across the EU, 64 and this can lead to problems where an insolvent's property is subject to security that was created in a different member state of the EU to the one in which insolvency proceedings have been opened under the EIR. 65 This is exacerbated by the fact that there is no exhaustive definition of security (rights in rem) in the EIR. 66 How the rules are drafted and whether the avoidance of other types of transactions should be catered for is a matter for a detailed study of the policy behind avoidance, the existing rules in member states and the breadth of such rules. ...
Article
Only the harmonisation of laws is seen as being able to solve legal uncertainty resulting from legal diversity, but, notwithstanding the advent of the EC Regulation on Insolvency Proceedings, thus far there is no real harmonisation of insolvency laws in the EU. There are indications that the European Commission (EC) has been considering the formulation of a scheme for the harmonisation of the rules that apply in insolvency proceedings to permit the avoidance of transactions entered into prior to the commencement of insolvency proceedings. On this basis this article identifies and analyses those factors that will need to be considered and addressed in the formulation of any harmonised scheme, as well as ascertaining the problems that these factors may cause in the construction of such a scheme. This is a critical issue, for it is all well and good to say that there should be harmonisation, but how that is done, what must be taken into account and what is included in any harmonised scheme is another matter and requires careful thought and consultation.
... Security and secured interests are treated differently across the EU, 64 and this can lead to problems where an insolvent's property is subject to security that was created in a different Member State of the EU to the one in which insolvency proceedings have been opened under the EIR. 65 This is exacerbated by the fact that there is no exhaustive definition of security (rights in rem) in the EIR. How the rules are drafted and whether the avoidance of other types of transactions should be catered for is a matter for a detailed study of the policy behind avoidance, the existing rules in Member States and the breadth of such rules. ...
Article
Only the harmonisation of laws is seen as being able to solve legal uncertainty resulting from legal diversity, but, notwithstanding the advent of the EC Regulation on Insolvency Proceedings, thus far there is no real harmonisation of insolvency laws in the EU. There are indications that the European Commission (EC) has been considering the formulation of a scheme for the harmonisation of the rules that apply in insolvency proceedings to permit the avoidance of transactions entered into prior to the commencement of insolvency proceedings. On this basis this article identifies and analyses those factors that will need to be considered and addressed in the formulation of any harmonised scheme, as well as ascertaining the problems that these factors may cause in the construction of such a scheme. This is a critical issue, for it is all well and good to say that there should be harmonisation, but how that is done, what must be taken into account and what is included in any harmonised scheme is another matter and requires careful thought and consultation.
Article
In March 2018, the European Commission issued its proposal for a regulation on the law applicable to third-party effects of assignments of claims, aiming to put an end to the ongoing debate on this issue and the legal uncertainty associated with it. On the basis of the Commission’s decision in favour of the application of the law of the assignor’s habitual residence, this article discusses the consequences of the Proposal under European Union (EU) insolvency law. For that purpose, the coherence of the Proposal with the Insolvency Regulation will be examined, first in general and then in more detail. The analysis comes to the result that the Commission’s objective of aligning the Proposal with the legal framework of the Insolvency Regulation has predominantly been well achieved. The authors point out remaining minor inaccuracies that may be clarified in the further legislative process or by later case law. It is concluded that, from the perspective of international insolvency law, the proposed uniform conflict-of-laws rule at the EU level offers a good opportunity to promote legal certainty with regard to cross-border assignments of claims in the future.
Article
Cross-border transactions and resultant legal proceedings often cause problems. One major problem is knowing which law should govern the transaction and any legal proceedings. Cross-border insolvencies in the EU are subject to the European Regulation on Insolvency Proceedings (‘EIR’) but this legislation does not determine which substantive insolvency law rules apply in a given insolvency. There are many differences in the insolvency rules applicable in the various EU Member States and this has caused concern in relation to the avoidance of transactions entered into by an insolvent prior to the opening of insolvency proceedings. In light of this, the paper examines options to address divergence between national avoidance rules. One option, harmonization, is analysed as well as its possible benefits and drawbacks.
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