- 1 European
Communication and Cooperation Guidelines
For Cross-border Insolvency
Developed Under the Aegis of
Academic Wing of INSOL Europe
by
Professor Bob Wessels and Professor Miguel Virgós
May 2007
- 2 European
Communication and Cooperation Guidelines For Cross-border
Insolvency
Guideline 1 Overriding objective
1.1. These Guidelines embody the overriding objective of enabling courts and liquidators to
operate efficiently and effectively in cross-border insolvency proceedings within the
context of the EC Insolvency Regulation.
1.2. In achieving the objective of Guideline 1.1. the interests of creditors are paramount and
are treated equally.
1.3. All interested parties in cross-border insolvency proceedings are required to further the
overriding objective as set out above in Guideline 1.1.
Guideline 2 Aim
2.1. The aim of these Guidelines is to facilitate the coordination of the administration of
insolvency proceedings involving the same debtor, including through the use of a
governance protocol.
2.2. In particular, these Guidelines aim to promote:
(i) The orderly, effective, efficient and timely administration of proceedings;
(ii) The identification, preservation and maximisation of the value of the debtor's assets
(which includes the debtor's undertaking or business) on a world-wide basis;
(iii) The sharing of information in order to reduce the costs involved; and
(iv) The avoidance or minimization of litigation, costs and inconvenience to all parties
affected by proceedings.
2.3. In individual insolvency proceedings, the Guidelines require cases to be administered
with a view:
(i) To ensure that the creditors' interests are paramount and that they are on an equal
footing;
(ii) To save expense;
(iii) To deal with the debtor's estate in ways which are proportionate to the amount of
money involved, to the importance of the case, to the complexity of the issues, and to the
number of jurisdictions involved; and
(iv) To ensure that the case is dealt with timely and fairly.
Guideline 3 Status
3.1. Nothing in these Guidelines is intended:
(i) To interfere with the independent exercise of jurisdiction by each of the national courts
involved, including their respective authority or supervision over a liquidator;
(ii) To interfere with national rules or ethical principles by which a liquidator is bound
according to applicable national law and professional rules; or
(iii) To confer substantive rights or to interfere with any function or duty arising out of the
EC Insolvency Regulation or to impinge on applicable national law.
- 3 Guideline
4 Liquidator
4.1. A liquidator is any appointed person or body whose function is to administer or
liquidate assets of which the debtor has been divested or to supervise the administration of
its affairs, either in reorganisation or in liquidation proceedings.
4.2. A liquidator is required to act with the appropriate knowledge of the EC Insolvency
Regulation and its application in practice.
4.3. A liquidator is required to act honestly, objectively, fairly and expeditiously in dealing
with all parties concerned, including the courts.
Guideline 5 Direct Access
5. Any foreign liquidator should be granted direct access to any court necessary for the
exercise of legal rights to the same extent that a national liquidator is so permitted.
Guideline 6 Communications
6.1. Liquidators are required to communicate with each other directly and as soon as they
are appointed.
6.2. The liquidator appointed in the main proceedings should always take the initiative to
start or to continue communications with other liquidators.
6.3. Substantive replies by a liquidator to queries from other liquidators should always be
responded to as soon as reasonably practicable.
Guideline 7 Information
7.1. Liquidators are required to provide prompt and full disclosure to all other liquidators
involved of all relevant information about the existence and status of the insolvency
proceedings in which they have been appointed.
7.2. Liquidators are required to provide information periodically which may be relevant to
the other proceedings detailing the conduct of the proceedings.
7.3. Liquidators in possession of such information are required to inform the courts insofar
as they are subject to any reporting duties under national law, of any material development
in any such other proceedings.
7.4. A foreign liquidator should be permitted to use all legal methods to obtain information
that would be available to a creditor or to a liquidator in any national insolvency
proceedings.
7.5. To the fullest extent permissible under any applicable law, relevant non-public
information should be shared by a liquidator with other liquidators subject to appropriate
confidentiality arrangements to the extent that this is commercially and practically sensible.
7.6. The duty to provide information in the meaning of this Guideline includes the duty to
provide copies of documents at reasonable costs on request.
Guideline 8 Information by a liquidator in secondary proceedings
- 4 8.1.
The liquidator in any secondary proceedings should provide all relevant information to
the liquidator in main proceedings without any delay so as to facilitate the submission of
proposals on the liquidation or use of assets in secondary proceedings.
8.2. The liquidator in any secondary proceedings is encouraged to provide advice to the
liquidator in the main proceedings concerning any views on how to best to proceed.
8.3. The liquidator in main proceedings is encouraged to involve liquidators in any
secondary proceedings in devising those proposals referred to above in Guideline 8.1.
8.4. Where a reorganisation or rescue plan can be adopted in secondary proceedings which,
in attaining the aims pursued under Guideline 2.2(ii), would give better value to creditors in
main proceedings or reduce the overall size of debts, the liquidator in main proceedings and
the courts shall take advantage of the opportunity to promote the adoption of this plan.
Guideline 9 Authentication
9.1. Except to the extent provided for under any applicable law, where existing
authentication of documents is required, methods should be established so as to permit
rapid authentication and secure transmission of faxes and other electronic communications
relating to cross-border insolvencies on any basis that permits their acceptance as official
and genuine communications by liquidators and courts in other jurisdictions.
9.2. To the extent permissible under national law, courts are encouraged to provide or
publish judgments, orders or rulings also in languages other than those regularly used in
proceedings or encourage translations to be made as much as possible.
Guideline 10 Language
10.1. Liquidators shall determine the language in which communications take place on the
basis of convenience and the avoidance of costs. The court is advised to allow use of other
languages in all or part of the proceedings if no prejudice to a party will result.
10.2. Courts are encouraged, to the maximum extent permissible under national law, to
accept any documents related to those communications in language decided upon under
Guideline 10.1, without the need for a translation into the language of proceedings before
them.
Guideline 11 Obligations incurred by and fees of liquidators
11.1. Obligations incurred by the liquidator during proceedings and the liquidator's fees are
funded from the assets within those proceedings in which the liquidator is appointed.
11.2. Obligations and fees incurred by the liquidator in the main proceedings prior to the
opening of any secondary proceedings but concerning assets to be included in the estate in
principle will be funded by the estate corresponding to the secondary proceedings.
Guideline 12 Cooperation
12.1. Liquidators are required to cooperate in all aspects of the case.
12.2. Liquidators ensure that cooperation takes place with other liquidators with a view to
minimising conflicts between parallel proceedings and maximising the prospects for the
- 5 rehabilitation
and reorganization of the debtor's business or the value of the debtor's assets
subject to realisation, as may be the case.
12.3. Cooperation is intended to address all issues that are important to the actual case.
12.4. Cooperation may be best attained by way of an agreement or "protocol" that
establishes decision-making procedures, although decisions may continue to be made
informally as long as they are compatible with the substance of any such agreement or
"protocol".
12.5. In case where any matter is not specifically provided for within the protocol, the
liquidators shall act in a manner designed to promote the overriding objective set out above
in Guideline 1.1.
Guideline 13 Cross-Border Sales
13.1. Where during any period of cooperation between liquidators in main and any
secondary proceedings assets are to be sold or otherwise disposed of, every liquidator
should seek to sell these assets in cooperation with the other liquidators so as to realise the
maximum value for the assets of the debtor as a whole.
13.2. Any national court, where required to act, should approve those sales or disposals that
will produce such maximum value.
Guideline 14 Assistance in Reorganization
14.1. Where main insolvency proceedings are aimed at ensuring the rehabilitation and
reorganisation of the debtor's business, all other liquidators shall cooperate in any manner
consistent with the objective of reorganisation or the sale of the business as a going concern
wherever possible, mindful of the interests protected by local insolvency proceedings.
14.2. Liquidators should cooperate so as to obtain any necessary post-commencement
financing, including through the granting of priority or secured status to lenders providing
finance to the debtor and related entities as may be appropriate and insofar as permitted
under any applicable law.
Guideline 15 Coordination between secondary proceedings
15. Liquidators in all secondary proceedings are required to comply with these Guidelines.
Guideline 16 Courts
16.1. Courts are advised to seek to give effect to the overriding objective of enabling courts
and liquidators to operate efficiently and effectively operate in cross-border insolvency
proceedings within the context of the EC Insolvency Regulation, in the meaning of
Guideline 1.
16.2. Courts are advised to operate in a cooperative manner to resolve any dispute relating
to the intent or application of these Guidelines or the terms of any cooperation agreement or
protocol.
16.3. Courts are advised to consider whether an appointment of the liquidator in main
proceedings or a nominated agent of such liquidator as a liquidator or a co-liquidator in
- 6 secondary
proceedings would better ensure coordination between different proceedings
under the courts' supervision.
16.4. To the maximum extent permissible under national law, courts conducting insolvency
proceedings or dealing with requests for assistance or deciding on any matters relating to
communications from other courts should cooperate with each other directly, through
liquidators or through any person or body appointed to act at the direction of the courts.
16.5. Courts should encourage liquidators to report periodically, as part of national
reporting duties, on the way these Guidelines and/or agreed Protocols are applied, including
any practical problems which have been encountered.
Guideline 17 Notices
17.1. Notice of any court hearing or the making of any order by a court should be given to
each of the liquidators at the earliest possible point in time where the hearing or order is
relevant to that liquidator.
17.2. Where a liquidator cannot be present in person before the court, the court is advised to
invite the liquidator to communicate any observations to the court prior to any order being
made.
17.3. The liquidators should provide for the keeping of an accessible record of notices in
the meaning of Guideline 17.1, which shall be regularly updated, to note the dates and
relevant descriptions of any legal documents communicated, including those filed or
transferred electronically.
Guideline 18 Scope
18. Whilst the aim of these Guidelines is to facilitate the coordination of the administration
of insolvency proceedings involving the same debtor (including through the use of a
protocol), liquidators or administrators and courts outside the scope of the EC Insolvency
Regulation are encouraged, wherever possible, to use these Guidelines so as to facilitate or
increase the prospects of cooperation in other proceedings taking place.
- 7 -
INTRODUCTION
1. The EU Insolvency Regulation is founded on the rationale that the proper functioning of
the internal market requires that cross-border insolvency proceedings should operate
efficiently and effectively. The Insolvency Regulation aims to achieve this objective which
comes within the scope of judicial cooperation in civil matters within the meaning of
Article 65 of the EC Treaty. The Regulation requires the coordination of the measures to be
taken regarding an insolvent debtor. The form chosen is that when the centre of main
interest (COMI) of the debtor is in Member State A main insolvency proceedings can be
opened. In Member State B, C and/or D secondary proceedings towards the same debtor
can be opened when in this other State the debtor possesses an establishment (being any
place of operations where the debtor carries out a non-transitory economic activity with
human means and goods) within the territory of these latter States.
2. `Main insolvency proceedings and secondary proceedings can ... contribute to the
effective realisation of the total assets only if all the concurrent proceedings pending are
coordinated. The main condition here is that the various liquidators must cooperate closely,
in particular by exchanging a sufficient amount of information. In order to ensure the
dominant role of the main insolvency proceedings, the liquidator in such proceedings
should be given several possibilities for intervening in secondary insolvency proceedings
which are pending at the same time. For example, he should be able to propose a
restructuring plan or composition or apply for realisation of the assets in the secondary
insolvency proceedings to be suspendeď, thus recital (20) preceding the text of the EU
Insolvency Regulation (all italics by the authors). Main insolvency proceedings, opened in
one Member State do not deprive the courts in other Member States of the authority to open
secondary proceedings, see Article 16(2) of the Insolvency Regulation. The universal effect
of the main proceedings throughout the European Community (except for Denmark) does
not apply to the secondary proceedings, opened in another Member State, whilst the effects
of the secondary proceedings may not be challenged in other Member States (Article 17).
Because the procedural and substantive effects of the secondary proceedings are
determined by the lex concursus (Article 4 and Article 28), the focus of the secondary
proceedings is the protection of local interests.
3. There are however other aspects of this primary function of secondary proceedings,
which allows to view the secondary proceedings being a national proceeding, functioning
in an European context:
(i) despite secondary proceedings being opened in another Member State (in which the
debtor has an establishment, see Article 3(2) and Article 2(h)), the secondary proceedings
are concerned with (a part of the assets and liabilities of) the same (insolvent) debtor as the
main insolvency proceedings;
(ii) despite the secondary proceedings only being permitted to be proceedings as listed in
Annex B, and therefore winding-up proceedings with territorial effect (Article 3(2) and
Article 27), Chapter III of the Insolvency Regulation provides the liquidator appointed in
the main insolvency proceedings with several powers to influence or the change the
character of the secondary proceedings and to align these latter proceedings in accordance
with developments in the main proceedings;
(iii) despite `locaľ creditors being able to lodge claims in secondary proceedings, these
proceedings are fully open for other creditors to lodge their claims too (Article 32).
- 8 It
is generally acknowledged that secondary proceedings have an auxiliary function and
therefore should be considered in the context of the main proceedings. The Insolvency
Regulation does not aim to ring-fence these secondary proceedings. These proceedings
have their formal character (listed in Annex B) of the Member State where they have been
opened and comprise assets, located in the territory of that Member State. However, the
concept of the universality of the main proceedings is allowed to become fragmented, but it
is not to be renounced. The mutual connection between both proceedings is founded on the
maxim that, ultimately, the administration concerns one debtor with one estate and one
group of creditors. See recital 3, indicating that the Regulation stems from the need for
`coordination of the measures to be taken regarding an insolvent debtor's assets.' This may
be referred to as the principle of unity of estate.
4. The concept of one debtor with one estate to satisfy all creditors is reflected ­ though
less systematically ­ by the rights and powers assigned to the liquidator in the main
insolvency proceedings by the Insolvency Regulation. The following illustrates these rights
and powers:
(i) he has the power to apply for secondary proceedings in other Member States (Article
29);
(ii) he can ask liquidators in the secondary proceedings for information (Article 31(1)); and
(iii) he can demand that they cooperate with him (Article 31(2));
(iv) he can exercise the power to put forward certain proposals in the context of the
secondary proceedings (pursuant to Article 31(3));
(v) he may request a stay of the process of liquidation in these secondary proceedings
(Article 33(1));
(vi) he may request the termination of a stay (Article 33(2));
(vii) he may propose a rescue plan in the secondary proceedings (see Article 34(1)), also
during the stay of the process of liquidation (Article 34(3));
(viii) he shall lodge in other proceedings claims which have already been lodged in the
main proceedings (Article 32(2));
(ix) he has the power to participate in the other proceedings on the same basis as the
creditors (Article 32(3));
(x) he has the right to request the return to the main proceedings of anything already
obtained by creditors as they have satisfied their claims by any means on the assets of the
debtor situated in the other Member State (Article 20); and
(xi) he has the power to collect any remaining assets from the secondary proceedings if all
claims in these proceedings have been met (Article 35).
5. These powers have their origin in the Insolvency Regulation. In addition, the liquidator
appointed in the main proceedings will use the powers conferred to a liquidator according
to its domestic insolvency legislation, see Article 18. The recitals to the Regulation devote
only a few words to the guiding notion of unity of the estate. Recital (3) states: `The
activities of undertakings have more and more cross-border effects and are therefore
increasingly being regulated by Community law. While the insolvency of such
undertakings also affects the proper functioning of the internal market, there is a need for a
Community act requiring coordination of the measures to be taken regarding an insolvent
debtor's assets.' See also recital (12), explaining the characteristics of main proceedings
and secondary proceedings, adding: `Mandatory rules of coordination with the main
proceedings satisfy the need for unity in the Community.' Furthermore recital (20): `Main
insolvency proceedings and secondary proceedings can, however, contribute to the
effective realisation of the total assets only if all the concurrent proceedings pending are
- 9 coordinated.
The main condition here is that the various liquidators must cooperate
closely, in particular by exchanging a sufficient amount of information', and recital (21):
`Every creditor, who has his habitual residence, domicile or registered office in the
Community, should have the right to lodge his claims in each of the insolvency proceedings
pending in the Community relating to the debtor's assets. (all italics by the authors).
6. To summarise, cross-border insolvency proceedings in a large part of Europe are
managed and realized within a model of main insolvency proceedings (opened in a Member
State where the debtor has its centre of main interest) and secondary insolvency
proceedings (in other Member States, where the debtor possesses an establishment). The
main liquidator has a list of powers to influence secondary proceedings. This raises
questions with regard to the coordination of these proceedings. A close and trustful
cooperation between liquidators in main and secondary insolvency proceedings is
indispensable in order to achieve an efficient and optimal administration of the insolvent
debtor's assets.
7. The footing for cooperation is expressed in Recital (20) of the EC Insolvency Regulation
("...the main condition here is that the various liquidators must cooperate closely, in
particular by exchanging a sufficient amount of information ..."), which has been worded in
Article 31 of the EC Insolvency Regulation. The text is as follows:
Article 31
Duty to cooperate and communicate information
1. Subject to the rules restricting the communication of information, the liquidator in the main
proceedings and the liquidators in the secondary proceedings shall be duty bound to communicate
information to each other. They shall immediately communicate any information which may be
relevant to the other proceedings, in particular the progress made in lodging and verifying claims and
all measures aimed at terminating the proceedings.
2. Subject to the rules applicable to each of the proceedings, the liquidator in the main proceedings
and the liquidators in the secondary proceedings shall be duty bound to cooperate with each other.
3. The liquidator in the secondary proceedings shall give the liquidator in the main proceedings an
early opportunity of submitting proposals on the liquidation or use of the assets in the secondary
proceedings.
8. The absence of guidance in Article 31 EC Insolvency Regulation in general results in ad
hoc and case by case communication and cooperation without a solid and practical
framework which might guarantee the realisation of the overriding objective of enabling
liquidators and courts to efficiently and effectively operate in cross-border insolvency
proceedings in the context of the EC Insolvency Regulation.
9. The Core Group of the Academic Wing of Insol Europe, in its second meeting in
October 2004 (Prague), discussed a proposal to address the principle issue of the
liquidators' duties of communication and cooperation in cross-border insolvency instances.
The Core Group tossed the idea of the possibility/necessity of the establishment of a (nonbinding)
set of standards for communication and cooperation in cross-border insolvency
cases, which are a subject to the application of the EC Insolvency Regulation. The Core
Group in general agreed that the proposal should be supported and it established a Task
Force with the mandate to draft a plan, which was approved early 2005. The Task Force is
co-chaired by professor Bob Wessels (Amsterdam, the Netherlands) and professor Miguel
Virgós (Madrid, Spain).
- 10 10.
The following European Communication and Cooperation Guidelines For Cross-border
Insolvency are based on several papers of the individual members of the Task Force
providing an overview and critical assessment of literature and court cases with regard to
Article 31 of the EC Insolvency Regulation, of literature and court cases concerning nonEU
examples of cross-border communication and cooperation in cross-border insolvency
cases and of literature and the EC Treaty related regulation and court cases concerning
cross-border communication and cooperation in general civil and commercial law matters,
within the framework of the EC Treaty. The members of the Task Force are listed in
Appendix II.
11. The Task Force has been guided by three primary reasons for focusing on the
development of `standards' for cross-border communication and cooperation between
liquidators in the EU:
a. A set of Guidelines reflects (i) the central principle of cooperation and coordination
between insolvency proceedings pending in two or more Member States, where the text of
the Regulation is left open, and (ii) a realistic set of Guidelines should ensure as best as
possible to make the Regulation work in practice, so that either liquidation or
reorganisation of the debtor's estate is dealt with efficiently.
b. A set of Guidelines fits in the current environment within which in the field of crossborder
insolvency efficient and effective solutions have been developed based on models
reflecting cooperation among courts and liquidators (e.g. Protocols; UNCITRAL Model
Law). Several Member States have enacted provisions relating to communication and
cooperation in its respective national legislation, inspired on these examples.
c. The insolvency profession in Europe has reached a stage in its development that demands
heightened attention to strong, international standards of professionalism. A consistent set
of Guidelines regarding the organisation, the contents and the quality of communication
and cooperation processes (i) aims to be beneficial to the goals of the insolvency
proceedings within which they will function, (ii) increases the strength and the reputation
of the profession, and (iii) may support courts in providing tailor-made orders or insolvency
(related) judgments in general.
12. The Task Force, assigned with the project, has organized its work according to a plan,
which would ensure that during its operation different stakeholders and interest groups
were involved in the outcome. In addition to several discussions of several drafts between
the members of the Task Force, the Task Force has been guided in its work by a Review
Group, committed to review drafts of the Guidelines and comment on their consistency and
practical use. The members of the Review Group are listed in Appendix II.
13. The outcome of the Task Force's work, including a first round of comments and
discussion with the Review Group, was a non-public draft of the Guidelines (May 2006).
This draft was explained and discussed at the INSOL International Academics meeting in
Scottsdale, Az., USA, May 20-21, 2006. We then prepared a public draft of the Guidelines,
to be discussed during the Annual Conference of INSOL Europe end September 2006 in
Bucharest, Romania. Also this public draft was the result of consultation both within the
Task Force as with the Review Group. Compared to text distributed during the Scottsdale
conference the subsequent discussions and evaluation resulted in a number of Guidelines of
18 as compared to Scottsdale, where the draft contained 22 Guidelines. The main reasons
for the changes were (i) the rearrangement of certain sections, and (ii) the view that in a
stage of a first step framework some of the proposed guidelines seemed superfluous
- 11 (Guideline
13 - Notices Among liquidators; Guideline 17 - Informal processes; Guideline
19 - Interim measures; Guideline 22 ­ Definitions), combined with (iii) the idea that some
of the proposed guidelines might prove to be too complex in this stage (Guideline 16 Corporate
Groups; Guideline 21 - Actions to be taken outside the territory of the Member
States where proceedings are pending).
14. The public draft of September 2006 of the Guidelines, including a brief Explanation,
was discussed extensively during the general meeting at the Annual Conference of INSOL
Europe in Bucharest, assembling over around 300 insolvency practitioners. Additionally in
a workshop during this Conference specific Guidelines were discussed, and during the
treatment of a hypothetical case twenty questions were raised and answered by the audience
by way of electronic voting. This draft again has been subject for discussion during the
Annual Conference of the Insolvency Lawyers Association, Oxford, March 2-3, 2007, and
the INSOL International Academics meeting in Cape Town, South Africa, March 17-18,
2007. We thank all the participants of these meetings for their remarks and suggestions
made.
In the light of the outcome of these discussions, the authors have reconsidered the content
of the draft Guidelines. This has led to the introduction of Guideline 1.2 and 2.3, and to a
full consideration of Guideline 11. Texts of several draft Guidelines have been moved to
the Explanation, in an aim to come to a ready readable text. We also expanded the
Explanation and finalised Guidelines and Explanation after a round of consultation in April
and May 2007 with the Task Force and the Review Group.
15. We consider the European Communication and Cooperation Guidelines For Crossborder
Insolvency, in their final form, to function as a first step in a framework to realize
the objective of enabling liquidators and courts to efficiently and effectively operate in
cross-border insolvency proceedings in the context of the EC Insolvency Regulation. In
individual cases the Guidelines are minimum requirements and may need to be
supplemented by other measures designed to address particular conditions. The Guidelines
are not a cookbook of recipes certain to succeed in all cases; they should inspire all actors
to tailor solutions in specific cases. The Guidelines strongly endorse the use of agreements
concerning cooperation or `protocols' as a means to codify coordination in decision making
procedures related to two or more insolvency proceedings in two or more Member States'
jurisdictions. We are pleased with INSOL Europe's decision to install a `Protocol
Committee' to further develop certain forms or templates for such protocols.
16. We intend the Guidelines to serve as a sound and well-tailored framework for crossborder
cooperation and as a basic reference for individual liquidators, professional
insolvency practitioners' associations, judges and other public authorities in all EU
Member States and internationally. It will most likely be for national professional
associations of insolvency practitioners to introduce or to strengthen ethical or professional
rules concerning a relative new subject: cross-border communication and cooperation.
These associations may consider to use the Guidelines to review their existing rules and to
initiate a plan designed to address any deficiencies as quickly as is practical within their
authority. We are confident that the Guidelines reflect present consensus within larger
groups of insolvency practitioners and specialised scholars. INSOL Europe is in the process
of establishing a permanent Communication/Cooperation Standards Committee,
supervising the roll out of the Guidelines, to review them on an ongoing basis and police
and monitor their application in practice or their implementation by associations. It is the
purpose that judges will participate in this Committee. These associations are encouraged to
- 12 submit
any comments or suggestions for improvement or for additional Guidelines to said
Committee.
17. We believe that achieving consistency with the Guidelines in Member States will be a
significant step in the process of improving communication and cooperation between
insolvency proceedings pending in two or more Member States. We recognise however that
the speed with which this objective will be achieved will vary. In some Member States
changes in the legislative framework may prove to be necessary. In such cases it is essential
that national legislators give urgent consideration to the changes necessary to ensure that
the Guidelines can be applied in all material respects.
18. The Guidelines presuppose that liquidators act with the appropriate knowledge of the
EC Insolvency Regulation and its applicability in practice, which would include the
operation of these Guidelines. We encourage INSOL Europe and other professional
organisations of lawyers, accountants or judges to engage in structured training, preferable
on a European level in order to get acquainted to the multi-jurisdictional and multi-cultural
setting within which the Regulation and these Guidelines operate.
19. In closing, we express our sincere appreciation to our colleagues on the Task Force and
our consultants from the Review Group. Collectively they have put time, energy, intellect
and sense of purpose in the development of the Guidelines.
May 2007
Amsterdam/Dordrecht Madrid
The Netherlands Spain
Bob Wessels Miguel Virgós
- 13 -
Sources
The drafters of the European Communication and Cooperation Guidelines For Cross-border
Insolvency have drawn on several public sources. These are:
UNCITRAL Model Law
United Nations Commission on International Trade Law (UNCITRAL) Model Law on
Cross-Border Insolvency, with Guide to Enactment, 1997.
ALI Principles
The American Law Institute's Transnational Insolvency Project regarding Cooperation
Among NAFTA Countries (USA; Canada, Mexico), which resulted in General Principles,
Procedural Principles and Recommendations.
(source: Westbrook, Jay (reporter), International Statement of United States Bankruptcy
Law (2nd volume in: American Law Institute, Transnational Insolvency: Cooperation
Among the NAFTA Countries, 4 Volumes), JP Juris Publishing, Inc., 2003).
ALI/UNIDROIT Principles on Transnational Proceedings 2004
Principles and the accompanying commentary, adopted by the American Law Institute
(ALI) in May 2004 and by the International Institute for the Unification of Private Law
(source: Uniform Law Review 2004-4, 760)
EBRD Insolvency Office Holders Principles Draft January 2007
Principles setting standards for the qualifications, appointment, conduct, supervision and
regulation of office holders in insolvency cases (Draft January 2007)
(source: www.ebrd.com/country/sector/law/insolve/Princip/principles.pdf)
Principles of European Insolvency Law 2003
Principles designed by an Ad hoc International Working Group on European Insolvency
Law
(source: Principles of European Insolvency Law, McBryde, W.W., Flessner, A, Kortmann,
S.C.J.J. (eds.), in: Law of Business and Finance, Vol. 4, Deventer: Kluwer Legal
Publishers, 2003)
Protocols
Examples from several protocols of cross border insolvency cases can be found via
www.iiiglobal.org
Virgós / Schmit Report (1996)
Miguel Virgós and Etienne Schmit, Report on the Convention on Insolvency
Proceedings (July 1996)
- 14 European
Communication and Cooperation Guidelines For Cross-border
Insolvency
Contents
Guideline 1 Overriding objective
Guideline 2 Aim
Guideline 3 Status
Guideline 4 Liquidator
Guideline 5 Direct Access
Guideline 6 Communications
Guideline 7 Information
Guideline 8 Information by a liquidator in secondary proceedings
Guideline 9 Authentication
Guideline 10 Language
Guideline 11 Obligations incurred by and fees of liquidators
Guideline 12 Cooperation
Guideline 13 Cross-Border Sales
Guideline 14 Assistance to Reorganization
Guideline 15 Coordination between secondary proceedings
Guideline 16 Courts
Guideline 17 Notices
Guideline 18 Scope
- 15 Guideline
1 Overriding objective
1.1. These Guidelines embody the overriding objective of enabling courts and liquidators to
operate efficiently and effectively operate in cross-border insolvency proceedings within
the context of the EC Insolvency Regulation.
1.2. In achieving the objective of Guideline 1.1. the interests of creditors are paramount and
are treated equally.
1.3. All interested parties in cross-border insolvency proceedings are required to further the
overriding objective as set out above in Guideline 1.1.
Explanation
General.
20. Member States in the European Union have a strong mutuality of interests in the
management and execution of effective operations of cross-border insolvency proceedings.
It is therefore important that Member States, courts, any other competent legal authority
and associations of insolvency practitioners develop arrangements for the efficient and
effective cooperation in enforcing these proceedings and minimize conflict in the
application of these Guidelines.
21. Article 31 Insolvency Regulation falls short in appropriate detail of the duties to
communicate and to cooperate for liquidators, who therefore may be not sufficiently aware
of their mutual duties on a European level, which is that both are working towards a
common goal, the ultimate unity of the process of administering the debtor's estate as an
economic unit. The mutual inter-relationship of the proceedings (originating from
procedural rights of the main liquidator, e.g. requesting the opening of secondary
proceedings, requesting the stay of the process of liquidation or the proposal of a rescue
plan within the secondary proceedings) and of the claims of creditors (who have the right to
lodge claims in any of the insolvency proceedings) assume the adequate and unconditional
realisation of mutual duties with regard to communicating information and to cooperation.
22. The role of the courts is paramount in insolvency matters and, particularly with view to
rescues, consolidations or reorganisations, experience often is that the attitude taken by
courts may be determinative of the eventual outcome. The Guidelines also refer to courts,
but it must be remembered ­ like for any other party addressed ­ the Guidelines are nonbinding
(Guideline 3). The text should be understood as to reflect the drafters respect of the
individuality of courts and legal cultures and therefore the texts are facilitative and should
not, for that reason, offend judges or courts' views of their roles, nor should they serve to
undermine notions of judicial independence or respect for national sovereignty.
Guideline 1.1.
23. The text has its basis in recital 2 of the Insolvency Regulation (`The proper functioning
of the internal market requires that cross-border insolvency proceedings should operate
efficiently and effectively and this Regulation needs to be adopted in order to achieve this
objective which comes within the scope of judicial cooperation in civil matters within the
- 16 meaning
of Article 65 of the Treaty'). The Guidelines therefore fully function within system
and scope of the Insolvency Regulation.
Guideline 1.2.
24. This Guideline serves two purposes. The importance of acting in the interest for the
debtor's creditors results from the principle rationale of the creditor's position in the
Regulation: a right to receive information (Article 40), the right to lodge claims in all
insolvency proceedings regarding the debtor (Article 32), and the right of equal treatment
(Article 20(2)). A basis for the text is provided in recital 21 of the Insolvency Regulation
(`Every creditor, who has his habitual residence, domicile or registered office in the
Community, should have the right to lodge his claims in each of the insolvency proceedings
pending in the Community relating to the debtor's assets. This should also apply to tax
authorities and social insurance institutions. However, in order to ensure equal treatment of
creditors, the distribution of proceeds must be coordinated. Every creditor should be able to
keep what he has received in the course of insolvency proceedings but should be entitled
only to participate in the distribution of total assets in other proceedings if creditors with
the same standing have obtained the same proportion of their claims.')
25. The other purpose of this Guideline is to set a benchmark for professional actions and
behaviour of liquidators involved. The application of the Guidelines as a whole should be
conditioned by the paramount interests of creditors. Guideline 1.2 therefore requires too,
also in jurisdictions where professional or ethical rules for liquidators are not available, to
act fairly and proportionally in charging fees or costs. See also Guideline 11.
Guideline 1.3.
26. In establishing this Guideline all interested parties in cross-border insolvency
proceedings are required to act in accordance with the Guidelines, and therefore the
Regulation's general requirements. It should encourage all players in cross-border
insolvency proceedings, including creditors, employees and public authorities, to respond
to the necessity of efficient and effective operations of these proceedings. It is envisaged
that the Guidelines apply analogically to instances which fall (partly) outside the scope of
the Insolvency Regulation, so for instance to liquidators and courts of two ore more
secondary proceedings, see Guideline 18. Nothing in these Guidelines, though, can alter or
infringe the right or duties of these players.
Guideline 2 Aim
2.1. The aim of these Guidelines is to facilitate the coordination of the administration of
insolvency proceedings involving the same debtor, including through the use of a
governance protocol.
2.2. In particular, these Guidelines aim to promote:
(i) The orderly, effective, efficient and timely administration of proceedings;
(ii) The identification, preservation and maximisation of the value of the debtor's assets
(which includes the debtor's undertaking or business) on a world-wide basis;
- 17 (iii)
The sharing of information in order to reduce the costs involved; and
(iv) The avoidance or minimization of litigation, costs and inconvenience to all parties
affected by proceedings.
2.3. In individual insolvency proceedings, the Guidelines require cases to be administered
with a view:
(i) To ensure that the creditors' interests are paramount and that they are on an equal
footing;
(ii) To save expense;
(iii) To deal with the debtor's estate in ways which are proportionate to the amount of
money involved, to the importance of the case, to the complexity of the issues, and to the
number of jurisdictions involved; and
(iv) To ensure that the case is dealt with timely and fairly.
Explanation
General.
27. General principle is: in the system of the Insolvency Regulation there is only one debtor
who is submitted to main insolvency proceeding and ­ for reasons not to explain here ­
possibly there are one or more secondary proceedings in other Member States towards that
same debtor. The Insolvency Regulation requires these proceedings to be coordinated.
28. Coordination means that the duties of communication and cooperation as set out in
Article 31 of the Insolvency Regulation are fulfilled within the context of a common
purpose regarding the debtor, his assets and the treatment of his creditors. This results in
two principle rules, one concerning the aim of the Guidelines themselves, and one
concerning the specific insolvency proceeding concerning said debtor. Guidelines 2.1 and
2.2 are related to the general aim of the Guidelines, always covering two or more
insolvency proceedings in two or more jurisdictions. Guideline 2.3 should cover each of the
individual insolvency proceedings.
29. Guideline 2 has its basis in recital 3 (`The activities of undertakings have more and
more cross-border effects and are therefore increasingly being regulated by Community
law. While the insolvency of such undertakings also affects the proper functioning of the
internal market, there is a need for a Community act requiring coordination of the
measures to be taken regarding an insolvent debtor's assets') and a part of recital 20
(`Main insolvency proceedings and secondary proceedings can, however, contribute to the
effective realisation of the total assets only if all the concurrent proceedings pending are
coordinateď).
Guideline 2.1.
30. The text underlines the function of the Guidelines to facilitate the coordination of
between main proceedings and one or more secondary proceedings. Coordination is
possible through all types of means of modern international measures of professional
communication (telephone, email, fax or video conferencing for instance discussions with
creditors in several jurisdictions) and through the use of a "protocol".
- 18 31.
A protocol is a means of agreeing alignment between different insolvency proceedings
or pre-reorganisation measures, which has been used in (mostly non-European) crossborder
insolvency cases. Such an agreement is concluded in the course of multiple
proceedings and is designed to overcome certain legal or factual obstacles. Office holders
are often entering into a protocol with the consent of courts and the active participation of
judges involved. A Protocol could cover different types of cross-border insolvency cases,
for exemple (i) main proceedings, covering all assets in Europe (also those which do not
result in an establishment in another Member State) and all claims of creditors, irrespective
of where they are located or (ii) main proceedings with two or more secondary proceedings.
See the explanation to Guideline 12. The use of a governance protocol is mentioned as this
is an established practice outside Europe, mainly in USA, Canada and UK. However, courts
in other jurisdictions have been involved in protocols too, e.g. Bahamas, Israel,
Switzerland, Bermuda and Hong Kong. A protocol filed in conformity with the European
Insolvency Regulation is the one concluded regarding the French branch of Sendo
International Limited, singed by (the representatives of) a French liquidator and English
liquidators and endorsed by the Commercial Court of Nanterre (dated June 1, 2006). It is
noted that in several jurisdiction the nature of a protocol (containing procedural and
substantial provisions) may be of such a kind that a court or an insolvency practitioner can
not (fully) be bound by it. See also Guideline 3 expressing the non-binding nature of the
Guidelines.
Guideline 2.2.
32. The text of Guideline 2.2 would fit in a preamble, but given the non-binding nature of
the Guidelines now have been formulated in Guideline 2.2. The text specifies central
objectives of the Guidelines. It sets the context for professional action and behaviour and
may assist in providing guidance in those matters of the Guidelines which need
interpretation or which are not covered at all.
Guideline 2.3.
33. Guidelines 2.1 and 2.2 relate to connected jurisdictions or related insolvency
proceedings, Guideline 2.3 concerns itself with each of the individual insolvency
proceedings to be coordinated. The formulation of Guideline 2.3 is inspired by the
Overriding Objective in Part 1 of the Civil Procedural Rules (England and Wales). The
specific objectives align to those mentioned in Guideline 2.2. The duty to ensure the
creditors' interests follows the similar aim mentioned in Guideline 1.2.
Guideline 3 Status
3. Nothing in these Guidelines is intended:
(i) To interfere with the independent exercise of jurisdiction by each of the national courts
involved, including their respective authority or supervision over a liquidator;
(ii) To interfere with national rules or ethical principles by which a liquidator is bound
according to applicable national law and professional rules; or
- 19 (iii)
To confer substantive rights or to interfere with any function or duty arising out of the
EC Insolvency Regulation or to impinge on applicable national law.
Explanation
General.
34. Guideline 3 seeks to ensure that the Guidelines do not cause friction with existing
applicable laws or professional rules or with duties flowing from the EC Regulation, nor
that the Guidelines create any rights. In their nature these Guidelines are non-binding for
anyone concerned (court, liquidator, creditor, debtor).
Guideline 3(i)
35. Although the Guidelines may serve as a guide for interpretation in certain situations, it
is evident that the autonomous position of a national court and the independence of a judge
should be respected unconditionally at all times. The same goes for national rules
concerning the courťs supervision regarding insolvency proceedings or the performance of
the liquidators tasks.
Guideline 3(ii)
36. The EC Insolvency Regulation does not contain any sanctions in case that the duties
within the meaning of Article 31 of the EC Insolvency Regulation are not fulfilled, or are
not fulfilled in due time. Therefore, the insolvency court which supervises the regularity of
the proceedings from the perspective of both national and international insolvency law
should be seen as to be in the position to enforce the duty to cooperate and communicate
information. The Regulation after all is legally binding as a whole and thus directly
applicable in all EU Member States (except for Denmark) according to Article 249 (2),
second sentence EC Treaty and Article 47, second sentence, of the Insolvency Regulation.
The Virgós / Schmit Report (1996), para 234, submits that where appropriate, the
applicable national law will determine the liquidator's liability when the latter has not
respected the duties arising from Article 31 of the EC Insolvency Regulation. In assessing
relevant criteria with regard to liability, a court may take notice of certain of the Guidelines.
This does not mean that these Guidelines have any binding force by themselves, but that
they are seen by the court in the given circumstances of a case as reflecting a general
consensus with regard professional trustworthiness.
37. In instances in which a national association of insolvency practitioners would apply the
Guidelines as part of the Member State's applicable professional rules, a professional
regulatory remedy will sanction a liquidator's lack in abiding the Guidelines.
Guideline 3(iii)
38. In addition to respect for national courts (Guideline 3(i)) and national professional rules
(Guideline 3(ii)), the Guidelines do not create substantial rights, as they also are not
- 20 intended
to breach any binding rules of the Insolvency Regulation or applicable national
law. Guideline 3.3 aims to capture this intention.
Guideline 4 Liquidator
4.1. A liquidator is any appointed person or body whose function is to administer or
liquidate assets of which the debtor has been divested or to supervise the administration of
its affairs, either in reorganisation or in liquidation proceedings.
4.2. A liquidator is required to act with the appropriate knowledge of the EC Insolvency
Regulation and its application in practice.
4.3. A liquidator is required to act honestly, objectively, fairly and expeditiously in dealing
with all parties concerned, including the courts.
Explanation
General.
39. The text aims to secure that in cross-border insolvency cases liquidators act with
appropriate knowledge and experience with the EU Insolvency Regulation and in an honest
way, with appropriate understanding of the interwovennes of any parallel proceedings.
Guideline 4.1.
40. A liquidator for the purposes of the Guidelines is a person or body as meant under the
definition in Article 2(b) of the Insolvency Regulation and therefore listed in Annex C. It
covers also such a person or body which, based on applicable law, fulfils a provisional
function based on a judgment which is not final. In addition, Guideline 4.1 intends to cover
a temporary administrator in the meaning of Article 38.
Guideline 4.2.
41. This Guideline aims to encourage liquidators to taking training, both technical and skill
training. The lack of detail of Article 31 Insolvency Regulation and the absence of
appropriate knowledge may lead to domestic liquidators fulfilling their national tasks,
without having full familiarity of the purpose and the effect of the Insolvency Regulation
and the supportive function of the secondary proceeding. Guideline 4.2 will promote the
efficient and effective operation in cross-border insolvency proceedings (Guideline 1.1) and
will prevent the unduly rise of conflicts between liquidators.
Guideline 4.3.
42. Guideline 4.3 is to be regarded in the light of Guideline 1.2, which furthers the
overriding objective of the Guidelines. The collaborate spirit which underpins Article 31
Insolvency Regulation requires a relationship between liquidators and courts of trust and
- 21 cooperation
for the benefit of efficient and effective operation in cross-border insolvency
proceedings.
43. Acting honestly means that a liquidator conducts himself in dealing with courts,
creditors, the debtor and other parties in good faith.
Acting objectively means that a liquidator, in its specific role in the Insolvency Regulation,
acts with professional trust. Liquidators respect each other's professional integrity and treat
each other with respect.
Acting fair includes the assurance that liquidators involved are on an equal footing. Acting
fair includes furthermore the obligation to prevent the rise of any concern over professional
behaviour, specific knowledge and over costs and fees.
Acting expeditiously includes acting in a way to save costs and expenses.
44. Inspiration has been taken from three sets of Principles:
- The CCBE (Council of Bars and Law Societies of Europe) Charter of core principles of
the European legal profession (2006). These core principles are in particular: (a) `the
independence of the lawyer', (c) `avoidance of conflicts', (d) `the integrity and good repute
of the individual lawyer', (f) `fair treatment of clients in relation to fees', (g) `the lawyer's
professional competence', (h) `respect towards professional colleagues', and (i) `respect for
the rule of law and the fair administration of justice';
- The EBRD (European Bank for Reconstruction and Development) Insolvency Office
Holders Principles Draft January 2007, related to setting standards for the qualifications,
appointment, conduct, supervision and regulation of office holders in insolvency cases,
especially Principles 1 (Qualifications & Licensing Generally) and 6 (Standards of
Professional and Commercial Conduct); and
- Article 11 section 1 and 2 of the American Law Institute (ALI)/UNIDROIT Principles on
Transnational Proceedings 2004:
11. Obligations of the Parties and Lawyers
11.1 The parties and their lawyers must conduct themselves in good faith in dealing with
the court and other parties.
11.2 The parties share with the court the responsibility to promote a fair, efficient, and
reasonably speedy resolution of the proceeding. The parties must refrain from procedural
abuse, such as interference with witnesses or destruction of evidence.
Guideline 5 Direct Access
5. Any foreign liquidator should be granted direct access to any court necessary for the
exercise of legal rights to the same extent that a national liquidator is so permitted.
Explanation
General.
45. The text underlines the importance of direct access to the courts of each Member State
for intervention or for substitution, as appropriate, in lawsuits involving the debtor. It also
allows for bringing lawsuits to obtain or defend assets or for other purposes. Granting
access does not alter the need to engage local counsel in each State.
- 22 Guideline
5 reflects Article 9 (Right of direct access) of the UNICITRAL Model Law on
Cross-Border Insolvency (A foreign representative is entitled to apply directly to a court in
this State ) and the meaning of the American Law Institute's (or: ALI) Procedural Principle
7 (Court Access), the first two sentences:
A recognized foreign representative should be granted direct access to any NAFTA court
necessary for the exercise of its legal rights. A recognized foreign representative of a main
proceeding should be granted such access to the same extent as a domestic administrator.
46. The Guideline does not intend to cover substantial rights of a liquidator, which find
their origin in national insolvency (procedural) law. If the liquidator has been appointed in
main insolvency proceedings, these right will follow from the applicable law (lex
concursus). The Guideline aims to address the necessity of allowing access to a foreign
court on the same basis as a national liquidator possesses according to the host jurisdiction.
Guideline 6 Communications
6.1. Liquidators are required to communicate with each other directly and as soon as they
are appointed.
6.2. The liquidator appointed in the main proceedings should always take the initiative to
start or to continue communications with other liquidators.
6.3. Substantive replies by a liquidator to queries from other liquidators should always be
responded to as soon as reasonably practicable.
Explanation
General.
47. Insolvency in cross-border insolvency proceedings where the insolvent debtor's estate
is managed and realized in two or more separate proceedings raises questions with regard
to the coordination of the proceedings. A close and trustful cooperation between liquidators
in main and secondary insolvency proceedings is indispensable in order to achieve an
efficient and optimal administration of the insolvent debtor's assets.
48. The text of Guideline 6 finds its basis in recital 20 ( referring to: `the main condition
here is that the various liquidators must cooperate closely, in particular by exchanging a
sufficient amount of information'). Guideline 6 should be regarded in the light of the
liquidators' duty to communicate information to each other, see Article 31(1). According to
the Virgós/Schmit Report (1996), para. 230, the exchange of information between the
liquidators concerns in particular:
(i) the assets,
(ii) the actions planned or under way in order to recover assets
(iii) actions to obtain payment or actions for set aside,
(iv) possibilities for liquidating assets,
(v) claims lodged,
(vi) verification of claims and disputes concerning them,
(vii) the ranking of creditors,
(viii) planned reorganization measures,
- 23 (ix)
proposed compositions,
(x) plans for the allocation of dividends,
(xi) the progress of operations in the proceedings.
49. On the topic of communication the Guidelines are inspired by Chapter IV of the
UNCITRAL Model Law on Cross-Border Insolvency, titled `Co-operation and direct
communication between a court of this State and foreign courts or foreign representatives',
Articles 25-27.
Article 25. Cooperation and direct communication between a court of this State and foreign
courts or foreign representatives
1. In matters referred to in article 1, the court sha11 cooperate to the maximum extent
possible with foreign courts or foreign representatives, either directly or through a [insert
the title of a person or body administering a reorganization or liquidation under the law of
the enacting State].
2. The court is entitled to communicate directly with, or to request information or
assistance directly from, foreign courts or foreign representatives.
Article 26. Cooperation and direct communication between the [insert the title of a person
or body administering a reorganization or liquidation under the law of the enacting State]
and foreign courts or foreign representatives
1. In matters referred to in article 1, a [insert the title of a person or body administering a
reorganization or liquidation under the law of the enacting State] shall, in the exercise of
its functions and subject to the supervision of the court, cooperate to the maximum extent
possible with foreign courts or foreign representatives.
2. The [insert the title of a person or body administering a reorganization or liquidation
under the law of the enacting State] is entitled, in the exercise of its functions and subject to
the supervision of the court, to communicate directly with foreign courts or foreign
representatives.
Article 27. Forms of cooperation
Cooperation referred to in articles 25 and 26 may be implemented by any appropriate
means, including:
(a) Appointment of a person or body to act at the direction of the court;
(b) Communication of information by any means considered appropriate by the court;
(c) Coordination of the administration and supervision of the debtor's assets and affairs;
(d) Approval or implementation by courts of agreements concerning the coordination of
proceedings;
(e) Coordination of concurrent proceedings regarding the same debtor;
(f) [The enacting State may wish to list additional forms or examples of cooperation].
50. Another source for consideration has been ALI Procedural Principle 10
(Communications):
To the maximum extent permitted by domestic law, courts considering bankruptcy
proceedings or requests for assistance from foreign bankruptcy courts should communicate
with each other directly or through administrators. To the maximum extent, such
communications should take advantage of modern methods of communication including
telephone, telefacsimile, teleconferencing, and electronic mail, as well as written
documents delivered in traditional ways. Any such communications should at all times
follow procedures consistent with domestic law as to such matters.
- 24 51.
It should be noted here that Guideline 3 determines that any method of communication
may not interfere with applicable law, e.g. rules regarding form and language of certain
communications as provided in the Council Regulation (EC) No. 1348/2000 of 29 May
2000 on the service in the Member States of judicial and extrajudicial documents in civil or
commercial matters (OJ L 160, 30 June 2000, 37) or domestic constitutional rules involving
rights and liberties of an individual or rules restricting communication of information. The
provisions of Guideline 6 relate to all liquidators, being those ­ as per Guideline 2.1 ­ who
act in different proceedings involving the same debtor.
Guideline 6.1.
52. According to Art. 31 (1) sentence 2 of the Insolvency Regulation, information is to be
passed on `immediately', however delays that are, for instance, due to translations are to be
taken into account. Circumstances will differ to much in each case to include a certain
period (e.g. within 8 days). Communication should take place at the earliest possible time
without undue delay.
Guideline 6.2.
53. Given the dominance of the position of the main liquidator he acts as a conductor
overseeing different proceedings. Therefore he should always take the initiative to start or
to continue said communications with other liquidators and for this reason be mindful of
any secondary proceeding started in another jurisdiction. Evidently, The Guideline does not
allow any secondary liquidator to be passive in cases he reasonably understands that actions
intended will influence the main proceedings. Before taking such actions he should
communicate with the main liquidator.
Guideline 6.3.
54. The notion of communication and cooperation, resulting in coordination of proceedings
and actions to be taken, will raise questions by a liquidator appointed in insolvency
proceedings concerning the same debtor or questions concerning other interested parties,
like creditors. Queries relate to issues concerning the practical development of
administering the proceedings. Liquidators should treat other liquidators with the
professional standard of providing substantive replies to their queries, within reasonable
time. The Guideline does not intend to create a duty to report or an account for certain
actions taken or to be taken.
Guideline 7 Information
7.1. Liquidators are required to provide prompt and full disclosure to all other liquidators
involved of all relevant information about the existence and status of the insolvency
proceedings in which they have been appointed.
- 25 7.2.
Liquidators are required to provide information periodically which may be relevant to
the other proceedings detailing the conduct of the proceedings.
7.3. Liquidators in possession of such information are required to inform the courts insofar
as they are subject to any reporting duties under national law, of any material development
in any such other proceedings.
7.4. A foreign liquidator should be permitted to use all legal methods to obtain information
that would be available to a creditor or to a liquidator in any national insolvency
proceedings.
7.5. To the fullest extent permissible under any applicable law, relevant non-public
information should be shared by a liquidator with other liquidators subject to appropriate
confidentiality arrangements to the extent that this is commercially and practically sensible.
7.6. The duty to provide information in the meaning of this Guideline includes the duty to
provide copies of documents at reasonable costs on request.
Explanation
General.
55. Communications relate to information. Exchange of information and cooperation
cannot take place without knowledge of the other proceedings. In main or secondary
proceedings local rules cannot be correctly applied in ignorance of activities elsewhere. In
its role as a representative of creditors, a liquidator should be able to use all legal processes
to obtain information to the same extent as a creditor seeking to enforce a claim or a
judgment. This information should include, as far as possible, non-public information.
56. The text of Guideline 7 is inspired by ALI General Principle IV (`Information').
A. Cooperation should include, as a minimum, free exchange of information obtained in
each proceeding concerning assets and claims.
B. A recognized foreign representative should be entitled to use all available legal means to
obtain information about the debtor's assets in each jurisdiction.
Guideline 7.1.
57. Coordination between proceedings only is possible when all relevant information is
shared. All information should be understood widely, including information and
background about pending litigation and facts which could generate liabilities of the debtor
or its directors. For the text guidance has been taken from ALI Procedural Principle 8
(`Information and Communication'):
An administrator, debtor, or creditor filing a bankruptcy or seeking recognition of a
foreign bankruptcy should be required to provide full disclosure of all relevant information
about the existence and status of each bankruptcy or similar proceeding pending in other
jurisdictions as to the same or a related debtor at the time of filing.
Guideline 7.2.
58. Guideline 7.2. intends to maintain the ongoing process of mutual sharing of
information. This should be done periodically, the time of which may be based on an
- 26 agreement
(protocol) between liquidators or should follow certain events which are relevant
for the other proceedings. Information which may be relevant to the other proceedings,
detailing the conduct of the proceedings, will in particular relate to (but are not limited to):
(i) the progress made in lodging and verifying claims;
(ii) the ranking of the admitted claims;
(iii) the calling of creditors meetings;
(iv) planned actions regarding realisation of relevant assets;
(v) planned actions to initiate proceedings concerning wrongful trading or actions
based on rules regarding detrimental acts;
(vi) distribution of (interim) dividends to creditors, including the application of the
rules regarding imputation as meant in Article 20(2) of the Regulation; and
(vii) all measures aimed at terminating proceedings, including a composition or rescue
plan.
59. Information may include details of the debtor's assets and past transactions, specially
those taking place during an applicable suspect period, and such other particulars as the
other liquidators may reasonable require.
Guideline 7.3.
60. In most jurisdictions the court or a supervisory judge plays an important role in the
general progress of the administration of the proceedings, sometimes accompanied by
powers of approval laid down in national law. In general such courts and judges should be
aware of developments of proceedings against the same debtor elsewhere. For this reason
Guideline 7.3 aims to establish a reporting duty. The text is based on ALI Procedural
Principle 8 (`Information and Communication') (second line):
Administrators or debtors in possession should be required to inform the court of any
material development in any such foreign proceeding.
Guideline 7.4.
61. This Guideline recognises the need to perform the task of liquidator based on adequate
and relevant information. In case of need, the main or secondary insolvency liquidator may
even file a claim for the disclosure of information which may enable them to exercise their
powers as meant in Article 18(1) and 18(2) of the Insolvency Regulation. Guidelines 7.3
and 7.4 aim to prevent the use of such power. The text is based on ALI Procedural Principle
9 (`Obtaining Information'):
A recognized foreign representative should be permitted to use all legal methods of
obtaining information that would be available to a creditor or to an administrator in a
domestic bankruptcy proceeding.
Guideline 7.5.
62. Most information exchanged by liquidators shall be of a public nature. In this case,
there is no doubt that information should be fluidly transferred to the other liquidators. It is
possible, though, that some information is of a non-public character; in this case the basic
principle of communication between liquidators should not be withdrawn but corrected.
- 27 Therefore,
the sharing of information should be possible subject to confidentiality
agreements. The text is based on the Everfresh protocol:
5. Information publicly available in any forum state shall be publicly available in both fora.
To the extent permitted, non-public information shall be made available to official
representatives of the Debtors, including any official committee appointed in these cases
and shall be shared with other official representatives, subject to appropriate
confidentiality arrangements and all privileges under the applicable rules of evidence.
Guideline 7.6.
63. The sharing of information should not be limited to the exchange of statements
describing relevant and specific developments in an insolvency proceeding. In certain cases
liquidators may wish to verify certain information or their national law requires certain
information the be filed in an authentic form. For such cases Guideline 7.6 formulates that
the duty to provide information also includes the duty to provide copies of documents at
reasonable costs on request.
Guideline 8 Information by a liquidator in secondary proceedings
8.1. The liquidator in any secondary proceedings should provide all relevant information to
the liquidator in main proceedings without any delay so as to facilitate the submission of
proposals on the liquidation or use of assets in secondary proceedings.
8.2. The liquidator in any secondary proceedings is encouraged to provide advice to the
liquidator in the main proceedings concerning any views on how to best to proceed.
8.3. The liquidator in main proceedings is encouraged to involve liquidators in any
secondary proceedings in devising those proposals referred to above in Guideline 8.1.
8.4. Where a reorganisation or rescue plan can be adopted in secondary proceedings which,
in attaining the aims pursued under Guideline 2.2(ii), would give better value to creditors in
main proceedings or reduce the overall size of debts, the liquidator in main proceedings and
the courts shall take advantage of the opportunity to promote the adoption of this plan.
Explanation
General.
64. Without prejudice to the application of Guideline 7, Guideline 8 reflects in particular
the dominant role of the main proceedings, within the context of a fair relationship between
insolvency professionals. See recital 20 (`Main insolvency proceedings and secondary
proceedings can, however, contribute to the effective realisation of the total assets only if
all the concurrent proceedings pending are coordinated. The main condition here is that
the various liquidators must cooperate closely, in particular by exchanging a sufficient
amount of information. In order to ensure the dominant role of the main insolvency
proceedings, the liquidator in such proceedings should be given several possibilities for
intervening in secondary insolvency proceedings which are pending at the same time. For
example, he should be able to propose a restructuring plan or composition or apply for
realisation of the assets in the secondary insolvency proceedings to be suspendeď).
- 28 65.
The liquidator in the secondary proceedings must give the liquidator in the main
proceedings the opportunity to submit proposals on the realization or use of the assets in the
secondary proceedings (Article 31(3) of the Insolvency Regulation). In these proposals the
main liquidator should involve liquidators in any secondary proceeding.
66. The duty to communicate information forms at the same time the basis for the
liquidator's supplementary duty to ensure mutual cooperation as provided in Article 31(2)
of the Insolvency Regulation and enables the main liquidator to intervene in any individual
secondary insolvency proceeding according to Articles 32 to 38 of the Insolvency
Regulation.
Guideline 8.1.
67. Virgós/Schmit Report (1996), para. 233, provides: `Article 31(3) expressly mentions a
specific obligation of information and cooperation that affects the liquidator in the
secondary proceedings, on the grounds of primacy of the main proceedings over the
secondary proceedings. The liquidator in the secondary proceedings must give the
liquidator in the main proceedings the opportunity to submit proposals on the realization or
use of the assets in the secondary proceedings. The secondary liquidator must therefore
inform the main liquidator of any use or realization of these assets. ..... This duty to
communicate information forms at the same time the basis for the liquidator's
supplementary duty to ensure mutual cooperation as provided in Article 31(2) and enables
main liquidators to intervene in any individual secondary insolvency proceeding according
to Articles 32 to 38.' Guideline 8.1 requires the secondary liquidator to provide all such
information in such a way that the main liquidator can perform his tasks timely and well
informed.
Guideline 8.2.
68. The overriding objective of Guideline 1.1 and the liquidators' general obligation to act
fair and in respect of each others know how and professional integrity in the meaning of
Guideline 4 will encourage the main liquidator to invite the liquidator in any secondary
proceedings to provide his advice, which will be in accordance with applicable domestic
law, to the liquidator in the main proceedings concerning his view on how to proceed best.
69. These same objective and obligation justifies that any secondary liquidator is
encouraged to give his opinion on any related issue, though he should be mindful for
unnecessary delay and of the fact that the main liquidator represents the dominant
proceedings.
Guideline 8.3.
70. Proposals on the liquidation or use of the assets in the secondary proceedings will have
to take into account domestic law and practice. Guidelines 1.1 and 4 should set the tone for
the main liquidator's encouragement to involve liquidators in any secondary proceedings in
the design of proposals as meant in 8.1.
- 29 Guideline
8.4.
71. One of the aims in Guideline 2.2 is the identification, preservation and maximization of
the value of the debtor's assets (which includes the debtor's undertaking or business) on a
world-wide basis. Where a reorganization plan or a rescue plan can be adopted in
secondary proceedings that would give better value to creditors in main proceedings or
reduce the overall debt, Guidelines 8.4. encourages all actors, especially the liquidator in
main proceedings and the courts, to promote the adoption of this plan.
Guideline 9 Authentication
9.1. Unless otherwise provided under any applicable law, where existing authentication of
documents is required, methods should be established so as to permit rapid authentication
and secure transmission of faxes and other electronic communications relating to crossborder
insolvencies on any basis that permits their acceptance as official and genuine
communications by liquidators and courts in other jurisdictions.
9.2. To the extent permissible under applicable law, courts are encouraged to provide or
publish judgments, orders or rulings also in languages other than those regularly used in
proceedings or encourage translations to be made as much as possible.
Explanation
General.
72. Efficient operation of cross-border proceeding is enhanced greatly by authentication
procedures with respect to judicial cooperation. National rules and practices may include
such procedures; in individual cases they may be agreed. Where certain judgments and
orders follow a same structure courts may anticipate use of foreign language, to facilitate
coordination and promote the speedy administration of proceedings.
Guideline 9.1 and 9.2.
73. This guidelines is inspired by ALI Recommendation 7 (`Authentication'):
Where authentication of documents is required, the NAFTA countries should establish
methods to permit very rapid authentication and secure transmission of faxes and other
electronic communications relating to cross-border insolvencies within the NAFTA on a
basis that permits their acceptance as official and genuine by ministries and courts.
Guideline 10 Language
10.1. Liquidators shall determine the language in which communications take place on the
basis of convenience and the avoidance of costs. The court is advised to allow use of other
languages in all or part of the proceedings if no prejudice to a party will result.
- 30 10.2.
Courts are encouraged, to the maximum extent permissible under national law, to
accept any documents related to those communications in language decided upon under
Guideline 10.1, without the need for a translation into the language of proceedings before
them.
Explanation
General.
74. It is noted that the text of the Insolvency Regulation is equally authentic in over 20
languages. Guideline 10 tries to accommodate the choice for a language, which is based on
international practice, convenience and agreement.
Guideline 10.1.
75. Although in appropriate cases of cross-border insolvency e.g. German or French will be
the language used in parallel proceedings and cross-border communication between
liquidators, the general experience is that English is the language of the global business
community and in the cross-border communications between advisors, lawyers and
liquidators involved in a cross-border insolvency case. Where courts are involved, the
ordinary language will be the language regularly used by the courts, although the court is
advised to allow use of other languages in all or part of the proceeding if no prejudice to a
party will result.
76. Where a choice for a language is made native speakers of that language should be
cautious of the fact that the person(s) he is speaking to communicates in his second or third
language. Acting fair (Guideline 4.2) in general will mean the usage of simple, clear words,
spoken in slow pronunciation and avoiding dialect, sophisticated language, puns or
references.
Guideline 10.2.
77. It is recognised and respected that national law will provide for rules relating to the
translation of documents. Guideline 2.2 determines that the Guidelines in general promote
the orderly, effective, efficient and timely administration of proceedings, the sharing of
information in order to reduce the costs involved, and the avoidance or minimization of
litigation, costs and inconvenience to all parties affected by proceedings. Although the
ordinary language will be the language regularly used by the courts, these cost
considerations may take the court to decide that translation of lengthy or voluminous
documents may be limited to portions, as agreed by the parties or ordered by the court. On
the other hand in fair proceedings translations should be allowed or provided when a party
(e.g. a foreign liquidator, debtor, creditor or expert) is not competent in the language in
which the proceeding is conducted.
78. The text of Guideline 6 finds its inspiration in Article 6 of the ALI / UNIDROIT
Principles of Transnational Civil Procedure 2004:
6. Languages
- 31 6.1
The proceedings, including documents and oral communication, ordinarily should be
conducted in a language of the court.
6.2 The court may allow use of other languages in all or part of the proceeding if no
prejudice to a party will result.
Guideline 11 Obligations incurred by and fees of liquidators
11.1. Obligations incurred by the liquidator during proceedings and the liquidator's fees are
funded from the assets within those proceedings in which the liquidator is appointed.
11.2. Obligations and fees incurred by the liquidator in the main proceedings prior to the
opening of any secondary proceedings but concerning assets to be included in the estate in
principle will be funded by the estate corresponding to the secondary proceedings.
Explanation
General.
79. Due to the specific international character of the case liquidators may face additional
costs, e.g. engaging foreign local counsel, costs for tracing or valuating assets, court filing
fees and costs of translations of documents to present to the foreign court or (other)
documents to share with other liquidators. Said costs will relate too to obligations incurred
(including trading costs), to fees, to the costs of the court, costs for service of documents,
costs for an expert, costs for representation in a court or costs of enforcement. The
determination of the remuneration of a liquidator will follow from its domestic
(insolvency) law. The method for calculating that remuneration may differ according to
national law: In some systems it may be fixed by reference to the time properly spent on
the administration of the estate , in others it may be calculated upon a certain percentage
of the quantum of the estate or a combination of both methods..
80. The possible inter-relationship of main insolvency proceedings and one or more
secondary proceedings opened subsequently concerning the same debtor may result in
uncertainty. Certain obligations incurred or certain costs or fees in the main proceedings
may relate to the assets or the interests of the secondary proceeding and its creditors.
Guideline 11 intends to provide a general rule concerning to the allocation or the sharing of
these costs. It is based on three premises, set out below.
81. The first premise is the general principle that obligations incurred and therefore costs
that result from these obligations and the liquidators' fees are to be funded from the
debtor's assets and satisfied as they fall due.
The second premise is that the main liquidator, appointed in the main insolvency
proceedings, is recognised and can exercise all its powers all over the Community (Article
18), as long as no secondary proceedings have been opened.
The third premise is that secondary proceedings do not operate from scratch. The opening
of subsequent secondary proceedings entails a "conversion" from the main insolvency
proceedings governed by the law of the state of debtor's COMI, and deploying all their
effects in the forum, into insolvency proceedings governed by the law of the state of the
establishment. Recognition of the main proceedings and of the main liquidator's powers in
- 32 all
Member States involves a principle of continuation: payments made and liabilities
incurred in the course of the administration of the main proceedings in accordance with the
law governing those proceedings are recognised as valid in all Member States.
Guideline 11.1.
82. The first premise results in Guideline 11.1. Obligations incurred by the liquidator
during main proceedings or any secondary proceedings and the main liquidator's or any
secondary liquidator's fees are funded from the assets within those proceedings in which a
liquidator is appointed. Where the Insolvency Regulation systematically is build on
interdependency of different national insolvency proceedings, domestic law, including
procedural rules of a court, and legal tradition will be decisive. The text reflects § 5.1 of
Principles of European Insolvency Law (`Obligations incurred by, and fees of the
administrator')
Obligations incurred by the administrator during the proceeding and the administrator's
fees are to be funded from the debtor's assets and satisfied as they fall due, in priority to
insolvency claims
Guideline 11.2.
83. When in a simple example main insolvency proceedings are opened on Day 1, and
secondary proceedings in the jurisdiction of another Member State are opened on Day 33, it
is evident that the main liquidator will have incurred obligations in the interest of the assets
which as of Day 33 are encompassed in the secondary proceedings. Examples include costs
regarding the assets or the establishment in the latter jurisdiction, e.g. engage foreign
counsel, payment of ongoing trading costs, payment of salaries for employees or the fees of
the main liquidator.
84. Guideline 11.2 determines that outstanding pre-secondary insolvency costs in principle
will be funded by the estate of the secondary proceedings. Here the second and third
premises are decisive. Where the main liquidator, appointed in the main insolvency
proceedings, can exercise all its powers all over the Community (Article 18), his `presecondary'
actions are valid by virtue of the Regulation. From the principle of recognition
two consequences follow: (i) obligations incurred by the main liquidator in accordance with
the law governing the main proceedings relating to the assets which are now comprised in
the secondary proceedings remain to be obligations to be respected by the liquidator of the
secondary proceedings; and (ii) the status of any action taken prior to the opening of the
secondary proceedings by the main liquidator, including its liability and the calculation of
his remuneration, has to be referred to the law governing the main proceedings.
85. It is acknowledged that Guideline 11.2 may create some tension in cases in which the
honorarium of the main liquidator is of a (much) higher level than the general basis of the
honorarium for liquidators in a jurisdiction where secondary proceedings have been
opened. Given the internationality of a case a main liquidator, which acts objectively and
fair, will maintain detailed record keeping, including the allocation of time spend to certain
proceedings, assets or specific interests. On the other hand courts are advised to honour
the fees, when it is recognised that the liquidator has acted in due exercise of his powers
aiming at efficient and effective operation of a cross-border insolvency case.
- 33 At
this instance it is well to remember that the position of the creditors is not influenced by
the outcome of the question which part of the costs will fall in which estate. The right of
creditors to lodge their claim in any of the insolvency proceedings (Article 32(1) of the
Insolvency Regulation), the rule regarding imputation (Article 20(2)) and the rules
concerning multi-cross filing of claims (Article 32(2) establish a system in which the
position of a creditor is not influenced by the outcome of the question which part of the
costs will fall in which estate.
86. From a practical point of view, it may not be excluded that a main liquidator, when he
expects that secondary proceedings in other jurisdictions will be opened , will retain other
professionals in the State where secondary proceedings presumably will be opened to assist
him in carrying out his duties. If allowed by applicable law and assuming appropriate
knowledge, experience and professionalism such a division of work seems practical and
efficient.
87. Guideline 11.2 is expressed as a principle. Acting in accordance with applicable
domestic law and taking into account the international circumstances of the case liquidators
may agree another division based on the availability of assets in a certain estate and the
interests of creditors concerned. Acting fair and expeditiously includes the duty to provide
any court at its request full disclosure of any such agreement, which should include a
justification of the departure from the principle as laid down in Guideline 11.2.
Guideline 12 Cooperation
12.1. Liquidators are required to cooperate in all aspects of the case.
12.2. Liquidators ensure that cooperation takes place with other liquidators with a view to
minimising conflicts between parallel proceedings and maximising the prospects for the
rehabilitation and reorganization of the debtor's business or the value of the debtor's assets
subject to realisation, as may be the case.
12.3. Cooperation is intended to address all issues that are important to the actual case.
12.4. Cooperation may be best attained by way of an agreement or "protocol" that in the
context of and in conformity with applicable laws establishes decision-making procedures,
although decisions may continue to be made informally as long as they are compatible with
the substance of any such agreement or "protocol".
12.5. In case where any matter is not specifically provided for within the protocol, the
liquidators shall act in a manner designed to promote the overriding objective set out above
in Guideline 1.1.
Explanation
General.
88. Article 31(2) of the Insolvency Regulation is the central provision concerning the
coordination between main and secondary insolvency proceedings ('Subject to the rules
applicable to each of the proceedings, the liquidator in the main proceedings and the
liquidators in the secondary proceedings shall be duty bound to cooperate with each other').
Main liquidators are obliged to actively cooperate with secondary liquidators. The
- 34 Virgós/Schmit
Report (1996), para 232, refers to the duty of the liquidators to exchange
information and the complementary function of the obligation to cooperate with each other.
Guideline 12 seeks to ensure that cooperation is related to all aspects of certain insolvency
proceedings, to the maximum extend possible and encourages globally accepted practices
of recording method and content of cooperation in writing. It is not possible to stress
enough that the concept of cooperation forms a central element in the system of the
Regulation. It is designed to bridge the gap between two or more insolvency proceedings
pending in two or more Member States. By connecting these proceedings and aligning their
purposes, by cooperation, by sharing of information and by establishing mutual procedural
adjustments and assisting each other consistent with the objective of the insolvency of the
debtor (and in as far as permitted under any applicable law), the actors involved can
minimize the loss of efficiency and the higher costs resulting from the multiplicity of
proceedings.
Guideline 12.1.
89. The liquidators' duty to act in concert with a view to the development of proceedings
and their coordination, and to facilitate their respective work, is reflected in Guideline 12.1:
to cooperate in all aspects of the case. Their cooperation is based on mutual respect and
fairness (Guideline 4.2) in the spirit of the overriding objective to efficiently and effectively
operate in cross-border insolvency proceedings in the context of the EC Insolvency
Regulation (Guideline 1.1). The text is similar to the first sentence of ALI Procedural
Principle 14 (`Cooperation'):
A. The administrators in parallel proceedings should cooperate in all aspects of the case.
Guideline 12.2.
90. Cooperation takes place in the spirit of Guideline 1, the overriding objective of enabling
courts and liquidators to efficiently and effectively operate in cross-border insolvency
proceedings within which the interests of creditors are paramount and are treated equally.
The general aim of the Guidelines, as expressed in Guidelines 2.1 en 2.2 is decisive for the
course taken during cooperation. In specific cases the goals of the individual proceedings,
as formulated in Guideline 2.3 should become a shared goal.
91. For this reason Guideline 12.2 intends to direct the course of cooperation towards this
shared goal, especially to minimize conflicts between parallel proceedings (main
insolvency proceedings and any secondary proceedings) and to maximize prospects for the
rehabilitation and reorganization of the debtor's business or the value of the debtor's assets
subject to realization, as may be the case.
92. In alignment with Guideline 3 it is intended that cooperation will not come into conflict
with applicable domestic law; on the other hand the benefit of domestic law in promoting
and facilitating cooperation should be taken to the maximum extent permissible under
national law, to make cooperation effective and successful.
Guideline 12.3.
- 35 93.
Liquidators are required to cooperate in all aspects of the case and therefore cooperation
is intended to address all issues that are important to the actual case, including (but not
limited to):
(i) Publication of the proceedings and notices to creditors;
(ii) Organising creditors meetings;
(iii) Continuing operation and management of the business;
(iv) Disposal of relevant assets;
(v) Raising of new finance;
(vi) Preparing and implementing composition or reorganisation plans;
(vii) Realization of the estate in liquidation and distribution to creditors.
Guideline 12.4.
94. Guideline 12.4 is founded on globally accepted practices of recording method and
content of cooperation in writing. Cooperation may be best attained by way of an
agreement or "protocol" that establishes decision-making procedures, although decisions
may continue to be made informally as long as they are compatible with the substance of
any such agreement or protocol. See nr. 31 in this Explanation. The text is inspired by ALI
Procedural Principle 14 (`Cooperation'):
A. The administrators in parallel proceedings should cooperate in all aspects of the case.
Such cooperation is best obtained by way of an agreement or "protocol" that establishes
decision making procedures, but many decisions may be made informally as long as the
essentials are agreed.
Guideline 12.5.
95. This Guideline states that a protocol establishes decision-making procedures. It is not
meant to limit the contents of the arrangements between the liquidators. A protocol for
cooperation between proceedings should include, at the very least, provisions for the
coordination of court approval for decisions and actions whenever required and for
communications with creditors as required under any applicable law. It should also include
a statement of the various cross-border issues to be addressed (e.g. reorganisation,
treatment of claims, realisation of assets) and any questions in respect of which the
liquidators are required to seek agreement in advance from other liquidators.
96. In practice, cooperation ­ and therefore a protocol ­ can have different forms and its
contents should adept to the circumstances of the case. In some cases a protocol may
achieve its purpose in a simple way by aligning practical means of treating notifications to
creditors, the treatment of claims lodged, the verification of claims and the distribution of
dividends. In other cases a protocol could cover also other topics and will particularly refer
to:
- the goal of co-operation;
- the phases of the insolvency proceedings to be taken by or followed by all liquidators;
- the performance of acts concerning realization;
- the drawing up or the submission of a liquidation or reorganisation plan;
- the right to demand performance or to terminate an executory contract;
- the communication to creditors;
- the exercise of any voting rights;
- 36 -
the location of assets;
- the use of actions to set aside detrimental acts;
- borrowing or the provision of security;
- the filing of additional insolvency petitions concerning other establishments;
- the filing of actions against third parties in relation to the insolvent company;
- the submission of an insolvency plan (of reorganization or liquidation) or a composition;
- the disposal of relevant assets;
- the distribution of any dividends;
- the application of the hotch-pot rule;
- the applicable law on certain issues;
- the closure of secondary proceedings and the change in applicable law.
In the case a particular problem is not dealt with in the protocol, Guideline 12.2 constitutes
a remainder of the main objective which is to be pursued by the cooperation among
liquidators.
97. Each liquidator is required to obtain court approval or creditor's approval of any action
affecting assets or operations in the jurisdiction where the proceeding has been opened, if
approval is required under the laws of that jurisdiction.
98. To the extent possible, a protocol should also provide for timesaving procedures to
avoid unnecessary and costly court hearings and other proceedings. See also Guideline 2.
The explanation in the foregoing is inspired by ALI Procedural Principle 14 (`
Cooperation'):
B. A protocol for cooperation among proceedings should include, at a minimum, provisions
for coordinated court approvals of decisions and actions when required and for
communication with creditors as required under each applicable law. To the extent
possible, it should also provide for timesaving procedures to avoid unnecessary and costly
court hearings and other proceedings.
99. The protocols are called to apply within the framework of the Insolvency Regulation
and in conformity with applicable laws. Therefore, all liquidators should be acquainted
with the terms referred to in the Regulation and the protocols. See Guideline 4.1. For the
sake of clarity and in order to avoid misunderstandings that may hinder the achievement of
the aims pursued in the protocol, it is highly recommended that a final annex is included
with the definitions of the terms used in the protocol. A sample of issues which could be
covered by a protocol appears as Appendix I to these Guidelines.
100. Agreements of cooperation (or protocols) are not static; they may evolve as the needs
of the proceeding so demand. This dynamic character does not entail, however, an
entitlement to unilateral or informal amendments.
For the source of the text see for example the Protocol in Re Everfresh:
17. This Stipulation may not be waived, amended or modified orally or in any other way or
manner (including, without limitation, pursuant to a plan of reorganization of the Debtors)
except by a writing signed to a party to be bound, and such approval and authorization of
the Bankruptcy Court or the Canadian Court as may be necessary and appropriate under
the circumstances. Notice of any proposed amendment or modification of the Stipulation
shall be provided by the party providing such to the Specified Parties in accordance with
the Notice Procedures. This Stipulation may be supplemented from time to time by the
parties hereto as circumstances require with any supplementing stipulations as approved
by the Bankruptcy Court and the Canadian Court.
- 37 101.
National attitudes towards the use of a protocol will differ. There will be countries in
which the law allows cross-border protocols to be concluded and executed, especially in
those jurisdictions where there is a tradition of judicial assistance. In these cases a
liquidator should be mindful of the fact that the law of other jurisdictions may not allow a
protocol or will at least be very sceptic in applying it. In such cases a court may consider to
issue one or more orders explaining the purpose and content of a protocol and include
certain elements of it in a separate judicial decision deriving directly from the insolvency
proceedings.
102. In cases where the law does not allow cross-border protocols to be concluded or
executed a liquidator should explain that the law of other jurisdictions indeed allows a
protocol and should point at any other available legal bases to enable the exchange of
letters or memoranda of understanding between cooperating office holders or courts.
Guideline 13 Cross-Border Sales
13.1. Where during any period of cooperation between liquidators in main and any
secondary proceedings assets are to be sold or otherwise disposed of, every liquidator
should seek to sell these assets in cooperation with the other liquidators so as to realise the
maximum value for the assets of the debtor as a whole.
13.2. Any national court, where required to act, should approve those sales or disposals that
will produce such maximum value.
Explanation
General.
103. A central goal of cooperation is maximizing value (Guideline 2.2(ii)). In
reorganisation cases that objective may be sought primarily in a financial or operational
restructuring or in a sale of the business. Sale of (large parts of) the assets is the most
common method used in liquidation. A coordinated and aligned approach across national
borders is likely to produce greater value. Guideline 13 addresses the latter goal.
104. Approval by anyone concerned, but at least by any national court, will be encouraged
when proposals are based on advice of or marketed by a professional third party, employed
jointly by all liquidators concerned. This party may also provide an expert opinion as to
allocation of the sales price among the assets sold, which allocation could be the basis for
distributions to creditors, unless a protocol contains another principle.
105. Though divided in two sections, the text of Guideline 13 finds its basis in ALI
Procedural Principle 17 (`Cross-Border Sales'):
When there are parallel proceedings and assets are to be sold, each domestic administrator
should seek to sell assets in cooperation with the other administrators to produce the
maximum value for the assets of the debtor as a whole, across national borders. Each
domestic court should approve sales that will produce such value.
- 38 Guideline
14 Assistance in Reorganization
14.1. Where main insolvency proceedings are aimed at ensuring the rehabilitation and
reorganisation of the debtor's business, all other liquidators shall cooperate in any manner
consistent with the objective of reorganisation or the sale of the business as a going concern
wherever possible, mindful of the interests protected by local insolvency proceedings.
14.2. Liquidators should cooperate so as to obtain any necessary post-commencement
financing, including through the granting of priority or secured status to lenders providing
finance to the debtor and related entities as may be appropriate and insofar as permitted
under any applicable law.
Explanation
General.
106. In case of a cooperation should take place in the spirit of these Guidelines and in any
manner consistent with the objective of reorganization or the sale of the business as a going
concern. Also in obtaining post commencement financing Guideline 14 inspires liquidators
to cooperate.
Guideline 14.1.
107. The text is based on ALI Procedural Principle 18 (`Assistance to Reorganization'):
The existence of a main proceeding that is a reorganization proceeding in a NAFTA
country is a compelling reason for courts in the other two NAFTA countries to cooperate
by conducting parallel domestic proceedings in a manner as consistent with the
reorganization objective in the main proceeding as is possible under the circumstances.
The final words of Guideline 14.1 intend to ensure that the interests protected by local
insolvency proceedings are not prejudiced.
Guideline 14.2.
108. Quite often the prospect of reorganisation is based on the availability of postcommencement
financing. Liquidators should cooperate to the maximum extend possible to
put in place a financing proposal, which may count on the approval of a large group of
creditors.
Guideline 15 Coordination between secondary proceedings
15. Liquidators in all secondary proceedings are required to comply with these Guidelines.
Explanation
General.
- 39 109.
Estate assets and business values are more likely to be preserved and enhanced if
administration is coordinated from a single forum. Article 31 of the Insolvency Regulation
does not address the situation that there are multiple insolvency proceedings and there is no
main forum. If assets are located in several secondary jurisdictions or outside of any such
jurisdictions, in such a case the same objectives may be met if the relevant liquidators agree
upon a protocol. The protocol should take into account Guideline 12 and consider a
balanced way of cooperation, as all secondary proceedings are on the same footing.
Guideline 16 Courts
16.1. Courts are advised to seek to give effect to the overriding objective of enabling courts
and liquidators to operate efficiently and effectively operate in cross-border insolvency
proceedings within the context of the EC Insolvency Regulation, in the meaning of
Guideline 1.
16.2. Courts are advised to operate in a cooperative manner to resolve any dispute relating
to the intent or application of the terms of any cooperation agreement or protocol.
16.3. Courts are advised to consider whether an appointment of the liquidator in main
proceedings or a nominated agent of such liquidator as a liquidator or a co-liquidator in
secondary proceedings would better ensure coordination between different proceedings
under the courts' supervision.
16.4. To the maximum extent permissible under national law, courts conducting insolvency
proceedings or dealing with requests for assistance or deciding on any matters relating to
communications from other courts should cooperate with each other directly, through
liquidators or through any person or body appointed to act at the direction of the courts.
16.5. Courts should encourage liquidators to report periodically, as part of national
reporting duties, on the way these Guidelines and/or agreed Protocols are applied, including
any practical problems which have been encountered.
Explanation
General
110. Article 31 of the Insolvency Regulation only provides a duty of the liquidator to
communicate information and to cooperate as far as the relationship between main and
secondary liquidators is concerned. Article 31 does not express a duty for a court involved
in the related proceedings. Nevertheless, in certain countries a has accepted that a court is
subject to the principles stated in Article 31, see e.g. Higher Regional Court Vienna 9
November 2004 (Stojevic), NZI 2005, 56, deciding that although according to the text
Article 31 of the Insolvency Regulation only obliges liquidators to cooperate, according to
the prevailing opinion and under the UNCITRAL Model Law, this obligation also applies
to a court. There is some experience that in other cross border insolvency cases
communication between courts (in England, Germany, the Netherlands and France) has
been proven efficient in the alignment of judicial developments in these cases.
111. Several jurisdictions in Europe will provide for some methods of cross-border
cooperation between judges. It is noted however that mutual cross-border communication
- 40 and
cooperation between courts is implied in the Insolvency Regulation. It flows generally
from the ratio of the duty of mutual assistance and cooperation between Member States as
provided in Article 10 of the EC Treaty and the place of the Insolvency Regulation as a
means which operates within the scope of judicial cooperation in civil matters within the
meaning of Article 65 of the EC Treaty. As this flows from the principle of mutual trust in
the meaning of recital 22 (`This Regulation should provide for immediate recognition of
judgments concerning the opening, conduct and closure of insolvency proceedings which
come within its scope and of judgments handed down in direct connection with such
insolvency proceedings. Automatic recognition should therefore mean that the effects
attributed to the proceedings by the law of the State in which the proceedings were opened
extend to all other Member States. Recognition of judgments delivered by the courts of the
Member States should be based on the principle of mutual trust. To that end, grounds for
non-recognition should be reduced to the minimum necessary. This is also the basis on
which any dispute should be resolved where the courts of two Member States both claim
competence to open the main insolvency proceedings. The decision of the first court to open
proceedings should be recognised in the other Member States without those Member States
having the power to scrutinise the courťs decision'), courts are advised to act in aid of, and
be auxiliary to each other and to all courts, as well as judges and officers of those courts,
that have jurisdiction under corresponding laws in all administration matters.
Guideline 16.1
112. Courts will interpret the Insolvency Regulation in its application in a given case in the
light of the circumstances at hand. In doing so it is advised that a court gives effect to the
overriding objective as set out above in Guideline 1. Courts may take notice of these
Guidelines when deciding on matters related with communication and cooperation under
the application of the Insolvency Regulation.
Guideline 16.2.
113. The cooperative spirit in which cross-border coordination between liquidators takes
place should inspire courts to operate in a cooperative manner to resolve any dispute
relating to the intent or the application of these Guidelines or the terms of any cooperation
agreement or protocol.
Guideline 16.3.
114. Cooperation between two courts takes place with a view to establishing methods of
communication, coordinating orders and rulings and conducting joint hearings, e.g. by
conference call, with or without translators. Guideline 16.5 underlines the importance of
accountability of insolvency professionals.
115. When deciding about opening secondary proceedings a court could consider, when
domestic law allows so, to appoint or to co-appoint the `foreign' main insolvency
practitioner as a liquidators or as a co-liquidator in these secondary proceedings.
Consequently, such an appointment shall subject the foreign main liquidator to the regime
of supervision or general oversight of the court opening the secondary proceedings. A main
liquidator, appointed or co-appointed as secondary liquidator, is advised to seek assistance
- 41 of
local counsel. The advised approach also could apply to a nominated agent of the main
liquidator.
Guideline 16.4.
116. Cooperation between two or more courts should take place in a context of
mutual trust, in a collaborative manner and by the most rapid means possible.
Several methods could be used, direct communication between the courts, through
liquidators or through any person or body, appointed to act as an independent
intermediary at the direction of the courts. In cases where no formal request for
assistance is involved direct means of communications could include phone, email or
facsimile. The starting words (`To the maximum extent permissible under national law')
express the idea that means and ways of communication and cooperation must comply with
applicable national laws and Community legislation.
Guideline 16.5.
117. Guideline 16.5 underlines the importance of accountability of insolvency
professionals. In applying Guideline 16, it is useful for courts to understand better
certain practical problems and the way these are solved as also in what way certain
Guidelines or specific provisions in a protocol are addressed. This guideline aims to
provide the court some feedback.
Guideline 17 Notices
17.1. Notice of any court hearing or the making of any order by a court should be given to
each of the liquidators at the earliest possible point in time where the hearing or order is
relevant to that liquidator.
17.2. Where a liquidator cannot be present in person before the court, the court is advised to
invite the liquidator to communicate any observations to the court prior to any order being
made.
17.3. The liquidators should provide for the keeping of an accessible record of notices in
the meaning of Guideline 17.1, which shall be regularly updated, to note the dates and
relevant descriptions of any legal documents communicated, including those filed or
transferred electronically.
Explanation
General.
118. When a court is involved by a specific order or approval it is presumed to be
important enough to require notice to the other liquidators. Guideline 17.1 and 17.2
intend to guarantee that notices are made and that a liquidator is heard timely. When
the exigencies of the circumstances render it impractical to provide prior written
notice as required herein, the necessary notice shall be provided as soon as possible
- 42 thereafter
and providing a liquidator to give his views. When allowed by domestic
law, hearings could be assisted by technological aids (conference call; video
conference) or by making certain court orders subject to action by the other
interested court.
119. The text of Guideline 17.1 and 17.2 is inspired by ALI Procedural Principle 16
(`Notice Among Administrators'):
Notice of any court hearing or the making of any order by a court should be given
to each of the administrators at the earliest possible time, if the hearing or order is
relevant to that administrator. Notice and approval should always be in advance of
such an action if possible or if required by applicable law.
Guideline 17.3.
120. Liquidators should keep a record of such notices and other relevant documents. These
records should be accessible for the courts and the liquidators involved.
Guideline 18 Scope
18. Whilst the aim of these Guidelines is to facilitate the coordination of the administration
of insolvency proceedings involving the same debtor (including through the use of a
protocol), liquidators or administrators and courts outside the scope of the EC Insolvency
Regulation are encouraged, wherever possible, to use these Guidelines so as to facilitate or
increase the prospects of cooperation in other proceedings taking place.
Explanation
General.
121. It is encouraged that the Guidelines are applied by analogy in instances which
fall outside the scope of the EC Insolvency Regulation. These Guidelines are
standards for transnational disputes on insolvency matters. Although the Guidelines
are drafted to be applicable in issues concerning communication and cooperation between
liquidators in cross-border insolvency proceedings under the EC Insolvency Regulation,
same Guidelines can be used in the context of enacted versions of the UNCITRAL Model
Law on Cross-border Insolvency or in other cross-border insolvency cases.
- 43 Appendix
I
Checklist Protocol
A Protocol is designed to apply within the framework of the EC Insolvency Regulation and
all liquidators should be acquainted with the terms referred to in the Regulation, the
Guidelines and in a Protocol. See Guideline 4.1. In practice, cooperation ­ and therefore a
Protocol ­ will particularly refer to certain basic requirements and to specific issues to be
addressed in the cross-border insolvency case at hand.
Basic requirement for a Protocol
1. A clause should be inserted, stating that nothing contained in the protocol shall be
construed to increase, decrease or otherwise affect in any way the independence,
sovereignty or jurisdiction of the relevant national courts.
2. An additional clause should be inserted, stating that the courts involved shall be entitled
at all times to exercise its independent jurisdiction and authority with respect to matters
presented to the courts and the conduct of the parties appearing in such matters, including
the courťs ability to provide appropriate relief on an ex parte basis or a limited notice basis.
3. A clause could be inserted, stating that where there is any discrepancy between the
Protocol and the Guidelines either one of them (the Protocol or the Guidelines) will prevail.
Basic requirements with regard to liquidators
1. Statement of the status of the liquidators.
2. Statement that each of the liquidators is subject only to the jurisdiction of its own court.
3. Statement of the right of each of the liquidators to be heard as a foreign representative in
the other insolvency proceedings.
4. Statement of each of the liquidators that they will communicate and cooperate with each
other as best as possible under the application of the European Communication and
Cooperation Guidelines For Cross-border Insolvency.
Basic requirements with regard to the debtor
1. Statement of identity of the debtor and its management.
2. Statement of the involvement of the debtor prior to certain steps taken.
Basic requirement with regard to the proceedings
1. Statement of type (main, secondary) and nature (domestic name) of the insolvency
proceedings.
2. Statement of specific topics, like mandatory involvement of certain third parties or
bodies and to certain mandatory forms to use.
3. Statement of the use of language.
4. Statement of division of costs.
5. Statement relating to methods of exchanging and sharing information.
Specific issues for cooperation
1. The goal of co-operation.
2. The performance of certain acts and timescales to realise this goal.
3. The coordination of issuing information to be communicated to creditors.
4. The coordination of lodging of claims.
5. The sharing of information on claims lodged, the verification and disputes concerning
claims.
- 44 6.
The ranking of creditors.
7. The description and disposal of relevant assets.
8. The actions planned or underway in order to recover assets, including action to obtain
payment from debtors.
9. The location of assets.
10. The actions to obtain payment from debtors.
11. The initiation of actions to set aside detrimental acts.
12. The filing of actions against third parties in relation to the insolvent company.
13. The right to demand performance or to terminate an executory contract.
14. The exercise of any voting rights.
15. The decisions relating to (post-commencement) financing, including the provision of
security.
16. The filing of additional insolvency petitions concerning establishments in other
Member States.
17. The process of drawing up or the submission of a liquidation or reorganisation plan.
18. The distribution of any kind of dividends.
19. The application of the hotch-pot rule.
20. The applicable law on certain issues.
21. The closure of any insolvency proceedings and its effect on the continuation of
other insolvency proceedings.
- 45 Appendix
II
European Communication and Cooperation Guidelines For
Cross-border Insolvency
Task Force
- Paul Omar, Associate Professor University of Sussex, United Kingdom;
- Klaus Pannen, insolvency practitioner, partner White & Case, Hamburg, Germany;
- Susanne Riedemann, associate White & Case, Hamburg, Germany;
- Anker Sörensen, Medus Devaux Sorensen, Paris, France;
- Professor Miguel Virgós, Universidad Autónoma de Madrid; Uría Menéndez, Madrid,
Spain;
- Professor Bob Wessels, Vrije University, Amsterdam, the Netherlands, Chair;
- Willem van Nielen, attorney-at-law, Udink & De Jong, The Hague, the Netherlands,
secretary of the Task Force.
Review Group
- Jan van Apeldoorn, Attorney-at-law, Amsterdam, The Netherlands; former member of
several Technical Committees of INSOL Europe;
- Neil Cooper, Partner Corporate Advisory & Restructuring Group, Kroll, London, United
Kingdom; Past President of Insol Europe and INSOL International;
- Isabelle Didier, Insolvency Practitioner, Paris, France; Former President Insol Europe;
Chair "Best Practices" Committee of Insol Europe;
- Professor Eric Dirix, University of Leuven (Belgium) and Justice Supreme Court
Belgium;
- Honourable James Farley, Senior Counsel to McCarthy Tetrault LLP, Toronto, formerly
Justice in the Ontario Superior Court of Justice, Toronto, Canada; Member of the
Committee on Cross Border Communications in Insolvency Cases, International
Insolvency Institute (III);
- Richard Gitlin, Gitlin & Company, Hartford (CT), USA. Past president of the American
Bankruptcy Institute;
- R. Han C. Jongeneel, Justice District Court (Bankruptcy Chambers), Amsterdam, The
Netherlands;
- Professor Sebastian Kortmann, University of Nijmegen, The Netherlands; Chair Core
Group Academic Wing INSOL Europe;
- Maggie Mills, Partner Corporate Finance & Advisory Services, Ernst & Young, London,
United Kingdom;
- Steven Taylor, partner AlixPartners, London, United Kingdom;
- Professor Heinz Vallender, Justice District Court Cologne, Germany; Professor
University of Cologne;
- Professor Jay Westbrook, Benno C. Smidt Chair of Business Law, University of Texas
Law School, Austin (Texas), USA. U.S. Reporter of American Law Institute's Principles of
Cooperation in Transnational Insolvency Cases Among the Members of NAFTA.