« Chapter 9's Cabinet of Constitutional Curiosities: Ongoing Constitutional Violations | Main | The CFPB and Consumer Welfare »

Proposed New EU Insolvency Directive

posted by Jason Kilborn

The European Commission has just released its proposal for another Insolvency Directive, finally tackling the very sticky issue of substantive harmonization. I had hoped the Directive would push Member States toward greater harmonization of their consumer insolvency regimes, and I even made some proposals for principles and rules for such a move, but because cross-border lending to individuals for personal consumption remains quite limited in Europe (only about 5% of total household lending), the Commission concluded that "the problem of consumers' over-indebtedness should be tackled first at national level." (p. 15)  Nonetheless, the Commission's explanatory memo heartily endorses applying the principles on discharge in this new Directive (principally, providing a full and automatic discharge after a maximum 3-year process) to all natural persons, both entrepreneurs and consumers.

As to the former, though, the proposed Directive virtually shoves European national insolvency law in the direction of US law--for better or worse. The primary thrust is to encourage a rescue climate through more robust "preventive restructuring frameworks." Read: Chapter 11. The characteristics of such frameworks include leaving the debtor in possession of its assets and affairs, staying enforcement proceedings that might interfere with restructuring negotiations, mandating disclosures for proposed restructuring plans, facilitating plan adoption by creditors in classes, including a cram-down option and an explicit absolute priority rule (pp. 30, 38, not mentioning a new value corollary ... though not using the troublesome phrase "on account of its claim" in the definition of the absolute priority rule), and protecting new (DIP) financing. The importance of institutions is highlighted, with mandates concerning the expertise and training of judges, administrators, and practitioners. A few Credit Slips contributors in particular might be interested in the Commission's comment that "It is important to gather reliable data on the performance of restructuring, insolvency and discharge procedures in order to monitor the implementation and application of this Directive." The proposal thus includes detailed rules on data to be collected using standardized templates for easy comparison of empirical results across countries.

My sense is that this proposal will face some substantial political opposition, but the Commission has an impressive track record on getting its proposals adopted by the Parliament and Council. If and when this thing is adopted, I'm sure European authorities will have no trouble finding US restructuring professionals eager to volunteer to visit Europe to provide the type of training to judges, administrators, and practitioners mandated by this Directive. Put my name on the list!

Comments

The comments to this entry are closed.

Contributors

Current Guests

Follow Us On Twitter

Like Us on Facebook

  • Like Us on Facebook

    By "Liking" us on Facebook, you will receive excerpts of our posts in your Facebook news feed. (If you change your mind, you can undo it later.) Note that this is different than "Liking" our Facebook page, although a "Like" in either place will get you Credit Slips post on your Facebook news feed.

News Feed

Categories

Bankr-L

  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

OTHER STUFF

Powered by TypePad