The European Insolvency Regulation and the UNCITRAL Model Law on Cross‐Border Insolvency

• Date: 01 December 2017
• Author: Reinhard Bork
• DOI: http://doi.org/10.1002/iir.1282
• Published date: 01 December 2017

The European Insolvency Regulation and the

UNCITRAL Model Law on Cross-Border

Insolvency

Reinhard Bork*

,†

University of Hamburg, Hamburg, Germany

Abstract

This article compares the Recast European Insolvency Regulation of 2015 with the

UNCITRAL Model Law on Cross-Border Insolvency of 1997, focussed on their scope

of application, international jurisdiction and the coordination of main and secondary

proceedings. The scopes of both catalogues of norms and their rules on coordination

of main and secondary insolvency proceedings reflect one another. However, the

Recast EIR makes a significantly greater contribution to the unification of law and is

also more fully differentiated and more precise, even if this comes at a price, namely,

limited flexibility. The UNCITRAL Model Law made an important contribution to

the harmonisation of international insolvency law but requires now modernisation.

Copyright © 2017 INSOL International and John Wiley & Sons, Ltd.

I. Introduction

On 25 June2015, the recast EuropeanInsolvencyRegulation (‘RecastEIR’) came into

force,in accordance with its ownArticle 92. Accordingto Article 84, it appliesto insol-

vency proceedings that are opened after 25 J une 2017.

1

The adoption of this indisput-

ably most modern of regulations within the realm of international insolvency law

creates the welcome opportunity to compare it with another body of laws that possesses

international popularity, namely, the UNCITRAL Model Law on Cross-Border

Insolvency (‘Model Law’).

2

This comparison should be pursued in five steps. First of

all, the two laws will be given an overview (Section II). Then, three specificaspects

of the laws will be scrutinised, namely, their scope of application (Section III),interna-

tional jurisdiction(Section IV) and the coordinationof main and secondary insolvency

proceedings (Section V), before making some concluding remarks (Section VI).

*E-mail: bork@uni-hamburg.de

†Professor of Civil Procedure and General Procedural Law

Copyright © 2017 INSOL International and John Wiley & Sons, Ltd Int. Insolv. Rev., Vol. 26: 246–269 (2017)

Published online 12 September 2017 in Wiley Online Library

(wileyonlinelibrary.com). DOI: 10.1002/iir.1282

II. General Comparison

Starting off by characterising the laws according to their significant features, the

following can be said.

A. Regulatory approaches

With regard to their regulatory approaches, the laws are markedly different to one

another in many respects.

The Recast EIR is binding legislation for the member states of the European

Union. It currently applies to 27 member states, that is, all current member states

of the European Union, with the notable exception of Denmark.

3

The Recast EIR

therefore has a unifying impact within its scope on the law applicable to

cross-border insolvencies: the same norms apply in all EU member states, whereas

member states use their respective national international insolvency laws with

regard to non-EU member states.

For example, this means that in Germany, recognition of Austrian insolvency

proceedings follows the rules of the Recast EIR (specifically Article 19 of the

Recast EIR), whereas the recognition of US insolvency proceedings is governed

by §§335 et seq. of the German Insolvenzordnung (specifically §343 of the German

Insolvenzordnung). The UK has four simultaneous legal regimes for cross-border

insolvency cases: with regard to other EU member states, the Recast EIR applies;

with regard to Commonwealth states, section 426 of the Insolvency Act 1986 (‘IA

1986’) applies; with regard to all other states, the provisions of the Cross-Border

Insolvency Regulation 2006 apply, which constitutes the incorporation of the

Model Law into English insolvency law. Added to this are, above all, the duties

of cooperation grounded in English common law.

4

In contrast, the Model Law –as the name suggests –is only a template provided

by the United Nations Commission on International TradeLaw. It is recommended

that states incorporate the Model Law into their own national insolvency laws, but

whether they actually do so is left completely optional. At present, 41 states have

done as suggested and incorporated the Model Law into their national laws,

including the European states Poland, Romania, Serbia, Slovenia and the UK,

as well as important non-European states such as Australia, Japan, Canada, New

Zealand and, most crucially, the USA.

5

The fact that the Model Law is only a nonbinding recommendation leads to

some states fundamentally incorporating the Model Law into their national laws

but diverging from it on certain details, which is in accordance with the flexible

approach taken by the Model Law.

6

This is the case with the USA, for example.

The USA incorporated the Model Law into their national law via Chapter 15 of

their Bankruptcy Code, although they moved away from the template provided

by the UNCITRAL on specific details.

7

Before the introduction of Chapter 15

Bankruptcy Code, the only source on international insolvency law to be found in

US law was §304 Bankruptcy Code, which above all demanded that the courts

obey the principle of ‘comit’by way of a very broad and general formulation.

8

EU and UNCITRAL Cross-Border Insolvency 247

Copyright © 2017 INSOL International and John Wiley & Sons, Ltd Int. Insolv. Rev., Vol. 26: 246–269 (2017)

DOI: 10.1002/iir