Inside this Topic Guide
There is no universal insolvency law. There are various frameworks in place to determine whether a particular court has jurisdiction to commence proceedings and which law is to govern those proceedings. It is also possible for there to be more than one insolvency or restructuring process in respect of the same entity, taking place in different jurisdictions. In addition, there are no bespoke provisions at present to deal with groups of companies. Matters become more complicated where companies in the same group are located in different jurisdictions and as a result it is possible that each company in a group may be subject to a separate insolvency process or restructuring process or indeed more than one process in various jurisdictions.
In order to regulate cross border insolvencies, in the UK there are various frameworks which facilitate recognition and co-operation amongst courts in relation to insolvency proceedings. From the English law perspective, the relevant legislation and court practice are derived from the following:
- CBIR – Cross Border Insolvency Regulations 2006;
- Insolvency Act 1986 – s. 426; and
- Common law principles of comity.
Jurisdiction of the English courts
Please note that for English law purposes insolvency proceedings commenced in the EU (including in the UK) prior to 1 January 2021, or proceedings commenced after that date but derived from insolvency proceedings commenced within the EU before that date remain subject to Recast EU Regulation on Insolvency Proceedings (Regulation (EU) 2015/848) (the EUIR). The EUIR continues to operate across the remaining EU member states, providing rules on the allocation of insolvency jurisdiction, and the automatic recognition of insolvency and pre-insolvency proceeding within the EU. Separate materials in respect of the EUIR as it applies in the UK post 1 January 2021 (EUIR UK) are included in a separate subsection, although it should be noted the on shored version does not include any automatic benefits for the recognition of foreign proceedings. The EUIR UK does however provide an additional ground for UK jurisdiction in relation to debtors with a COMI in the UK, or a COMI in the EU and an establishment in the UK.
Jurisdiction for English proceedings commenced after 1 January 2021 can be based on either the Insolvency Act 1986 and/or the EUIR UK, for example:
- a UK incorporated company with a UK COMI - the grounds for jurisdiction for administration can be based on both/either of, the Insolvency Act 1986 or the EUIR UK. They can be proceedings to which paragraph 111(1A)(a) of Schedule B1 of the Insolvency Act 1986 applies, to which the EUIR UK does not apply, based on incorporation only, and/or COMI proceedings per Article 1A(a) of the EUIR UK, to which the EUIR UK applies
- an administration of a company incorporated in the UK, presumed to have a UK COMI, or equally of a company incorporated in Germany with its COMI in England - jurisdiction is based upon Article 1A(a) of the EUIR UK, with an additional basis for jurisdiction, for the UK company under paragraph 111(1A)(a) of Schedule B1, and for the German incorporated entity, paragraph 111(1A)(b) of Schedule B1, for which the EUIR UK would not apply
- for non-EEA incorporated entities under the Insolvency Act the COMI/establishment in the UK continues to apply.
While the English courts have this wider jurisdiction in respect of companies incorporated in the EEA under the Insolvency Act 1986, they may choose not to exercise it where there is no substantial purpose to the proceedings, therefore the effect may be more illusory than real..
EU Member states are also required to implement restructuring frameworks by 21 July 2021 as a result of the Directive (EU) 2019/1023 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt.
Recognition of UK insolvency proceedings in Europe
From 1 January 2021 all English insolvency proceedings not instituted or derived from proceedings commenced prior to 1 January 2021, parties will have to rely upon the private international law rules of the relevant EU member state in order to be recognised and given effect in Europe.
The domestic law has been complemented in certain jurisdictions by the adoption of the UNCITRAL Model Law on cross border insolvency proceedings, namely in Greece, Poland, Romania, and Slovenia, but in those jurisdictions, while there is a framework for recognition, it is not automatic and an application is required. The UK has also adopted the Model Law so it is likely to be used as a route for recognition for EU insolvency proceedings seeking recognition in the UK in the future. (See separate section on CBIR)
Generally speaking our experts in Belgium, France, Germany, Italy, Luxembourg, the Netherlands, and Spain consider that English insolvency proceedings (i.e. CVAs, administration and liquidation) and restructuring proceedings (i.e. schemes, and restructuring plans) are likely to be recognised (either automatically or upon a formal application being made to the local court) as long as the local law requirements are satisfied as to the English court's jurisdiction to commence proceedings in the first place.
In the case of English insolvency proceedings and restructuring plans – companies/individuals must have either a COMI/establishment or sufficient nexus with England. Recognition of the proceeding or insolvency office holder may be automatic in certain jurisdictions, but where the effects of the insolvency proceedings or the restructuring plan are required to be recognised, including for the recovery of assets, or to prevent proceedings, a separate application to the court may be required for further relief depending on the jurisdiction.
In the case of schemes of arrangement – the English court must satisfy the ordinary rules as for jurisdiction of civil and commercial judgments and may in some cases benefit from the Hague Convention on Choice of Court Agreements.
Where a scheme of arrangement pursuant to Part 26 of the Companies Act 2006 is used to implement a restructuring, the court judgment approving the scheme may be also recognised automatically under the Hague Convention on Choice of Court Agreements provided certain requirements are met.
Schemes of arrangement may benefit from the Hague Convention on Choice of Court Agreements as long as:
- they are not considered to be insolvency proceedings; and
- if the finance agreements that are being restructured benefit from:
- an exclusive jurisdiction clause; and
- the agreements were entered into after the UK's accession to the Hague Convention on Choice of Court Agreements (there is some uncertainty as to when the UK's accession takes effect: either 1 October 2015 or 1 January 2021).
From the English law perspective it is worth noting that when it comes to considering whether a restructuring plan or scheme is likely to be given effect in the relevant international jurisdictions, the English court bases its consideration on expert legal opinions from the relevant jurisdictions, so it does not require a separate application to be made for recognition or as a condition of the English court's sanction.
The Insolvency Service has published guidance entitled Cross-border Insolvencies: Recognition and Enforcement in EU Member States | Webpage
For further information, please see the Beyond Brexit Topic Guide.
|Adrian Cohen (London)||Jeanette Best (London)|
|Philip Hertz (London)||Melissa Coakley (London)|
|John MacLennan (London)||Gabrielle Ruiz (London)|
|David Towers (London)||Iain White (London)