Insolvency; EU Style
Nobody likes it — neither the people, nor their attorneys and not even some of the judges who pass the ruling. And yet, there’s not much we can do about the new bankruptcy law (not so new seeing that it is almost a year old now). Just about everyone’s got something bad to say about the new law. That got me thinking: if the new law is so bad out here, there must be some place where the law is good, something we can point out to our legislators and say, “Now, that’s what I call a bankruptcy law!” Well that got me checking bankruptcy laws in the European Commission (EC) countries. And guess what I came up with? The laws there suck as well!!
Forgive my swearing, it’s just that I couldn’t help but cheer the fact that those guys are not much smarter than our guys out here. Well, so what’s so bad about their law? Some experts believe that the introduction of the EC Insolvency Regulation was one of the great legislative blunders of all time. This regulation, which primarily deals with corporates, requires judges to decide where a company’s main interests lie. They also have to decide under which jurisdiction’s laws proceedings should be conducted.
As is the case everywhere, the concept is fine. It envisages an insolvency regime that will provide a set of rules for the uniform application of insolvency laws across the European Union (EU). So where’s the problem? The regulation requires judges to go against centuries of deference to corporate form over corporate substance. Earlier, when a company failed, its financiers and other creditors knew that the company would have to subject itself to the insolvency rules applying in the country in which it was incorporated. Now, a court can decide in which jurisdiction an insolvency should take place. Pretty confusing, what? Once I reached this point, I decided that it was futile to study foreign insolvency laws!