Opinion of the Economic and Social Committee on the 'Initiative of the Federal Republic of Germany and the Republic of Finland with a view to the adoption of a Council Regulation on insolvency proceedings, submitted to the Council on 26 May 1999'
Date: 2000-01-26
Institutions: European Economic and Social Committee
Subjects: EU Member State, Finland, Germany, bankruptcy, financial solvency, multinational enterprise

15.3.2000

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Official Journal of the European Communities

C 75/1

II

(Preparatory Acts)

ECONOMIC AND SOCIAL COMMITTEE

Opinion of the Economic and Social Committee on the ‘Initiative of the Federal Republic of
Germany and the Republic of Finland with a view to the adoption of a Council Regulation on
insolvency proceedings, submitted to the Council on 26 May 1999’ (1)

(2000/C 75/01)

On 22 July 1999 the Council decided to consult the Economic and Social Committee, under Article 262
of the Treaty establishing the European Community, on the above-mentioned initiative.

The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 14 December 1999. The rapporteur was
Mr Ravoet.

At its 369th plenary session (meeting of 26 January 2000), the Economic and Social Committee adopted
the following opinion by 97 votes to 2.

1.

Introduction

The present proposal

regulation repeats
1.1.
word-for-word the provisions of the Brussels Convention of
23 November 1995 on insolvency proceedings, with the
exception of Chapter V of
the Convention concerning
interpretation by the Court of Justice.

for

a

2.1.2.
invest-
Insurance undertakings, credit institutions,
ment undertakings holding funds or securities for third parties,
and collective investment undertakings, which are already
subject to special arrangements, are excluded from the scope
of the regulation.

1.2.
The purpose of the initiative is to speed up implemen-
tation of the Convention and to make it directly applicable in
the Member States, in order to improve insolvency proceedings
with cross-border implications.

2.2. Proposed system

2. General comments

2.1. Scope

2.1.1.
The proposed regulation applies to collective insol-
vency proceedings — regarding either a natural or a legal
person — and entailing the partial or total divestment of the
debtor and the appointment of a liquidator. The proceedings
involved are listed for each Member State in an annex.

(1) OJ C 221, 3.8.1999, p. 8.

2.2.1.
a compromise between:

The system introduced by the regulation represents

— the principle of the uniqueness and universality of insol-
vency, which implies that a business declared insolvent is
subject to single proceedings the effects of which are
acknowledged by all Member States; and

— the principle of the territorial and plural nature of insol-
vencies, under which proceedings may be initiated in each
country where the debtor holds assets, and the effects of
which are restricted to that country.

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The text

2.2.2.
thus introduces the principle of main
proceedings, opened in the country where the debtor’s centre
of main interests is located, which are recognised and effective
in the other Member States with no further formalities. Unless
proved otherwise, the centre of
interest of companies is
presumed to lie where their registered offices are located.

2.2.3.
The courts of a Member State other than that in
which the centre of main interests is located are empowered
to open insolvency proceedings only if the debtor possesses
an establishment within that state. The effects of the proceed-
ings are limited to the debtor’s assets located there. When
opened after the main proceedings have already begun, such
proceedings are referred to as secondary proceedings and must
necessarily be winding-up proceedings.

2.2.4.
Opening of secondary proceedings may be requested
by the liquidator in the main proceedings, or by any other
person or authority empowered to make such a request under
the law of the country in which the request is made.

2.2.5.
Guarantees are provided to ensure that the main and
the secondary proceedings can be conducted simultaneously.
They entail, for example, the duty of the different liquidators
to communicate information, the option available to the
liquidator in the main proceedings to request that the second-
ary proceedings be stayed, and the transfer of any remaining
assets from the secondary proceedings to the total assets in the
main proceedings.

2.3. Law applicable

The law applicable to the proceedings and their
2.3.1.
effects is in principle that of the Member State in which the
proceedings are, or are to be, opened. The same applies to
the conditions for the opening, closure and conduct of
proceedings.

2.3.2.
Specific rules are provided to resolve specific prob-
lems. One such is employment contracts: here it is stipulated
that the effects of insolvency proceedings on such contracts
shall be governed solely by the Member State law applicable
to the contract of employment. Other rules concern the effects
of proceedings on reservation of title, set-off, third parties’
rights in rem and contracts relating to immovable property.

2.4.2. Moreover, the liquidator in the main proceedings is
empowered, as long as no secondary proceedings have been
opened, to exercise within the territory of the other Member
States all the powers conferred on him by the law of the state
in which proceedings have been opened. In this way, he may
remove the debtors’ assets from the territory of the state in
which they are situated, unless they are subject to third parties’
rights in rem or reservation of title. In exercising his powers,
however, the liquidator must comply with the law of the state
in which he is taking action.

2.4.3.
Judgements in insolvency proceedings handed down
by the court which ordered that the proceedings be opened
are recognised with no further formalities. Such judgements
are enforced in accordance with the rules laid down by the
Brussels Convention of 27 September 1968 on Jurisdiction
and the Enforcement of Judgements in Civil and Commercial
Matters. Under these rules, judgements given in a contracting
state and enforceable in that state may be enforced in another
state when, on the application of any interested party, the
order for its enforcement has been issued there.

3. Specific comments

3.1. Appropriateness of the initiative

3.1.1.
The Committee is in principle in favour of a Com-
munity regulation to overcome the difficulties raised by
insolvencies with an international dimension and, thereby, to
speed up the implementation of the 1995 Brussels Convention
on Insolvency Proceedings. The initiative should make an
effective contribution to integrating national economies into
the single market.

3.1.2.
The initiative is all the more welcome in that it is the
first taken by the Council in the field of civil proceedings not
directly related to consumer protection, employing for this
purpose the new provisions introduced by the Treaty of
Amsterdam.

The Committee would however emphasise the need
3.1.3.
to avoid an excessively complex system which might prove
unworkable in practice. It is evident that most of the provisions
contained in the proposed regulation are highly complex.

2.4. Recognition of proceedings

2.4.1.
Under the terms of the draft regulation, any judge-
ment opening insolvency proceedings handed down in a
Member State is to be recognised within the territory of the
others. This does not, however, prevent secondary proceedings
from being opened.

3.1.4.
The Committee would also emphasise the need for
the regulation to apply throughout the European Union. It
therefore hopes that the United Kingdom, Ireland and Den-
mark will join in the planned arrangements, making use of the
opportunities available to them under the protocols to the
Treaty of Amsterdam.

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3.2. Objective

3.2.1.
The Committee must stress that insolvency proceed-
ings are not intended only to settle liabilities and share assets
among creditors. Other objectives must be pursued, such as
the survival of viable businesses and the safeguarding of jobs.
In this regard, the Committee is pleased to note that the draft
regulation is not restricted to winding-up proceedings alone,
but also extends to procedures aimed at rescuing companies
(cf. Annex A).

3.2.2.
The Committee nevertheless regrets that the pro-
posed regulation does not remove the distortions caused by
differences in national law. Similarly, it fails to set common
objectives for all the Member States. While representing a
degree of progress, therefore, the proposed arrangements are
extremely modest and unambitious.

3.3. Rapidity

3.3.1.
One of the main criticisms generally levelled against
insolvency proceedings is their excessive length. Here, the
Committee regrets that the planned regulation fails to reflect
the concern to accelerate proceedings, for example by propos-
ing to introduce uniform machinery to this end in all the
Member States.

3.4. Planned system

3.4.1.
The Committee regrets that the planned regulation
does not simply enshrine the principle of the uniqueness and
universality of insolvency within the European Union: this
would mean that a business declared insolvent would be
subject to single proceedings, the effects of which would be
recognised by all Member States. The European Commission
did in fact express its support for this approach when the
Brussels Convention was finalised in 1995.

3.4.2. While it may be understandable that a system of this
kind cannot be set up at world level, the same is certainly not
true for the EU countries, which form a single market — a
concept which, by its very nature, should exclude the possi-
bility of secondary insolvency.

3.4.4. Moreover, the possibility of opening secondary pro-
ceedings could render the main proceedings meaningless in
economic terms.

3.4.5.
The introduction of single proceedings would, on
the other hand, serve to boost the chances of success of action
to put failing businesses back on their feet.

3.5. Scope

The exclusion of credit institutions, insurance enter-
3.5.1.
prises,
investment undertakings and collective investment
undertakings from the scope of the proposed regulation is to
be welcomed. These entities are subject to specific rules and a
single source of supervision — by the country in which the
company has its registered office — which clearly could not
fit in with a system recognising a plurality of procedures with
limited territorial effects.

3.6. Recognition and enforceability of judgements

3.6.1.
Seeking decisions to order enforcement may slow
down proceedings and entail unnecessary cost. The Committee
therefore believes that judgements handed down under the
terms of the draft regulation should be automatically enforce-
able. In this regard, it warmly welcomes the current work at
Community level to up-date and simplify the provisions of the
1968 Brussels Convention on jurisdiction and enforcement
of
judgements, and to incorporate these provisions in a
regulation.

3.6.2.
The Committee believes that the regulation should
provide for recognition within the EU of judgements pro-
hibiting persons having contributed to the failure of their own
businesses, through negligent or improper management, from
exercising certain activities.

3.7. Comments on articles

Article 16: it would seem that the provision con-
3.7.1.
tained in paragraph 2 is to be interpreted in the light of
Article 3(4). Should Article 16(2) not contain a direct reference
to this provision?

3.7.2.
vation measures ‘contrary to the exercise of these powers’.

Article 18(1): it might be clearer to refer to preser-

The universality of insolvency approach is unques-
3.4.3.
tionably that most likely to guarantee equality of creditors and
rapid and rational organisation of liquidation. Indeed, the
system envisaged — which provides for simultaneous conduct
of main and secondary proceedings, the effects of which would
be restricted to a single Member State — may well in practice
raise insurmountable problems.

4. Conclusion

Notwithstanding its reservations, the Committee con-
4.1.
siders the text to be preferable to a total absence of rules
governing insolvencies with an international dimension. It

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would however stress that it can only be a step towards a fuller
and more ambitious measure. Efforts must in particular be
pursued to ensure that the principle of the uniqueness and
universality of insolvency is acknowledged.

4.2.
The Committee therefore feels that at the very least,
the emphasis of the text should be shifted to strengthening
main rather than secondary proceedings. One way of doing
this might be to reinforce the powers of the liquidator in the

main proceedings, and to provide broader opportunities for
securing stay of secondary proceedings.

The Committee is pleased to note that an evaluation
4.3.
clause was added to the Brussels Convention shortly before it
was finalised. Under this provision, the system as set up may
be evaluated at the request of a contracting state and in any
case ten years after its implementation (Article 53). A similar
provision should be inserted into the proposed regulation.
However, in the Committee’s view, this evaluation should take
place after five years.

Brussels, 26 January 2000.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI

Opinion of the Economic and Social Committee on the ‘Communication from the Commission
to the Council, the European Parliament, the Economic and Social Committee and the Committee
of the Regions — The European Airline Industry: from Single Market to Worldwide Challenges’

(2000/C 75/02)

On 20 May 1999 the European Commission decided to consult the Economic and Social Committee,
under Article 262 of the Treaty establishing the European Community, on the above-mentioned
communication.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for
preparing the Committee’s work on the subject, adopted its opinion on 21 December 1999. The
rapporteur was Mr von Schwerin.

At its 369th plenary session of 26 and 27 January 2000 (meeting of 26 January) the Committee adopted
the following opinion with 116 votes in favour and three abstentions.

1.

Introduction

1.1.
In its Communication The European Airline Industry:
From Single Market to Worldwide Challenges the Commission
looks at the current state of the European airline industry, the
need for continuing improvement of the competitiveness of
European airlines and the past ten years of liberalisation of air
transport.

1.3.
The Commission considers that European airlines have
developed innovative strategies in order to adapt themselves
to market growth and competition challenges. During the
last decade they have achieved considerable productivity
improvements, which now permits the sector to create new
jobs. However, the sector still suffers from a high degree of
fragmentation and financial fragility when compared to its
main competitors, notably North American carriers.

The aim of the communication is to assess the progress
1.2.
made and to identify the initiatives which can contribute to
the competitiveness of the industry.

Liberalisation and globalisation make the market
1.4.
increasingly competitive and require airlines to undertake large
restructuring efforts.