On Thursday 17 May, the Bulgarian Presidency of the Council of the EU published a compromise text on the draft directive establishing a single legal framework for tackling business insolvency (see EUROPE 11673).
Its objective: to reach a partial general approach during the European Justice Ministers' meeting on 4 June next.
To reach this objective, the Presidency, unsurprisingly, highlighted the need for flexibility and made a lot of effort to allow member states sufficient flexibility for implementation.
The compromise text focuses on Title III (Discharge of debt), Title IV (Measures to increase the efficiency of procedures) and Title V (Monitoring of procedures) and for certain definitions in Title 1, particularly those on entrepreneurs and debt remission.
It should be pointed out that Titles I, II and VI have not been tackled in any detail and will need to be further discussed at the next working parties.
Debt remission. At the beginning of the negotiations, other member states were in favour of the principle according to which an honest businessman that has become insolvent should be given a “second chance” and released from his debts after a certain period.
It is, however, precisely on the question of how long this period should last that they are struggling to find an agreement. It should be recalled that during the ministerial level discussion in December, only Poland, Sweden, Latvia and Spain spoke out clearly in favour of a maximum three-year period, as proposed by the Commission (see EUROPE 11922).
Since then, the consensus obtained is broader and the Presidency is proposing a general rule according to which, the rehabilitation period should not exceed three years but is however, offering the member states, broader possibilities for defining situations in their national law in which: - access to rehabilitation procedures is limited; - the period can be extended or; - rehabilitation can be revoked. The text also authorises the member states to exclude certain kinds of debt according to their national rules.
The compromise also demands that they at least include a procedure for clearing the debts of an insolvent entrepreneur, whilst allowing them the freedom to interpret the concept of insolvency in accordance with their own national law.
Efficiency of procedures. The Bulgarian Presidency also proved cautious on the section on the “efficiency of procedures”.
It explained that “In view of the political sensitivity of the organisation of the judiciary of a Member State, the compromise text limits itself to a principle-based approach”.
The text introduces a certain number of general principles that the member states should follow in their respective national legal systems with regard to access to information, appointments, selection, supervision and remuneration for practitioners. It does, however, allow them significant room for manoeuvre when interpreting the way in which they have to comply with these provisions.
It should be pointed out that the compromise text still requires the member states to undertake certain procedural stages through digital means but restricts the provision to procedural action “which can be implemented within a reasonable time”. The period for implementing this provision was also established at three to five years in general and seven years for disputes and appeals.
The text now has to be submitted to the Committee of Permanent Representatives to the EU (Coreper) next week. In Parliament, the report by Angelika Niebler (EPP, Germany) is expected to be voted on in July. (Original version in French by Marion Fontana)