In an effort to overcome disparities in national insolvency regimes and facilitate the free movement of capital, the European Justice Ministers, meeting at the EU Council in Luxembourg on Friday 20 October, discussed the Commission’s December 2022 proposal for a directive (see EUROPE 13079/2) aimed at harmonising insolvency rules within the EU, deemed essential for the integration of European financial markets.
The directive proposes the harmonisation of certain national insolvency rules, with particular emphasis on revocatory actions, a legal mechanism for retrospectively challenging debtor transactions. This provides an opportunity to avoid otherwise valid transactions and to recover assets for the benefit of creditors. However, the discussions highlighted the need to maintain a balance between standardisation of rules and the flexibility required by the various Member States.
María Pilar Llop Cuenca, Spanish Minister of Justice and representative of the EU Council Presidency, highlighted the evolution of the EU’s approach, moving from a strategy focused on liquidation to one favouring support for companies in difficulty and the protection of creditors’ rights. This transition was previously illustrated by the 2019 directive (see EUROPE 12224/4) on preventive restructuring.
During the session, the ministers discussed the need for flexibility in the application of the harmonised rules. The Directive proposes minimum standards, but Member States may opt for more stringent protection for creditors, thereby adapting insolvency procedures to national circumstances.
Opinions, albeit varied, converged on the importance of harmonisation while preserving flexibility, so as not to interfere with national procedures, as Estonian Justice Minister Kalle Laanet emphasised. German Minister Angelika Schlunk has suggested that insolvency rules should offer sufficient flexibility to protect creditors while taking account of extraordinary situations. For her part, Leena Meri, the Finnish minister, called for greater flexibility in the deadlines for revocation action, while highlighting the efficiency of the Finnish system.
France argued for a balanced regime, stressing the need to protect the interests of creditors while allowing economic activity to continue and jobs to be safeguarded. The French position calls for greater flexibility in the text, insisting on the protection of the interests of the beneficiary of the deed while making prejudicial deeds unenforceable against the creditors’ representative.
At the press conference held at the end of the day, Pilar Llop Cuenca reaffirmed the Spanish Presidency’s objective of providing Member States with a degree of flexibility in regulating avoidance actions. The European Commissioner for Justice, Didier Reynders, also emphasised the importance of harmonisation in stimulating cross-border investment, stressing the importance of this initiative for legal certainty and economic growth within the EU. (Original version in French by Nithya Paquiry)