Brexit and the end of the transition period—insolvency and pre-insolvency impacts from 31 December 2020 onwards

Brexit and the end of the transition period—insolvency and pre-insolvency impacts from 31 December 2020 onwards

Borja García-Alamán and Juan Verdugo of J&A Garrigues SLP and Ivan Heredia, Professor of International Law at Universidad Autónoma de Madrid consider the draft Withdrawal Agreement and its potential impact on the restructuring and insolvency market following Britain’s exit from the EU.

Original news

On 28 February 2018, the European Commission published the Draft Agreement on the withdrawal of the UK from the EU (see LNB News, 28/02/2018 145 ). This draft, based on the Joint agreement submitted by the negotiators of the EU and the UK on 8 December 2017, will set the tone for the future negotiations between the EU and the UK.

What are the relevant provisions of the draft Withdrawal Agreement?

One of the most interesting parts of the draft is that regarding the consequences of Brexit in relation to the principal rules of Private International Law provided in EU legislation; these rules currently affect a significant number of subjects (contracts, international insolvency, torts, succession, marital breakdown, alimony, etc.).

In the specific case of cross-border insolvencies, the draft establishes that the Community Regulation on insolvency proceedings, Regulation (EU) 848/2015 (Recast Regulation on Insolvency) will continue to be applicable to all insolvency proceedings which are commenced in the Member States (including the UK) before the end of the transition period (31 December 31 2020). However, from that date onwards the authorities of the UK will cease to apply the Recast Regulation on Insolvency and will resort to its internal legislation when:

  • declaring themselves to have jurisdiction to commence an insolvency proceeding
  • identifying the national law which will apply to that proceeding
  • deciding whether they recognise and under what conditions an insolvency proceeding conducted in an EU Member State
  • assessing whether or not they cooperate with the authorities of the EU Member State in which that proceeding is conducted, or whether they will provide that same cooperation for the managers appointed to manage it

What would be the impact on English schemes of arrangement?

However, undoubtedly the most important consequences of the draft will

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.