Brexit—Deal or no deal?

Brexit—Deal or no deal?

Kate Stephenson and Sacha Lürken, partners at Kirkland and Ellis International LLP consider the potential practical implications for the cross-border European restructuring and insolvency landscape of a ‘no deal’ Brexit, in the context of recent developments.

UK legislation to deal with the impact of a ‘no deal’ Brexit in the restructuring and insolvency market was enacted at the end of January.  The prospect of Brexit is evolving rapidly-almost daily-amid opposition to the negotiated deal and calls for a second referendum.

A negotiated Brexit would involve a transition period, currently anticipated to end on 31 December 2020. The draft Withdrawal Agreement confirms that the EU Insolvency Regulation and the EU Judgments Regulation (important for cross-border recognition of schemes of arrangement) would continue to apply to insolvency proceedings/judgments commenced before the end of the transition period. This means it would be ‘business as usual’ for European cross-border restructurings and insolvencies until the end of 2020.  Recognition for later proceedings is left open for negotiation (during the transition period), and is much more uncertain. At the time of writing, it remains highly uncertain whether the UK Parliament will approve the draft Withdrawal Agreement, or any revised agreement.

Accordingly, the UK and the EU continue to step up preparations for a ‘no deal’ Brexit.

Key takeaways for a ‘no deal’ Brexit

  • UK insolvency proceedings would not automatically be recognised in other EU countries
  • English schemes of arrangement may not be recognised in other EU countries
  • a UK insolvency officeholder would have to seek recognition in the relevant EU member state(s) under domestic law. The ease and likelihood of recognition would vary significantly from state to state; in most cases, this would be more difficult if the debtor’s centre of main interests (COMI) were located outside the UK
  • Regulation (EU) 2015/848 Recast Regulation on Insolvency (the Recast Regulation on Insolvency) and its predecessor, the EC Regulation on Insolvency 1346/2000 (the EC Regulation on Insolvency), would be largely repealed in the UK
  • UK courts may recognise

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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.