The European Union approach to cross border insolvencies. The European Insolvency Regulation.

1. Introduction:

In an increasingly internationally operating business world, where from the commercial point of view, borders are just a nuisance and not very relevant, and an "open market approach" is often economically necessary, one would be inclined to ultimately aim at harmonisation of insolvency laws and the universal effect of insolvency proceedings. The tremendously increased speed of transport, travel, information and the interdependence of economies would certainly justify such harmonisation and such universal effect.

On 31 May 2002, the European Insolvency Regulation ("EUIR") came into force. This regulation is the result of more than 30 years of discussions on the European approach to cross border insolvency issues.

2. Council Regulation (EC) No 1346/2000:

The official name of the EUIR is Council Regulation (EC) No 1346/2000 of 29 May 2000 on Insolvency Proceedings. The Regulation aims to improve the efficiency and effectiveness of insolvency proceedings with a cross border dimension by either simplifying or removing formalities associated with recognition and enforcement.

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While changing the legal system applicable to certain issues, it does not attempt to harmonise insolvency laws of individual states. The Regulation is directly applicable and will prevail in the event of incompatibility with national law.

It provides specific rules of jurisdiction, applicable law and recognition of judgements, while enhancing co-ordination of the measures to be taken regarding an insolvent debtor's assets. The solutions rely on the principle of the opening of main insolvency proceedings with universal scope in the Member State where the debtor has the centre of his main interests, while retaining the possibility of opening secondary local proceedings in another Member State where the debtor has an establishment.

3. Scope of Council Regulation (EC) No 1346/2000:

Centre of the main interests in EU:

The Regulation has limited applicability. It will only be applicable if the centre...