Recognition of Debt Restructuring and Resolution Measures under the European Union Regulatory Framework
Article first published online: 5 MAR 2014
Copyright © 2014 INSOL International and John Wiley & Sons, Ltd
International Insolvency Review
Volume 23, Issue 1, pages 57–72, Spring 2014
How to Cite
Arons, T. (2014), Recognition of Debt Restructuring and Resolution Measures under the European Union Regulatory Framework. Int. Insolv. Rev., 23: 57–72. doi: 10.1002/iir.1220
- Issue published online: 2 APR 2014
- Article first published online: 5 MAR 2014
- 1Amsterdam District Court 22 March 2013 (ECLI:NL:RBAMS:2013:BZ5246) JOR 2013/191 with commentary by W.J.M. van Andel.
- 2France (accord): Article L 611-4 to L 611-15 of the Commercial Code (Code de commerce, C.com.); Germany (Insolvenzplan): §§ 217-269 Insolvency Act (Insolvenzordnung, InsO); Netherlands (faillissementsakkoord): Articles 138-172a Insolvency Act (Faillissementswet, Fw); UK (compositions or schemes of arrangement): ss. 895-903 Companies Act 2006 (CA 2006); (company voluntary arrangement): ss. 1-7B Insolvency Act 1986.
- 3The European Commission underlines the importance of the rules regulating restructuring plans as crucial in creating the conditions for successful restructuring. See: Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee, A new European approach to business failure and insolvency COM(2012) 742 final, p. 7.
- 4France (accord de sauvegarde financière): Article L 611-8 II 1° Commerce Code: ‘For an endorsement of the agreement by the court (homologation), the following conditions must be satisfied: 1° The debtor has not reached the state of insolvency or, if it has, the agreement will end that stage.’; UK: ss. 895(2) CA 2006: in and outside insolvency; ss. 1-7B Insolvency Act 1986.
- 5France: Article L 611-8 II 1° Commerce Code; Germany: § 258(1) InsO: as soon as the endorsement decision had taken final and conclusive effect, the insolvency court closes the insolvency proceedings; Netherlands: Article 161 Fw: as soon as the court decision to endorse the agreement (homologatie) has taken final and conclusive effect, the insolvency situation ends.
- 6aIt is noteworthy that I do not refer to the possibility under the Dutch WCAM to settle non-contractual debt claims. In the aftermath of the insolvency of the Dutch Dirk Scheringa Beheer Bank, the administrator and two representative foundations concluded an agreement to settle the claims based on an alleged violation of (pre-contractual) duties of the bank. The authority of the administrator to settle these claims under the WCAM proceedings is based on s. 110(3) of the Dutch Insolvency Act as amended by the WCAM Amendment Act 2013 (Wet tot wijziging van de Wet collectieve afwikkeling massaschade, Stb. 2013, 255). The information on the Dirk Scheringa Beheer settlement can be found on: https://www.dsbcompensatie.nl/. In principle the binding declaratory judgment of the Amsterdam Court of Appeal has to be recognised by the courts in the EU. See also: and , ‘Beyond tulips and cheese: exporting mass securities claim settlements from the Netherlands’ (2010) 21 European Business Law Review 6, pp. 857–883; b , Cross-Border Enforcement of Listed Companies' Duties to Inform (Kluwer 2012), ch. 11; c , ‘Die grenzüberschreitende Durchsetzbarkeit von Sammelklagen’ in M. Casper et al (eds), Auf dem Weg zu einer europäischen Sammelklage? (Sellier 2009); d , ‘Grenzüberschreitender kollektiver Rechtsschutz in Europa’ (2009) 3 JZ, pp. 121–133.
- 7Jurisdictions where secured creditors can be subject to the arrangement: France (Article L611-12 C.com.); Germany (§ 222 InsO); UK (s. 899 CA 2006). Jurisdiction where secured creditors cannot be subject to the arrangement: Netherlands (Article 143 jo. 145 Fw ff.).
- 8Point 3.2(iii) of the FSB's Key Attributes of Effective Resolution Regimes for Financial Institutions (October 2011). Available at: < http://www.financialstabilityboard.org/publications/r_111104cc.pdf>
- 9The FSB advises to include clauses recognising the resolution actions by the firm's home state authorities. See: Enforceability and implementation of ‘bail-in’ FSB's Recovery and Resolution Planning for Systemically Important Financial Institutions: Guidance on Developing Effective Resolution Strategies, 16 July 2013, p. 9. Available at: <http://www.financialstabilityboard.org/publications/r_130716b.pdf>
- 10See: FSB Guidance, p. 10. Point 3.2(x) and (xi) of the FSB's Key Attributes of Effective Resolution Regimes for Financial Institutions.
- 11See: Proposal for a Regulation of the European Parliament and of the Council establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Bank Resolution Fund and amending Regulation (EU) No 1093/2010 of the European Parliament and of the Council COM(2013) 520 final ‘proposal for resolution regulation’. On 18 December 2013, the Council set out its position on the SRM. It will enter into negotiations with the European Parliament with the aim of agreeing the regulation at first reading before the end of the Parliament's current legislature (May 2014). See: Press Release 17602/13 PRESSE 564.
- 12aCf. speech of Paul Tucker at the INSOL International World Congress, The Hague 20 May 2013. The speech is retrieved from: <http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech658.pdf>; b , ‘The review of the EU Insolvency Regulation: some general considerations and two selected issues (hybrid procedures and netting arrangements)’ in: The Review of the EU Insolvency Regulation: some proposals for amendment, Preadviezen voor de NVRII/Reports for the NACIIL 2011 <http://nvrii.zeauw.nl/uploads/files/preadvies-2011.pdf>, p. 31. cSee also: , Een betere insolvenctieverordening, Verslag van de eerste jaarvergadering van de NVRII, 2012 (5) FIP, p. 152–155.
- 13For an analysis of the issue of security rights and compositions under the Insolvency Regulation, I refer to Cross-border insolvency proceedings and security rights (diss. Radboud University Nijmegen) (Law of Business and Finance Series Vol. 8) (Kluwer 2004), pp. 352–353.,
- 14Wet van 24 mei 2012 tot wijziging van de Wet op het financieel toezicht en de Faillissementswet, alsmede enige andere wetten in verband met de introductie van aanvullende bevoegdheden tot interventie bij financiële ondernemingen in problemen (Wet bijzondere maatregelen financiële ondernemingen), Stb. 2012, 241.
- 15Article VI lid 1 Stb. 2012, 241.
- 16Stichting Afwikkeling Onderhandse Schulden SNS Reaal.
- 17Article 6:2(1) in connection with Article 6:2(4) of the Dutch Financial Supervision Act (Wet op het financieel toezicht, Wft).
- 18Besluit tot onteigening van effecten en vermogensbestanddelen SNS REAAL NV en SNS Bank NV in verband met de stabiliteit van het financiële stelsel, alsmede tot het treffen van onmiddellijke voorzieningen ten aanzien van SNS REAAL NV, brief van 1 februari 2013, FM/2013/213 M; Parliamentary Papers II 2011–2012, 33 532, nr. 1
- 19In the Explanatory Memorandum to the Intervention Act 2012 to Article 6:2 Wft, the Government stated that: [the minister as ultimum remedium may expropriate the components of the financial firm's property (vermogen). The term ‘property components’ (vermogensbestanddelen) encompasses assets as well as liabilities of the company. Examples of securities issued by, or in cooperation with, the financial firm that can be expropriated are shares in its capital, convertible bonds or perpetuals. Parliamentary Papers II 2011–2012, 33 059, nr. 3, p. 68.
- 20Council of State 25 February 2013, ECLI:NL:RVS:2013:BZ2265, JOR 2013/140 with commentary from B.P.M. Ravels and E.P.M. Joossen.
- 21Enterprise Chamber of the Amsterdam Court of Appeal 11 July 2013, ECLI:NL:GHAMS:2013:1966, JOR 2013.
- 22Kreditinstute-Reorganisationsgezetz, KredReorgG, BGBl. I S. 1900.
- 23These limitations are not only a plain reduction (‘haircut’) but involve rescheduling and interest rate reductions as well.
- 24§ 17 jo. § 12 KredReorG.
- 25§ 8(2) KreditReorG.
- 26Bundesanstalt für Finanzdienstleistungsaufsicht.
- 27§7 KredReorG.
- 28Oberlandesgericht, OLG.
- 29§ 19 jo. § 20 jo. § 21 KredReorG.
- 30§ 19(2) KredReorG.
- 31§ 48a up to and including § 48 s of the German Banking Act. (Kreditwesengesetz, KWG).
- 32§ 48r KWG.
- 33Loi no 2013-672 du 26 juillet 2013 de séparation et de régulation des activités bancaires, JORF 27 juillet 2013, p. 1–40.
- 34The Autorité de contrôle prudentiel et de resolution is an independent regulatory authority and part of the French central bank, Banque de France.
- 35In insolvency situations, the ACPR may on the basis of Article L.613-25 French Monetary and Financial Code (C.com.fin.) take over the shares in the insolvent bank or financial firm; the former shareholders receive the value of these shares as determined by the judicially appointed expert.
- 36Article L613-31-16 I. 9 ° C.com.fin.
- 37Cour de cassation.
- 38Article L613-31-16 I 4° and 5 ° C.com.fin.
- 39Article L613-31-17 I C.com.fin.
- 40S. 1(2) Banking Act 2009.
- 41S. 1(3) Banking Act 2009.
- 42The Financial Services Compensation Scheme is the UK implementation of the required Depository Guarantee Scheme. It is subject to the rules laid down in part 25 of the Financial Services and Markets Act 2000 (‘FSMA 2000’). Directive 2009/14/EC of the European Parliament and of the Council of 11 March 2009 amending Directive 94/19/EC on deposit-guarantee schemes as regards the coverage level and the payout delay  OJ L68/3; Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994 on deposit-guarantee schemes  OJ L 135/5.
- 43That is the non-sold or non-transferred part of the bank.
- 44S. 136(2)(c) Banking Act 2009.
- 45The opera ain't over till the fat lady sings – ein englisches “scheme of arrangement” vor dem BGH (zu BGH, 15.2.2012 – IV ZR 194/09, unten S. 264, Nr. 16)’, 2013 (3) IPRax, pp. 234–239, p. 235., ‘
- 46See also in regard of the Dutch proceedings: Polak/Pannevis, Insolventierecht (12th edn, Kluwer 2011, para. 10.5. The Dutch Supreme Court (Hoge Raad) ruled in its decision of 26 August 2003 in the ICH/UPC-case that in the judicial approval proceedings, the court at its own discretion has to give or deny its approval to the agreement without in any case to be bound by the opinions of the administrator, the creditors or the debtor respectively (para. 3.3.2, JOR 2003/211 with commentary by J.J. van Hees).
- 47Article 1(2)(b) Brussels I Regulation. It is noteworthy that the reform proposal of the Insolvency Regulation adds the following to the EU Insolvency Regulation's consideration: recital 7: ‘ Proceedings concerning the winding-up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings and actions related to such proceedings are excluded from the scope of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. These proceedings should be covered by the present Regulation. The interpretation of this Regulation should as much as possible avoid regulatory loopholes between the two instruments.’ (Article 1(5) reform proposal). Case C-292/08 German Graphics Graphische Maschinen GmbH v Alice van der Schee  ECR I 8421, paras 14-20, JOR 2011/341 with commentary by P.M. Veder; NJ 2010/541with commentary from M.V. Polak.
- 48Council regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings  OJ L160/1, Annex A list of insolvency proceedings referred to in Article 2(a).
- 49aSee: European Insolvency Regulation (De Gruyter 2007) Art. 25, para. 11, p. 375;Europäische Insolvenzverordnung, Kommentar (4th edn R&W 2013), art. 25, para. 3, p. 301;/ ,
- 50The alternative jurisdiction in the MS where the debtor possess an establishment (Article 3(2) Insolvency Regulation) is not applicable in these proceedings. They are restricted to winding-up proceedings, whereas the purpose of schemes of arrangement is to end insolvency and to enable the debtor to continue his activities.
- 51Proposal for a Regulation of the European Parliament and of the Council amending Council Regulation (EC) No 1346/2000 on insolvency proceedings COM(2012)744 final - 2012/0360 (COD) (‘reform proposal’). See also: P.M. Veder, ‘Europese ontwikkelingen in het insolventierecht’, TvI 2013/32.
- 52Cf. ECJ, Case C-292/08, paras 23-25: ‘[t]he intention on the part of the Community legislature to provide for a broad definition of the concept of “civil and commercial matters” referred to in Article 1(1) of Regulation No 44/2001 and, consequently, to provide that the article should be broad in its scope. Such an interpretation is also supported by the first sentence of the sixth recital in the preamble to Regulation No 1346/2000, according to which that regulation should, in accordance with the principle of proportionality, be confined to provisions governing jurisdiction for opening insolvency proceedings and judgments which are delivered directly on the basis of the insolvency proceedings and are closely connected with such proceedings. Consequently, the scope of application of Regulation No 1346/2000 should not be broadly interpreted.’ For an extensive overview and analysis of the recognition of UK schemes of arrangement by Dutch courts on the basis of Brussels I Regulation, I refer to: De erkenning van een Engelse scheme of arrangement door de Nederlandse rechter’ in: N.E.D. Faber et al. (ed.), Overeenkomsten en insolventie (Kluwer 2012), p. 335.and , ‘
- 53Article 1(2) Insolvency Regulation and recital 9.
- 54See: Garcimartín (2011), p. 20.
- 55Unfortunately, the German Federal Court of Justice (BGH) did not expressly answer this question in its decision of 15 February 2012 (IV ZR 194/09), para. 26. The BGH denied recognition on the basis of Articles 8, 12(1) and 35 Brussels I Regulation. The English High Court of Justice per Justice Hildyard in its decision of 9 August 2012 in the case NEF Telecom Company BV and Bulgarian Telecommunications Company AD (JOR 2013/58) also ruled on recognition but not on the basis of the Brussels I Regulation. Hildyard ruled that the courts in the Netherlands and Bulgaria would not recognise an order of the English court in this case where neither of the companies proposing and affected by the scheme of arrangement has any presence in the UK nor is any company incorporated under UK law. In its decision of 6 September 2012, the High Court of Justice per Justice Vos overruled Hildyard's decision and deemed on the basis of evidence presented to him, without any reference to the Brussels I Regulation in this regard, that Dutch and Bulgarian courts would recognise his order approving the scheme of arrangement. Vos did not, and needed not, rule on the applicability of the Brussels I Regulation (para. 12).
- 56BAIC  EWHC 1621 at para. 82: ‘He submitted that the comparison that the court must make was a comparison between the rights that creditors would acquire under the scheme (if approved); and the rights that they would enjoy if it were not. In the latter case the court should consider (and consider only) realistic alternatives. If the company in question was insolvent, then the obvious realistic alternative was an insolvent liquidation. But if the company is solvent, then that is an inappropriate comparator. In some cases, an appropriate comparator might be a members' voluntary liquidation. But that could only be appropriate if it was a realistic possibility.’in
- 57On the basis of s. 899 CA 2006, the court has to sanction the scheme of arrangement in order to have binding effect on unwilling creditors. According to established case-law, ‘ the court is concerned (i) to ensure that the meeting or meetings have been summoned and held in accordance with its previous order, (ii) to ensure that the proposals have been approved by the requisite majority of those present at the meeting or meetings and (iii) to ensure that the views and interests of those who have not approved the proposals at the meeting or meetings (either because they were not present or, being present, did not vote in favour of the proposals) receive impartial consideration.’ In Scottish Lion Insurance Co Ltd, Petitioners (Outer House 10 September 2009, 2010 S.L.T. 100), Lord Glennie formulated the court's discretion as follows: ‘The discretion conferred by s 899 of the 2006 Act to sanction a scheme which has been approved by the requisite majorities at creditors' meetings is, on the face of it, unfettered. The cases, however, show that, subject to being satisfied on certain matters, the court “will be slow to differ from the meeting” (Re Telewest Communications Plc (No 2) at  BCC, p 42, para 22), though some disquiet about how this ties in with the court having an unfettered discretion has been voiced in Re British Aviation Insurance Co Ltd at p 33, para 75 and Re Sovereign Marine & General Insurance Co Ltd at para 41. For these reasons, either because the discretion is indeed unfettered or because the court will be slow to differ from the majority, a submission that it can never be fair to sanction a solvent insurance scheme which has achieved the statutory majorities at the meeting(s) of creditors is likely to run into difficulties. (para. 41)’. Justice Warren in Re Sovereign Marine & General Insurance Co Ltd (2007 WL 1591035 Chancery Division): ‘It is a discretion which must be exercised in novel circumstances not foreseen in other cases in a way which reflects the justice of the case.’ (para. 42).
- 58Article 153(3) Fw. The test to be applied is whether the breach of the paritas creditorum will lead to unreasonable and unfair results and whether the necessary formal conditions are met. See: Insolventierecht VI: Het akkoord (Kluwer 2010), para. 6126.,
- 59Article L 611-8 II 1° Code de commerce.
- 60Cf. Case C-414/92 Solo Kleinmotoren GmbH v Emilio Boch  ECR I-2237. In that case the ECJ ruled that in order to qualify as decision in the sense of Article 32 Brussels I Regulation the decision has to lay down the rights and duties of the parties. The parties should be able to independently without a court's interference be able to execute it. That ‘condition is not fulfilled in the vase of a settlement, even if it was reached in a court of a member state and brings legal proceedings to an end. Settlement in court are essentially contractual in that their terms depend first and foremost on the parties' intention.’ (paras 17-18).
- 61Also: Die international Reichweite eines englischen Scheme of Arrangement’ (2011) 26 WM pp. 1210–1219, p. 1217; Arons (2012), p. 359-360., ‘
- 62See: Mäsch (2013), p. 238.
- 63English High Court of Justice per Justice Vos in its decision of 6 September 2012,  EWHC 2944 (Comm); JOR 2013/38 with commentary by P.J.M. Declercq (NEF Telecom Company BV and Bulgarian Telecommunications Company AD), para. 43. Cf. Amsterdam Court of Appeal in Dutch Collective Settlement of Mass Damage Act (WCAM)-cases where it based its international jurisdiction on the fact that at least one of the interested parties (‘defendants’) to the settlement was domiciled in the Netherlands and that the other interested parties were deemed closely connected: Shell case (Amsterdam Court of Appeal, 29 May 2009, ECLI:NL: GHAMS:2009:BI5744; JOR 2009/197 with commentary by A.F.J.A. Leijten, paras 5.15-5.27 ) and most recently in the Converium case (Amsterdam Court of Appeal, 12 November 2010, ECLI:NL:GHAMS:2010: BO3908; JOR 2010/46 with commentary by J.S. Kortmann, para 2.11). It is noteworthy that in Re Rodenstock GmbH more than half its creditors were actually domiciled in the UK. Therefore, the English court had jurisdiction on the basis of Article 2 Brussels I Regulation (para. 62).
- 64Decision of 6 May 2011 by the Chancery Division (Companies Court) in Re Rodenstock GmbH  EWHC 1104 (Ch) per Justice Briggs.
- 65Decision of 20 January 2012 by the Chancery Division in Primacom Holding GmbH & Ors v. A Group of the Senior Lenders and Crédit Agricole  EWHC 164 (Ch).
- 66Paras. 29-32.
- 67Article 35(3) Brussels I Regulation. An exception applies in regard of proceedings that have as their object rights in rem in immovable property, then the courts of the member state in which the property is situated have exclusive jurisdiction. (Article 35(3) jo. Article 22(1) Brussels I Regulation). Therefore, compositions and arrangements affecting debts secured by rights in rem in immovable property may be subject to such a review; and further, recognition has to be denied (Article 35(1) Brussels I Regulation). See: Eidenmüller (2011), p. 1217.
- 68Credit institutions mean an undertaking whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account; or (b) an electronic money institution within the meaning of Directive 2000/46/EC. See: definition in Article 4(1) of Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast)  OJ L 177/1.
- 69Article 1(2) Insolvency Regulation.
- 70Recital 9 of the Insolvency Regulation.
- 71Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit institutions  OJ L 125/15.
- 72Article 3(1) Directive 2001/24/EC.
- 73Garcimartín (2011), p. 20.
- 74Proposal for a Directive of the European Parliament and of the Council establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directives 77/91/EEC and 82/891/EC, Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC and 2011/35/EC and Regulation (EU) No 1093/2010 COM(2012) 280 final ‘Bank Recovery and Resolution Directive proposal’. On 20 December, the Council approved a final compromise text; this text is sent to the European Parliament for approval. See: 2012/0150(COD): ST 17957 2013 INIT; ST 17957 2013 COR 1; ST 17957 2013 ADD 1.
- 75Article 106 of the Bank Recovery and Resolution Directive proposal and of the final compromise text of 20 December 2013 adds Article 1(3) to Directive 2001/24/EC. In that new article reference is made to the definition of investment firms in point (b) of Article 3(1) of Directive 2006/49/EC of the European Parliament and of the Council on the capital adequacy of investment firms and credit institutions (recast)  OJ L 177/201: institutions as defined in Article 4(1)(1) of MiFID excluding credit institutions. Hence, any legal person whose regular occupation or business is the provision of one or more investment services to third parties and/or the performance of one or more investment activities on a professional basis. The investment services and activities are listed in Section A of Annex I relating to any of the instruments listed in Section C of Annex I of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC (MiFID)  OJ L 145/1. Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management is an ancillary service (Section B of Annex I). Therefore, securities depositors as investment undertakings holding funds or securities for third parties are not covered by the Bank Recovery and Resolution Directive proposal's extension of the scope of Directive 2001/24/EC.
- 76It is noteworthy that on 5 October 2012, the European Commission launched a consultation on a possible recovery and resolution framework for financial institutions other than banks including insurance companies. Similar resolution powers, including the restructuring of insurance companies' liabilities are provided for. The consultation was closed on 28 December 2012. On March 2013, the summary of the replies was published. The current framework was deemed sufficient. The consultation document and the summary of the replies can be obtained at: < http://ec.europa.eu/internal_market/bank/crisis_management/#maincontentSec2>
- 77It is noteworthy that under the resolution tools under the Dutch Intervention Act are applicable to ‘financial firms’ (financiële ondernemingen) including insurance companies threatening the stability of the Dutch financial system (Article 6:1 jo. Article 1:1 ‘financiële onderneming’ sub l Wft). The resolution tools available to the BaFin under the Kreditinstute-Reorganisationsgezetz are restricted to credit instutions. The French resolution procedure is also limited to credit institutions and investment firms (Article L 613-31-12 jo. L613-31-13 C.com.fin.). The application of resolution powers under the UK Banking Act 2006 is restricted to credit institutions, i.e. institutions which have a permission under Part 4 of the Financial Services and Markets Act 2000 to carry on the regulated activity of accepting deposits.
- 78Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II)  OJ L 335/1.
- 79For the full effectiveness see: recital 118 to and Article 269(4) of the Insolvency II Directive. Article 311 Solvency II Directive jo. Article 1(3) of the Directive 2012/23/EU of the European Parliament and of the Council amending Directive 2009/138/EC (Solvency II) as regards the date for its transposition and the date of its application, and the date of repeal of certain Directives  OJ L 249/1 postponed the entry into force to 1 January 2014. It is noteworthy that the proposal of 2 October 2013 to amend Directive 2009/138/EC postpones the date to 1 January 2016. Proposal for a Directive of the European Parliament and of the Council amending Directive 2009/138/EC on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) as regards the dates of transposition and application and the date of repeal of certain Directives COM(2013) 680 final. Cf. Proposal for a Directive of the European Parliament and of the Council amending Directives 2003/71/EC and 2009/138/EC in respect of the powers of the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority (‘Omnibus II Directive’) COM(2011) 8 final. In his statement of 2 October 2013, Commissioner Barnier expects these proposals to be adopted before 1 January 2013 (MEMO /13/841).
- 80The Directive provides in Article 49/164 the legal basis for supervisory authorities to authorise the transfer of all or part of its portfolio to another insurance company established in the EU. Such authorisation is only granted if the accepting company meets the capital requirements (Article 39/164 Solvency II Directive). Furthermore, under Article 141 of the Solvency II Directive, the national supervisory authorities have, when the solvency position continues to deteriorate, the power to take all measures necessary to safeguard the interests of policy holders in the case of insurance contracts, or the obligations arising out of reinsurance contracts. On the basis of Article 138(2) jo. Article 142 of the Solvency II Directive (re)insurance companies are required to submit a ‘realistic’ recovery plan for approval by the home supervisory authority. These provisions must be implemented in national law before 30 June 2013 (Article 309(1) Solvency II Directive jo. Article 1(1)(a) Directive 2012/23/EU). The proposal to amend Directive 2009/138/EC seeks to postpone the implementation deadline to 31 January 2015 (Article 1(2)(a)).
- 81Cf. V. P. G. de Serière and A. J. A. D. van den Hurk's reply of 28 December 2012 on behalf of the Institute of Financial Law to the Commission consultation on a possible recovery and resolution framework for financial institutions other than banks, p. 12-13, see: Fn 77.
- 82Garcimartín (2011), p. 20 referring to the judgment of the Madrid Commercial Court 4 June 2009, A.E.D.I.Pr. 2009, p. 1045.
- 83E.g. UCITS (Undertakings for Collective Investment in Transferable Securities); or AIFs (Alternative Investment Funds) like hedge funds or private equity funds.
- 84Article 2 seventh indent Directive 2001/24/EC. It is noteworthy that the Bank Recovery and Resolution Directive proposal adds an explicit reference in Article 1(4) of Directive 2001/24/EC to the resolution tools and the exercise of resolution powers provided for by that Directive. (Article 106(1) of the proposal and of the final compromise text of 20 December 2013).
- 85Another possibility is that the home member state issues authorisation to a credit institution having its head office in the home member state and actually carrying on its business there, whereas its registered office is situated in another member state. Article 6(2) second indent jo. Article 1 point (6) of Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions  OJ L 126/1.
- 86Article 3(2) jo. Article 2 first indent Directive 2001/24/EC jo. Article 1 point (6) of Directive 2000/12/EC.
- 87Article 3(2) Directive 2001/24/EC.
- 88Article 37(2) of the Bank Recovery and Resolution Directive proposal and of the final compromise text of 20 December 2013.
- 89Explanatory Memorandum to the Single Resolution Mechanism proposal, p. 8.
- 90The write down or conversion must be in accordance with Article 26 of the Single Resolution Mechanism proposal (Article 18(9) proposed Bank Recovery and Resolution Directive)
- 91Article 26(1) Single Resolution Mechanism proposal.
- 92According to Article 42 jo. Article 43 of the Bank Recovery and Resolution Directive proposal and of the final compromise text of 20 December 2013, the order of priority is the following: (i) claims related to eligible deposits and claims from deposit guarantee schemes; (ii) unsecured non preferred claims; (iii) claims subordinated other than those mentioned in points (iv) to (vi); (iv) claims from senior executives and directors; (v) claims related to additional Tier 1 and Tier 2 instruments; and (vi) claims related to common equity Tier 1 instruments; starting from point (vi) and ending with point (i). It is noteworthy that Article 14 of the proposed resolution regulation prescribes that the Commission, the Board and the national resolution authorities of the member states are bound by this order of priority as well when applying writing down or converting debt into equity to claims of an institution under resolution following a reverse order of priority to the following order for normal insolvency procedures. This bail-in may not prejudice liabilities excluded from the bail-in tool under Article 24(3) of the Single Resolution Mechanism proposal.
- 93Cf. Article 13(1) of the Single Resolution Mechanism proposal and Article 29(1) of the Bank Recovery and Resolution Directive proposal and of the final compromise text of 20 December 2013.
- 94Article 6 Directive 2001/24/EC.
- 95Article 6(5) Directive 2001/24/EC.
- 96Article 10(2)(i) Directive 2001/24/EC.
- 97Article 10(2)(d) Directive 2001/24/EC. Winding-up proceedings include the proceedings terminated by a composition or other, similar measure (Article 2 ninth indent Directive 2001/24/EC).
- 98Article 25 Directive 2001/24/EC. The regime applicable to the enforceability of such clauses in insolvency is not the lex fori concursus but the lex contractus.
- 99Garcimartín (2011), p. 37-41.
- 100Cf. Article 107 of the Bank Recovery and Resolution Directive proposal and of the final compromise text of 20 December 2013: Article 7(1) of the Collateral Directive (Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements  OJ L 168/43), granting full effect to the provision regardless of winding up proceedings, does not apply to any restriction on the effect of a close out netting provision that is imposed by virtue of Article 77 of the proposed directive or by the exercise by the resolution authority of the power to impose a temporary stay in accordance with Article 63 of that directive.
- 101On the basis of Article 63(1) jo. Article 6(6)(d) of the Bank Recovery and Resolution Directive proposal and of the final compromise text of 20 December 2013, the national resolution authorities must have the power to temporarily suspend the termination rights in regard of repurchase agreements relating to securities.
- 102See: Article 23 Directive 2001/24/EC and Article 6 Insolvency Regulation. It is noteworthy that Article 77(2) of the Bank Recovery and Resolution Directive proposal requires member states to ensure that creditors of the institution under resolution are not entitled to exercise statutory rights to set-off unless the resolution action is the sale of business tool or the bridge institution tool and the rights and liabilities covered by the financial contract are not transferred to a third party or bridge institution, as the case may be.
- 103The master fund of the hedge fund management company Long-Term Capital Management.
- 104See: US General Accounting Office (GAO)'s letter ‘Responses to Questions Concerning Long-Term Capital Management and Related Events’ of 23 February 2000 to US Senate. Available at: <http://www.gao.gov/archive/2000/gg00067r.pdf>
- 105Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to UCITS as regards depositary functions, remuneration policies and sanctions  OJ L 302/32.
- 106Proposal for a Directive of the European Parliament and of the Council amending Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to UCITS as regards depositary functions, remuneration policies and sanctions COM(2012) 350 final.