- EU Insolvency Regulation will cease to apply to the UK
- Insolvency proceedings opened in any EU Member State may be recognised by the UK courts based on the UNCITRAL Model Law
- Cross-border insolvencies between the EU and UK will likely become more time consuming, complex and expensive
- Recognition of UK scheme of arrangements post-Brexit may be subject to EU Member States' domestic laws, unless there will be an alternative for the Brussels I bis Regulation
EU Insolvency Regulation
The EU Insolvency Regulation provides common rules of jurisdiction for opening insolvency proceedings in the EU (excluding Denmark), the applicable law and the recognition of insolvency proceedings and judgments. After the transition period, the Insolvency Regulation shall cease to be effective in the UK and thus any insolvency and restructuring proceedings opened in the UK will no longer be automatically recognised in the EU and vice versa.
Future EU/UK relationship
It depends on the outcome of the negotiations between the EU and the UK whether the current arrangements between the EU and UK shall be maintained or whether no deal will be reached on this subject. The UK has indicated that it indents to enter into a new bilateral agreement with the EU which includes rules on jurisdiction and on recognition and enforcement of judgments in various areas, including insolvency matters.
If no agreement is reached at all, the domestic laws of the UK and the Member States shall apply to establish jurisdiction for opening insolvency and restructuring proceedings and the recognition of such proceedings in cross-border EU-UK situations. Insolvency practitioners from an EU Member State may not have authority over assets located in the UK anymore and vice versa. They will need to apply to the relevant UK or EU Member State courts to recognise their powers and authority and to seek assistance in recovering assets and distributions. Although the UK has adopted the UNCITRAL Model Law on Cross-Border Insolvency - based on which UK courts can recognise insolvency proceedings of EU Member States even if such Member State has not adopted the Model Law - recognition via the Model Law still requires a court application which will add time, cost and complexity to the recognition process.
Scheme of arrangements
The UK's scheme of arrangements does not fall within the scope of the Insolvency Regulation. It has been argued that the UK scheme will be recognised within the EU based on the Brussels I bis Regulation. However, the Brussels I bis Regulation will no longer apply to the UK after Brexit either. In a no-deal scenario parties may therefore need to fall back on domestic private international law of the individual Member States, unless alternative arrangements are put in place.
Please also see the articles on the impact of Brexit in other practice areas. For a more detailed analysis of the impact of Brexit on your business, please do not hesitate to contact any of our experts.