It has now been almost two years since the United Kingdom (UK) left the European Union (EU) at 11pm on 31 January 2020. How has the legislative landscape changed for insolvency professionals since Brexit?
Whilst the UK left the EU on 31 January 2020, there was a transitional period following that date until 31 December 2020.
During that transition period, the EU legislation that was directly applicable in the UK remained in place and the UK was treated as if it were still a EU member state. As such, Insolvency Regulation 2000 No. 1342/2000 and the Recast Insolvency Regulation No 848/2015. (the Recast Insolvency Regulation) continued to apply during this period.
The European Union Withdrawal Act 2018 took a snapshot of EU law that already applied in the UK as at 31 December 2020 and incorporated it into English law before being amended by English legislation.
The Insolvency (Amendment) (EU Exit) Regulations 2019 (SI 2019/146) apply from 31 December 2020, although were amended on 1 November 2019 and 26 June 2020 (the Exit Regulations).
For the transitional period, the Exit Regulations retain the effect of the Recast Insolvency Regulation where main proceedings were opened before 31 December 2020. It expressly makes UK insolvency proceedings available to a debtor if the debtor has its COMI (Centre of Main Interests) in the UK, or in the EU with an establishment in the UK. It also retains the pre-existing jurisdictional reach of the UK Courts in relation to insolvency proceedings.
Post 31 December 2020, there are changes to the jurisdictional reach of the UK courts in opening insolvency proceedings, as detailed below. Further, the UK is no longer treated as an EU member state for the purpose of the Recast Insolvency Regulation and therefore the co-ordination mechanisms set out in the Recast Insolvency Regulation between EU member states and the UK no longer apply.
As a result, post 31 December 2020, a determination by a UK court or insolvency officeholder that the COMI of a debtor is in the UK will not bind the Courts of a EU member state, unless that member state has its own domestic law to this effect. If the COMI is in the UK, the Recast Insolvency Regulation will not apply in respect of the insolvency proceedings relating to the debtor in the EU.
UK Insolvency proceedings post 31 December 2020
UK insolvency proceedings will not be automatically recognised in EU member states and English law will not necessarily be recognised as the governing law of the insolvency proceedings by EU member states. Conversely, EU insolvency proceedings will not be automatically recognised in the UK such that the Model Law under UNCITRAL is likely to become of increased importance.
However, few EU member states have implemented the Model Law so that it will still be necessary for UK officeholders to seek recognition under the relevant local laws, whilst the question of whether additional insolvency proceedings can or cannot be commenced in a EU member state will now be determined by the domestic law of that member state.
If you need specialist legal advice on insolvency proceedings whether in the UK or abroad, please do contact our experts.
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