1. Thursday 1 October 2009 Academic Forum Sponsors

2. Welcome Back Professor Bob Wessels, University of Leiden

3. Third Session: Update on the European Insolvency Regulation III Florian Bruder, Max-Planck Institute, Hamburg

4. The EIR and Cases of Enterprise Groups – Lessons from UNCITRAL Working Group V Dr Irit Mevorach University of Nottingham

5. The EIR and the case of groups No explicit rules for groups in the EIR Group solutions applied in practice

6. UNCITRAL: deciding on the format Recommendations in the Legislative Guide A Model Law?

7. The doctrinal and theoretical contexts ‘Double complexity’- Multiple debtors [the group problem] Multiple jurisdictions [the cross-border insolvency problem]

8. The cross-border insolvency problem –Universalism : global approach Single forum-law Maximum cooperation –Territorialism : territorial approach State sovereignty The ‘centre forum’ will be unpredictable

9. The cross-border insolvency problem and the case of groups –The problem intensifies in the group context No ‘group centre’ (each company is locally registered) –Should we adopt a universalist or a territorialist approach in this context?

10. Criteria for assessment 1.Does the cross-border insolvency measure promote insolvency goals? (a fair and efficient insolvency system) 2.Does it unduly defeat territorialism concerns? (state sovereignty/ creditors expectations) Bearing in mind- The type of group (degree of integration/ centralization)

11. UNCITRAL suggestions on the international aspects Considering a concept of ‘group COMI’ –A ‘strong’ universalist concept –Centralizing members’ proceedings in a single jurisdiction

12. The benefits of identifying a group centre Promotes insolvency goals –If the group was integrated Does not defeat territorialism concerns –A predictable centre [integrated centralized groups] –Separate (but coordinated) processes [integrated decentralized groups]

13. Coordination Centre Minor Administrative Role ? ? ? ? ? ? Recommendations 1 & 2- removed to commentary Recommendation 2- rebutting the presumption by various factors Recommendation 1- centre presumed to be at the parent’s registered office Group COMI UNCITRAL: the tale of the group COMI concept

14. Coordination Centre Group COMI UNCITRAL: the tale of the group COMI concept

15. Coordination Centre UNCITRAL: the tale of the group COMI concept

16. Coordination Centre UNCITRAL: the tale of the group COMI concept Recommendation 2- rebutting the presumption by various factors Recommendation 1- centre presumed to be at the parent’s registered office

17. Minor Administrative Role ? ? ? ? ? ? UNCITRAL: the tale of the group COMI concept Recommendation 2- rebutting the presumption by various factors Recommendation 1- centre presumed to be at the parent’s registered office

18. Minor Administrative Role ? ? ? ? ? ? Recommendations 1 & 2- removed to commentary UNCITRAL: the tale of the group COMI concept

19. Group COMI/ coordination centre under the EIR? Automatic recognition facilitates enforcement Developing the COMI concept

20. Facilitating cooperation and communication- UNCITRAL suggestions Cooperation between parallel proceedings Direct communication Joint hearings Use of Protocols A single insolvency representative

21. Cooperation, groups and the EIR Facilitating the use of cooperation and communication mechanisms between affiliates’ proceedings Resolving jurisdictional conflicts

22. Conclusion UNCITRAL work- a major step in the right direction EIR could follow suit and be even more ambitious

23. Regulating the profession of insolvency practitioners in the European Union Emmanuelle Inacio, Université du Littoral Côte d'Opale

24. The Regulation of the Insolvency Profession and the European Insolvency Regulation –The entire profession of insolvency practitioners is referred to under the generic term of “liquidator” in its English translation in the EIR. –Article 2(b) of the EIR: the court having jurisdiction to open the insolvency proceedings appoints a liquidator or more specifically “any person or body whose function is to administer or liquidate assets of which the debtor has been divested or to supervise the administration of his affairs”. –Annex C of the EIR lists the liquidators mentioned in Article 2(b).

25. The Regulation of the Insolvency profession and the European Insolvency Regulation –Article 18 of the EIR considerably strengthens the scope of insolvency practitioners: the liquidator appointed by a court which has jurisdiction pursuant to Article 3(1) may exercise all the powers conferred on him by the law of the State of the opening of proceedings in another Member State, as long as no other insolvency proceedings have been opened there nor any preservation measure to the contrary has been taken there further to a request for the opening of insolvency proceedings in that State. He may in particular remove the debtor’s assets from the territory of the Member State in which they are situated, subject to Articles 5 and 7.

26. The Regulation of the Insolvency profession and the European Insolvency Regulation –EIR cannot guarantee that all insolvency practitioners will know and apply the Regulation with diligence. –Too great of a divergence in the implementation of the EIR by liquidators may impede upon the legal certainty which is required for businesses to guarantee their freedom of establishment in the Internal Market and at the same time jeopardise the initial objective of the Regulation of not fostering forum shopping. –Consequently, it will become more and more necessary to clearly identify, within the European Union, competent, very well trained and reliable insolvency practitioners. –The efficiency and reliability of the liquidator cannot be guaranteed other than through regulation of the profession.

27. The Regulation of the Insolvency profession and the Member States –Insolvency practitioners belong to various professions within the European Union: lawyers, jurists, chartered accountants, administrators, tax advisors, economists, legal administrators and legal liquidators. –Between 2003 and 2009, eleven Member States endowed themselves with a regulation governing access to and practise of the insolvency profession.

28. The Regulation of the Insolvency profession and the Member States –The convergence of Member States toward increased regulation of the insolvency profession is the consequence of the evolution of the insolvency law in the different States which is increasingly calling upon professionals and specialists due to the complexity and diversity of the tasks to be accomplished. –This evolution is also an indirect consequence of the implementation of EIR relating to insolvency proceedings which requires the use of qualified and pre-identified professions as insolvency practitioners in the different Member States where main and secondary proceedings will open.

29. The Regulation of the Insolvency profession and the European Law: The Regulation of the Insolvency Profession and Free Movement The Regulation of the Insolvency Profession and Free Competition

30. The Regulation of the Insolvency profession and Free Movement –The Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition of professional qualifications The Directive governs the recognition by the host Member State of professional aptitude acquired in the home Member State for enabling access to and the pursuit of a regulated profession to all citizens of the European Union, whether on a self-employed or employed basis (Article 2). The Directive therefore applies to all insolvency practitioners wishing to pursue, on a temporary and occasional basis or permanently this profession in another Member State where said profession is subject to regulation, whether or not it is regulated in his/her home Member State.

31. The Regulation of the Insolvency profession and Free Movement –The Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition of professional qualifications Under cover of confidentiality, the competent authorities must exchange information on disciplinary or criminal sanctions or any serious acts likely to have an impact on the practise of the profession (Article 8). The directive prescribes organizing a contact point in each Member State (Article 57). The Member States must also evaluate their own implementation of the Directive through periodic reports sent to the Commission every two years (Article 60).

32. The Regulation of the Insolvency profession and Free Movement –The Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition of professional qualifications The Commission is assisted by a Committee on the recognition of qualifications (Article 58) and must draw- up a report on the implementation of the Directive every five years (Article 60). All is planned for creating a new process for fostering mutual trust among the Member States.

33. The Regulation of the Insolvency profession and Free Movement –The Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition of professional qualifications The professional associations and organisations, which are representative at national and European level, are encouraged to develop “common platforms” (Article 15). The Directive encourages the introduction of “professional cards” at European level by professional associations or organisations (Recital 32). It is suitable to augur that this new type of permanent dialogue between the Member States might result in a spontaneous form of harmonisation of standards related to professional qualifications.

34. The Regulation of the Insolvency profession and Free Movement –The Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market The “Services” Directive aims to facilitate freedom of establishment for providers in other Member States and the freedom of provision of services between Member States. The Directive applies to any self-employed activity provided for economic return (with the exception of excluded sectors) while taking the specific nature of certain activities or professions into account. The “Services” Directive shall hence apply to all insolvency practitioners.

35. The Regulation of the Insolvency profession and Free Movement –The Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market As regards the free provision of services, the Directive aims at combating any barriers which concern access to a service activity or the exercise thereof in the Member State where the provision is provided. However, the Directive recognises the right for Member States to impose restrictions on the freedom to provide services. Article 16 recognises the right for Member States to impose requirements non-discriminatory, necessary and proportionate to the objective pursued, but only for four possible reasons: public policy, public security, public health or the protection of the environment.

36. The Regulation of the Insolvency profession and Free Movement –The Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market The directive strengthens freedom of establishment. The Member States must voluntarily eliminate “prohibited requirements” as nationality requirements, establishments and economic test (Article 14) and evaluate and change the requirements which are subject to evaluation (Article 15). Such requirements correspond to non-discriminatory and proportional derogations justified by an overriding reason relating to the public interest.

37. The Regulation of the Insolvency profession and Free Movement –The Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market A duty of mutual assistance is established among the Member States (Article 28): a liaison point is appointed in each State for facilitating exchange of information. The Member States shall present a report to the Commission at the time of transposing the directive on 28 th December, 2009 (Article 39) about the result of the screening of their own legislation in terms of authorisation schemes, requirements to be evaluated and multidisciplinary activities. Also, the Commission proposes that, later, the Member States comment on each other’s reports.

38. The Regulation of the Insolvency profession and Free Movement –The Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market In its convergence programme, the Commission plans to develop codes of conduct at Community level. Such codes may cover rules governing professional ethics ensuring independence, impartiality, professional secrecy, insurance and guarantees, commercial communications and multidisciplinary activities.

39. The Regulation of the Insolvency profession and Free Movement –Whether it be through the Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition of professional qualifications and the Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market, the Internal Market and Services DG encourages comparison among the Member States in view of establishing a relation of equivalence among them or within a process of redefinition on a Community level. –The regulatory situation of insolvency practitioners could also evolve toward a sort of voluntary harmonisation with standards related to professional qualifications and code of ethic.

40. The Regulation of the Insolvency profession and Free Competition –The Commission’s Directorate General for Competition is encouraging Member States to tackle anti-competitive regulations in the sector of the liberal professions. –Report on Competition in Professional Services of 9 February 2004 advocates deregulation to provide a better service to consumers. –The report covers six professions including lawyers and accountants and deals with five restrictive regulations:(i) price fixing, (ii) recommended prices, (iii) advertising regulations, (iv) entry requirements and reserved rights, and (v) regulations governing business structure and multi- disciplinary practices.

41. The Regulation of the Insolvency profession and Free Competition –According to the Commission, a significant body of empirical research shows, the negative effects that excessive or out dated restrictive regulations may have for consumers. Such regulations may eliminate or limit competition between service providers and thus reduce the incentives for professionals to work cost-efficiently, to lower prices, to increase quality or to offer innovative services. –There are essentially three reasons why some regulation of professional services can be necessary: asymmetry of information between customers and service providers; externalities; and certain professional services are deemed to produce ‘public goods’ that are of value for society in general. –Proponents of restrictive regulations argue therefore that such regulations are designed to maintain the quality of professional services and to protect consumers from malpractice.

42. The Regulation of the Insolvency profession and Free Competition –The Commission invites the regulatory authorities of the Member States to proceed, themselves, with evaluating the anti-competitive effects of their regulation and examining the possibility of whether or not to correct it by replacing it with methods which are less harmful to the competition. –The Commission invites all involved to make a joint effort to reform or eliminate those rules which are unjustified. Regulatory authorities in the Member States and professional bodies are invited to review existing rules taking into consideration whether those rules are necessary for the public interest, whether they are proportionate and whether they are justified.

43. The Regulation of the Insolvency profession and Free Competition –The Commission reported in 5 September 2005 on progress made by the Member States in the review and removal of restrictions on competition is modest. Only one-third of the Member States seem to have progressed somewhat in the analysis. –The Commission observes a lack of “political ownership” of pursued objectives and urges Member States to demonstrate “more urgency” to bring about systematic pro-competitive reform. –The Commission also observes that professions have in general not been actively promoting the process. –Finally, upon drafting an action plan, the Commission set the deadline by 2010 for enabling Member States to make good progress.

44. The Regulation of the Insolvency profession and Free Competition –Both reports analyse the application of EC competition rules to the regulations in the sector of liberal professions found both in measures adopted by professional associations and in legislative or regulatory instruments adopted by public authorities. They both can be held liable for an anti- competition regulation. –The ECJ henceforth demands that must be taken into account “the overall context in which the decision of the association of undertakings was taken or produces its effects. More particularly, account must be taken of its objectives, which are connected with the need to make rules relating to organization, qualifications, professional ethics, supervision and liability, in order to ensure that the ultimate consumers of professional services and a specific public interest purpose are provided with the necessary guarantees in relation to integrity and experience”.

45. The Regulation of the Insolvency profession and Free Competition –The Directorate General on Competition challenges the professional regulation on a number of points: entrance conditions to the profession, publicity, multidisciplinary practice and tariffs... –Certainly, the Member States should perceive that it is in their interest to get rid of any superfluous and protectionist regulations destined to preserving the advantages of established positions. –But this can make it difficult to be heard by the DG Competition on the party line advocating regulation of a profession as the insolvency practitioners...

46. Whilst the moment tends rather toward a deregulation of the regulated professions, concerning insolvency profession, it is a contrary undercurrent which has commenced. The Directorate General on Competition seems to not reinforce or encourage the elaboration of new professional statuses but rather to militate in favour of their dismantling or, at the very least, a major review as to their protectionism, even corporate spirit. On the contrary, the Internal Market and Services Directorate General encourage the elaboration of standards related to professional qualifications and codes of ethic. In general, it is indeed necessary to exchange information and experiences for purposes of fostering an even greater rapprochement between insolvency practitioners in the various States in the interest of businesses and their creditors within a more and more integrated single market and striving toward a unified European statute for the profession.

47. Fourth Session: Younger Scholars Forum Dr Paul Omar, University of Sussex

48. Application of the EIR Fredrik Berg Hanna Wennerlund Linköping University

49. The Insolvency Regulation An Evaluation of the present Regulation and the future Development

50. 1.What problems arise from the ambiguous definition, and the risk of misinterpretation, regarding the CoMI of the debtor in the EIR?

51. 2.Does the EIR reach its aim to counteract forum shopping regarding emigration of the CoMI of companies?

52. 1.What problems arise from the ambiguous definition, and the risk of misinterpretation, regarding the CoMI of the debtor in the EIR? 2.Does the EIR reach its aim to counteract forum shopping regarding emigration of the CoMI of companies? 3.Is there a need for any amendments to be done in the upcoming revision in regards to question 1 and 2?

53. CoMI Article 3.1 “ The courts of the Member State within the territory of which the centre of a debtors main interest is situated shall have jurisdiction to open insolvency proceedings. In the case of a company or legal person, the place of the registered office shall be presumed to be the centre of main interest in the absence of proof to the contrary.”

54. Forum shopping Aim Free movement Protection of creditors

55. Revision Forum shopping CoMI

56. Amendment - CoMI Article 3.1 “ The courts of the Member State within the territory of which the centre of a debtors main interest is situated shall have jurisdiction to open insolvency proceedings. In the case of a company or legal person, the place of the registered office shall constitute the centre of main interest.” Ringe, Forum Shopping under the EU Insolvency Regulation, p. 27.

57. Amendment - CoMI Article 3.1 “ The courts of the Member State within the territory of which the centre of a debtors main interest is situated shall have jurisdiction to open insolvency proceedings. In the case of a company or legal person, the place of the registered office shall constitute the centre of main interest if it is not obvious that the centre of main interest is not where the registered office is.”

58. Amendment

59. “ A company which becomes insolvent within six months from the time that it has transferred its registered office to another Member State shall be considered as having its registered office in the Member State where the company was registered prior to the transfer if the transfer has not been certified.”

60. Certification Decision at General Meeting Transfer proposal Report Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European Company (SE)

61. Company A is a solvent company which wants to transfer its registered office from Sweden to Ireland due to more favourable tax legislations.

62. Company B possess the risk of insolvency, hence, it wants to transfer its registered office from Germany to England in order to be an object for a company rescue package. Company B is aware of its risk of insolvency, hence, it accomplishes the criteria, including the approval of the creditors, to get a certified transfer.

63. Company C posses the risk of insolvency, hence it wants to transfer its registered office from Germany to England in order to be an object for a company rescue package. Despite the risk of insolvency, Company C transfers its registered office without a certificate. Within the set time limit the Company becomes insolvent.

64. Conclusion - Amendment Company Law and Insolvency Law Avoid forum shopping Protect creditors Predictability Efficiency Flexibility

65. The courts of the Member State within the territory of which the centre of a debtors main interest is situated shall have jurisdiction to open insolvency proceedings. In the case of a company or legal person, the place of the registered office shall constitute the centre of main interest if it is not obvious that the centre of main interest is not where the registered office is. A company which becomes insolvent within six months from the time that it has transferred its registered office to another Member State shall be considered as having its registered office in the Member State where the company was registered prior to the transfer if the transfer has not been certified.

66. Thank you! f.g.berg@gmail.com hanwe882@student.liu.se

67. International Insolvency and Reservation of Title from a Comparative Perspective Sandie Calme

68. Europeanization/Internationali zation of Private Law  affects Insolvency Law

69. Research Projects such as the work Of the Working Team for Credit Securities in the Study Group on a European Civil Code

70. French Law on Reservation of Title Reform: Order No 2006/346 of the 23rd of March 2006 In particular: insertion of definition and regulation for reservation of title in the French Civil Code: Art. 2367 to 2372

71. French Law on Reservation of Title Specific treatment of the question of intervention of a credit institute Specific treatment of the case of motor vehicles

72. German Law on Reservation of Title A qualification as Reservation of Title ‘in case of doubt’

73. German Law on Reservation of Title Specific kinds of Reservation of Title: -“verlängert” (elongated):  resale  transformation of the good -“erweitert“ (enlarged): prohibition of “Konzernvorbehalt” -“weitergeleitet” (forwarded) -“nachgeschaltet” (subsequent)

74. German Law on Reservation of Title Specific treatment of the question of intervention of a credit institute Specific treatment of the case of motor vehicles

75. European juridical dimension of Reservation of Title Directive combating late payment in commercial transactions  with its own definition of Reservation of Title

76. European juridical dimension of Reservation of Title European Regulation (EC) no 1346/2000 of 29 May 2000 on insolvency proceedings: -Art. 7, Reservation of Title -Art. 5, Third parties rights in rem

77. Which role for the UNICITRAL Model Law on Cross-Border Insolvency in the legal harmonization on Reservation of Title? -a „free“ legal frame -targeting cooperation and coordination for cross-border insolvency proceeding -„centre of main interests“  main proceeding -„establishment“  foreign non-main proceeding

78. Which role for the UNICITRAL Model Law on Cross-Border Insolvency in the legal harmonization on Reservation of Title? Some differences with the EC-Regulation no 1346/2000, but in particular:  impact as for the German enlarged Reservation of Title  a call to the intra-community legislator?

79. The possible intervention role of the judge -Trib. Com. Nanterre, 19th of April 2005, SAS Rover, JCP G 2005, II, 10116, M. Menjucq - CA Versailles, 15 December 2005, SAS Rover France/Ministère public, RG n°05/04273

80. As a matter of conclusion It is up to the European Court of Justice! dealing with some questions for Reservation of Title with an international intra-community insolvency (challenge) - Case No C-292/08

81. Pre-Draft Dutch Insolvency Act and the Croatian Bankruptcy Act Compared Arnela Čolo, Leiden Law School

82. Introduction Dutch BA (1896) Pre-Draft (2007) Croatian BA (1997-2000)

83. Current Dutch BA: 3 articles Supreme Court: Universality/ Territoriality Grab-Rule

84. Aims Commission (2007): Modern, workable cross- border insolvecy tool

85. Mixed influence by Model Law and InsReg Recognition/Cooperati on (Model Law) Law applicable/Powers (InsReg)

86. Chapter 10.5 – International Cooperation Article 10.5.1 – Cooperation and Exchange of Information by Courts in the Netherlands 1.In relation to judicial decisions made pursuant to this Act and the settlement of the insolvency the court may, to the maximum extent possible, either directly or through the intermediary of the administrator or of a third party, provide information to, communicate with or cooperate otherwise with the foreign court or with the foreign liquidator. 2. The power within the meaning of the first paragraph applies equally in cases to which the EC Insolvency Regulation applies.

87. Conclusion

88. Coffee Break

89. Fifth Session: State Aids and Insolvency Stefania Bariatti, University of Milan

90. The Automobile Bankruptcies in the United States: Government Aid in Bankruptcy and the Future of Chapter 11 Paul B. Lewis Professor of Law Insol Europe Academic Forum, 2009 Stockholm, Sweden

91. I.Introduction A.The Chrysler and General Motors bankruptcies in the United States were unprecedented for the amount of government involvement: 1.Both Financial and Substantive; 2. Billions in relief from Troubled Asset Relief Program (“TARP”) funds; 3.Active control of the restructuring processes. B.Presentation will consider the Chrysler and GM bankruptcies in light of their meaning for the future of corporate reorganization of major international American companies under United States bankruptcy law.

92. Positives and Negatives of Government involvement: 1.Chapter 11 bankruptcy process in all likelihood allowed General Motors and Chrysler to survive. a.Financing made survival possible, at least short-term. b.Still have ramifications resulting from decades of is management. 2.But bankruptcy clearly has its limitations. a. Ignoring traditional bankruptcies rules has potential long-term ramifications.

93. In this Presentation I am going to do the following: 1. Give an overview of the lead-up to the Chrysler and GM Bankruptcies. 2.Provide a primer of the traditional Chapter 11 reorganization process. 3.Discuss what actually happened in the Chrysler and GM bankruptcies. 4.Discuss the Potential Long-Range ramifications – both positive and negative – of the US government’s actions in the two bankruptcies.

94. II.The Lead up to the Chrysler and GM Bankruptcies A.Major Government Involvement 1.Began in earnest in November, 2008, when Congress required GM and Chrysler to submit restructuring plans in order to obtain government financing. 2.December, 2008, Congress created the U.S. $ 700 billion Troubled Asset Relief Program, in part as a lifeline for the auto industry. 3.15 February, 2009, the government created an Auto Task Force charged with insuring fair treatment for all stakeholders and overseeing tax payer resources invested in the companies.

95. B.Chrysler – A Brief History 1.2006 – Chrysler reports $1.5 billion loss and drops to fourth in American car sales. 2.September 2008 – Chrysler announces that its sales are down an additional 32.8%. 3.December 2008 – Chrysler receives its first $4 billion loan from U.S. government. 4.January 16, 2009 – U.S. Treasury Dep. announces it will lend Chrysler’s finance unit $1.5 billion from TARP funds to finance loans for consumers. 5.January 20, 2009 – Fiat agrees to take 35% stake in Chrysler.

96. 6.February 17, 2009 – Chrysler files restructuring plan with the Treasury Department that would cut 3000 jobs and asked for additional $2 billion loan. 7.March 30, 2009 – U.S. Govt. rejects Feb. 17 plan. 8.April 26, 2009 – Under governmental pressure, UAW agrees to deal that cuts benefits and gives union 55% of shares, which covers half of Chryslers’ obligation for retiree health benefits, resulting in making UAW the largest shareholder. 9.April 28, 2009 – Treasury’s Department obtains acceptance on its third proposal for dealing with Chrysler secured debt – secured creditors get $2 billion in cash in exchange for their $6.9 billion debt obligations, or 29 cents on the dollar. 10.April 30, 2009 – Chrysler files for Chapter 11 in New York.

97. The government’s involvement with Chrysler included: A.Financing – ultimately $1.9 billion in DIP financing and an additional $6.3 billion in exit financing. B.A proposed business plan whereby Chrysler would insure viability by partnering with Fiat. C.Negotiations with creditors and other stakeholders – most notably getting the secured creditors to exchange their $6.9 billion in outstanding debt for $2 billion in cash. D.Shaping the 363 sale to Fiat.

98. C.General Motors – A Brief History 1.In 1994, G.M. held 33.2 percent of the American car market. a.By 2009, it was down to 18.8 percent. 2.In 2008, G.M. lost more than $30 billion. a. GM common stock traded at $93.62 per share in 2000; b.On 15 May, 2009, it traded at $1.09. 3.10 October, 2008 – General Motors says bankruptcy is not an option. 4.November, 2008 – GM seeks financial assistance from the U.S. government.

99. 5.7 November, 2008 – GM reports its fifth straight quarterly loss and warns that it may run out of cash by early 2009. 6.21 and 22 November, 2008 – The United States Congress requires GM (along with Chrysler) to submit restructuring plans to the government by 2 December in order to obtain government financing.. 7.2 December, 2008 – General Motors submits a new business plan to Congress in an effort to obtain $12 billion in federal loans and a $6 billion line of credit. 8.December, 2008 – General Motors proposed viability plan is rejected by Congress and Treasury Department imposes numerous conditions.

100. 9.December 31, 2008 -- GM and U.S. government enter into a Loan and Security agreement providing up to $13.4 billion in financing. 10.March 29, 2009 – Gov’t demands resignation of GM CEO Rick Wagoner. 11.March 30, 2009 -- Gov’t announces GM new viability plan is inadequate. 12.May 8, 2009 -- GM announces first quarter 2009 financial results 13.May 31, 2009 -- Roughly 54% of GM bondholders indicate support for a U.S. treasury-brokered swap that may help speed up a Chapter 11 bankruptcy. 14.June 1, 2009 -- GM files its Ch. 11 petition in the Southern District of NY.

101. Government involvement with GM included: A.Providing billions in financing. B.Replacing senior management. C.Negotiating with creditors and other stakeholders. D.Engineering 363 sale and essentially buying company.

102. III.The Chapter 11 Process (much negotiation) A.DIP operates business and tries to formulate workable rescue plan. 1.DIP retains broad powers to continue to run the business until confirmation or liquidation, including to sell, use, or lease collateral pursuant to § 363. B.Exclusivity. C.Disclosure. D.Creditor Voting.

103. E.Debtor satisfies other confirmation requirements. F.Once the bankruptcy court confirms a plan, the effect is to: 1. Vest property of the bankruptcy estate in the reorganized company, unless the plan provides for the property to be transferred to another party; 2.Discharge pre-confirmation obligations; and 3.Replace old debts with new debts provided for under the plan.

104. G.Changing Role of Chapter 11. 1.Ch. 11's traditional function is to provide a structure to enable the rescue of financially distressed corporations through a negotiated restructuring. 2.Focus now much more on sales of assets.

105. IV.The Chrysler and GM Bankruptcies A.The Chrysler Bankruptcy - filed April 30, 2009 – key elements. 1.Chrysler and Fiat create alliance – the 363 Sale to Fiat. a.Terms of Winning 363 Sale to Fiat include that Fiat will have 20% of equity of reorganized Chrysler and can earn up to 15% more (in 5% increments) based on performance. b.UAW will get 55% share, Fiat 20%, US government gets 8% and Canada and Ontario get 2% share; remaining 15% can go to Fiat based on merit and performance (e.g. if it can produce a car that gets 40 mpg in the US).

106. 2.U.S. Gov’t ultimately provides ultimately $1.9 billion in DIP financing and an additional $6.3 billion in exit financing. 3.Canadian Gov’t to provide another $2.6 billion. 4.Treasury forgives $4 billion lent to Chrysler last year from Bush administration. 5.Treasury lends Chrysler additional $3.3 billion: $2 billion to pay secured creditors, and $1.3 billion to cover Chrysler’s costs while in bankruptcy.

107. 6.The United Auto Workers made sizable concessions on wages, benefits, and retiree health care to bring Chrysler’s compensation in line with Toyota and other competitors. 7.The UAW retirees exchanged an almost $8 billion fixed obligation to the Voluntary Employee’s Beneficiary Association (“VEBA”) retiree health trust for a $4.6 billion unsecured note and stock in New Chrysler. 8.Chrysler’s largest secured creditors agreed to exchange $2 billion in cash for their $6.9 billion in outstanding secured debt.

108. B.The GM Bankruptcy – filed June 1, 2009 – key elements: 1.New GM purchases the key assets of GM, including Chevrolet and Cadillac brands, as a company whose majority owner is the U.S. Treasury. 2.Old GM is renamed “Motors Liquidation Company,” and remains in Bankruptcy. 3.The 363 Sale – The New General Motors completed its purchase of assets through the bankruptcy process on July 10, 2009.

109. 4.Among the critical elements that allowed General Motors to emerge were the following: a.The United Auto Workers made sizable concessions that have resulted in the new GM having wage rates comparable to its foreign competitors. b.Unsecured creditors receive 10% of the equity of New GM plus warrants for an additional 15% of the new company. 5.§ 363 Sale Terms a.The United States and Canadian governments were the only willing bidder for GM’s business. b.No private lenders willing to provide GM with DIP financing. c.The terms of the bid were prescribed by the government.

110. 6.The key terms of its bid are as follows: a.New GM, the government-backed entity, will acquire all of Old GM’s assets with the exception of certain assets expressly excluded under the Money Purchase Agreement. b.Old GM will retain all liabilities except those defined as Assumed Liabilities. 7.U.S. Treasury to own 60.8% of common stock in New GM.

111. V.Ramifications of the GM and Chrysler Bankruptcies. A.After considering the benefits of the government action, there are basically 5 key points I want to make regarding issues that are troubling. 1.The traditional Chapter 11 process was not followed, and there are inherent costs. 2.Bankruptcy priorities were reordered. 3.The 363 sales were abusive. 4.There was improper forum shopping. 5.We may see negative effects on future reorganizations.

112. B.Benefits of the government’s actions: 1.The size of the two companies made their survival of fundamental importance to the American economy. a.Congress is charged with insuring the vitality of interstate commerce in the U.S. b.Thus, with many thousands of jobs and stake and even more retirees dependent for survival upon retirement benefits, as well as countless ancillary businesses and their employees at risk, Congress had an obligation to intervene. c.Other federal concerns suggest that Congressional involvement is warranted. d.Arguably, only the massive intervention by the federal government in the GM and Chrysler bankruptcies made survival a possibility.

113. C.Critiques 1.The traditional Chapter 11 process was not followed. a.U.S. bankruptcy laws are well-designed to deal with the restructuring issues raised by the GM and Chrysler bankruptcies. b.The benefits of the restructuring process are lost. c.Neither GM nor Chrysler was forced to go through the full bankruptcy process which is designed to narrow focus on finances and sustainability. d. Chapter 11 largely succeeds. e.The process is also a check on managers overestimating the likelihood of reorganizations succeeding.

114. 2.Bankruptcy priorities were reordered. a.Destroys contract rights. i.The traditional priority structure in the United States for reorganizations guarantees senior lenders the right to be paid before junior parties. ii.The Chrysler sale undermined the established priority scheme by: (1).setting an undervalued sale price that brings the company far less than it should have received; while (2).simultaneously promising lower priority creditors a significant recovery. b.Thus, the 363 sale was used to force a restructuring on reluctant secured creditors, to in effect force them to pay for part of that re- structuring, and to favor certainly politically desirable parties.

115. 3.May effect Future Lending a.First, because the established priority rules were circumvented, the codified protections for senior creditors were destroyed. b.This may well result in increased lender reluctance to finance financially troubled companies in the future. c.This impaired access to debt and capital may well stymie future restructuring. d.So, there is reason to believe that more traditional bankruptcies – though certainly they would have taken longer – would have better positioned the companies for competitiveness in the future.

116. 4.The 363 sales were legally abusive a.GM argued that given the size of its secured debt -- $27 billion – there was no alternative but to have the 363 sale with no traditional buyer. b.The buyer being effectively the US government as the New GM – Gov’t gets 60 percent controlling stake in the NEW GM in exchange for $30 billion in capital. c.But, it was a sham sale to favored parties i.The purpose of this seems primarily to circumvent the established voting procedures. ii.The 363 sales were sales in only form, not in economic reality. d.Unduly restrictive bidding procedures improperly determined nature of proceeds distribution. e.Speed of bankruptcies troubling.

117. 5.There was improper forum shopping. a.The companies are Detroit companies, and the bulk of their suppliers are located there as well. Yet, the cases were filed in NY. i.The result is to limit participation of some interested parties. (1).And, about 70% of all such filings are in one of two places – Delaware and New York. ii.As a result of the forum shopping, there was significant bias in favor of managers, professionals and DIP lenders.

118. 6.We may see negative effects on Future reorganizations a.Other bankrupt companies are likely to try to strategize to achieve the same results – avoid lengthy stays in bankruptcy in a similar sale. b.This may occur without insufficient regulation and without thorough examination of relevant issues.

119. VI.Conclusions A.Thus, the biggest ramifications of government involvement in the auto bankruptcies are at least twofold. 1.First, the government has established a precedent whereby insiders of financially troubled companies can propose non-neutral sales of assets benefitting certain stakeholders at the expense of others. 2.Second, because established legal priority rules were circumvented and the codified protections for senior creditors were ignored, future lenders may be reluctant to finance financially troubled companies at an acceptable interest rate.

120. (topic to be confirmed) Professor Ulrich Ehricke, University of Cologne

121. Recovery of unlawful State Aid and the Insolvency of a Company Prof. Dr. Ulrich Ehricke, LL.M. (London), M.A. University of Cologne

122. Introduction European law of State Aid shall prevent the distortion of competition (Art. 87-89 EC Treaty) State Aid frequently based on structural or labor market policy considerations when companies face difficulties As a rule state aid is prohibited (Art. 87 para 1 EC Treaty) Exception: Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty

123. Unlawful State Aid Formal illegality  No State Aid notification submitted to the Commission  Payments made without awaiting decision of the Commission Defects of substantive law  Commission declared State Aid to be incompatible with Community law Consequence: Art. 14 para. 1 and 2 Reglulation 659/99  Obligation to the state to recover any State Aid granted

124. Recovery of unlawful State Aid The aim is to reverse any distortion in competition resulting from the State Aid Book provisions for the repayment?  Could force company into Insolvency proceedings CELF case (C-199/06, Judgment 12.2.08)  Commission approved aid after national court ordered repayment  Only liability to pay interest for the period of unlawfulness Obligation to recover State Aid using all means available  Exception: absolute impossibility

125. Recovery during Insolvency proceedings Recovery becomes factually impossible  Duty to the state to lodge claim during insolvency proceedings Risk of distortion of competition only ceases to exist after liquidation of the company  Unless unlawful State Aid is fully repaid, obligation to prevent restructuring of the company No preferential treatment of repayment obligation in violation of national insolvency law Under-value sales by administrator  No State Aid, as long as administrator does not act on behalf of state (e.g. Germany)  Might be possible, if administrator’s office is state function (rejected in rechter-commissaris case T-81/07, Judgment 1.7.09)

126. Recovery from third parties Possible, when sold during course of insolvency proceedings Share-deal  In general, change in ownership does not affect liability for repayment of State Aid  Exception: Sale at full market value & purchaser in good faith  vendor liable for repayment

127. Recovery from third parties (cont.) Asset-deal  In general, buyer not liable for repayment of the State Aid, if Repayable sums claimed during insolvency proceedings Sale conducted at initiative of administrator Sale at full market value / “though the market”  If conditions are not met, recovery from the beneficiary of the acquisition (not necessarily the buyer)

128. Thank you for your attention!

129. State Aids from the Perspective of Accession Members Signe Viimsalu, Estonian Development Fund, Tallinn

130. State Aids from the Perspective of Accession Member States Signe Viimsalu

131. Subthemes: 1.Definition and basic principles 2.Differences for accession member states 3.Recent trends 4.Possible legal challenges in the future

132. State Aid – a Definition? Art 87 (1) of EC Treaty “granted by a Member State or through State resources/.../ in any form whatsoever /.../ save otherwise provided in Treaty” Substance, not form, is the criterion when defining state aid

133. Art 87 (2): the following shall be compatible with the common market: (a) aid having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned; (b) aid to make good the damage caused by natural disasters or exceptional occurrences; (c) aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division.

134. Art 87 (3): The following may be considered to be compatible with the common market: (a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment; (b) aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State; (c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest; (d) aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Community to an extent that is contrary to the common interest; (e) such other categories of aid as may be specified by decision of the Council acting by a qualified majority on proposal from the Commission.

135. Supervision: Based on a system of ex ante authorization /ex ante notification Standstillprinciple Any aid, which is granted in absence of EC approval, is automatically classified as unlawful aid. Obligation of EC to order the recovery from the beneficiaries of any unlawful aid that is found to be incompatible with the common market.

136. Case of Accession Member States: Qualified as assisted areas (Art 87 (3) (+) Different approach from EC (-) Special limited transitory regimes applicable (+) Second layer added to the filtering process of pre-accession aid and screen decisions taken by the national state aid bodies in candidate countries (interim procedure). (+and - )

137. Recent trends in the light of changing economic landscape: General Block Exemption Regulation (GBER) – categories of aid measures contained in it are exempted from the notification requirement Rapid support schemes and ad hoc measures to meet the existing financial crisis challenge Temporary Community Framework up to December 2010

138. Granting state aid is possible: 1)before 2)during 3)after insolvency proceedings Dimensions to consider before ordering recovery: 1) EC competition law 2) Domestic laws: a)Corporate law b)Administrative law c)Law of Obligations 3) “Cross-Border” STATE EDF + co- investor (risk capital: equity) EDF + co- investor (risk capital: equity) Enterprise Estonia (subsidies) Enterprise Estonia (subsidies) A LUX tax pref eren ces A LUX tax pref eren ces B LA T qua rant ees B LA T qua rant ees C EST C EST PARENT/ HOLDING (EST) PARENT/ HOLDING (EST) OTHER MEMBER STATES

139. Challenges: Under Art 10 EC Treaty, national courts are in principle obliged to give full effect to the Commission decision. Art 14 of EC Regulation 659/1999 requires MS-s to take all necessary measures to recover the aid from beneficiary according to the procedures under the national law of the MS-s. As long as the MS has not taken any attempt to recover the unlawful aid, it will not be accepted that recovery is absolutely impossible.

140. Next steps? More legislative initiatives from EC/the MS? To what direction? In what extent?... Questions, questions, questions...

141. Lunch

142. Introduction of Guest Speaker Marc Udink, INSOL Europe General Secretary

143. Edwin Coe Lecture “New World and Old World – Symphony or Cacophony? Comparison of US and EU case-law on COMI under the Regulation and under the Model Law” Gabriel Moss, QC

144. Closing Address Dr Paul Omar, University of Sussex