1. The application of EIR rules concerning lodging, verification and admission of claims in Italy. Theory and Practice Giorgio Corno

2. Relevant EIR Rules a.Conflict of laws rules: save as otherwise provided in the Regulation, lex concursus applies to: a.claims which are to be lodged against the debtor's estate and the treatment of claims arising after the opening of insolvency proceedings (Art. 4, par. g); b.the rules governing the lodging, verification and admission of claims and h) EIR). b. Uniform law rules -Exercise of creditors’ rights (artt. 32) -Right to lodge claims (art. 39 EIR) -Duty to inform creditors (art. 40) -Content of the lodgment of a claim (art. 41) -Languages (art. 42 EIR)  Need for coordination

3. Guiding principles a.Equal treatment of creditors (recital 21) : general principle of equality collectivity ( par est condicio creditorum omnium ) non discrimination, on the grounds of nationality b.Proportionality (recital 6)  EIR deals with some aspects only of EU cross border insolvency proceedings: jurisdiction; judgments; their recognition, applicable law Need for: a.efficient and effective operation of cross border insolvency (recital 8) b.Proper functioning of the internal market (recital 2)

4. The risk of reverse discrimination Favor for EU creditors, where rules set by lex concursus are more severe than EIR rules some examples under Italian regulations –opening of a secondary proceeding against non trade debtor –lodgment of claims national need to be made uniform to EIR rules. no present discussion under Italian legislator

5. The Italian practice in lodging EU Creditors’ claims Survey among Italian insolvency professionals (January – March 2011) : 300 questionnaires forwarded to Italian insolvency professionals belonging to international insolvency associations (III, Insol Europe); national insolvency associations; personal contacts in Milan, Bologna, Rome and Monza; 38 replies: –63% office holders; 34% lawyers –76,32 % belong to Milan and Monza area –Majority aged between 36 and 55 years old; and practiced insolvency law for more than 16 years –60,5% are aware of provisions of Regulation 1346 (“EIR”)

6. Exercise of creditors’ rights in insolvency proceedings. Right to lodge claims (Artt. 32 and 39 EIR)

7. EIR and creditors’ rights in insolvency proceedings? a.Lodgment b.Opposition to the allowance of the claim of another creditor c.Petition for revocation of a lodged claim d.Attendance of creditors' meetings Right to be heard (opportunity to make his point of view known to the court / liquidator)

8. Follows on. Lodgement a.Right to achieve satisfaction on the proceeds and, specifically, to: recover a credit or demand assets by a third party b.Any action taken in the creditor’s activity to: establish its claim have it admitted or aknowledged in an insolvency proceeding, based on: The type of proceeding (winding up / restructuring) The applicable lex concursus. Italian regulations

9. Follows on. Multiple cross-filing artt. 32.1 and 32.2 EIR acknowledge simultaneous lodgment in any insolvency proceedings (main or territorial) opened, concerning the same debtor Benefits : – everyone is ensured right to participate; – reduction of incentives to parties’ strategic conducts; – reinforcement of liquidator’s powers; – coordination in proceeds’ distribution (hotch pot rule. Art. 20.2 EIR)

10. Which claims? Against insolvency proceedings (winding up / restructuring) When was the claim born: – Prior to the opening – During the insolvency proceeding (ie. Liquidators’ claims) Applicable law (art. 4 lett. g): –lex concursus –unless otherwise stated by the EIR Type: pre-preferential, secured, unsecured claims When several insolvency proceedings regarding the debtor  claims recognized in a foreign proceeding concerning the same debtor – Judgments  recognition issues (art. 25 EIR) – Authentications by liquidators

11. EU Tax and social security authorities’ claims – “Revenue rule” does not apply to EU tax and social security authorities’ (SSA) claims – Territorial nature may obstacle establishment of an internal market – Lodgment cannot be disallowed on the grounds that it is governed by the public law of another Member State (Virgòs Schmit)  – Which claims? – direct or indirect tax, including VAT or local taxes – fines or financial penalties ? (doubts from Wessels and Van der Plas) – subrogated right after having paid certain amounts to employees (Paulus) – Lex concursus sets whether a tax or ssa claim is secured or unsecured – More interest expected, due to public finances state Italian survey: tax claims (2,63% among respondents aware of EIR); SSA claims (5,263% among respondents aware of EIR)

12. Subjects entitled to take advantage of EIR when lodging their claims a.Creditors: –EU creditors, ie those who have their domicile, habitual residence or registered office (Brussels I Regulation (44/2001)) in a Member State other than the opening (art. 39 and 32.1 EIR)  Included –National / non EU creditors  Excluded. Lex concursus applies Italian survey: no problems, either in liquidation or winding up proceedings a.Any creditor, inclusive of: –EU tax and social insurance institutions –liquidators in main and secondary proceedings

13. Follows on. Liquidators Which claims? –already lodged in their proceedings, inclusive of the claims related to their activity –not contested by the liquidator Where? in main or territorial proceedings Is it a duty? Yes, when – usefulness for creditors or creditors’ classes – No creditors’ opposition or withdrawal from their claims Scope: overcome restrictions provided by the lex fori secundarii, because of nationality, lex causae, others Legal grounds liquidator’s powers: art. 18.1 EIR Compliance with lex concursus: art. 18.3 EIR Effects  liquidator considered as any creditor

14. Lex concursus Sets, with respect to lodgment, admission and verification of claims: time limits; penalties for exceeding those time limits admissibility and foundation of the lodgment and relative claims verification costs ways in which a claim must be lodged, and burden of proof to be satisfied eligibility of an appeal against the decision concerning the lodging capacity of a creditor to contest lodgments of others Specific issues dealt with by EIR (artt. 40 – 42)

15. Information to creditors (Artt. 40 and 42.1 EIR)

16. Information regarding insolvency proceedings Need to: –attest starting the proceedings in the interest of creditors; –facilitate foreign creditors as well as liquidator’s activity; – make the insolvency opening decision enforceable against third parties; – warn third parties of the decision of the opening of the proceeding Which information? –Opening of the proceeding (art. 21) –Notice to creditors regarding lodgment (art. 40) Absence of a community register of insolvency proceedings

17. Follows. Notice to the creditors (art. 40 EIR) Duty to inform known foreign creditors lies on l iquidator or the courts Beneficiaries: creditors – listed in accounting records or other documents – EU Creditors, not Non EU or National creditors Content –Minimum: art. 40 EIR –Further contents: lex concursus (i.e. see information in art. 92 legge fallimentare) Italian survey: information content different from the one of information to national creditors (60,53% of respondents aware of EIR); better description of the proceeding as well as creditors’ rights

18. Information notice service Service mode: – EC Regulation 1393/2007, by:  postal services;  registered letter with acknowledgement of receipt;  equivalent; – Other modes provided by lex fori concursus (i.e. public complaints) If not fulfilled  see lex concursus Italian survey: a. registered letter (57,14% of respondents) b. aimed at describing better the content of the proceeding as well as creditors’ rights

19. Information language Art. 42.1 EIR – official language of the State of the opening of the proceeding; or – one of the official languages of the UE State Heading “invitation to lodge a claim. Time limits to be observed” –Aim: facilitate the liquidators/courts’ activities Make creditors’ aware of their rights –translated in the recipient official language Italian survey: use of English (60,53% of respondents aware of EIR)

20. EC information form European Commission form, which bears the heading “Invitation to lodge a claim” (translated in the official language of the recipient) Aim: facilitate creditors’ activities Italian survey: limited use (7,8% of respondents aware of EIR)

21. Lodgment of claim. General rules and application form for EU creditors’ claims (Artt. 32, 41 and 42.2 EIR)

22. Application form and content (art. 41) Form –written form –other forms? Ie electronic transmission that allows permanent recording (e-mails)  allowed (Wessels) Minimum content required. Duty to: – demonstrate habitual residence, domicile and registered office in a member state other than the State of the opening of the proceeding; – Indicate specific claims’ elements (nature, date, amount, preference); – state the residual amount of the claim, if creditor partially satisfied in other proceedings Other contents: lex concursus

23. Follows on. Specific issues (according to lex concursus ): Evidence – In general: – copies of supporting documents, to be sent to the court / liquidator – Risk of discrimination with national / non EU creditors – liquidator’s application? -Based on claims lodged by creditors -Evidence -Schedule of claim of the proceedings he is responsible of -Together with copy of supporting documents. Other: – Request for a stay in the liquidation of the demanded assets (art. 93 IBL)

24. Language (art. 42) Claim may be lodged in the language of the State in which the creditor has his residence, domicile or registered office; Heading “invitation to lodge a claim” must be written in the original language of the State of the opening of the proceeding; Sanctions in case of unfulfilment? Italian survey: usually Italian language, sometimes English

25. EC lodgement of claim form European Commission form Aim: facilitate creditors’ activities Italian survey: limited use (2,63% of respondents aware of EIR)

26. Conclusions Italian insolvency regulations work with respect of lodgment of claims from EU and non EU creditors, notwithstanding the limited sensibility to EIR and its role for EU creditors’ claims. Useful to: improve EIR rules knowledge and application among Italian courts and practitioners make legislator, as well as insolvency courts and office holders, more sensible to cross border issues, and, among them, with specific respect to EIR

27. Thank you! Giorgio Corno Avvocato – Solicitor (admitted, England and Wales) Studio Corno Avvocati Tel. 039 2456792 – fax: 039 2458018 www.studiocorno.itwww.studiocorno.it – legale@studiocorno.it