1. Nordic-Baltic Insolvency Network
Annemari Õunpuu

2. Harmonization
*Harmony: the quality of forming a pleasing and consistent whole.
Oxford Dictionary
„Until at least a decade ago the combination of harmonization and insolvency law in Europe was regarded just as impossible as combination of water and fire.
/---/
Insolvency proceedings available still differ to a large extent, be it that concepts of continuity (or `corporate rescue`) in Europe generally have found their legal form only since the mid-1980s of last century“
Bob Wessels. Harmonization of Insolvency Law in Europe.
European Company Law 8, no 1 (2011):

3. EU harmonization initiatives
2002 (2017) EU Insolvency Regulation
competent court to open insolvency proceedings;
applicable law
recognition of insolvency decisions
April 2010 report on the harmonization of Insolvency Law at European Union
2014 Commission Recommendation on a new approach on business failure and insolvency
2015 Capital Markets Union action plan
December 2015 Commission set up an Expert Group
2016 Insolvency Report commissioned by the European Commission DG Justice
November 2016 EU Commission Proposal for a directive on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures.
ECB interest, NPL-s.

4. Nordic-Baltic Insolvency Network. Why?
Financial crisis
Experience
Restructuring
The need for the creation of Nordic-Baltic Insolvency Network arose from practical experience of:
seeing the differences and inefficiencies of company restructuring regimes during financial crisis in the Baltics; and
in high-profile restructuring cases in the Nordics (such as SAAB case in Sweden and Talvivaara Mining Company in Finland that both have also had impact on taxpayers/public money).

5. Nordic-Baltic Insolvency Network. Why?
Discussions in the expert group which already started in 2011 lead the experts to conclude that:
There are deficiencies in the existing regulations and practice; and
A better approach to restructuring is needed before the next financial crisis arrives.
In the Baltics the inefficiencies of the restructuring regime has made banks reluctant to support formal restructurings as the latter are seen as means to postpone bankruptcy.
In the Nordics the restructuring laws can be said to lack support for handling bondholder related issues in case of formal company restructurings.

6. Nordic-Baltic Insolvency Network. Why?
In both regions the regulations:
Do not provide enough incentives for companies to file for restructurings early; and
For creditors to make additional investment to companies under restructuring (distressed financing).
All this undermines the potential for successful company restructurings and preservation of jobs.

7. Nordic-Baltic Insolvency Network. Why?
It is a postulate of economic theory that complex, inefficient and unpredictable legal rules and institutions can severely hinder trade and investment.
This is mainly due to increased transaction costs regarding risk and uncertainty related to differences between legal cultures of foreign trading partners.
Therefore, from the perspective of investors and investment climate a great value can be seen in legislative harmonization initiatives.

8. EU has taken initiative … but still…
Harmonization at European level
Would concentrate on rather limited number of topics;
Probably result in a directive that would still leave a lot of room for national discretions;
Be a lengthy process due to high level of compromises necessary between all Member States.
This conclusion left the experts asking whether there was a better way to deal with harmonization in a region where economic reality sees active export-import relations mainly between Nordic and Baltic countries.

9. Nordic-Baltic Insolvency Network. Structure and working method
Ad hoc expert group consisting of leading academics and practitioners of the region working on developing a common approach to company restructuring regulation and practice.
Working sessions twice a year from
Emphasis on reorganization law.
Result: Nordic-Baltic Insolvency Network recommendations.
Final text version mainly prepared by Professor Mikael Möller at Uppsala University (Member of the 2015 EU Expert Group)

10. Nordic-Baltic Insolvency Network Recommendations
Introduction: Overall objectives and features of an effective and efficient insolvency law
Application and commencement of insolvency proceedings:
Representatives’ liability due to the continued operation of insolvent companies
Immediate legal effects of the commencement decision
Treatment of the debtor’s contracts
Treatment of pending lawsuits in liquidation proceedings
The order of priority regarding insolvency claims
Proof of debt procedure
Treatment of post-commencement claims
Recovery to the estate
Insolvency claims
Administration of insolvency proceedings
The reorganization plan
Treatment of environmental claims in insolvency proceedings
Treatment of groups of companies in insolvency proceedings
Short-term protection of voluntary restructuring negotiations

11. Nordic-Baltic Insolvency Network Recommendations
To highlight…
Representatives’ liability due to the continued operation of insolvent companies
- Ombudsman role
Legal effects of the commencement decision
Treatment of the debtor’s contracts
Recovery in reorganization
The court’s qualifications and role
- Specialized courts
The reorganization plan
Short-term protection of voluntary restructuring negotiations

12. Recommendations vs „second chance“ Directive
Who can commence the proceedings?
Grounds for commencing proceedings
Restrictions on the debtor’s right of disposition
Protection of the estate against enforcement and sale of securities
Stay of enforcements proceedings vs time limit for presenting the restructuring plan
Directive: Initial stay max 4 months, up to 12 months
Recommendations: plan in no less than 2 months, no longer than 6 months, extension by 2-3 months, up to a maximum of 12 months. Short-term protection of voluntary restructuring negotiations by stay of enforcement proceedings for no longer than 3 weeks
Confirmation of the plan
Specialization of courts

13. To be continued… Meeting of Nordic and Baltic Ministers of Justice
Co-ordination Committee
Guidelines/recommendations
Networks recommendations as a starting point

14. Thank you!