The harmonisation of insolvency regulations has stalled.

The lake is calm. After the Committee for Opinion on Economic and Monetary Affairs (ECON) adopted its opinion on 28 November last year, the dossier on the harmonisation of certain aspects of insolvency law went quiet. Initially, it looked as if the responsible Legal Affairs Committee (JURI) wanted to clarify its position on the European Commission's proposal [COM(2022) 702 final] from March onwards. The vote was due to take place at the beginning of April, but Pascal Arimont (EPP, BE), responsible for reporting, failed to submit his draft report. And an explanation, too.

Approaches to harmonised rules

December 2022, the European Commission proposed harmonising certain aspects of insolvency law and presented a proposal for a directive to this end. The proposal to harmonise insolvency law is intended to reduce distortions of competition and strengthen capital market integration. The proposed amendments focus on the provisions for actions of voidance, the acceleration of insolvency proceedings, easier access of insolvency administrators to bank account information and more (see also DSV-News 03/2003).

Convergence does not only have friends

According to reports, the biggest disagreement in the matter is over the simplified procedures for micro-enterprises and the so-called "prepack procedure". The latter is an accelerated procedure with the aim of continuing the company through purchase by the best bidder. And there are forces in the Council that do not want any harmonisation of insolvency regulations at all. Convinced that their own legal system is the best, six Member States, including Germany, categorically reject a change to the directive.

Agreement in the 10th term of office?

There is no time left in the expiring legislative period to bring about a position of the European Parliament. The Conference of Presidents will therefore have to decide after the new Parliament has been constituted whether the dossier will be taken up again and negotiated further. The S&D have at least already announced in both committees that the issue should be prioritised. Of course, it remains to be seen whether this will be followed after the election. The committees must first be reorganised. As the Commission proposal addresses core issues of the single market, one might think that the chances of a reopening are good, unless political pressure from the countries prevents this.

Social security contributions are not part of the insolvency estate

As public bodies, the social insurance institutions are covered by the scope of the proposed directive. The German Social Insurance (DSV) had campaigned in favour of exempting the social insurance funds from contestability and made a corresponding proposal March last year. The tenor: contribution funds do not belong in the insolvency estate, but should be used to protect the insured and stabilise the social security systems.

Some questions remain unanswered

René Repasi (S&D, DE), the rapporteur in the ECON committee, shared this view and proposed a corresponding addition to Article 6 in his draft report of 25 July 2023. This was also adopted by ECON with a slight modification on 28 November (see here). It would have been interesting to see what the JURI thinks about the question of contestability of social contributions. Unfortunately, the question remains unanswered. And there may not be an answer in the next legislative period either.