European distressed debtors and creditors face uncertainty regarding English law-governed debt and, more generally, their overall restructuring strategy. This uncertainty arises against the backdrop of the UK's imminent departure from the EU, the Covid-19 pandemic and turbulent markets. Recognition of any insolvency proceedings initiated in 2021 will now need to be assessed on a country-by-country basis.
Many major out-of-court or in-court European debt restructurings use English law governed loan debt and Luxembourg-based debtors, which are frequently used as borrowers or bond issuers in international corporate groups. English schemes of arrangement and administrations or other insolvency proceedings were used easily in the past, but now, with Brexit looming around the corner and the uncertainty around which alternative will be retained in respect of the recognition of English insolvency judgments, real strategic considerations considering the options for European debt restructurings arise. The automatic recognition of English insolvency proceedings remains free from doubt for any insolvency proceedings opened before 31 December 2020 under Regulation (EU) No 2015/848 on insolvency proceedings (the Insolvency Regulation). However, the recognition of any insolvency proceedings commenced in the UK as from 2021 will need to be assessed on a country-by-country basis as the Insolvency Regulation will no longer apply in respect of English insolvency proceedings and the absence of an alternative recognition framework.
In this article published by Legal 500 in the Legal Briefing dedicated to Restructuring and Insolvency (Autumn 2020), Anne-Marie Nicolas, Ignacio Jimenez Guardiola and Marko Huskic explain how Brexit impacts the recognition of English proceedings in Luxembourg and other EU jurisdictions and the knock-on impact on restructurings.
You can find the full article on the Legal 500 website.
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