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Editor's Note It is one year since INSOL’s News Update was launched. From the very first issue it was well received by our members and over the past months we have made significant changes to this newsletter to further improve it. It is now well known for its interesting structure and the high quality of material that is published from all over the world. This issue is no different. We bring to the attention of our readers information on two leading case law developments. The European Court of Justice has made a surprising ruling on the application of the EC Sixth Directive which is contrary to the earlier opinions of its Advocate Generals. The Supreme Court of South Africa recently dealt with the problems that inevitably arise where an order for the lifting of the corporate veil had been granted which allows the trustees to consolidate and administer the estates of several insolvent entities. In our last issue we covered the decision from the Ontario Superior Court of Justice in Re Muscletech, and this issue has an excellent article on this ruling and its cross-border implications when tort claims are handled. The regional one-day seminar organised by INSOL held in Toronto last month was a great success and there will be similar regional seminars in the future as well. The INSOL News Update is specially compiled for you, our members. It is therefore important that you let us know your views and preferences so that we can continue to improve this service for you. Ilan Spinath |
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| Highlight of this issue | ||||||
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Stay in touch with the Dutch The current Dutch insolvency law ("Faillissementswet") goes back as far as 1893. A new law however is in the making. Because the law from 1893 is not very detailed, it has remained virtually unchanged and can still be used fairly effectively until today. As always, when it comes to change, there are those in favour, and those against. Those against claim that although old, with some amendments here and there, the Faillissementswet still easily passes the test of time. Or: if it ain’t broke, why fix it? Those in favour however claim that, we do need more specific rules that are more suited for times in which multinationals, international transactions, payments by transfer in accounts and cross-border insolvencies play a massive role. It appears that those in favour have won the battle – at least so far. A special Commission was appointed in 2003 to advise the government on insolvency reforms. This Commission has now identified the basic principles of the Bill and the most important changes that have to be made to the current regime. For more details please click here. Ilan Spinath |
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| Case Decisions | ||||||
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EUROPE, AFRICA & MIDDLE EAST Surprise Judgment from the European Court of Justice: IRAP is Compatible with Article 33 of the Sixth VAT Directive Banca Popolare di Cremona Soc. coop. arl v Argenzia Entrate Ufficio di Cremona – Judgment from the European Court of Justice Case – C 475/03 IRAP (imposta regionale sulle attivita produttiva) is an Italian tax levied on companies, partnerships and individuals which came into force in 1997. Banca Popolare brought this action before the European Court of Justice for a preliminary ruling against the decision of Argenzia Entrate Ufficio di Cremona (Italian tax authorities) refusing to reimburse the IRAP paid by the bank in 1998 and 1999. The bank requested reimbursement on the grounds that the tax was unlawful because it was contrary to Article 33 of the EU Sixth Council Directive relating to VAT. The Court ruled that Article 33 must be interpreted as meaning that it does not preclude the maintenance of a charge to tax with the characteristics of the tax at issue, namely, IRAP. Surprisingly, this ruling is contrary to earlier opinions of two of its Advocate Generals. For a comment on this ruling by KPMG, UK please click here. For the full judgment please click here. Lifting the Corporate Veil: Interpretational Problems Arising from a Previous Court Order Consolidating the Administration of Separate Insolvent Entities Allers v Fourie and Others NNO [2006] SCA 106 (RSA) Brenda Jansen was the mastermind behind a fraudulent scheme that drew investments from the public in excess of R50m. Chinza Holdings (Pty) Ltd was used as the vehicle for her scheme. Both Jansen and Chinza Holdings were declared insolvent. The liquidators of Chinza had applied to court for the lifting of the corporate veil in respect of all the entities that had been used by Jansen in the operation of her fraudulent scheme, so that the estates of all these entities under either sequestration or liquidation, could be administered as one estate. The court granted the order. However, it was the trustees of Jansen’s insolvent estate that were appointed to administer the consolidated estate. The question facing the Supreme Court of Appeal was whether the order (consolidating the various insolvent entities), on a proper interpretation, reflected an intention by the court that creditors who had previously proved their claims against Chinza were to be absolved from proving their claims against Jansen’s insolvent estate. The trustees contended that although the court had ordered the entities to be administered as one, the order did not interfere with the separate existence of the entities involved. In rejecting the trustees’ arguments, the Court pointed out that the confusion resulted from a skewed understanding on the part of the trustees of what the consolidation order sought to achieve. The court held that it would be unfair if creditors who had proved their claims against one of the constituent elements of the consolidation, namely insolvent estate Jansen, would remain proved creditors of the new entity, while those who had proved claims against any of the other constituent entities would have to start all over again. The court also pointed out that such discrimination would not only amount to a matter of procedure, but may also involve substantive prejudice on the part of the creditors. For a full case note by Prof. David Burdette, INSOL Scholar, please click here. |
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| Legislation | ||||||
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EUROPE, AFRICA & MIDDLE EAST The New Insolvency Legislation in the Czech RepublicOn April 14, 2006, the President of the Czech Republic signed a new Bankruptcy Reform Act which will come into effect on 1 July 2007. The new law is known as the “Czech Insolvency Act.” The key reforms that are introduced includes a test to determine when “insolvency” is triggered, the introduction of three insolvency procedures instead of the single procedure that existed prior to the reforms, full settlement of claims for secured creditors, increased role for unsecured creditors, changes to the process in which claims are filed and dealing with disputed claims. The new law also deals with claims of set-off. Another notable change is that the new Act has dedicated special bankruptcy proceedings for banks, insurance companies, and credit co-operatives. For more details please see White & Case Insolvency Notes, September 2006, P. 13. |
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AMERICAS Eye on the Americas: Recognition and Use of Cross-border Proceedings Product liability claims have been an issue in United States insolvency proceedings for some time, and recently, in Canadian restructuring cases. The two nations have taken different approaches to the treatment of such claims, in part because of their different histories respecting the treatment of product liability. A current challenge is how to handle tort claims where the proceeding is crossborder and Re Muscletech is one of the first cases in which both Canadian and U.S. courts have had to consider how tort claims are to be dealt in a cross-border restructuring proceeding. This article discusses the treatment of tort claims across the Canada-U.S. border and also looks at Latin America and the challenge of cross-border proceedings. For the full article by Prof. Janis Sarra, INSOL Scholar, please click here. EUROPE, AFRICA & MIDDLE EAST Management Change – The Last Restructuring Taboo Bringing effective restructuring techniques to the developing parts of the Asia Pacific region means having to face many challenges. Some of the legislative regimes are still sadly lacking despite encouraging efforts at modernisation, with no provision for a moratorium and dependence on the endgame procedure of liquidation. Where there are more flexible laws, the lack of judicial capacity, experience and independence can be a severe obstacle. For the full article please see International Case Law - Alert, August 2006, P. 4 |
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| Publications | ||||||
EUROPE, AFRICA & MIDDLE EAST Cross-border Insolvency: A Commentary on the UNCITRAL Model Law, 2006 This new publication covers the national implementation of the UNCITRAL Model Law in ten jurisdictions namely, British Virgin Islands, Canada, England, Japan, Mexico, Poland, Romania, Serbia and Montenegro, South Africa, and United States. The chapters in respect of each jurisdiction also aims to cover – the scope of the application of the legislation; reciprocity if required, access of foreign representatives and creditors to local courts, recognition of foreign proceedings and relief available; concurrent proceedings, protection of creditors and third parties, and issues on communication and co-operation between courts. |
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This issue was kindly sponsored by:
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INSOL Contacts If you would like to send an article for inclusion in one of our forthcoming issues please contact our Technical Manager, Sonali Abeyratne at sonali@insol.ision.co.uk If you would like to introduce a new member to INSOL International please contact our Communications Manager, Penny Robertson at pennyr@insol.ision.co.uk |
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