Tuesday, 26 February 2013

Questions (486, 487)

Pearse Doherty

Question:

486. Deputy Pearse Doherty asked the Minister for Justice and Equality the discussions he has had with the British authorities regarding so-called bankruptcy tourism and the practice of citizens of the State relocating to Britain in order to take advantage of more lenient bankruptcy legislation. [9766/13]

View answer

Pearse Doherty

Question:

487. Deputy Pearse Doherty asked the Minister for Justice and Equality the discussions he has had with European authorities regarding the so-called bankruptcy tourism and the practice of citizens of the State relocating to other member states in order to take advantage of more lenient bankruptcy legislation. [9767/13]

View answer

Written answers (Question to Justice)

I propose to take Questions Nos. 486 and 487 together.

I take it that the Deputy is referring to the provisions of the EU Regulation on insolvency proceedings of 2000, which came into effect in 2002. That Regulation is a mutual recognition instrument and does not seek to harmonise EU insolvency laws. In determining an application for the opening of an insolvency proceeding, for which it would have exclusive power as the primary proceedings, of a company or of a natural person, the Regulation requires that a court should determine the centre of main interest (COMI) of the applicant in the context of assuming jurisdiction.

It is a matter for the court to satisfy itself that the provisions in its national law in this regard have been observed. For example, the UK Courts can and have refused or revoked insolvency proceedings where an abuse has been detected. Indeed, this has occurred with certain individuals, who were subsequently subject to insolvency proceedings in this jurisdiction.

A company or natural person is entitled to change a COMI and could do so for the purposes, inter-alia of taking advantage of more favourable insolvency legislation. This entitlement arises under the broad rubric of freedom of movement in the Internal Market and such freedom has been enforced by decisions of the European Court of Justice. The country in which the debts are incurred is not necessarily material, but the relocation must not be artificial. The question of COMI is determined at the date the application for the insolvency proceeding is made and not at the time the debts were incurred. Orders made in insolvency proceedings in another EU jurisdiction, including an order discharging a person from bankruptcy, are enforceable against creditors elsewhere in the EU.

In response to the economic downturn across Europe, the EU has published a proposal to modernise cross-border insolvency law which seeks to make cross-border insolvency proceedings more efficient, benefiting both debtors and creditors throughout the EU. One of the primary aims of the new Regulation will be to give potentially viable companies and entrepreneurs a second chance before being declared insolvent. The proposal also addresses a range of other insolvency issues.

I arranged that the initial discussion on the proposed Regulation took place at the informal Justice and Home Affairs Council meeting of EU Justice Ministers held in Dublin Castle on the 17 and 18 of January last. The Ministers, including my British colleague, engaged in a very detailed and constructive discussion on the proposals contained in the Regulation. I emphasised the importance of a more uniform approach across the EU in regard to the establishment of the centre of main interest so as to combat potential abuses in this regard which have given rise to allegations of "bankruptcy tourism".

Detailed consideration of the provisions contained in the new draft Regulation has now commenced in a Working Group chaired by the Irish Presidency.