A View from the Acropolis
Earlier this month Vernon Dennis attended the 2018 INSOL Europe Annual Congress held in Athens. In this month's article Vernon outlines some of the themes identified both in and outside the conference hall.
With a record number of delegates hailing from 35 countries, a wide variety of views were expressed (thankfully mostly in English) on comparators between insolvency regimes, reforms at both state and cross-border level and (of course) Brexit.
Reform is Nigh
It is of note that many of the conference presentations focused on the development in various countries of business rescue modelling outside of formal process, debtor in possession restructuring and the introduction of schemes similar to those existing in the UK flexible regime, but which on closer analysis are more akin to US Chapter 11 processes. When viewing the vast array of European development it puts into context the Insolvency Services current consultation on a new form of moratorium and scheme of arrangement procedures. There is a clear need to keep pace with developing business models to ensure that UK Plc remains attractive and competitive to inward business investment. Certainty of business risk and recoverability of credit (i.e. an effective insolvency regime) being the cornerstone in continuing to attract businesses to do business in the UK.
Transparency vs Privacy
Aside from the inexorable march of reform, an overriding theme of the conference was the delicate balance between the control of debtors/the rights of creditors against the rights to privacy and fears over excessive state control. This balance was evident in a number of sessions including those on offshore companies, fraud and asset recovery, the rise of digital assets and the use of legal technology.
An interesting argument put forward during the conference was that blockchain technology is part of a ripple effect from the 2007/08 financial crisis and the loss in confidence in the Banking systems and in state regulation. The technology has developed to avoid state interference, allowing users freedom, privacy and security. These may be laudable aims but the use of secret and encrypted transactions was also identified as a means to conceal nefarious activities. The worldwide web was once offered similar 'freedom' but it was pointed out that this too is increasingly regulated and controlled. Do potential fetters/controls and regulation on blockchain technology and its offspring crypto-currencies prevent illegal use and fraud or would it be an unwarranted loss of freedom and privacy?
Further debate on legal technologies looked at the increasing drive across very many European countries to consolidate information on bankrupts and debtors while at the same time noting concern regarding data protection, the right to anonymity and privacy. A fascinating display on the ability to keep surveillance on criminal activity came with a stark warning that the use of such technology is in many countries in fact itself illegal.
Lastly a presentation entitled 'How to Crack Down On Offshore Companies' looked at the use of off shore structures and/or trusts that have enabled some large multinational corporation to avoid tax and/or by those with criminal intent to avoid detection. In contrast representatives from offshore jurisdictions can point to the demands of a global economy and the ability for capital to shift into advantageous areas; the off shore structures do not cause tax avoidance but are an inevitable consequence of the free movement of capital. It has to be said that discussions on the use of trust in English law and the anonymity afforded to beneficiaries is somewhat perplexing to some European lawyers.
Brexit – It's No Deal
A European conference at this present time would not be complete without reference to Brexit. Andrew Shaw the Insolvency Services Assistant Director of the Strategy and Change Directorate described his role in leading the Agency's team responsible for the UK exit from the European Union. With a no deal exit now becoming a real possibility the UK's position as a hub for cross-border restricting is clearly threatened and reliance on common law remedies for recognition, 'mirroring' by means of a UK Court Order the rights and powers of a foreign office holder, is a solution but one which has largely been untried for many years.
An overriding impression however is that the European's response to Brexit seems to be a mixture of incredulity, regret and perhaps more alarmingly slight indifference. Continental Europe will forge ahead perhaps with greater alignment in its insolvency processes, seeing the UK system not as one in concert with Europe but as one in rivalry. This makes the reforms anticipated in Europe and in the UK both economically and politically motivated.
For more information, please contact Head of Business Recovery and Reconstruction, Vernon Dennis.