From Whipped Cream to Multibillion Financial Collapse: The European Regulation on Transnational Insolvency in Action

Matteo M. Winkler, Yale Law School


The article deals with the problem of multijurisdictional defaults in the European context. Since its entry into force, the Regulation no. 1346/2000 on transnational insolvency, which regulates the jurisdictional and choice-of-law issues related to insolvency, had many opportunities for being enforced by the domestic courts, and by the European Court of Justice (ECJ) as well. The Regulation represents the first binding international instrument, enacted for the purpose of regulating insolvency of debtors with assets in more than one country.

The Regulation applies also to the biggest multijurisdictional default ever, that is the collapse of the Parmalat group at the end of 2003. In particular, the attached article faces a case concerning the Irish subsidiary of Parmalat, Eurofood. Eurofood entailed a proper “war” between courts, the Italian and the Irish one, for adjudicating the case. While the dispute was settled by the ECJ in 2006 with a guide for the Regulation’s interpretation, the Regulation’s lacunas remain.

On the one hand, in fact, the Regulation deals only with single-debtor’s bankruptcy and therefore fully ignores the phenomenon of multinational enteprises’ default. Accordingly, one may easily predict that the problems concerning the debtor’s opportunistic behavior in the immediate moment before filing for insolvency, i.e. the reincorporation in another country or his assets’ strategic transfer, would be extended in the case of multinational enterprises and result in a harm for creditors.

On the other hand, the Regulation approaches transnational insolvency exploiting the “universalist theory,” i.e. establishing a unique court – the court where the debtor has his “centre of main interests” – as the one that is competent to open the main insolvency proceedings. The establishment of an exclusive court generates a potential competition between courts of Member States, as the article illustrates through a case-survey.

In sum, in the attached paper I argue that: the concept of “centre of main interests” as the leading criterion for determining the competent court not only deteriorates the spirit of the European Members’ mutual trust, but also has negative effects on the creditors’ prediction of the legal risks connected to debtor’s insolvency; the lack of a regulation of multinational enterprises undermines the coherency of the Regulation’s enforcement by different courts; finally, Parmalat/Eurofood raised a problem that no scholar so far has examined, that is the protection of the interests of a sovereign country from the attempts of another to adjudicate a subsidiary’s insolvency, when it would be instead better-off if settled, entirely with the parent company, by a unique jurisdiction in the latter’s country.