European Insolvency Regulation: Territorial and Secondary Proceedings

The reach of territorial and secondary proceedings is restricted, but I think it important to note that the restriction is partial. In relation to non-main proceedings and the territory in which they were opened:

The effect of those proceedings shall be restricted to the assets of the debtor situated in the territory of the latter Member State.

(Article 3(2), European Insolvency Regulation). I think the key phrase is “the assets of the debtor situated in the territory”. Article 3(2) does not refer to “the establishment situated in the territory”, so the territorial or secondary liquidator is a liquidator of the debtor (albeit able to deal only with certain assets but responsible to all the debtor’s creditors). Neither does Article 3(2) say “the assets and the liabilities of the debtor situated in the territory”, so it is not simply a local insolvency under local law: foreign creditors are accorded rights by the Regulation. One thing I have sensed in reported cases of secondary proceedings is that the secondary liquidator has seen himself as acting for (even as a champion of) the local creditors. To my mind this is fundamentally wrong, particularly given the rights of creditors to claim in any proceedings by Articles 39 and 32(1). Such liquidators should beware of litigation against them personally from creditors from other jurisdictions, or even from the main liquidator.