The UK's accession to the Lugano Convention has become somewhat politicised, with the EU stating that it is not minded to allow the UK to accede, as that will then set a precedent for other third party states.
This will impact certain UK restructuring tools.
For insolvency proceedings, for example liquidation, administration, CVAs and according to recent case law, restructuring plans under Part 26A Companies Act, those proceedings would have been carved out from the Lugano Convention which does not apply to insolvency proceedings but rather civil and commercial matters.
The recognition of such insolvency proceedings in third party states would depend on that state's own laws (including whether any relevant treaty or convention applied to that state). For EU Member States except Denmark, this would include the EU Regulation on Insolvency Proceedings (the "EU Regulations") which continues to apply in the EU. Some EU Member States (Greece, Poland, Romania and Slovenia) have adopted the UNCITRAL Model Law on Cross-Border Insolvency and may recognise foreign office holders under that Model Law. For others, it will depend on their own local laws (including their private international laws, ie conflict of laws).
As the market knows, the EU Regulations no longer applies in full force and effect to the UK so the UK does not benefit from automatic recognition and application of its insolvency proceedings in the EU. Concomitantly, EU Member States have to apply the EU Regulations, so if a company's COMI is in an EU Member State, the EU has to recognise the main insolvency proceeding in that EU Member State and not the UK.
For schemes under Part 26 Companies Act (and assuming that the view that schemes are civil and commercial matters is correct), the fact that the UK is not bound by the Lugano Convention means that the UK court will not be bound by the jurisdictional conditions thereunder (for example, a need to determine whether scheme creditors have "agreed" to the UK court's jurisdiction), but will be able to exercise jurisdiction based simply on whether the company is "liable to be wound up". However, that means any scheme judgment does not benefit from automatic recognition under the Lugano Convention.
Without the Lugano Convention, recognition in other states will now depend on other tools. For the EU, this may include the following:
Given the absence of the EU Regulations for insolvency proceedings and now potentially the Lugano Convention for schemes, it seems clear that the insolvency market should be pushing for another unified set of rules which are applied consistently across as many contracting states as possible. The application of the UNCITRAL Model Law is now more important than ever.
The UK has adopted the UNCITRAL Model Law under the Cross-Border Insolvency Regulations 2006, without requirement of reciprocity. This means that foreign representatives of relevant foreign proceedings in EU member states can have access to the UK courts and seek recognition. Unfortunately, representatives of relevant UK proceedings do not have that reciprocal right across the whole of the EU or EEA. The EU/EEA should now be encouraged to adopt the UNCITRAL Model Law across the whole of the EU and EEA.