Harmonisation of EU Laws on Business Failure and Rescue. A Case Study on the Internal Market and European Integration

One of the primary objectives underlying the EU was the creation of a fully integrated European single market. Initiatives regarding European integration and the furthering of the Internal Market have been more prolific in policy areas characterised by high level of transnational transactional exchanges. Initially the creation of the Single Market required the abolition of domestic rules acting as barriers to cross-border economic exchange. As the single market developed, so did cross-border dealings between companies, their shareholders and creditors. A second phase moved from abolition of barriers to harmonisation of commercial law standards to improve integration. Corporate insolvency law was seen as a fundamental part of the European economic system and therefore was brought to the fore through harmonisation initiatives. In the current crisis addressing business failure on a pan-European level is vital to the concerns of stakeholders and to wealth preservation in the EU. The paper addresses the difficulties facing harmonisation initiatives stemming from the fundamental distinctions that exist between domestic legal frameworks. Consequently, full integration of the internal European market is presented with many obstacles and rules on business failure are presented in this paper as a case study. The debate around the efficiency of EU insolvency law shows that many obstacles derive from issues of political legitimacy, rather than economic criteria. The two main options to the improvement of cross-border insolvencies in the EU involve the entire, substantive harmonisation of insolvency and rescue law rules; or permitting countries and then companies to select the insolvency law they prefer. However, neither approach has received clear commitment from the EU institutions, and in light of deep seated concerns regarding corporate mobility, forum shopping and regulatory competition, a conflict-of-laws instrument (the European Insolvency Regulation) has been presented instead, involving a limited harmonisation of procedural aspects of European insolvency law only.