Maritime Cross-Border Insolvency Under the European Insolvency Regulation and the Uncitral Model Law

Cover
Half Title
Title
Copyright
Dedication
CONTENTS
Preface
Table of cases
Abbreviations
OPENING REMARKS
	1 A Relatively New Debate in the Maritime Field
		1.1 The Wrong Assumptions
		1.2 New Developments
			1.2.1 The Operation of the Shipping Industry Revisited
			1.2.2 The Idea of the “General Average” in Insolvency Proceedings
			1.2.3 Emphasis on the Rescue of the Debtor
				1.2.3.1 Pre-Insolvency Proceedings
				1.2.3.2 Insolvency Proceedings
	2 Subject, Methodology and Structure of the Present Study
		2.1 Subject Covered
		2.2 Methodology
		2.3 Structure
		2.4 Terminology
PART I SYSTEMIC CONFLICT BETWEEN THE RULES OF MARITIME AND INSOLVENCY LAW
	CHAPTER 1 INSOLVENCY MECHANISMS AND THE OPERATION OF SHIPPING COMPANIES: FINANCIAL ASPECTS
		1 Shipping Dependence on Bank Loans
			1.1 Evolving Bank Lending Practices
				1.1.1 Features
					1.1.1.1 Macro Features of the Industry Seeking for Finance
						(i) Capital Intensity
						(ii) Market Cycles
					1.1.1.2 Micro Characteristics of Borrowers
					1.1.1.3 Characteristics of Lenders, With Particular Reference to Syndicated Loans
					1.1.1.4 Features of the Loan Relationship
				1.1.2 The Ship as the Main Security
					1.1.2.1 Securities In Rem Against a Ship
						(i) Ship Mortgage
							(a) Function
							(b) Weaknesses
						(ii) Ownership-Based Collaterals
							(a) Ownership as a Form of Security in Shipping Finance
							(b) Transfer of Ownership as Security for a Debt
								1 The Statutory Example of the Greek CPML
								2 Lease-Back
							(c) Lease Finance with Bareboat Charter
						1.1.2.2 Additional Collaterals
							(i) Other Forms of Real Security
							(ii) Collaterals in Personam
			1.2 Limited Recourse to Other Sources of Funding
				1.2.1 Raising Equity on Public Markets
				1.2.2 Risk Management through Freight Derivative Products
					1.2.2.1 The Economic Importance of Freight Derivatives
					1.2.2.2 Freight Futures/Forward Contracts
					1.2.2.3 Freight Options
		2 The Relationship Between Finance and Insolvency in the Shipping Sector
			2.1 Finance as the Cause of Insolvency
				2.1.1 Distortion in the Financing of New Capacity
				2.1.2 Distortion in the Conditions of Bank Lending
			2.2 Insolvency Mechanisms at the Service of Finance
				2.2.1 At the Service of Finance in General
				2.2.2 At the Service of Ship Finance in Particular
				2.2.2.1 Preventive Mechanisms
					(i) Creditworthiness Criteria
					(ii) Creditworthiness Control or “Negative Pledge” Clauses
				2.2.2.2 Access to Funding
					(i) Tighter Loan Terms and Securitization
					(ii) Private Placement
					(iii) Assignment of Shipping Loans
	CHAPTER 2 LEGAL INTERACTION BETWEEN INSOLVENCY AND MARITIME LAW
		1 The Progressive Internationalization of Insolvency Law
			1.1 Territoriality v Universalism
				1.1.1 The Theory of Territoriality and Plurality
				1.1.2 The Theory of Universalism and Unity
				1.1.3 Modified Universalism as a Legislative Choice
			1.2 UNCITRAL Model Law on Cross-Border Insolvency
				1.2.1 Structural Features
				1.2.2 Right of Access
					1.2.2.1 Of Foreign Representatives
					1.2.2.2 Of Foreign Creditors
				1.2.3 Recognition of Foreign Proceedings
					1.2.3.1 Criteria for Recognition
						(i) “Main” and “Non-Main” Proceedings
						(ii) The Public Policy Reservation
					1.2.3.2 Effects of Recognition
						(i) Provisional Relief Upon Application for Recognition
						(ii) Automatic Effects of the Recognition of a Foreign Main Proceeding
						(iii) Discretionary Effects Upon Recognition
						(iv) Safety Valves
				1.2.4 Coordination of Proceedings
					1.2.4.1 Cooperation Between Courts and Representatives
					1.2.4.2 Coordination of Concurrent Proceedings
				1.2.5 The United States Enactment: Chapter 15
			1.3 Regulation 2015/848 on Insolvency Proceedings
				1.3.1 Basic Differences Between an UNCITRAL and a European Cross-Border Insolvency
					1.3.1.1 Scope of Application
					1.3.1.2 Regulatory Content
				1.3.2 Jurisdiction to Open Insolvency Proceedings: EU Autonomous Criteria
				1.3.3 Consequences
					1.3.3.1 Automatic and Immediate Recognition
						(i) Extension of the Effects of Main Proceedings
						(ii) Fractured Universalism and Territorial Proceedings
						(iii) Coordination
					1.3.3.2 Uniform Conflict-of-Laws Rules
		2 Systemic Divergences and Coordination Efforts
			2.1 Hierarchy of Rules
				2.1.1 International, But Not Similar Regimes
					2.1.1.1 Evolving Nature of Cross-Border Insolvency Law
					2.1.1.2 Qualitative Characteristics of International Maritime Law
						(i) Substantive Uniformity
						(ii) A High Level of Maturity
						(iii) Potential Interaction of Multiple Regimes
				2.1.2 Coexistence of EU Insolvency Law and International Maritime Conventions
					2.1.2.1 The Principle of the Pre-Eminence of EU Law
					2.1.2.2 Self-Sufficiency of Maritime Conventions Under the Case-Law of the CJEU
			2.2 Mitigating Substantive Divergences: Proposed Guidelines
				2.2.1 Maritime Claims v Insolvency Claims
					2.2.1.1 The “Maritime Claim” Lacks Definition
						(i) Common Minimum Characteristics
						(ii) Diversity of Maritime Claims
						(iii) The First Guideline
					2.2.1.2 Substantive Protection of Maritime Claims
						(i) Preferred Maritime Creditors
						(ii) The Substantive Attachment of the Claim to the Ship: Maritime Liens
							(a) From the Perspective of Civil Law Systems
							(b) From the Perspective of English Law
						(iii) Safeguarding Maritime Security Mechanisms Within Insolvency Procedures
						(iv) Second Guideline
				2.2.2 Universality of Insolvency Estate v Specificity of Maritime Property
					2.2.2.1 Procedural Mechanisms Connecting the Vessel to the Maritime Claim
						(i) Arrest Under the 1952 Convention
						(ii) Actions In Rem and the Personification of the Ship
							(a) Under the English Version
							(b) Under the US Version
						(iii) Treatment of Specific Maritime Procedures in the Context of Cross-Border Insolvencies
						(iv) Third Guideline
					2.2.2.2 Setting up a Special Purpose Property for Maritime Claims Subject to Limitation of Liability
						(i) Exclusive Purpose of the Limitation Fund
							(a) Fragmentation of the International Regime
							(b) Common Characteristics
								1 Legal Nature: Assets Belonging to the Debtor
								2 Exclusive Use for Specific Maritime Creditors
						(ii) The “Immunity” of Limitation Funds
							(a) Immunity as an Outcome of Interpretation
							(b) Immunity as a De Lege Ferenda Demand
						(iii) The Fourth Guideline
PART II AREAS OF CONFLICT BETWEEN MARITIME AND INSOLVENCY LAW
	CHAPTER 3 OPENING OF CROSS-BORDER INSOLVENCY PROCEEDINGS
		1 Determining the Centre of Main Interests of Shipping Companies
			1.1 The COMI as the Connecting Factor
				1.1.1 The COMI of Legal Persons
					1.1.1.1 Constitutive Elements
						(i) The Function of the COMI under the Insolvency Regulation and the UNCITRAL ML
						(ii) Main Interests
						(iii) Administration on a Regular Basis
						(iv) Objective Ascertainability by Third Parties
					1.1.1.2 The Presumption of the Registered Office
						(i) The Function of the Presumption
						(ii) Rebuttal of the Presumption
						(iii) The Application of the Presumption Under US Chapter 15
				1.1.2 The COMI of Groups of Companies
					1.1.2.1 The Principle: Separate Insolvency Proceedings for Each Legal Entity
					1.1.2.2 The Exception: One COMI for Integrated Groups of Companies
					1.1.2.3 The Light Form of Procedural Cooperation
					1.1.2.4 Group Coordination Proceedings (GCP)
					1.1.2.5 The Jurisdictional Connection of the “Establishment” in the Context of Group Insolvencies
			1.2 The COMI of Shipping Companies
				1.2.1 Choice of the Cross-Border Insolvency Regime
					1.2.1.1 Selection Criteria: Cross-Border Elements
					1.2.1.2 Inclusion of Shipping Investment Companies in the Material Scope of the Regulation
				1.2.2 Corporate Shipping Structure as a Nexus of Cross-Border Elements: The Greek Paradigm
					1.2.2.1 EU Shipping Companies with Access to the Ship Registries of Other Member States
					1.2.2.2 Foreign Shipowning/Ship-Management Companies and Ships Registered as Foreign Capital
					1.2.2.3 Foreign Shipowning/Ship-Management Companies with Ships Flying a Foreign Flag
					1.2.2.4 Crucial Connecting Factors in Determining the Shipping COMI
				1.2.3 Localizing the COMI of Shipping Groups
					1.2.3.1 The Development Strategy of Shipping Groups
					1.2.3.2 “Related” Insolvencies in the Context of Shipping Groups
						(i) A Single Group COMI
						(ii) Coordination Issues
		2 The Effects on the Shipping Company of the Opening of Insolvency Proceedings
			2.1 Under the UNCITRAL Regime
				2.1.1 Allocation of Jurisdiction: The US Example
					2.1.1.1 Allocation of Jurisdiction Between Bankruptcy and Admiralty Courts
					2.1.1.2 The Classification of Maritime Disputes as “Core”, “Non-Core” and “Unrelated”
					2.1.1.3 The Chapter 15 “Gap Period”
				2.1.2 Determining the Applicable Law
					2.1.2.1 The Rule
					2.1.2.2 Choice of Law and Measures to Pierce the Applicable Law
						(i) The Limits of Direct and Indirect Choice
						(ii) Piercing the Foreign Applicable Law
			2.2 Under the EU Regime
				2.2.1 Extension of Jurisdiction: Actions Related to Insolvency Proceedings
					2.2.1.1 Vis Attractiva Concursus
					2.2.1.2 Examples of Related and Non-Related Actions
				2.2.2 Exceptions to the Application of Lex Fori Concursus
					2.2.2.1 Explicit Exceptions Crucial to Shipping Undertakings
					2.2.2.2 Implied Exceptions
				2.2.3 The Effect of Cross-Border Insolvency Proceedings on Maritime Arbitration
					2.2.3.1 Legal Characterization and Treatment of Pending Arbitrations
					2.2.3.2 Comparing the EU and UNCITRAL Solutions
	CHAPTER 4 THE TREATMENT OF MARITIME SECURITIES
		1 Contractual Securities: Mortgage and Transfer of Title
			1.1 The Status of (Preferred) Mortgages in Insolvency Proceedings
				1.1.1 Article 8 of the Insolvency Regulation: Conditions of Application
					1.1.1.1 The Meaning of the Exception
						(i) The Nature of the Provision
						(ii) The In Rem Nature of the Ship Mortgage
					1.1.1.2 Determining the Situs of the Vessel
						(i) Situs Based on the Registration Link
						(ii) Situs Based on the Physical Location of the Vessel
				1.1.2 Consequences and Potential Outcomes
					1.1.2.1 Cases in Which the Exception Applies
					1.1.2.2 Cases in Which the Exception Does Not Apply
						(i) EU Debtor – Intra-Union Proceedings – Third Country Flag State
						(ii) EU Debtor – Intra-Union Proceedings – Registration and Proceedings in the Same Member State
					1.1.2.3 The Insolvency Regulation Does Not Apply
						(i) De Facto
						(ii) De Jure: Activation of the UNCITRAL Regime
					1.1.2.4 Case Study: Greek Law as the Law of the Ship’s Register
						(i) No Secondary Proceedings in the State of the Ship’s Register
						(ii) Secondary Proceedings Are Opened: Application of the Lex Concursus Secundarii
						(iii) The Right to Assume Operation of the Ship
			1.2 Title-Based Security in Insolvency Proceedings
				1.2.1 The Advantage: Exception from the Insolvency Estate
					1.2.1.1 The Limited Scope of Art. 10 of the Insolvency Regulation: Reservation of Title
					1.2.1.2 Right of Repossession of the Legal Owner
				1.2.2 Disadvantages
					1.2.2.1 Risk of Legal Recharacterization
					1.2.2.2 Risks Related to Operation at Sea
		2 Ex Lege Liens
			2.1 The Preliminary Issue of the Existence of the Maritime Lien
				2.1.1 Conceptual and Regulatory Diversity
				2.1.2 Proposed Rules of Conflict
					2.1.2.1 Lex Causae
						(i) In its Original Form
						(ii) Corrective Interventions: The Law Appropriate to Maritime Liens
					2.1.2.2 Lex Fori
					2.1.2.3 Lex Navis
			2.2 The Satisfaction of Maritime Liens in Insolvency Proceedings
				2.2.1 The Law Applicable to Ranking: Return to Lex Fori
					2.2.1.1 The Rule
					2.2.1.2 Examples of Application
				2.2.2 Ranking Issues
					2.2.2.1 Preservation of the Status of Maritime Liens in the Context of Insolvency
					2.2.2.2 The Difficulty of Distinguishing Between Pre-Insolvency and Post-Insolvency Liens
					2.2.2.3 Treatment of Liens in the Context of Liquidation: Greek Law
					2.2.2.4 Examples
			2.3 The Right to Arrest the Ship
				2.3.1 Partial Neutralization of the Right to Arrest
					2.3.1.1 The 1952 Arrest Convention Does Not Establish a Right In Rem
					2.3.1.2 Release and Security in the Context of Insolvency
						(i) Release of the Vessel
						(ii) Security to Release the Ship from Arrest
					2.3.1.3 The Status of the Proceedings on the Merits in Light of Art. 18 of the Regulation
				2.3.2 “In Rem Claims” Under Common Law and Insolvency: The Crucial Time Factor
					2.3.2.1 A Previously Filed Action In Rem
						(i) Treatment in the Context of the Insolvency Regulation
						(ii) Treatment Under the UNCITRAL Regime
					2.3.2.2 Actions In Rem Subsequent to Insolvency Proceedings
					2.3.2.3 Assessment of Statutory Claims In Rem by a Foreign Court
	CHAPTER 5 INSOLVENCY AND LIMITATION OF LIABILITY FOR MARITIME CLAIMS
		1 Invoking Limitation of Liability
			1.1 The Applicable Law
			1.2 Substantive Solutions
				1.2.1 Prior to Insolvency Proceedings: Limitation of Liability Without the Constitution of a Fund
				1.2.2 Following the Opening of Insolvency Proceedings
		2 Constitution of the Limitation Fund
			2.1 Prior to Insolvency Proceedings
				2.1.1 Constitution of the Fund by the Debtor-Shipowner
					2.1.1.1 Parallel Application of the LLMC 1976/96 and the Insolvency Regulation
						(i) The Issue from the Perspective of the LLMC
						(ii) The Issue from the Perspective of the EU Insolvency Regulation
						(iii) Parallel Application of the CLC 1992 and the Insolvency Regulation
					2.1.1.2 Parallel Application of an International Convention on Limitation and the UNCITRAL ML
				2.1.2 Constitution of the Fund by the Insurer
			2.2 Overturning the Limitation Fund
				2.2.1 Constitution of the Fund During the Suspect Period
					2.2.1.1 The Conflict-of-Laws Rule
					2.2.1.2 The Substantive Solution
				2.2.2 Conduct Barring Limitation
			2.3 Following the Opening of Insolvency Proceedings
Postface
Bibliography
Index