Legal basis for EU insolvency
An EU insolvency represents the insolvency proceedings in a member state of the European Union. Your creditors lose the right to the claim and can no longer assert it against you within the framework of a levy of execution, seizure of an account, registration with the bank or an economic information file.
We can give you a number of paragraphs underlining the obligation of all EU Member States to recognize insolvency carried out in a Member State of the European Union with the discharge of residual debt granted.
However, this would not be the right thing to do. Our aim is to give you, a non-lawyer, anoverviewas simple and understandable as possible of why each of the 27 member states in Europe is obliged to recognize the residual debt discharge of another member state of the European Union and why you are entitled to choose any EU member state which offers you the best insolvency law.
In order to understand why every country in the European Union is obliged to recognize a residual debt discharge from another member state of the European Union, we must start with the foundation of the European Union. Don’t worry, we will keep the introduction as short as possible.
The Establishment of the European Community
The EU was founded in 1957 by the Treaty establishing the European Community. Since then, more and more countries have joined the EU. The following countries are currently members of the European Union:
Belgium, Bulgaria, Romania, Czech Republic, Denmark, Germany, Estonia, Greece, Spain, France, Ireland, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, Netherlands, Austria, Poland, Portugal, Slovenia, Slovakia, Finland, Sweden, and United Kingdom.
In addition to the Treaty establishing the European Community, the Treaty on the Functioning of the European Union was concluded. These two treaties (also called the “Roman Treaties”) are the founding treaties of the EU (the primary legal basis of the EU political system).
Every citizen of the EU is a national of one of the above-mentioned countries. So you are too if you are a citizen of one of these countries.
Belgium, Bulgaria, Romania, Czech Republic, Denmark, Germany, Estonia, Greece, Spain, France, Ireland, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, Netherlands, Austria, Poland, Portugal, Slovenia, Slovakia, Finland, Sweden, United Kingdom
Freedom of travel and establishment
In the European Union, EU citizens (private individuals) and companies (firms) incorporated under the laws of a Member State and having their registered office within the EU are entitled to settle (reside) in any Member State of the European Union (see the Member States above).
Establishment (residence) is defined as the actual pursuit of economic activity (work or self-employment) through a permanent establishment (residence) in another Member State for an indefinite period of time. Freedom of establishment is governed by Articles 49 to 55 of the Treaty on the Functioning of the European Union (TFEU).
Why you choose to reside in another EU member state is completely irrelevant, as this right is unrestricted for you as an EU citizen. Whether if you know that:
- Ireland has a better tax record
- the laws in Sweden or Finland
- the rental prices or land prices in Spain
- or just want to get more money for your work in France
plays no role in the implementation of the right of freedom of establishment in Europe. You are free, for whatever reason, to move your centerof main interests(COMI) to another EU Member State.
Travel and freedom of establishment - Insolvency in Latvia 28 different laws have to be under one hat.
One of the EU’s problems is that the 28 member states also have 28 different laws, some of which are similar, but ultimately different. In recent years, the EU has worked hard to create uniform regulations so that EU citizens do not suffer disadvantages when exercising their freedom to travel and settle. Thus, the 28 member states repeatedly agreed on simplified and super ordinate laws, which were recognized by all 28 member states in the EU. To put it more simply: every EU member state has said “Yes, I want these” to each of these regulations. These regulations, therefore, apply without restriction in the 28 member countries of the EU and must be followed by all of them.
Recognition of foreign residual debt discharges in Germany, Austria and the remaining 25 member states of the European Union
Even in the case of the revision of the REGULATION (EU) 2015/848 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL from20 May 2015 on insolvency proceedings, 27 member states have agreed.
One of the points of the European Parliament and thus of the 27 member states for the reorganization of the Insolvency Regulation was
Quote: “In order to achieve the objective of improving the efficiency and effectiveness of insolvency proceedings with cross-border effects, it is necessary and appropriate to combine the provisions on the place of jurisdiction, recognition, and applicable law in this area in a single Union measure which is binding and directly applicable in the Member States”.
Source: (Point 8 of recitals to Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings)
The Regulation (EU) 2015/848 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL from20 May 2015 on Insolvency Proceedings, Article 20, “Effect and Recognition”, contains binding provisions stipulating that each member state of the European Union must recognize insolvency carried out in another member state or the resulting discharge of residual debt.
Since the new Insolvency Ordinance came into force on 26 June 2017, there has been no legal uncertainty regarding the recognition of residual debt discharge resolutions.
Therefore, you can be told that Germany, Austria, the Netherlands, Italy, and Greece are legally obliged to recognize a residual debt discharge from Latvia.
Enforcement against you is no longer possible after successful insolvency, as the creditor has lost all rights to the debt.
EU Insolvency: Legal and Secure
There is no criminal offense relating to the conduct of EU insolvency proceedings. Insolvency tourism is not a criminal offense in any EU country. An EU insolvency is therefore not illegal or ethically reprehensible. It does not violate any law.
Instead, there is a regulation issued by the EU for the conduct of European insolvency proceedings which protects your rights as a free and responsible EU citizen.
Therefore, an EU insolvency cannot be illegal if it takes place within the EU regulations of the respective valid state regulations as well as tax regulations.
It is remarkable that many lawyers, especially in Germany, still neglect the fact that in Europe, we live in a large community in which the national laws (e.g. the laws of Germany, Austria, Italy, Greece, the Netherlands) must give way to the international laws (European Union regulations) in order to not endanger the freedom of travel and establishment (our highest European asset) within the European Union.
Often judged too difficult or dismissed as unlawful, the European laws receive almost no attention in legal advice, especially in Germany and in other EU member states. It is, therefore, not surprising that some lawyers categorically reject the EU insolvency. After all, this means a considerable effort for their studies, which is not proportionate for them.
Thus, there are obsolete, rigid and often no longer up to date legal provisions that are being quoted out of convenience to the point of making someone sick. This results in a significantly worse, not client-friendly consultation.
The European Court of Justice and the European Parliament, as well as the European Council, take many efforts to bring about a rethinking of the system.
It is the ignorance about the many regulations and their interpretation that deter many lawyers from dealing intensively with the European regulations. It is precisely these that enable you to develop freely and to obtain better solutions to certain problems.
False legal statements, such as that an EU insolvency violates existing legal provisions, are therefore only protective statements for lawyers who are too comfortable to deal with the regulations of the European Union. After all, they are in danger of losing turnover because their outdated legal solutions are slowly but surely no longer appealing to those seeking legal advice.
An EU insolvency does not violate the law by complying with all legal provisions.