Taking Creditors for a Ride: Insolvency Forum Shopping and the Abuse of EU Law

Abstract

In the course of the past ten years forum shopping in the vicinity of a financial

crisis has become very popular among debtors located in the EU. Particularly by

altering international jurisdiction parties seek to gain advantage by bringing a more favourable insolvency regime in place. The EU insolvency law-marketplace holds in stock a colorful menu of 26 different insolvency laws out of which debtors can choose. Even though there cannot perse be anything bad about making use of the legal framework to further ones own ends, many commentators and courts face forum shopping in insolvency with some feeling of discomfort.

The essay attempts to reveal the sources of the prevalent discomfort with forum shopping and analyses why and when forum shopping in the vicinity of insolvency may appear problematic. Furthermore, it determines whether a prohibition of abuse of EU law principle can be put in place to tackle problematic effects of forum shopping. The analysis shows, that forum shopping is not necessarily bad as it may bring about advantages that make an efficient resolution of financial distress of a debtor possible. Nevertheless, where forum shopping attempts prove to be

detrimental to the single market goal (Art. 26 TFEU), they have to be avoided. A prohibition of abuse of EU law principle may only partly cope with these situations. Due to decisive limitations of the principles scope and structure (ultima ratio device; principle of mutual recognition and mutual trust, application on case-by-case basis), it is not suitable to be applied against detrimental forum shopping effects on a broad basis. The essay thus finally ends with some future prospects on the reform debate.