Europe has struggled mightily during the last several years to
triage a long series of critical blows to the economies of the 28
countries that comprise the European Union, as well as the
collective viability of eurozone economies. Here we provide a
snapshot of some recent developments regarding insolvency,
restructuring, and related issues in the EU.
Germany—On July 25, 2013, the Higher
Regional Court (Oberlandesgericht) of Munich ruled that an
irrevocable license does not become unenforceable in German
insolvency proceedings. The judgment concerned the rejection of a
cross-license by an insolvency administrator. Such licenses play a
significant role in industries with a high concentration of
patents, such as the semiconductor, biotechnology, software, and
internet industries. To minimize the risks of patent violations,
market participants grant to each other rights of use in patents,
patent applications, and know-how. An appeal against the judgment
has been filed. The decision follows an obiter dictum by the German
Federal Supreme Court (Bundesgerichtshof) in 2012, in
which the court indicated that it does not consider license
agreements insolvency-proof. Despite the Munich decision, there is
currently no certainty that a license agreement, whether exclusive
or nonexclusive, cannot be rejected by a German insolvency
administrator. Companies may try to benefit from enhanced
protections available for sublicense (as distinguished from
main-license) agreements. A more detailed discussion of the ruling
can be accessed at
http://www.jonesday.com/cross-license-agreements-in-german-insolvency-proceedings-an-update-08-21-2013/.
France—On July 26, 2013, Law No.
2013-672, relating to the separation and regulation of banking
activities, was formally enacted. The law was introduced to respond
to lessons learned from the 2007–2008 financial crisis, which
highlighted the limited number of tools available to supervisory
authorities to limit the risks created in the financial system by
systemically important financial institutions. The provisions of
the law extend over a broad array of issues, such as ring-fencing
of certain proprietary trading activities, anti‒tax haven
rules, money laundering, trading of agricultural commodities,
high-frequency trading, mandatory clearing, and central supervision
of counterparties. Most important, the law creates a new
banking-resolution regime that applies to credit establishments,
financial companies, financial holding companies, and investment
firms (with the exception of portfolio management companies).
Under the new regime, the French Prudential Control and Resolution
Authority (Autorité de contrôle prudentiel et de
résolution) has the power to implement a number of
resolution measures. Such measures include: (i) requesting
information; (ii) appointing a special resolution administrator;
(iii) changing governance; (iv) transferring all or part of a
business unit; (v) temporarily using a bridge financial institution
in support of the failing institution; (vi) activating subordinated
bond loss-absorption clauses; (vii) recapitalizing the failing
institution; and (viii) suspending or prohibiting certain
businesses of the failing institution. Two measures are of
particular relevance to the OTC derivatives industry: (i) a
prohibition of termination or closeout netting in case of a
temporary or permanent transfer, to a bridge or successor financial
institution, of transactions governed by a master agreement,
without prejudice to the single agreement principle; and (ii) the
declaration of a temporary stay of the exercise of early
termination and closeout netting rights. A more detailed discussion
of Law No. 2013-672 can be accessed at
http://www.jonesday.com/making-french-banks-safer-impact-of-the-new-french-law-relating-to-separation-and-regulation-of-banking-activities-on-netting-agreements-08-09-2013/.
Other recent European developments can be tracked in Jones Day's EuroResource, available at http://www.jonesday.com/euroresource--deals-and-debt-september-2013/.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.