Rethinking the law applicable to rights in rem in cross‐border insolvency: The European Insolvency Regulation and the
UNCITRAL
draft model law
Anhelina Andrieieva Abstract
Rights in rem in cross‐border insolvency proceedings remain one of the most debated topics, standing at the crossroads of secured creditors' reasonable expectations and trade. The European Insolvency Regulation (recast) regulates the matter, providing that the basis, validity, and extent of rights in rem are determined under the lex situs and are not affected by the opening of insolvency proceedings. However, the rule has been numerously criticised as overprotecting secured creditors and obstructing the effectiveness of insolvency proceedings. Against this backdrop, the recent UNCITRAL proposal, set out in the draft model law on applicable law in insolvency proceedings, to regulate rights in rem by the lex fori concursus provides a diametrically opposite approach and detracts from the European Insolvency Regulation's trajectory. Nonetheless, the UNCITRAL proposal contains an important safeguard. If the lex fori concursus impairs the position of a secured creditor, either the lex situs or the law established by the private international law rules shall come into effect instead of the lex fori concursus . The applicable law, among these two options, would depend on whether the localisation rules can determine where the asset is situated. In light of the aforesaid, this paper compares the approaches present in the European Insolvency Regulation (recast) and the UNCITRAL Draft Model Law regarding the treatment of rights in rem in cross‐border insolvency proceedings, arguing that neither of them is capable of ensuring legal predictability for stakeholders, but rather can significantly complicate the insolvency case and produce legal gaps alongside uncertainties. Ultimately, the author concludes that the most predictable alternative for all stakeholders involved would be regulating the treatment of rights in rem in insolvency proceedings by the lex fori concursus , with the only safeguard that a secured creditor proves that it had the reasonable expectation that the centre of the debtor's main interests was located in a particular Member State.