Insolvency Office Holder Regulation Worldwide: An Assessment
20 March 2017
The state of insolvency office holder (“IOH”) regulation worldwide is a matter of some concern to the international bodies active in the insolvency field. The European Bank of Reconstruction and Development held a conference on 7 November 2014 to disseminate the findings of a two-year project into the IOH regulatory environment in its client group, of which 27 out of 35 were the subject of an assessment. While the laws of many of these states have been the subject of domestic scrutiny with a view to reforms to insolvency practice frameworks, this assessment was apparently the first time that research had been undertaken into the structure of the IOH profession in many of these jurisdictions. As such, the holistic view enabled as a result of the work contains some interest for those keen on understanding how IOH regulation is performing worldwide, especially in the European Union, of whose members, some 10 were surveyed, most of which were drawn from the 13 countries acceding between 2004-2013 (the exceptions being Malta, Cyprus and the Czech Republic).
The most essential component of the project’s findings was the great diversity in terms of status, qualification and training of insolvency practitioners, and the framework for their registration, supervision and discipline. Nonetheless, some indications of cross-jurisdictional trends in these countries was possible, a notable example being that where a self-regulatory model or state-sponsored regulatory agency was used, there was a strong correlation with performance overall across the criteria being measured. While most states had a licencing regime in place, less performing countries tended to include those where Government directly exercised supervision over the profession or no regulatory framework existed at all. The tension between private and public control was evident in a number of the jurisdictions surveyed.
Overall, while minimum educational standards and professional entrance exams were often prescribed, the project revealed weak performance in areas such as continuing professional development and training needs. Similarly, lacunae also existed at the level of the development of professional associations and of ethical rules. In many places, however, even where regulatory regimes were sufficiently robust, issues with resources tended to restrict active supervision of IOHs to the context of individual proceedings with the effectiveness of such monitoring dependent on the courts’ own supervisory capacity. The role of the courts in the conduct of proceedings was also identified as an issue, particularly in the balance of control and supervision between creditors and the courts. Over-monitoring was stated as potentially a problem where it inhibited IOHs in the performance of their duties. Finally, the structure of the appointments system in cases, as well as remuneration, were felt to be insufficiently encouraging of competition in the market for IOH services. In summary, the terms of the report revealed that there was much to do in relation to improving the environment and framework for practice in almost all of these states.
Some of the issues reflected in the EBRD assessment had been anticipated in work carried out by the professional associations, including INSOL Europe, which as representative of the European insolvency community, has a watching brief on behalf of their membership over matters connected with reforms to insolvency law and practice. Although written in the context of the then anticipated review of the European Insolvency Regulation, INSOL Europe authored a report in April 2010 on the topic of harmonisation, titled: “Harmonisation of Insolvency Law at EU Level”). This report was presented to the European Parliament Committee on Legal Affairs and largely advocated consideration of substantive harmonisation in a number of areas of insolvency law.