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12 Int'l Fin. L. Rev. 30 (1993)
Make Way for the Conciliator

handle is hein.journals/intfinr12 and id is 78 raw text is: federal parliament but which now prevail over the fed- eral acts. It has in certain instances given rise to an anomaly where there are two similar, but not identical, pieces of legislation on the same subject; eg in the Czech Republic there were two securities laws. It is, however, now clear that in such a case the legislation passed by the Czech Republic prevails. Similarly, new tax legislation was passed in spring 1992 to be effective from January 11993. Towards the end of 1992 it became clear that this legislation would require amendment for technical reasons. In early December, therefore, when the Czech parliament became nervous about the failure of the federal gov- ernment to pass the Division Act, the Czech parlia- ment itself passed a number of amendments to the new tax laws. The federal parliament subsequently also passed certain amendments to the tax legislation. In the Czech Republic, therefore, the tax legislation is the original new legislation as amended by the Czech Republic, but in Slovakia the amendments are those passed by the federal parliament prior to its dissolu- tion. In practice, however, the amendments are very similar. The division of Czechoslovakia and the emergence of the two new countries of the Czech and Slovak Republics has given rise to a large number of practical problems from both a legal and political standpoint. How these two countries will develop and emerge as full sovereign states, only time will tell. From a Czech point of view, the majority of the immediate problems arising from the division appear to have been solved, the principal outstanding issue being the distribution of coupons under the coupon scheme in the first priva- tization wave. Slovaks have invested much more heav- ily in Czech companies in the first privatization wave than vice versa. The question therefore remains of redressing this balance either through monetary or other means. A number of issues continue to concern Slovakia including the destiny of its oil and gas pipelines and the general problems besetting a weaker, less developed economy. Commentators predict a divergence between the two economies with the stronger Czech economy joining mainstream Europe, including EC membership, and the weaker Slovak Republic being consigned to play the role of the poor relation in the slow stream of the post-communist world. Whilst these predictions may be borne out in the long term, what must also be recognized, in partic- ular from a western investor's perspective, is that both countries will suffer in the short term, as a result of the cost and diversion of resources involved in estab- lishing their own new infrastructure. What is certain is that the progress of the two countries will be monitored with interest by the international commu- nity as a whole and by their European neighbours in particular. U Make way for the Conciliator Embattled French companies are looking to conciliation proceedings to avert outright bankruptcy - but legal ambiguities persist. By Christopher Annandale, legal manager of Banque du Phenix, Paris The well-publicized problems confronting French banks with loans to real-property developers (see the Financial Times' articles of December 10 and 11 1992) have given rise to renewed interest in a relatively unknown technique for restructuring business debts. Conciliation proceedings (rglement amiable, mean- ing, literally, amicable settlement) were introduced by a law of March 11984 (the 1984 Law) together with a decree of March 11985 (the 1985 Decree) as part of an overall reform of French insolvency law. The rag-bag of measures contained in this legislation was aimed at giving borrowers advance warning of impending insolvency and the opportunity to take remedial mea- sures in time. They include the reinforcement of both the powers and the responsibilities of a company's statutory auditors. Four brief sections of the 1984 Law describe the new conciliation procedure (the word procedure is used in this article in a loose, general sense). It will become apparent from the following discussion that the legis- lator only intended to provide the simplest of legal frameworks. The operational rules of the procedure were left, perhaps optimistically, to be defined by the presidents of the Commercial Courts (in some cases, the Civil Courts will have jurisdiction). Conciliation proceedings are confidential. For this reason, it is difficult to obtain precise information and figures. However, it would appear, from discussion with bankers and legal practitioners, that only a hand- ful were initiated over the first few years after adop- tion of the 1984 Law and that, of these few, many either failed to produce an agreement with creditors or, alter- natively, were terminated when the debtor subse- quently became insolvent. In addition, other equally or even more informal procedures were available to debtors in financial difficulty. The courts already had considerable practical experience of these procedures and perhaps did not consider that the new procedure held out any substantive additional benefits. It would appear that the recent revival of the concil- iation procedure is due to the specific characteristics of property developers' indebtedness. Two major factors are involved. Firstly, the debt is almost entirely held or guaranteed by banks and other financial institutions. Negotiation of an agreed restructuring is therefore in practice made easier. Secondly, for reasons known to themselves, lenders have often over-stretched themselves, by making advances in excess of the real value of the property acquired or, alternativelyby failing to supervise the International Financial Law Review February 1993

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