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70 Am. Bankr. L.J. 485 (1996)
The European Union Convention on Insolvency Proceedings

handle is hein.journals/ambank70 and id is 521 raw text is: The European Union Convention on Insolvency Proceedings by Manfred Balz* Insolvency is a universal economic fact of life common to all economies that regulate the interaction of economic subjects through markets, and not through a plan. In substance, the concept of insolvency denotes one and the same economic reality in all legal systems no matter how seemingly different it is defined for legal purposes-the fatal inability of a market actor to sur- vive in a system which is based on credit in the broadest possible sense of this term, that is on the market's confidence in one's ability to pay one's debts and to perform one's legal obligations as they come due. Whether we use the concept of an act of bankruptcy as in some common law jurisdictions, the balance sheet test of overindebtedness (insolvency) as in the German law of companies,' or the illiquidity test (inability to pay mature debt) as in French law,2 we all mean essentially the same thing when we say someone is bank- rupt. We know it when we see it-much as in the case of obscenity as Justice Stewart once put it3-even without a precise definition. In broad terms, all legal systems of free countries react in much the same way to the fact of insolvency. Enforcing the market exit of inefficient firms as well as reorganizing ailing firms that can be saved under a market standard evidently requires similar legal requirements in any economy which relies on markets for ensuring the efficient deployment of productive resources. Little wonder, therefore, that the emerging market economies of the former Com- munist bloc attach particular weight to the enactment of modem insolvency Partner, Wilmer, Cutler & Pickering, Washington, D.C., London, Brussels, Berlin, heading the firm's Berlin office. The author served as permanent Chair of the EU Council Group on Bankruptcy and au- thored the draft EU Convention, was the expert for Germany in the Strasbourg negotiations for a Council of Europe Convention on Certain Aspects of Bankruptcy, and helped draft the German Insolvency Law Reform Act of 1994. He now serves, inter alia, on the German delegation to the UNCITRAL negotia- tions on Uniform Legislative Provisions on Judicial Cooperation and Access and Recognition in Cases of Cross-Border Insolvencies. The author is indebted to Ms. Pauline Koskelo of the European Investment Bank for valuable comments on an earlier draft of this Article. This Article is based upon a paper presented at the National Conference of Bankruptcy Judges, San Diego, California, October 16-19, 1996. 'For discussion of the recent changes in the German law of insolvency, see Klaus Kamlah, The New German Insolvency Act: Insolvenzordnun& 70 Au BAtm<. LJ. 417 (1996). 2For a discussion of the French law of insolvency, see Richard L. Koral & Marie-Christine Sordino, The New Bankruptcy Reorganization Law in France: Ten Years Later, 70 ALL BANLr. LJ. 437 (1996). Jacobellis v. Ohio, 378 U.S. 184, 197 (1964) (Stewart, J, concurring).

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