Ms Madeleine Reid:

Coming back to one of the points Deputy Brophy raised when he asked us if there was anything good for Ireland in this proposal, I think elements of the proposal are worth looking at. There are some elements that we have already considered as additional measures. One of the possibilities is of access to preventive restructuring before insolvency actually occurs for private individuals. We do not have that in Irish law at present as the personal insolvency legislation applies from the moment one is insolvent. I think there is already some visible stakeholder interest in whether it might be worth looking at setting in motion some sort of process to encourage people to be able to start engaging in restructuring before the moment occurs, although the directive is rather vague as to how that would be done.

The difficulty is that to the extent that the directive is putting forward interesting ideas of that sort, we could do all of that voluntarily. The directive, however, would oblige us to do certain things in a way that would not necessarily sit with our existing legislation and it is for that reason we are scrutinising it carefully, where we feel there might be a negative impact. I suppose it is also worth bearing in mind that we are a common law member state. The negotiations on this are likely to continue for some time in Council. By the time they conclude, we may have no other large common law member state in the European Union. The continental approach to all of these matters differs quite substantially from ours. One of the reasons I think that the provisions about courts are more intrusive than what we are used to seeing is that in many continental member states, judges are civil servants effectively. They are officials of the Government.

Where there might be a negative effect and the Chairman asked about protection of existing rights, I suppose one of the issues we are looking at is the way in which the proposals, as they are drafted at present might change the balance between different types of creditors' protection and between protection of creditors and protection of debtors. A cross-class cram-down effectively occurs where a court is asked to intervene. One has a restructuring plan which has been put forward by the individual, some creditors like it but other creditors do not. It has not got the necessary majority approval under the normal rules. The court is asked, using criteria which generally refer to the overall good of the economy and society, to decide whether the proposal should be imposed over the objection of some of the creditors. The absolute priority rule which is being proposed by the proposal at the moment would seem to mean that in that situation somebody like the secured creditors for example would have to be given a priority, which is arguably higher than they would enjoy under examinership, as we know it in Irish law. That would be quite a significant change but we are looking at the implications of that and what exactly it would entail.