Unification of bankruptcy (insolvency) proceedings in the EU. Participation of Cyprus.

Insolvency proceedings initiated in the European Union can be recognized in Cyprus according to the EU Insolvency Regulation (2015/848).

In the absence of a regulatory framework providing for the recognition of foreign insolvency proceedings in Cyprus, such recognition may be achieved in accordance with the common law principles.

The power to recognize the insolvency proceedings of foreign companies was recognized in the first-instance case of Eitan Erez vs Borris Bannai (Application No. 1535/2011 dated February 1, 2012). However, in the above case, by applying the principles of common law, the court refused to recognize the insolvency proceedings that were initiated abroad due to the following reasons:

• the defendants to the proceedings were not residents of Cyprus,
• the applicant had failed to provide sufficient evidence that he owned assets within the specified jurisdiction.

Although the framework for recognizing cross-border insolvency originating outside the European Union remains largely untested in Cyprus, the above case shows the willingness of the Cyprus courts to follow the principles of common law in accordance with current commercial realities. Given the fact that companies registered in Cyprus are part of the numerous cross-border structures in the EU, it is expected that the new practice regarding the recognition of EU foreign bankruptcy (insolvency) proceedings in Cyprus may become quite common.