The US was once the pre-eminent and busiest forum for large, complex restructuring cases, with its Chapter 11 procedure providing the answers and solutions. Over the last five years or so, it has started to be challenged by Europe’s push to develop its own credible alternatives.
Whether it is by using the UK’s Restructuring Plan or Scheme of Arrangement, Germany’s StaRUG process, the Netherland’s WHOA procedure or Italy’s Concordato Preventivo, global multi-jurisdictional groups with assets and interests in Europe facing short-term debt challenges can now benefit from a range of tools and restructure their debts in a binding, efficient and internationally recognised process. These procedures can often deliver similar outcomes to Chapter 11 and at a lower cost.
Europe’s restructuring market offers modern, flexible and harmonised restructuring regime, with the particular benefit of strong cross-border legal cooperation within the EU as a result of the Recast Insolvency Regulation and also in the UK.
Why is cross-border restructuring increasing in Europe?
USA policy changes
Since the start of Donald Trump second term as US President in January 2025, there has been a very significant shift in US trade strategy, which has had financial and commercial repercussions worldwide. The tariff-centric position now favoured by the US, as well as the Trump administration’s differing approach on energy, is creating substantial and ongoing volatility and uncertainty in markets. Unresolved conflicting views and regulatory rifts have also emerged from diverging attitudes to AI and cyber security, creating further global trade friction and a reduction in cross-border investment.
Russia’s invasion of Ukraine
In addition to the disruption to energy markets and commercial supply chains ever since the start of what is now more than four years of the conflict, international business activity has been distorted by the resulting sanctions regimes.
The Iran War
If anything, this conflict now threatens to be an even greater threat to international trade than the Ukraine war. Some five months in, Middle East energy supplies and prices remain in flux, while supply chains for a range of other internationally traded goods are at constant and fluctuating risk.
Subdued economic growth in Europe
The major European economies including Germany, UK, France and Italy are all facing recessionary pressures as a result of some or all of excessive government debt, high borrowing costs, elevated energy costs, weak export demand, weak business investment and inflation. This is creating additional risks for businesses, many of which have significant cross-border trading relationships.
Liability management exercises (LMEs)
The out-of-court LME phenomenon started in the US in the 1980s but has spread widely around the world and especially in Europe in recent years. Whether an LME is initiated in the US, Europe or any other jurisdiction, in many cases it involves complex, multi-national issues, as well as assets, liabilities and issues in a spread of jurisdictions. In some cases, formal restructuring procedures are necessary to enforce outcomes.
Why Europe?
The shift towards European cross-border solutions reflects more than just the increasing range of effective options for restructuring issues there. It also comes from the scale of transatlantic trade, involving the US, UK, the EU and other European jurisdictions. Estimates suggest that this could represent a third of global GDP and plays a role in supporting commerce, investment and innovation around the world.
As a result, the likelihood in many larger restructuring scenarios is that assets, liabilities and trading relationships may similarly be spread worldwide, but a significant part will be located in Europe. If a European restructuring route provides the necessary solutions and maybe a less challenging process and especially if that route works well in tandem with Chapter 11 via Chapter 15 international recognition in the US, then taking that option is an obvious way to go.
If you are seeking professional advice for your business, Opus is here to help. We can arrange for you to speak to one of our Partners, who can discuss options with you. We have offices nationwide and by contacting us on 0203 995 6380, you will be able to get immediate assistance from our Partner-led team.