Tort-Based Claims and Legal Divergence in EU Insolvency Systems: Towards a Framework for Trust and Stability in Cross-Border Contexts

Abstract

The increasing interconnection of European legal and economic systems has significantly amplified the importance of coherent cross-border insolvency regimes. While Regulation (EU) 2015/848 on insolvency proceedings coordinates jurisdiction, recognition, applicable law, and cooperation across Member States, it does not fully harmonize the substantive treatment of individual categories of claims. Among the most complex and insufficiently structured areas within this landscape is the treatment of liabilities arising from tort-based claims and other forms of unlawful or harmful conduct.This paper examines how claims resulting from unlawful or harmful conduct are classified, treated, included in insolvency proceedings, excluded from discharge, or otherwise affected under different national insolvency regimes, with a particular analytical focus on Ireland as an illustrative case within the European context. Ireland is especially relevant because its personal insolvency framework reflects both the historical influence of common law and Commonwealth-derived legal traditions and a modern statutory architecture designed to manage personal debt through regulated procedures. In this context, the paper briefly outlines the Irish procedural pathway, including the role of the Personal Insolvency Practitioner (PIP), who acts as a regulated intermediary between the debtor and creditors in procedures such as Debt Settlement Arrangements and Personal Insolvency Arrangements. This institutional role illustrates how Irish insolvency law combines formal legal procedures, creditor participation, debtor protection, and professional intermediation within a structured debt-resolution process.The analysis further addresses why the Irish system may appear particularly complex in cross-border contexts. This complexity arises from the coexistence of several procedural routes, including bankruptcy, Debt Relief Notices, Debt Settlement Arrangements, and Personal Insolvency Arrangements, each with distinct eligibility requirements, debt categories, creditor approval mechanisms, procedural safeguards, and consequences for discharge. Personal insolvency law in Ireland is governed by the Bankruptcy Acts 1988 to 2015 and the Personal Insolvency Acts 2012 to 2021; the Personal Insolvency Act introduced three central methods of debt resolution and amended bankruptcy law. The involvement of multiple institutional actors, including courts, the Insolvency Service of Ireland, creditors, approved intermediaries, and PIPs, further contributes to the system’s layered structure. This makes Ireland a useful example for examining how legal tradition, statutory reform, institutional design, and practical access to professional guidance interact in personal insolvency proceedings.Moving beyond descriptive and comparative approaches, the paper demonstrates that divergences in the treatment of tort-based claims give rise to significant challenges in terms of legal predictability, enforceability of claims, creditor protection, debtor rehabilitation, and the overall level of trust in cross-border insolvency systems. These challenges are particularly evident in the inconsistent delineation between dischargeable, non-dischargeable, excluded, and conditionally includable obligations, differing evidentiary and procedural requirements, and varying policy priorities regarding the balance between creditor protection and the debtor’s economic fresh start.Against this backdrop, the paper develops a structured conceptual framework designed to systematically address these issues. The framework identifies key dimensions of legal divergence, including the legal origin of the claim, the nature of the harmful conduct, the degree of fault or unlawfulness, the procedural status of the claim, the availability of discharge, the involvement of institutional or professional intermediaries, and the rationale for excluding or limiting certain obligations within insolvency proceedings. These dimensions are translated into an analytical model that enables the classification, comparison, and evaluation of national approaches.Furthermore, the paper outlines how a structured understanding of these dimensions can serve as a basis for improving transparency, enhancing comparability, and reducing systemic tensions in cross-border contexts. Rather than advocating for full legal harmonization, the proposed framework provides practical orientation and evaluative criteria that can support academic analysis, professional decision-making, and institutional development. In doing so, the paper contributes to the development of solution-oriented approaches for managing legal diversity within the European insolvency landscape and aims to strengthen the stability, legitimacy, and trustworthiness of cross-border insolvency systems.

Keywords: Tort-Based Claims in Insolvency, Legal Divergence in Cross-Border Systems, Dischargeability of Claims, EU Insolvency Regulation

DOI: 10.54941/ahfe1008131