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Shatter bid to stop ‘bankruptcy tourism’

Justice Minister Alan Shatter is trying to eliminate abuses of bankruptcy laws in other countries through proposals for modernising EU-wide insolvency legislation.

Irish property developers have attracted widespread criticism over the past few years for availing of much more lenient bankruptcy laws in the UK in what has been described as "bankruptcy tourism".

Mr Shatter said he had arranged that the initial discussion on the proposed regulation took place at the informal Justice and Home Affairs Council meeting of EU justice ministers held in Dublin Castle on Jan 17 and 18.

"I emphasised the importance of a more uniform approach across the EU in regard to the establishment of the centre of main interest so as to combat potential abuses which have given rise to allegations of ‘bankruptcy tourism’," said Mr Shatter in response to a Dáil question tabled by Sinn Féin’s Pearse Doherty.

Central to the EU proposals will be tightening up on guidelines on what is known as the centre of main interest. This will impose a higher burden of proof on people who want to apply for bankruptcy that they have moved their business interests and families to that country for a requisite time before they can start proceedings.

Steve Thatcher, a UK lawyer and bankruptcy specialist who has dealt with Irish clients, says the most effective way for Mr Shatter to eliminate bankruptcy tourism would be to implement personal insolvency legislation in this country "instead of drip-feeding it in".

Moreover, it is highly unlikely that the UK minister for justice will change existing legislation because of Irish people seeking bankruptcy protection in that jurisdiction, said Mr Thatcher.

However, Mr Doherty said there has to be an urgent tightening up of EU-wide legislation. "This is something that has been going on for some time and the minister needs to crack down hard on it," he said.

"For example, we have all heard of the Nama developers who’ve been able to declare themselves bankrupt outside of the State, to avoid this State coming after their assets.

"We cannot have a situation where those who can afford it can avail of more lenient bankruptcy regimes, while the ordinary person is left waiting at home, in this instance for a personal insolvency bill that we’re not even sure will assist people. Bankruptcy laws need to be fair to the individual and the state and they need to be declared in the state that person is resident."