Cross‐border Insolvency and Legal Transnationalisation

The last 20 years has seen an explosion of approaches for dealing with an inevitable consequence of globalised markets, that of cross‐border insolvencies. This article places phenomena such as the United Nations Commission on International Trade Law Model Law on Cross‐border Insolvency and Cross‐border Insolvency Agreements (also known as Protocols) within the context of developing laws on international commercial transactions. First, it briefly describes the evolution of the international commercial law (sometimes known as the law merchant) to provide a context to understanding the international commercial responses to the problems created by cross‐border insolvencies. Next, it outlines the range of approaches being adopted by states and multilateral bodies in recent decades to resolve cross‐border insolvency issues. Finally it draws some preliminary conclusions on the potential implication of this transnationalisation process and broader international commercial law perspective, in particular on the capacity of cross‐border insolvency agreements to address cross‐border insolvency issues. Copyright © 2012 John Wiley & Sons, Ltd.     

The legal responses of Canada and Poland to international bankruptcy and insolvency with a focus on cross‐border insolvency law

This article discusses and compares the respective legal responses of Canada and Poland to international bankruptcy and insolvency with a focus on cross‐border insolvency law. Specifically, the issues addressed herein concern jurisdiction, recognition of foreign bankruptcy proceedings, and co‐operation with foreign courts and foreign administrators. Notwithstanding some real differences between Canadian and Polish international insolvency proceedings, both legal regimes may be compared, since both countries have adopted many of the principles contained in the UNICTRAL Model Law on Cross‐Border Insolvency. The major impetus behind the changes established by Canada in its bankruptcy and insolvency laws have been the economic realities produced by the North American Free Trade Agreement. Likewise, Poland's accession to the European Union (EU) has been a major catalyst for revising the Polish Insolvency and Restructuring Act. Part II of the said act is entirely devoted to international insolvencies. However, following Poland's adherence to the EU, those sections of the Polish Insolvency and Restructuring Act that deal with international or cross‐border insolvencies will be severely limited or constrained in scope. The article indicates that Poland, the EU and Canada are taking the necessary steps to meet the needs of debtors who would like to restructure in an international setting. Copyright © 2006 John Wiley & Sons, Ltd.     

Chinese cross‐border insolvencies: current issues and future developments*

This article deals with several problems pertaining to cross‐border insolvency, an important but ignored area in China. In this article, the current status of Chinese bankruptcy laws has been firstly addressed, with a focus on its legal blank on cross‐border insolvency and unsatisfactory judicial practice. Thereafter, the influential Guargdong International Trust and Investment company case has been analysed, which further highlights the inadequacy of Chinese bankruptcy legislation and crying needs for its reform. Basing on the essential principles embodied in the United Nations Commission on International Trade Law Model Law and European Union Regulation, the gaps between Chinese bankruptcy laws and international practice have been made clear. Accordingly, the developments of Chinese cross‐border insolvency have been proposed in order to provide helpful references for the future legislation. Copyright © 2001 John Wiley & Sons, Ltd.     

Maritime cross‐border insolvency in China

Due to the high degree of mobility of ships and the special operational structures of shipping companies, it is difficult to harmonise the cross‐border insolvency regime with the maritime law regime governing ships. One of the typical examples is the recent bankruptcy of Hanjin Shipping Co Ltd. Chinese creditors were heavily affected by the bankruptcy of Hanjin. However, Hanjin never filed an application to have its Korean insolvency proceeding recognised in the People's Republic of China (PRC). Nor did it commence any ancillary insolvency application under the Enterprise Bankruptcy Law of the PRC. Taking Hanjin's bankruptcy as an example, this article examines the current statutory regime of cross‐border insolvency in the PRC in detail and analyses the approach adopted by the Chinese courts to resolve the conflicts that arise between the cross‐border insolvency and maritime law regimes.     

Implications of the UNCITRAL model law for Australian cross‐border insolvencies

Recent events in international financial markets have focused regulators' and lenders' attention not only on the importance of insolvency laws as an integral part of the regulation of market economies but also on the need to facilitate the administration of multi‐jurisdictional insolvencies. In this context, UNCITRAL has proposed a Model Law on Cross‐border Insolvencies for adoption by its member states. Australia contributed to the relevant UNCITRAL deliberations and is considering possible adoption of the Model Law. This article outlines the Law's main features and its potential impact on current Australian procedures for dealing with cross‐border insolvencies. Copyright © 1999 John Wiley & Sons, Ltd.     

Are Bangladesh,India and Pakistan Ready to Adopt the UNCITRAL Model Law on Cross‐Border Insolvency?

The development of business laws in key markets has not kept pace with the exponential growth of foreign investment they have experienced. Countries such as Brazil, Russia and China either do not consider the issue of cross‐border insolvency in their legislation or they explicitly provide for a ‘territorialist’ approach to cross‐border insolvency proceedings, whereby each country grabs local assets for the benefit of local creditors, with little consideration of foreign proceedings. This has led to uncoordinated, expensive attempts at cross‐border reorganisation. The UNCITRAL Model Law on Cross‐Border Insolvency (1997) was adopted with the objective of modernising international insolvency regimes and enhancing cross‐border cooperation. In its 19 years of existence, it has been adopted by 41 countries in a total of 43 jurisdictions but by none of the BRIC states or the ‘Next‐11’ nations of Bangladesh and Pakistan. While it has entered into policy‐level discussion in China, India and Russia, it would seem that there is still scepticism regarding the efficacy and suitability of the Model Law for adoption into their national systems. This paper seeks to establish whether the Model Law can adequately plug, what Steven Kargman calls, ‘the glaring gap in the international insolvency architecture’, looking particularly at the context of the South Asian states of India, Bangladesh and Pakistan. It will question whether its adoption will improve the ability of these jurisdictions to handle the challenges of cross‐border insolvencies, especially in light of their existing legal landscape, their market policy objectives and the existing alternatives available to the Model Law. Copyright © 2016 INSOL International and John Wiley & Sons, Ltd.     

The Context for Cross‐Border Insolvency Law Reform in Sub‐Saharan Africa

Cross‐border insolvency literature has developed significantly in recent years. However, the scholarship that has evolved lacks an insight from the perspective of Sub‐Saharan Africa (SSA). Existing theories on cross‐border insolvencies, and the global insolvency benchmarks that emerged in the recent years, have almost exclusively been developed from the best practices obtained in advanced economies. Accordingly, the context within which SSA cross‐border insolvency reform may be undertaken must be determined and explored given the pressure towards globalisation and the potential for the pressure to result in unsuitable legislative reform. This article sets out the context for cross‐border insolvency law reform in SSA. It raises issues that are likely to arise during the reform process and challenges that may be faced. Copyright © 2014 INSOL International and John Wiley & Sons, Ltd     

Conflicts of interest,intra‐group financing and procedural coordination of group insolvencies

Modern insolvency law instruments recognise the specificity of enterprise group insolvencies, premised on the existence of close operational and financial links between group members. It is widely accepted that maximisation of insolvency estate value and procedural efficiency depend on coordination of insolvency proceedings opened with respect to group entities. Such coordination is prescribed in the European Insolvency Regulation (recast), the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Enterprise Group Insolvency and the recently reformed German insolvency law. Yet in insolvency, group members retain their own insolvency estates and pools of creditors. This is based on the traditional company law principle of entity shielding. Active communication and cooperation between insolvency practitioners and courts do not sit well with the separate (atomistic) nature of insolvency proceedings, as well as different and oftentimes conflicting interests of creditors in such proceedings. As a result, communication and cooperation may be restricted in a situation of conflicts of interest. This article explores how in the context of group distress the risks arising from conflicts of interest can be controlled and mitigated, while ensuring efficient cross‐border cooperation and communication to the maximum extent possible. It analyses three cutting‐edge coordination mechanisms, namely (a) cross‐border insolvency agreements or protocols, (b) special (group coordination and planning) proceedings and (c) the appointment of a single insolvency practitioner. It concludes that both the likelihood and significance of conflicts of interest correlate with the degree of procedural coordination. Therefore, conflict mitigation tools and strategies need to be tailor‐made and targeted at a specific level and coordination mechanism.     

China's Enterprise Bankruptcy Law (EBL 2006): cross‐border perspectives

With China's new Enterprise Bankruptcy Law (‘EBL 2006’) having come into effect on 1 June 2007, a critical issue arises as to the extent to which Article 5, as a cross‐border provision, will strengthen creditors' rights across jurisdictions. In this paper attention will be paid in particular to how the Chinese People's Court is likely to exercise its discretion to grant recognition to a foreign court ruling, and vice versa. The paper will start with a brief introduction to the circumstances under which Article 5 came into being. The evolution of China's cross‐border insolvency practices will be examined through an analysis of an inbound case of B&T (2002) as well as an outbound one of GITIC (2005). In spite of the fact that China has not adopted the UNCITRAL Model Law, essential factors deemed necessary to be considered by China's court and its counterparts in US and UK are to be highlighted throughout the paper. Although the effect of Article 5 remains to be seen, it will be critically analysed focusing on some controversial issues. Copyright © 2009 John Wiley & Sons, Ltd.     

Universalism and the recognition of group proceedings under the UNCITRAL Model Law in Montenegro

Among the most topical insolvency issues in 2017 was the Croatian “Lex Agrokor”—a controversial “tailor‐made” law providing a unique restructuring opportunity for the largest Croatian conglomerate, the parent company of which was otherwise facing bankruptcy. Soon after the “extraordinary administration procedure” began, the appointed administrator started filing motions for the recognition of the alleged group insolvency as foreign insolvency proceedings in a number of neighbouring and other European countries, most of which have adopted the UNCITRAL Model Law on Cross‐Border Insolvency. It was an attempt to save the conglomerate's property from being seized in a disorderly fashion by various secured creditors, most noticeably, the largest Russian financial institution Sberbank, which contested these motions with varying success. This article, however, does not present an effort to comprehensively analyse the ongoing legal battle but rather adopts a broader approach to examining the Lex Agrokor to establish grounds for more general conclusions. More precisely, the purpose of this article is twofold. First, to offer strong arguments that, from the standpoint of typical insolvency legislation based on the Model Law, such as that of Montenegro, both the actual and future group proceedings initiated under the Lex Agrokor should fail to meet recognition requirements. Second, based on the preceding case study, to offer conclusions on how to further promote universal approach regarding group insolvencies by emphasizing exactly what the national laws regulating group insolvency should not feature so as to have the proceedings introduced therewith recognized in countries adopting the Model Law.     

Cross‐border assistance in insolvency under Jersey law

As an off‐shore financial centre, Jersey has not been immune from the global recession, which has brought consideration of cross‐border insolvencies and whether the right tools exist in domestic law to manage proceedings of this nature. It is the purpose of this article to outline the Jersey law relating to cross‐border assistance in insolvency. Copyright © 2011 John Wiley & Sons, Ltd.     

Towards adoption of the United Nations Commission on International Trade Law Model Law on cross‐border insolvency in Kenya

Kenyan Insolvency Bill has been in the Kenyan government website since 2010. The analysis of the Bill reveals that if it were to be passed into law, it will have significant implications for the Kenyan insolvency legal regime. The regime which is currently in use is based on the law that was inherited from the colonial administration. This review article focusses on the potential implication that the Bill is, if it were to be passed into law, likely to have for cross‐border insolvency reform and proceedings. The analysis is informed by the international insolvency benchmarks, particularly the United Nations Commission on International Trade Law Model Law on cross‐border insolvency and the emerging trends of its adoption in various countries including in sub‐Saharan Africa. Copyright © 2013 INSOL International and John Wiley & Sons, Ltd     

China's new Enterprise Bankruptcy Law—A great leap forward,but just how far?

The closure of many small and medium enterprises (SMEs) following the global financial crisis of 2008 spurred the Chinese government to follow its international counterparts in issuing an economic stimulus package. While it was effective in preventing many financially distressed SMEs from failure by boosting demand for its businesses, in the long run, such SMEs should be rescued through a statutory regime, which affords them temporary protection from creditors and provides them an opportunity to restructure their businesses. In doing so, the premature liquidation of SMEs would be prevented and SMEs with viable businesses but in temporary financial difficulties would be given a chance to succeed again. Although China's new Enterprise Bankruptcy Law (EBL) has shortcomings, it improves upon its predecessor legislation and, since it is still at an infantile stage of development, is bound for further reform. Despite the EBL's success in bringing Chinese corporate bankruptcy laws in line with international standards, full compliance with the UNCITRAL Model Law on Cross‐Border Insolvency and UNCITRAL Legislative Guide on Insolvency Law remains to be seen. In September 2008, the South China Morning Post newspaper reported that the number of (applications for) corporate reorganization and bankruptcy cases had dropped, “leading to widespread speculation there are problems in the law's practical application”. 1 This article examines the implementation of the EBL, critiques key aspects of the EBL and argues for a comprehensive assessment of the EBL and for bringing the EBL in full compliance with the international standards on cross‐border insolvency. Copyright © 2010 John Wiley & Sons, Ltd.     

The UNCITRAL Model Law on Cross‐border Insolvency and the Rule of Law

The rule of law is a concept that was often considered in the context of national legal systems. However, it is now commonly being promoted as significant in the transnational context. This paper addresses its importance within the transnational economic and commercial context, in particular in response to cross‐border insolvencies. It examines how the UNCITRAL Model Law on Cross‐border Insolvency and its Guide to Enactment and Interpretation promote key tenets of the rule of law in transnational disputes arising out of businesses in financial distress. In particular, some examples are provided of cases from the Asia‐Pacific region in which the Model Law has been applied to demonstrate how the rule of law may be promoted in an insolvency context. Finally, the paper concludes that the adoption of the UNCITRAL Model Law on Cross‐border Insolvency promotes transparency, accountability and predictability, which in turn support stability in financial systems and credit relationships and thus trade within a global market. This is a direct result of adherence to elements of the rule of law principle. Copyright © 2016 INSOL International and John Wiley & Sons, Ltd. Copyright © 2016 INSOL International and John Wiley & Sons, Ltd     

The corporate reorganization regime under China's new enterprise bankruptcy law

This paper reviews the background of embarking on the bankruptcy law reform of China, and examines the newly introduced corporate reorganization regime under China's new Enterprise Bankruptcy Law 2006. As a patchwork of the US Chapter 11 and English Administration, China's new regime is a good law on paper with sound intention and perfect logic. But there are still many legal and institutional impediments to the new regime's utilization. For example there is a serious institutional incapacity among the judiciary, as the necessary training and organization of thousands of professionals has not started. Also of concern is the still‐unfinished process of updating and modification of related laws and accounting standards as well as their application and enforcement. Enacting a new bankruptcy law is only the first step. Copyright © 2008 John Wiley & Sons, Ltd.     

Conceptualising upcoming Chinese bank insolvency law: Cross‐border issues

This paper examines the cross‐border effectiveness of bank resolution measures in the context of current and soon‐to‐be revised Chinese bank insolvency legislation, that is, the Bank Resolution Regulation. The general framework is regulated in the Chinese Enterprise Bankruptcy Law. With regard to the outgoing effects of Chinese bank resolution measures, the ultimate decision is in the hands of China's counterparts. However, it is proposed that the contractual approach could be a solution to enhance legal certainty. On the other hand, the incoming effectiveness of foreign resolution measures has to be firstly recognised in China. Three major tests in terms of recognition and enforcement are international agreement, reciprocity, and public policy exception. These criteria should be interpreted against the background of emerging international regime for bank resolution and latest development in the Chinese legal community.     

Rwanda Legal Framework on Insolvency: Problems and Proposals for Reform

The purpose of this article is to explore some key insolvency issues, which will be highly selective for this article, and to identify the weaknesses and inconsistencies in the existing framework on insolvency. Rwanda does not have an efficient and effective framework on insolvency, and the article argues that there is a need for an improved insolvency law regime. In view of the weaknesses and inconsistencies, it is vital to consider international best practices such as the United Nations Commission on International Trade Law (UNCITRAL) Legislative Guide on Insolvency and the UNCITRAL Model Law on Cross‐border Insolvency as the basis needed to deal with different aspects or elements of the Rwanda insolvency law. The value of this article lies in the insights it offers into the current framework on insolvency and the opportunity given to address the inconsistencies, weaknesses and uncertainties that invariably arise from the law. Copyright © 2015 INSOL International and John Wiley & Sons, Ltd     

The Inherent Power of Common Law Courts to Provide Assistance in Cross‐Border Insolvencies: From Comity to Complexity

The weighty and difficult issues associated with cross‐border insolvency have generated considerable debate over the last two decades. Legislative reform has typically proven slow and fragmented. This article analyses the inherent power of common law courts to grant assistance in cross‐border insolvency proceedings and the basis on which the inherent power is exercised. In doing so, it seeks to explore how the inherent power may continue to be of utility to common law courts. In particular, it considers the position in jurisdictions that are yet to adopt the United Nations Commission on International Trade Law Model Law on Cross‐Border Insolvency or enact a substantial statutory regime for recognising and cooperating with foreign courts or representatives in insolvency proceedings. The article considers the benefits and disadvantages of continuing to recognise – and extend – the inherent power. It suggests that although there are fundamental differences concerning the exercise of the inherent power, it may be possible to agree on a number of principles that inform the application of the inherent power and its future development. Copyright © 2017 INSOL International and John Wiley & Sons, Ltd.     

Bridge over Troubled Water: The Revised Insolvency Regulation

The EU legislature has used the last two and a half years to negotiate a modernised framework for cross‐border insolvencies largely outside the spotlight of public debate. The revised Insolvency Regulation introduces new rules on secondary proceedings and innovative provisions on insolvency proceedings for groups of companies. Some parts of the final reform package were not originally envisaged by the European Commission, and it was the European Parliament and the Council that, in an unusual display of unity, agreed on more ambitious steps than the EU executive had proposed. However, not all that glitters is gold. The legislature missed the opportunity to clarify the concept of Centre of Main Interest, and it is still for the courts to establish international jurisdiction on the basis of rather vague criteria. It will soon be time to give life to the rules and ensure that cross‐border insolvencies are conducted more effectively than they are today. The new rules entered into force on 25 June 2015 and apply from 26 June 2017. Copyright © 2015 INSOL International and John Wiley & Sons, Ltd     

The Use of Noncourt‐Based Corporate Rescue: Does the Australian Voluntary Administration Procedure Provide a Model for China?

In the recent international history of insolvency law reform, the reform of corporate rescue and restructuring has been an ongoing project. In China, the enactment of the Enterprise Bankruptcy Law 2006 saw the introduction of a bankruptcy reorganisation procedure that incorporates the debtor‐in‐possession model found in Chapter 11 of the US Bankruptcy Code. However, the Chinese corporate rescue procedure has been significantly underused due in part to various drawbacks associated with this court‐based and highly politicalised process. This paper explores the possibility of reforming China's current corporate rescue regime by drawing upon the Australian voluntary administration procedure. Found in Part 5.3A of the Corporations Act 2001 (Cth), this procedure was designed to provide a relatively swift, inexpensive and flexible corporate rescue mechanism for companies in financial distress. It comprises a noncourt based mechanism under the control of one or more professionally qualified private administrators. It is interesting to note that the UK also moved away from exclusive reliance upon court‐based administration procedures following the passage of the Enterprise Act 2002. This moved the UK closer to the Australian practitioner‐dominated approach to corporate rescue. This paper argues that the addition of a voluntary administration‐style procedure to China's current corporate rescue regime may be needed as China develops its market economy based on the rule of law. Copyright © 2017 INSOL International and John Wiley & Sons, Ltd