Cross‐border Insolvency Problems: Is the UNCITRAL Model Law the Answer?

This paper examines the impact that the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross‐border Insolvency has had on States in the light of the central problems often associated with transnational insolvencies. Despite the accolades that it has received, the Model Law has been adopted in only 19 countries in the last 15 years and that too in many different ways. If the number of adoptees and the rather conditional acceptance of the Model Law's provisions represent a lack of international enthusiasm for adopting the Model Law, what are the reasons for this? The paper concludes by asking whether the UNCITRAL Model Law presently has a future in dealing with cross‐border insolvencies. Copyright © 2012 INSOL International and 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     

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.     

Northern Lights,Canada's version of the UNCITRAL Model Law on Cross‐Border Insolvency

Statute of Canada Chapter 47, when it is proclaimed in force, will largely adopt the UNCITRAL Model Law on Cross‐border Insolvency. The current and proposed cross‐border provisions could be considered Canada's “Northern Lights”, evolving constantly, but aligning with the objectives and scope of the UNCITRAL Model Law. While Chapter 47 is a modified version of the Model Law, it continues Canada's regime as one of modified universalism, with a strong commitment to comity and coordination. There are likely to be contests for control over the scope of foreign proceedings, although arguably, no more so than under the language of the Model Law. The most critical issues to resolve in the short term are definitions of COMI where corporate groups are involved, and the issue of the scope and extent of possible concurrent main proceedings, both areas left to the discretion of the courts in their interpretation of the legislation's domestic, as well as cross‐border, provisions. Copyright © 2007 John Wiley & Sons, Ltd.     

The Future Direction of China's Cross‐border Insolvency Laws,Related Issues and Potential Problems

The enactment of bankruptcy laws by the People's Republic of China (PRC or China) in 2006 was a necessary step in the development of its economy. This law represented a significant modernisation of the insolvency framework, supporting the transforming economy, but it was also a law of political expediency, for the enhancement of external relations. One aspect of the enhancement of external relations was the provision of cross‐border insolvency rules. However, this complex area of law was addressed in only one article, which was only a starting point, leaving many details unaddressed, and further reforms are required. In particular, it is desirable that the law provides a greater level of predictability as to the likely outcomes of cross‐border insolvencies, to encourage inward trade and investment, as well as encourage external trade. Both inbound and outbound business dealings are important to China's continued economic development. It is clear also, however, that insolvency law and practice is still a developing area for China. The establishment of a modern and unified system of insolvency laws was a big step for China, representing a sacrifice of tight controls on insolvencies, but the impact of this law in practice is only recently developing, with a loosening of state controls, after a very slow start. 1 The establishment of a cross‐border insolvency framework represents a further challenge; one that is likely to beset with considerable difficulties, as any further development of this law would potentially entail some further loss of control over proceedings, not least in outbound cases, and resistance may be anticipated. In keeping with China's historical approach to lawmaking in the area of bankruptcy law, it is likely that the cross‐border insolvency framework will develop gradually and with caution. This article assesses the way forward in respect of cross‐border insolvency laws, contending that an incremental approach over a period of years, in three broad stages, is required, with more developed and country‐specific approaches providing a link, or interim stage, between the clarification of the Article 5 and the formal adoption of the United Nations Commission on International Trade Law Model Law on Cross‐Border Insolvency Proceedings 1997 (Model Law) in China. Copyright © 2018 INSOL International and John Wiley & Sons, Ltd.     

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.     

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.     

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.     

McGrath v Riddell: A flexible approach to the insolvency distribution rules?

The rules relating to the division of the insolvent estate assume considerable importance in the field of international insolvencies, where different legal systems interact. International instruments including the European insolvency regulation and the UNCITRAL Model Law on Cross‐Border Insolvency have provided a framework which governs the relationship between local and foreign distribution schemes. For English lawyers, questions remain however regarding the future role of the courts' statutory power to cooperate with the courts of ‘relevant’ countries or territories, and of the common law principle of universalism. An important issue connected to the determination of such questions is the established judicial approach to the pari passu rule, in the application of domestic law. This paper examines the manifestation of this tension in the litigation arising from the collapse of the HIH Casualty & General Insurance group of companies. It notes the scope which remains for continued resort to the statutory power of cooperation, and the potential for the Cross‐Border Insolvency Regulations 2006 to encourage a more flexible approach to resolving differences between distribution schemes. Copyright © 2010 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.     

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.     

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     

Conflicting norms: Impact of the Model Law on Chapter 11's Global Restructuring Role

The Model Law's emphasis on the debtor's center of main interest (COMI) as the proper jurisdiction for the main insolvency proceeding is at odds with the traditional United States approach of applying Chapter 11 to restructure foreign entities with no significant US connection. This paper explores whether adoption of the Model Law has made Chapter 11 less available for debtors with a foreign COMI. The Model Law has had no direct impact on the US courts approach to foreign‐entity Chapter 11 cases. However, shortly after the Model Law's adoption, several reported US decisions added the pendency of a foreign insolvency proceeding as a factor supporting discretionary abstention or dismissal of foreign Chapter 11 cases. While those decisions do not refer to the Model Law, it is possible that the Model Law's COMI‐centric approach influenced this new trend.     

‘Brexit’ and International Insolvency Beyond the Realm of Mutual Trust

The outcome of the referendum held in the UK in June 2016 is of far‐reaching and unpredictable consequences. This article focuses on the particular field of international insolvency with a view to identifying some of them, all arising out of the fact that the UK will be leaving the EU area of justice and the strong cooperation based on mutual trust between member states. This will make UK–EU insolvency cases clearly less efficient and effective. The consequences of Brexit could be mitigated by the already existing coordination among the international instruments dealing with these matters, in particular the European Insolvency Regulation and the UNCITRAL Model Law on Cross‐Border Insolvency. However, not all EU member states have in place rules dealing with these issues as regards to third states. In order to lessen the impact of Brexit in this sensitive area of law, the implementation of the Model Law in order to deal with extra‐EU cross‐border insolvency could be of avail. Copyright © 2017 INSOL International and John Wiley & Sons, Ltd     

The European Insolvency Regulation and the UNCITRAL Model Law on Cross‐Border Insolvency

This article compares the Recast European Insolvency Regulation of 2015 with the UNCITRAL Model Law on Cross‐Border Insolvency of 1997, focussed on their scope of application, international jurisdiction and the coordination of main and secondary proceedings. The scopes of both catalogues of norms and their rules on coordination of main and secondary insolvency proceedings reflect one another. However, the Recast EIR makes a significantly greater contribution to the unification of law and is also more fully differentiated and more precise, even if this comes at a price, namely, limited flexibility. The UNCITRAL Model Law made an important contribution to the harmonisation of international insolvency law but requires now modernisation. Copyright © 2017 INSOL International and 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     

Cross-border insolvency law in India: Are the principles of comity of courts and inherent common law jurisdiction relevant?

Deliberations are in the final stages for enacting a cross-border insolvency law in India based on the UNCITRAL Model Law on Cross Border Insolvency 1997 (‘Model Law’). The cross-border insolvency regime in India will provide an avenue for recognising foreign insolvency proceedings in India. Although it is a matter of time before India adopts the Model Law, it is important to examine whether there remains an independent basis in addition to the Model Law for recognising and providing assistance to cross-border insolvency proceedings in India. This is crucial on account of the following reasons: first, the Model Law does not provide that it is the exclusive pathway for foreign creditors to seek remedies under domestic law. The Model Law, as reflected in Article 7, was intended by its drafters to be an additional gateway to those provided under local laws. The proposed Indian law in Article 5 of Draft Part Z of the Insolvency and Bankruptcy Code 2016 also does not depart expressly from this principle. Second, there may be instances where neither the ‘Centre of Main Interests’ nor an establishment of a corporate debtor is situated in India; therefore, assistance and cooperation in respect of such cross-border insolvency proceeding can only be based on the inherent common law jurisdiction, if available. Third, the cross-border insolvency framework in India will be premised on the requirement for reciprocity and, therefore, countries that do not meet the reciprocity requirement may find it beneficial if such an independent basis for recognition exists in India. This article argues that foreign representatives should be encouraged to explore the possibility of seeking assistance from the commercial courts in India under the common law principles governing cross-border insolvency and that the courts in India should be open to this possibility.     

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.     

Japanese comments on the extraterritorial effects of U.S. Chapter 15

As a basic principle, subject to defined exceptions, the effects of a bankruptcy proceeding commenced under Chapter 15 should be restricted to assets of the debtor located within the territorial jurisdiction of the United States. But Section 1528 provides broader exceptions to the above‐mentioned principle than those stated in Article 28 of the UNCITRAL Model Law. Using the Yukos and Maruko cases as illustrations, the author concludes that U.S. judges should exercise their jurisdictional powers conservatively and American courts should be careful not to appear to export their own system of justice abroad. Copyright © 2007 John Wiley & Sons, Ltd.