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.     

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.     

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.     

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.     

Cross‐border insolvency in Belgian Private International Law

Belgian PIL‐rules regarding insolvency proceedings were recently changed as a result of the enactment of the new Code on Private International Law (2004). The new provisions aim to harmonise domestic rules with the system and concepts of the Insolvency Regulation. Copyright © 2006 John Wiley & Sons, Ltd.     

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.     

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     

A Glimpse into the Future: Cross‐border Judicial Cooperation in Insolvency Cases in the European Union

After 2 years of study, discussion and consultation, in February 2015, the EU Cross‐Border Insolvency Court‐to‐Court Cooperation Principles were published. The EU Cross‐Border Insolvency Court‐to‐Court Cooperation Principles (‘EU JudgeCo Principles’) contain 26 principles. The EU JudgeCo Principles aim to strengthen efficient and effective communication between courts in EU Member States in insolvency cases with cross‐border effects. The EU JudgeCo Principles, in short, include principles on their non‐binding status and their objectives, case management of courts and the equal treatment of creditors, and principles about the judicial decisions itself, on the reasoning and for instance on providing a stay or moratorium. Several principles relate to the course of the proceedings, such as notifications and authentication of documents, and the last principles concern the outcome of judicial cooperation, for instance, cross‐border sales, assistance to a reorganisation or rules for binding creditors to an international reorganisation plan. The Principles include 18 EU Cross‐Border Insolvency Court‐to‐Court Communications Guidelines (‘EU JudgeCo Guidelines’). These EU JudgeCo Guidelines aim to facilitate communications in practice, in individual cross‐border cases. The EU JudgeCo Principles try to overcome present obstacles for courts in EU Member States such as formalistic and detailed national procedural law, concerns about a judge's impartiality, uneasiness with the use of certain legal concepts and terms, and, evidently, language. Presently, court‐to‐court communication between judges in insolvency matters in the EU, especially on the continent, is limited to only a few cases. In the near future, judicial cooperation and communication will be a cornerstone in the efficient and effective administration of insolvency cases within the EU. The EU JudgeCo Principles will then certainly serve as a significant guide. Copyright © 2015 INSOL International and John Wiley & Sons, Ltd     

Modelling as a Tool for Cross‐border Analysis of the Position of Insolvency Office Holders

This paper presents a framework and a model applied to make a cross‐border analysis of the position of Insolvency Office Holders. Both the framework and the model were developed in the course of an assignment to design Principles and Best Practices for Insolvency Office Holders for INSOL Europe. The framework is developed by induction from a variety of sources of rules and regulations regarding Insolvency Office Holders, while the model subsequently has been derived by deduction from the framework. Finally, the paper shows how this method assisted in determining the issues to be covered by Principles and Best Practices. The authors argue that commencing international legal comparison with abstract reasoning and modelling may lessen the effect of researcher's academic or professional blind spots and cultural bias and has the potential to enhance the value of cross‐border analysis in terms of coherence, consistency and completeness. Copyright © 2016 INSOL International and 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‐licensing and competition

We analyze the competitive effects of bilateral cross‐licensing agreements in a setting with many competing firms. We show that firms can sustain the monopoly outcome if they can sign unconstrained bilateral cross‐licensing contracts. This result is robust to increasing the number of firms who can enter into a cross‐licensing agreement. We also investigate the scenario in which a cross‐licensing contract cannot involve the payment of a royalty by a licensee who decides ex post not to use the licensed technology. Finally, policy implications regarding the antitrust treatment of cross‐licensing agreements are derived.     

Stock Liquidity Risk and the Cross‐sectional Earnings‐Returns Relationship

We argue that a higher sensitivity to aggregate market‐wide liquidity shocks (i.e., a higher liquidity risk) implies a tendency for a stock's price to converge to fundamentals. We test this intuition within the framework of the earnings‐returns relationship. We find a positive liquidity risk effect on the relationship between return and expected change in earnings. This effect on the earnings‐returns relationship is distinct from the negative effect observed for stock illiquidity level. Notably, the liquidity risk effect is evident (absent) during periods of neutral/low (high) aggregate market liquidity. We also show that the liquidity risk effect is dominant in firms that: (a) are of intermediate size; (b) are of intermediate book‐to‐market; and (c) are profit making.     

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.     

Law and Executive Compensation: A Cross‐Country Study

Companies outside the U.S. use substantially less equity in their compensation mix than U.S. firms. But despite this consistent “cross‐sectional” difference, the pattern of changes in equity‐based pay of non‐U.S. companies over time appears to mirror changes in the pay of U.S. companies. The authors provide persuasive evidence that features of a nation's legal environment help explain major differences in compensation structure across countries. As a general rule, companies in countries that provide greater protection of shareholder rights use larger amounts of equity‐based compensation. And the equity mix also tends to be higher when a country's legal system ensures strict enforcement of the laws that are on the books. At the same time, since the equity mix varies considerably over time within the same legal environment, it is clear that factors other than the legal environment affect compensation structure. The authors report that, after controlling for legal factors, company‐specific variables that proxy for “agency” conflicts—not only between managers and shareholders, but between controlling and minority shareholders as well—also affect the compensation mix in fairly predictable ways. The bottom line of this study is that, although we may have a global market for talent, compensation structures across countries are not likely to converge unless and until the underlying legal protections afforded shareholders converge. At the same time, the effect of agency costs in compensation design for non‐U.S. firms appears to be partly conditioned by the nation's legal system and the entire set of regulatory and other institutions that are affected by it.