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.     

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.     

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.     

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.     

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     

When Hong Kong becomes SAR,is the mainland ready? Problems of judgments recognition in cross‐border insolvency matters

After Hong Kong's handover in the year 1997 to the People's Republic of China (PRC), two judicial systems began to operate in parallel in one country. To date, judicial convergence in cross‐border insolvency matters has not yet been established between the mainland and the Hong Kong Special Administrative Region (HKSAR). By reviewing several recent court decisions, this article demonstrates some problems of judgment recognition in matters of cross‐border insolvency between the two regions. Copyright © 2010 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.     

The transaction avoidance regime in the recast European insolvency regulation: Limits and prospects

In the last decade, transaction avoidance in insolvency law has been in the limelight of the academic discussions. In particular, the scholarship has highlighted how the European Insolvency Regulation gives rise to several private international law issues. Moreover, the scholarship has explored solutions to these issues and proposed to harmonise the regime of transaction avoidance at European Union level. However, the recent legislative developments on the cross‐border insolvency law seem resistant to the proposed harmonisation. This article focuses on the transaction avoidance regime in the Recast European Insolvency Regulation. In particular, it seeks to evaluate whether the Recast has solved the issues arising within the original European Insolvency Regulation in relation to transaction avoidance. Secondly, it questions the suitability of the private international law approach to transaction avoidance in cross‐border insolvency within the European Union framework. The research suggests that the efforts required to the private international law framework to deal efficiently with transaction avoidance make the harmonisation of the regime of transaction avoidance at the European Union level a more appealing option.     

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.     

China's new law on enterprise bankruptcy: a story with a happy end?

The Chinese National People's Congress has recently promulgated a new law on enterprise bankruptcy, which will come into force in June 2007. For the first time, the law intends to cover generally both private and state‐owned enterprises (SOEs). The law does widely comply with accepted international standards and provisions found in modern insolvency codes of other jurisdictions. However, it also contains several gaps, blurred provisions and legislative shortcomings, which have to be addressed promptly in order to assure a smooth implementation of the new law. Copyright © 2007 John Wiley & Sons, Ltd.     

Recent Development in Recognition of and Assistance to Foreign Insolvency Representatives Under the Hong Kong Common Law

Although Hong Kong has neither enacted nor launched any plan to enact a statute addressing cooperation and assistance on cross‐border insolvency matters, recently, a unique Hong Kong approach dealing with recognition and assistance in cross‐border insolvency is gradually forming under common law. Thanks to the efforts made by the Companies Court of the Hong Kong High Court, insolvency representatives appointed in the place of incorporation of the debtors may, firstly, be accorded a certain degree of automatic recognition and cooperation based on traditional private international law rules without going through a recognition procedure and, secondly, be recognized and granted active assistance under principle of universalism at common law. With regard to the limits of this common law power, the court has referred to but not strictly followed the British Privy Council's decision in Singularis Holdings Limited v. PricewaterhouseCoopers (Singularis) and instead followed the previous approach in Cambridge Gas Transport Corp v. Official Committee of Unsecured Creditors (of Navigator Holdings PLC and others) (Cambridge Gas). The Companies Court also attempted to simplify and facilitate the application and grant of this common law recognition and assistance through a series of innovations. Copyright © 2018 INSOL International and 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.     

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     

Hurdles to debt relief for “no income no assets” debtors in Germany: A case study of failed consumer bankruptcy law reforms

Given that many overindebted households have low or no assets and income, governments have increasingly tried to adapt their consumer bankruptcy regimes to the needs and capacities of these NINA (“no income, no assets”) debtors. Most notably, since the mid‐2000s, some countries from the Anglosphere have created low‐cost, means‐tested, and administrative (i.e., nonjudicial) debt relief procedures as alternative to traditional bankruptcy for NINA debtors. By contrast, in some European countries such as Germany, legislators have tried—but until today failed—to create efficient debt relief measures for NINA debtors. This contribution aims to make English‐speaking readers familiar with the history of consumer insolvency law in Germany, with a focus on legislative developments regarding NINA debtors, and to identify actors, institutions, and ideas that have contributed—especially during the 2000s—to the failure of consumer bankruptcy reforms addressing the main problems of NINA cases in Germany (i.e., high hurdles to relief for debtors, high administrative efforts for trustees and courts, high costs for the public purse, and yet very few payments to creditors). The German case is relevant not only because it is a striking case of failure to adapt a debt relief regime to NINA debtors but also because German consumer bankruptcy law—despite its shortcomings—continues to serve as a template for insolvency law reforms in European and other countries.     

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     

A case of constitutional apples and oranges: a functional comparison of pension priority and benefit guarantees in U.S., U.K. and Canadian insolvency and pension law regimes

Canada's insolvency law reform increased the priority granted to employer‐sponsored pension claims. The article compares the treatment of such claims in the U.S., the U.K. and Canada. A comparison of the legislative provisions concerning pension funding shortfalls from contribution arrears or economic underperformance in relation to the assumptions used for investment income or liability valuations finds that insolvency law has been used to address contribution arrears, but risks from economic underperformance have been addressed by pension benefit insurance. Post‐insolvency priority for contribution arrears provides appropriate incentives to discourage pre‐insolvency preferences for payments to other creditors, while shortfalls from economic underperformance do not involve issues of preference between creditors. The absence of any insolvency rationale for changing priority for shortfalls from economic underperformance and the likely disparity between the assets available to satisfy clams and the much larger amounts of such shortfalls makes the use of insolvency law to address this risk much less effective than insurance. Canada, however, has not adopted the insurance policy instrument used in the U.S. and U.K. to mitigate the impact of pension funding shortfalls. The constitutional inability of Canada to legislate in respect of matters of pension regulation that would allow it to control the well‐known insurance problems of moral hazard and adverse selection may explain why it has only chosen to adopt an insolvency policy instrument. However, a change in priorities in insolvency may generate incentives for secured creditors that either undermine or reinforce this policy choice. Secured creditors could attempt to circumvent the new priority scheme through private arrangements with the debtor or to increase their monitoring activities to ensure the debtor is current in its pension contributions. Secured creditors choices will be influenced by the bankruptcy courts' interpretation of the preference provisions in the insolvency legislation. 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     

Wealth distribution in Chinese bankruptcy reorganization law and practice

Wealth distribution provisions in bankruptcy reorganization law, which regulate the distribution of the debtor's overall value among all the interested parties with an aim of ensuring a fair and equitable distribution, constitute an important part of the bankruptcy reorganization law. This article first examines the wealth distribution provisions contained in Chinese bankruptcy reorganization law from a Sino‐US perspective and then explores the wealth distribution in Chinese bankruptcy reorganization practice through an empirical study of 18 bankruptcy reorganization cases of listed corporations in China. After an analysis of Chinese legal provisions on wealth distribution and their application in practice, this article draws the conclusion that wealth distribution in Chinese bankruptcy reorganization practice is far from being fair and equitable, which may cause abused use of the reorganization proceeding and distort the operation of the bargaining mechanism. Reform suggestions for Chinese bankruptcy reorganization law are proposed at the end. Copyright © 2011 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 origins and development of the office of registrar in bankruptcy of the High Court

This article examines the history of the office of Bankruptcy Registrar of the High Court of England and Wales. It is argued that the power of the registrars to act judicially grew from their authorisation to act pursuant to delegated powers introduced in 1869 and that this began a major shift in their role from being largely administrative to their current status as fully fledged (and renamed) insolvency and companies court judges. The fluidity of bankruptcy offices in the nineteenth century is also examined, demonstrating that certain bankruptcy officer‐holders moved freely between functions in the course of the development in the office of registrar from what might be called its administrative phase to the judicial phase with the eventual creation of a Bankruptcy Court and more recently the creation of a specialist insolvency and companies list in the new Business and Property Courts. Finally, it is argued that a factor in the foregoing developments and the increasing reputation of the bankruptcy registrars was the extension of their jurisdiction from pure bankruptcy work to include company insolvency, directors' disqualification cases and non‐insolvency company work, a significant increase in their trial work and their acquisition of an appellate jurisdiction.