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.     

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.     

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.     

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.     

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 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.     

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 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.     

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.     

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     

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.     

Retracted: The inter‐relationship between intellectual property and international insolvency

The following article from International Insolvency Review, “The inter‐relationship between intellectual property and international insolvency” by Bashar H. Malkawi, published online on 13 Jan 2010 in Wiley InterScience (www.interscience.wiley.com), has been retracted by agreement between the author, the journal editor, and John Wiley & Sons. The retraction has been agreed due to significant overlap between this and another paper: “The fate of intellectual property assets in cross‐border insolvency proceedings” by Nadine Farid published in Gonzaga Law Review, 44(1). Copyright © 2010 John Wiley & Sons, Ltd.     

Debt Agreements for Consumers under Bankruptcy Law in Australia and Developing International Principles and Standards for Personal Insolvency

The debt agreement option under bankruptcy law was introduced in Australia in 1996. Since its introduction, it has undergone significant review, and two sets of amendments have been crafted to meet issues as they have been raised. Its popularity is reflected in the increasing proportion of debt agreements compared with the other two debt relief options available under bankruptcy legislation, bankruptcy and the personal insolvency agreement. A review of the debt agreement scheme has recently been undertaken, but the government has yet to respond to its recommendations. Meanwhile, the work of comparative bankruptcy scholars has found new impetus from the treatment of consumer debtors during the Global Financial Crisis. At the same time, at the international level, there is growing interest in developing general principles for the treatment of personal insolvency, despite the acknowledged diversity of approach to personal insolvency at the national level. This paper examines the debt agreement framework and how it fits within the comparative bankruptcy literature and the developing international principles for the treatment of personal insolvency. Copyright © 2014 INSOL International and John Wiley & Sons, Ltd     

‘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     

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     

INSOL Europe's Proposals on Groups of Companies (in Cross‐Border Insolvency): A Critical Appraisal

International bodies have started addressing the problem of cross‐border insolvency of corporate groups fairly recently. The United Nations Commission on International Trade Law has adopted a set of recommendations and the European Commission may tackle the matter in the near future, in the process of revising the European Insolvency Regulation (the ‘Regulation’). It is, therefore, timely to evaluate major proposals for the Regulation's amendment regarding groups, suggested by INSOL Europe. The paper critically evaluates the proposals regarding coordination of group cases and the concept of substantive consolidation. This evaluation takes account of both the variety of possible group structures and the goals the insolvency regime would aim to achieve. Copyright © 2012 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.     

Cross-border insolvency law of China: An empirical analysis and proposal based on the insolvency cooperation mechanism between the Chinese mainland and Hong Kong

In the context of the national strategy of the construction of the Guangdong-Hong Kong-Macao Greater Bay Area, the first institutional breakthrough in cross-border insolvency cooperation between the Chinese Mainland and Hong Kong was achieved on 14 May 2021, and the first case of recognition and assistance in insolvency proceedings in Hong Kong, Re Samson Paper Co Ltd., emerged in judicial practice in December 2021. The judicial practice of Samson not only successfully verifies the great significance of the Record of Meeting and the Opinion for institutional ice-breaking of cross-border insolvency cooperation in the Chinese Mainland, but also reflects the practical effects and legislative issues of the above documents on the mechanism of insolvency cooperation between two areas. In view of the problems reflected by the practice of Re Samson Paper Co Ltd. and existing in the legislation, this paper puts forward specific proposals for the cross-border insolvency cooperation between the Chinese Mainland and Hong Kong, including abolishing the precondition of reciprocity, strengthening exchanges, and cooperation between the two areas on parallel bankruptcy issues, and supplementing the coordination of parallel bankruptcy procedures for cross-border insolvency. It also proposes domestic legislation on cross-border insolvency recognition and assistance in China in a point-by-point manner, so as to achieve the establishment of a sound cross-border insolvency cooperation mechanism in line with the international community.     

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     

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.