Cross-Border Insolvency the Model Law in Australia and the Asia - PowerPoint PPT Presentation

Cross-Border Insolvency – the Model Law in Australia and the Asia Pacific Andrew Godwin, Melbourne Law School The Commercial Bar Association 7 November 2018

Overview • Cross-border insolvency – context and approaches • Gateways to recognition and assistance in Australia • UNCITRAL Model Law on Cross-Border Insolvency – global and regional adoption • Michael will discuss the experience with cross- border insolvency in Australia and the Cross-Border Insolvency Act 2008 (Cth) www.law.unimelb.edu.au

Cross-border insolvency – context and approaches • The context In what circumstances will cross-border insolvency issues arise?  To what extent are courts prepared to recognise and grant assistance to foreign  insolvency proceedings (and recognise and enforce foreign insolvency judgments)? • The approaches Territorialism and (modified) universalism  Pros and cons  By way of example, Article 5 of the PRC Enterprise Bankruptcy Law (2007)  Once the procedure for bankruptcy is initiated according to this Law, it shall come into effect in respect of the debtor’s property outside of the territory of the People’s Republic of China. Where a legally effective judgment or ruling made on a bankruptcy case by a court of another country involves a debtor’s property within the territory of the People’s Republic of China and the said court applies to or requests the people’s court to recognize and enforce it, the people’s court shall, according to the relevant international treaties that China has concluded or acceded to or on the basis of the principle of reciprocity, conduct examination thereof and, if it is of the view that the said judgment or ruling does not violate the basic principles of the laws of the People’s Republic of China, does not jeopardize the sovereignty and security of the State or public interests and, does not undermine the legitimate rights and interests of the creditors within the territory of the People’s Republic of China, it may decide to recognize and enforce the judgment or ruling. www.law.unimelb.edu.au

Gateways to recognition and assistance in Australia • 1. Inherent power of common law courts: Based on the principle of comity  Solomons v Ross (1764) 1 HBI 131 – the English court recognised the  extra-territorial effects of a foreign bankruptcy in England so as to require creditors based in England to prove in the foreign bankruptcy. In part, the modern-day manifestation of the inherent power can be traced  back to the South African case of In re African Farms Ltd [1906] TS 373, 377.  See Godwin, Howse and Ramsay, I., ‘The Inherent Power of Common Law Courts to Provide Assistance in Cross-Border Insolvencies: From Comity to Complexity’ (2017) 26 International Insolvency Review 5 – 39 www.law.unimelb.edu.au

Gateways to recognition and assistance in Australia • 2. Section 581(4) of the Cor orpor orat ation ons Act 2001: The Court may request a court of an external Territory, or of a country other than Australia, that has jurisdiction in external administration matters to act in aid of, and be auxiliary to, it in an external administration matter. • See Section 426(4) of the Insolvency Act 1986 (UK): The courts having jurisdiction in relation to insolvency law in any part of the United Kingdom shall assist the courts having the corresponding jurisdiction in any other part of the United Kingdom or any relevant country or territory. • See McGrath as Liquidators of HIH Insurance Ltd [2008] NSWSC 881 (Barrett J at paragraph 17): The s 426 jurisdiction, which continues despite the United Kingdom’s adoption of the Model Law, is seen by the liquidators as the more convenient route, particularly since the alternative involves the preliminary step of obtaining an order of the English court recognising the foreign insolvency proceeding. In Australia too, s 581 of the Corporations Act containing provisions similar to those of s 426 co-exists with domestic law adopting the Model Law (Cross-Border Insolvency Act 2008 (Cth)). There has been a deliberate decision in each country that the older system of cross-border assistance should be retained despite the enactment of Model Law legislation. www.law.unimelb.edu.au

Gateways to recognition and assistance in Australia • 3. Cr Cross-Border Insolvency cy Act ct 2008 (Cth): Based on the UNCITRAL Model Law on Cross-Border Insolvency  Principles behind the Model Law:  Access  Recognition  Relief  Cooperation  Article 8:  In the interpretation of the present Law, regard is to be had to its international origin and to the need to promote uniformity in its application and the observance of good faith . Global adoption of the Model Law – 43 jurisdictions, but significant divergence  Asia Pacific region:  Australia, New Zealand, Japan, Korea, The Philippines, Singapore and  Vanuatu Notable exceptions include Hong Kong  www.law.unimelb.edu.au

UNCITRAL Model Law – factors behind divergence • Courts and judicial practice: Common law jurisdictions vs civil law jurisdictions  In Japan, courts have less discretion and are expected to perform a more  passive role in supporting cooperation with foreign courts • Policy choices: Statutory exceptions (e.g. banks or insurance companies)  The public policy exception (Model Law, Article 6):  Nothing in the present Law prevents the court from refusing to take an action governed by the present Law if the action would be manifestly contrary to the public policy of this State. Re: Zetta Jet Pte Ltd and others [2018] SGHC 16, [23] (Aedit Abdullah J):  What flows from the omission being deliberate is that the standard of exclusion on public policy grounds in Singapore is lower than that in jurisdictions where the Model Law has been enacted unmodified. That is, in Singapore, recognition may be denied on public policy grounds though such recognition may not be manifestly contrary to public policy. Whether this will lead to a significant divergence from other jurisdictions remains to be seen. www.law.unimelb.edu.au

UNCITRAL Model Law – factors behind divergence • Policy choices (continued): Exclusion of foreign tax claims  The concept of the centre of main interest (COMI)  Reciprocity  • The existing legislative architecture: Multiple gateways in some jurisdictions  How the Model Law relates to other laws  • The desire to align with similar jurisdictions or adopt an ‘enhanced version’ of the Model Law UK, US and Singapore  www.law.unimelb.edu.au

Some relevant research • Godwin, Howse and Ramsay, ‘The Inherent Power of Common Law Courts to Provide Assistance in Cross-Border Insolvencies: From Comity to Complexity’ (2017) 26 International Insolvency Review 5 – 39 • Godwin, ‘Corporate Rescue in Asia – Trends and Challenges’ (2012) 34 Sydney Law Review 163 • Godwin, ‘Convergence, Divergence and Diversity in Financial Law – The Experience of the UNICTRAL Model Law on Cross-Border Insolvency’ in Maartje de Visser and Gary Low (eds) Conversations on Convergence [Cambridge University Press, forthcoming 2019] • Steele, Godwin, Jin, Han, Ren and Chi ‘Trends and developments in Chinese insolvency law – the first decade of the PRC Enterprise Bankruptcy Law’ (2018) American Journal of Comparative Law https://doi.org/10.1093/ajcl/avy038 www.law.unimelb.edu.au

Thank you Andrew Godwin, Melbourne Law School The Commercial Bar Association 7 November 2018