Vol 5 (2008) - Issue 3

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Advance Planning for US-Mexican Cross-Border Reorganisations

When firms expand across national borders, they anticipate that the benefits of operations, assets, or relationships in multiple jurisdictions are superior to those available at home. When those same firms encounter difficulties, however, their restructuring efforts can yield unexpected results: dramatically differing legal schemes, varying levels of expertise and sophistication with respect to insolvency, and even differing cultural attitudes regarding debtor-creditor relationships can create unanticipated challenges for the international firm attempting to restructure, and for its creditors seeking to maximize their recovery.

In North America, Mexico and the US share a growing level of cross-border trade and business development. Partly in response to this growth, each country’s national legislature has reformed or extensively revised its own insolvency law. Moreover, each jurisdiction now strongly upholds the recognition of insolvency proceedings commenced outside their borders. These changes raise an important question: how should the troubled firm – or its creditors – anticipate and plan for a crossborder reorganisation proceeding between Mexico and the US? This article offers some very general considerations for such planning.

The ties that bind: Cross-border recognition provisions and their impact on cross-border reorganisation planning in Mexico and the US

Historically, cross-border bankruptcy planning has been hindered by a lack of uniform law and concerns over predictability. Though the need to recognize and coordinate multi-national restructuring efforts has been long understood, such relief was ad hoc and casespecific. Indeed, it was the general lack of uniformity and predictability in this area that led, ultimately, to the UNCITRAL’s draft of a proposed model law of crossborder recognition. The UNCITRAL law has been adopted, either in large part or substantially in toto, by the legislatures of both Mexico and the US. As such, it now forms the framework for cross-border insolvency work between these jurisdictions.