Vol 20 (2023) - Issue 3

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Enhancing Efficiency and Rescue Outcomes in Cross-Border Insolvency Matters: The Role of Multilateral Cooperation Protocols and Judicial Diplomacy

Synopsis
Last year, we celebrated the 25th anniversary of the adoption of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on CrossBorder Insolvency ('Model Law'). The Model Law has made an immense contribution in ensuring greater consistency and more predictable outcomes for creditors and investors in cross-border insolvency matters.
It has also contributed to enhanced creditor returns and more successful restructuring outcomes by centralising proceedings and avoiding duplicate processes where assets and creditors are spread across numerous locations – a typical occurrence in today's modern commercial world.
The recognition provisions in the Model Law – allowing for foreign insolvency processes to be recognised as main or non-main proceedings, and providing for a range of automatic and discretionary ancillary relief such as enforcement stays, examination orders and entrusting local assets to a foreign insolvency representative – have been central in achieving these outcomes.
However, equally significant are the provisions in the Model Law for court-to-court cooperation. These provisions not only build confidence and certainty between courts in granting recognition orders, but also provide a framework for cooperation even where a foreign insolvency process does not qualify as a main or non-main proceeding because it is not taking place where the debtor has its centre of main interests or an establishment.
Proactive cooperation and communication between courts – especially at an early stage of the insolvency process – may avoid the need for parallel proceedings altogether. Even if parallel proceedings have been instituted, court-to-court cooperation can enhance efficiency and reduce costs, including through the negotiation of communication protocols and the conduct of joint hearings. Cooperation can also lead to more consistent outcomes for creditors, aligned with the modified universalism which is aspired to as a core principle of cross-border insolvency law.
The purpose of this article is to explore the benefit of court-to-court cooperation protocols in cross-border insolvency matters, and to identify developments in multilateral and bilateral cooperation and communication agreements in the Asia-Pacific region both within and outside the Model Law framework.
It is suggested that the multilateral cooperation approach reflected in the principles established by the Judicial Insolvency Network (JIN) – which are complementary to the Model Law – along with broader judicial diplomacy initiatives such as those advanced by INSOL International, the World Bank and UNCITRAL – provide the greatest potential to facilitate proactive cooperation among courts in cross-border insolvency matters throughout the Asia-Pacific. These measures also provide a foundation to enhance the scope of substantive recognition and harmonisation outcomes in the best interests of creditors.