Vol 4 (2007) - Issue 5

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Bob Wessels, Cross-Border Insolvency Law

International insolvency is a by-product of globalisation and the convergence of economic cycles around the world. Access to markets across the globe and competition, particularly by emerging economies, have made the supply of goods and services the province of entrepreneurs able to take advantage of changes in market conditions on a worldwide basis. Periodic downturns have resulted in a similar chase, this time by creditors, for the assets of debtors located around the globe. The quest for satisfaction has over the past two centuries led creditors to seek the assistance of courts abroad to recover debts owed them within the context of proceedings opened with respect to their insolvent debtors. However, the disparate nature of insolvency systems globally, owing much to the differences between legal systems generally and their approaches to insolvency, have made the task of creditors that much more difficult. In more recent times, the possible plight of creditors has led to commentators advocating better regulation of insolvency law at the domestic level as well as measures at the international level. As a result, a number of international organisations have expressed an interest in initiating activity this area.

However, depending on the commentators and the approaches they advocate, a variety of positions from complete harmonisation to partial harmonisation to simple procedural co-ordination of proceedings around a common theme or set of principles have been preached as a cure for the ills of international insolvency. Similarly, the approaches taken by the various international bodies have differed, ranging from treaties and conventions to model laws, benchmark standards and principles, also reflecting the change in emphasis in international law and regulation from hard-law to soft-law as a method for easing the concerns of states keen to protect their sovereignty as well as their economic and commercial interests in insolvency. Also into this turbulent mix have stepped non-governmental organisations keen to promote initiatives on cross-border matters on behalf of their constituent memberships. This text, by an eminent Dutch academic and practitioner, offers in a single locus the texts that have been adopted in this area accompanied by a brief commentary in relation to them. Over thirty instruments are featured in this work, which are divided into two categories, the first containing texts with a global remit, the second dealing with matters on a region-by-region basis. The sequence of the commentary and the annexes that follow, containing the texts themselves, obey this division.

Thus, in the first sequence, we see the international texts, which include both texts dealing with insolvency directly as well as those on ancillary subjects connected to insolvency. The insolvency texts, if further subdivided, deal both with the specifics of international insolvency as well as principles and standards by which the performance of insolvency systems is to be judged. As examples of the first type, there is the UNCITRAL Model Law on Cross-Border Insolvency 1997 and the IBA Cross-Border Insolvency Concordat 1995, while the second type is represented by the World Bank Principles and Guidelines for Effective Insolvency and Creditor Rights Systems 2001, the UNCITRAL Legislative Guide on Insolvency Law 2004, the IMF/World Bank Creditor Rights and Insolvency Standards 2005, the G22 Key Principles and Features of an Effective Insolvency Regime 1998 and the INSOL International Principles for a Global Approach to Multi-Creditor Workouts 2000. The ancillary texts contain an interesting and eclectic series of texts, mostly traditional conventions such as two of the Hague Conventions dealing with the Recognition of Trusts (1985) and Rights in Respect of Securities held by an Intermediary (2002) as well as two UNIDROIT Conventions on International Financial Leasing (1988, also known as the Ottawa Convention) and on International Interests in Mobile Equipment (2001, also known as the Cape Town Convention) and the latter’s Aircraft Protocol of the same year. The commentary reveals the reason for the inclusión of this material, much of which is germane to control over assets and security rights that can be asserted in the insolvency context, issues which are undoubtedly of the greatest concern to participating creditors.

The second series, arranged on a regional basis, begins with Latin America and the treaties adopted there between 1889 and 1940, at the earliest stages of the development of international insolvency law. Thus we have the Montevideo Treaties on International Commercial Law (1889 and 1940) and on Procedural Law (1940) as well as the Havana Convention on Private International Law 1928.