Will a local court recognise concurrent foreign restructuring or insolvency proceedings over a local debtor? What is the process and test for achieving such recognition? Has the UNCITRAL Model Law on Cross Border Insolvency been adopted or is it under consideration in your country?
Restructuring & Insolvency (2nd Edition)
As a result of Denmark’s opt-out of the EU rules on justice and home affairs, Denmark is outside the Insolvency Directive that concerns mutual recognition of insolvencies in the EU.
However, Denmark recognises based on Directive 2001/24EF and 2009/24EF insolvencies over credit institutions and insurance companies if insolvencies proceedings have been commenced in another EU Member State.
In addition to the above EU directives no express rules apply on recognition of foreign restructuring of insolvency proceedings in Denmark with the exception of the Nordic Bankruptcy Convention, see below.
The Danish Minister of Justice may lay down guidelines for recognition of foreign insolvencies proceedings in Denmark, but so far, the Minister of Justice has not used this power. In case law it is consequently assumed that as long as the Minister of Justice has not laid down guidelines for the recognition of foreign insolvency proceedings, foreign insolvency proceedings do not prevent other creditors from individual creditor action in respect of the debtor’s assets in action.
However, Denmark has acceded to the Nordic Bankruptcy Convention together with Norway, Sweden, Finland and Iceland according to which insolvency or restructuring proceedings against a debtor in one of the Nordic countries mean that the debtor’s assets in the home country of the debtor and in the other Nordic countries are also covered by the insolvency or restructuring proceedings.
Based on the Nordic Bankruptcy Convention the insolvency courts in Denmark will consequently recognise insolvency or restructuring proceedings from the other Nordic countries.
• Has the UNCITRAL Model Law on Cross Border Insolvency been adopted or is it under consideration in your country?
The UNCITRAL Model Law on Cross Border Insolvency has not been adopted in Denmark and it is not under consideration in Denmark.
The UNCITRAL Model Law on Cross Border Insolvency has not been adopted in China so far, but as the globalization spreads and against the background of China’s intensified efforts to propel the “Belt and Road” initiative, China is destined to make a difference in cross-border insolvency.
The positive conditions for China to recognize and enforce a foreign judgment or ruling on a bankruptcy case are as follows: such judgment or ruling must be final and legally effective and involve assets located in China and requiring the enforcement by a Chinese court; recognition of the foreign judgment or ruling must be based on an international treaty that both the foreign country and China have entered into or acceded to, or in line with the principle of reciprocity. The negative conditions for the recognition and enforcement are that the judgment or ruling does not violate the basic principles of PRC law, or impair the sovereignty, security or public interest of China or the Chinese creditors’ legal rights and interests.
Australian courts act cooperatively with foreign courts and insolvency practitioners, and will recognise the jurisdiction of the relevant court where the ‘centre of main interest’ is located. This approach follows the UNCITRAL ‘Model Laws’ on insolvency with were codified into Australian law through the Cross-Border Insolvency Act 2008 (2008) (Cth).
To receive recognition, evidence of the existence of the foreign proceedings must be tendered. A court has power to grant both provisional relief pending the determination of a recognition application and, if a finding of recognition is made, a broad power to grant ‘any appropriate relief’ requested by the foreign representative. The types of relief that can be granted include:
(a) staying the commencement or continuation of induvial actions or individual proceedings concern the debtor’s assets, rights, liabilities or obligations;
(b) staying execution against the debtor’s assets to the extent it has not been stayed; and
(c) providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor’s assets, affairs, rights, obligations or liabilities.
Whilst conceivable that an Australian company’s centre of main interest could be recognised as being outside Australia, a foreign restructuring that purported not to comply with the Australian Corporations Act and the Australian regulatory regime (imposed by ASIC and the ASX) would unlikely be recognised.
In addition, the Foreign Judgments Act 1991 (Cth) creates a general system of registration of judgments obtained in certain foreign countries. This legislation only extends to judgments pronounced by courts in countries where, in the opinion of the Governor-General, substantial reciprocity of treatment will be accorded by that country in respect of the enforcement in that country of judgments of Australian courts.
The application to register a foreign judgment must be made by a judgment creditor to the appropriate court (usually the State or Territory Supreme Court) within six years of the date of judgment or, if an appeal has been taken, within six years of the last judgment in the appeal proceedings.
Insolvency proceedings opened by a court of a Member State within the territory of which the centre of a debtor’s main interests (COMI) is located, are directly effective in all Member States, without prior exequatur proceedings (unless such recognition would be manifestly contrary to a State's public policy).
For debtors that have their COMI located outside the EU, Belgian courts will recognise foreign decisions if the decision was given by a court in a state where the debtor had its establishment at the time the action was introduced, and the decision respects certain safeguards (e.g. rights of defence). Such decisions will be recognised without the need to apply for a recognition procedure.
The UNCITRAL Model Law on Cross-Border Insolvency has not been implemented in Belgium and such implementation is not planned for the future.
Foreign insolvency proceedings and the effects thereof will only be automatically recognised in the Netherlands if there is an enforcement treaty in place between the foreign country and the Netherlands.
The Insolvency Regulation is applicable in the Netherlands.
In the absence of a treaty, the starting point under Dutch law is that (non EU) foreign insolvency proceedings have ‘territorial effect’ and do not apply in the Netherlands. This entails not only that the attachment made on assets of the debtor as a consequence of foreign insolvency law does not extend to assets located in the Netherlands, but also that the effects of a foreign insolvency proceeding cannot be recognised in the Netherlands if the consequence thereof would be that unsatisfied creditors can no longer take recourse (during or after the insolvency proceeding) on assets of the debtor located in the Netherlands. It follows from case law that this principle of territoriality is generally seen as a rule of Dutch public policy and therefore any consequence of a foreign insolvency proceeding that would breach this principle, cannot be recognised in the Netherlands.
Please note that the Netherlands has no legislation based on the UNCITRAL Model law on Cross-border Insolvency.
A U.S. court will recognize a foreign proceeding if the debtor seeks recognition of the foreign proceeding through chapter 15 of the Code, which Congress adopted to implement the UNCITRAL Model Law, with some modifications. The requirements under section 1517 for recognition of a foreign proceeding are relatively straightforward and require that the foreign proceeding is (i) a proceeding, (ii) judicial or administrative, (iii) collective in nature, (iv) conducted in a foreign country, (v) pursuant to local law relating to bankruptcy or the adjustment of debt, (vi) in which the debtor’s assets are subject to control or supervision by the courts and (vii) which is for the purpose of liquidation or reorganization.
In recognizing a foreign proceeding, the court must determine if the foreign proceeding is a “foreign main” or “foreign non-main” proceeding. Courts recognize a foreign proceeding as the debtor’s main proceeding if the foreign proceeding is in the jurisdiction where the debtor has its “center of main interests” (“COMI”). While the Code does not define COMI, courts have considered several factors in making a COMI determination. Generally, the Debtor’s registered office (or habitual residence in the case of an individual) is presumed to be its COMI, but that presumption is rebuttable with evidence to the contrary. Courts also examine the location of those who actually manage the affairs of the debtor, the location of a majority of the debtor’s creditors who would be affected by the case, the jurisdiction whose law would govern the disputes and the expectations of third parties with regard to a debtor’s COMI. Once a court recognizes a foreign proceeding as its foreign main proceeding, the debtor is afforded the immediate protection of the automatic stay for all of the debtor’s assets located in the territorial jurisdiction of the United States.
For a foreign proceeding to be recognized as a debtor’s “nonmain” proceeding, the debtor need only establish that it has an “establishment” in that jurisdiction where it engages in non-transitory economic activity. Recognition of a nonmain proceeding does not afford the debtor with the protection of the automatic stay, but the debtor is permitted to petition the court for such protection, which the court may grant in its discretion.
Once a foreign proceeding is recognized, chapter 15 generally provides that the U.S. court grant comity to and cooperate with the foreign courts. The court may refuse to grant any relief under chapter 15 if the action would be “manifestly contrary to public policy,” which courts have determined is a very high standard. Such public policy exception is very narrowly construed and only in exceptional circumstances do courts invoke it – usually when concerning matters of fundamental importance for the U.S. such as procedural fairness of the foreign proceeding or if granting the requested relief would impinge on a U.S. constitutional or statutory right.
- Companies incorporated in a EU Member State
Regulation (EC) 1346/2000 on insolvency proceedings (Insolvency Regulation) allows insolvency procedures in different EU Member States to be automatically recognized if the company's center of main interests (COMI) is in France. A company's COMI is presumed to be the place of its registered office.
Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (Recast) replacing the Regulation 1346/2000 provides for the same rules, except that the presumption that COMI is the place of the registered office will not apply if the registered office has been transferred in the preceding three months.
- Companies incorporated outside an EU Member State
A decision opening insolvency proceedings in a country outside of the European Union would have no effect in France, except after having obtained “exequatur” which is intended to verify that the foreign court had proper jurisdiction, international public policy has been complied with and no fraud has taken place or by virtue of an international treaty.
Insolvency proceedings within the scope of the Regulation (EC) No. 1346/2000 of 29 May 2000 on insolvency proceedings, as amended (Insolvency Regulation), which determined jurisdiction on the basis of the center of main interest (COMI) of a company, will be automatically recognised and enforced in Luxembourg without further review of the substantive matters adjudicated thereby or re-examination of the merits of the case.
Save for cooperation duties in the context of European insolvency proceedings, there is no specific duty for the Commercial Court and the receiver to cooperate with foreign courts and officers, in case of cross-border insolvency proceedings. Luxembourg private international law recognizes the principle of universality and unicity of insolvency proceedings. As a consequence, Luxembourg courts may recognize and, in principle, do recognise foreign proceedings without the need for a further order for enforcement of the award, provided that such foreign proceedings do not conflict with a domestic insolvency proceeding and provided the conditions for recognition of foreign judgments are met:
- The judgment must be rendered by a competent court;
- Due process must be complied with;
- The foreign court must have applied the appropriate Luxembourg conflict of law rules;
- The foreign judgment must not contravene Luxembourg public policy;
- The foreign insolvency law which has been applied must have extra-territorial scope.
Luxembourg courts generally hold that courts in the jurisdiction of the principal establishment of the company have jurisdiction to decide on matters of insolvency regarding that company. In Luxembourg, there is no recognition of jurisdiction based on the localisation of assets or any other connection with a jurisdiction.
Case law states that there can only be one single insolvency proceeding. However, under the Insolvency Regulation, secondary proceedings can be opened in any Member State where a company has an “establishment”.
The UNCITRAL Model Law on Cross-Border Insolvency has not been implemented in Luxembourg and such implementation is not planned for the future.
New Zealand law recognition of foreign restructuring or insolvency proceedings over local debtor
In relation to both personal and corporate insolvency, section 8 of the Insolvency (Cross-border) Act 2006 allows the Court, if it thinks fit, to act in aid of and be auxiliary to a foreign Court in an insolvency proceeding, where the foreign Court has requested assistance. This power is in addition to the Court's jurisdiction, at common law, to provide aid and assistance in respect of a foreign liquidation.
UNCITRAL Model Law
The UNCITRAL Model Law on Cross Border Insolvency (“Model Law”) has been adopted in New Zealand pursuant to the Insolvency (Cross-border) Act 2006, with the Model Law set out in Schedule 1 of that Act.
Some amendments have been made to the form of the Model Law adopted in New Zealand. Some of these amendments, such as the additional definitions included in relation to Article 2 of the Model Law, have been made for the application of the Model Law in the New Zealand context. Other amendments include, for example:
- The exclusion of registered banks that are subject to statutory management from the operation of the Model Law.
- A requirement, in relation to Article 6, that the Court consider whether the Solicitor-General should be heard on questions of public policy.
- The partial adoption of alternative wording in relation to Article 13.
- The provision, in relation to Article 20, for the Court to make an order that an automatic stay under that Article does not apply in respect of any particular action or proceeding, execution, or disposal.
Yes, there is the possibility to have a foreign decision recognized, if certain conditions provided by the law are met, and, in essence, there must be a reorganization procedure pending before the courts of law of the foreign state and reciprocity in what regards the effects of the foreign decisions between Romania and the state of the court that has delivered the decision. The foreign procedure will be recognized as a main foreign procedure if this is conducted in a foreign state in which the debtor has the centre of its main interests or as a secondary foreign procedure if this is conducted in a foreign state in which the debtor has a registered office. The Romanian law has adopted very many provisions from the UNCITRAL rules.
Swiss insolvency proceedings are intended to apply universally for local debtors (i.e., debtors incorporated in Switzerland). Swiss authorities would, thus, not recognize and give effect to any foreign main insolvency proceedings opened against a Swiss corporate debtor outside of Switzerland. In particular, it should be noted that Switzerland is not an EU Member State and, thus, the centre of main interest (COMI) principle laid down in EU Regulation 2015/848 on insolvency proceedings is currently not applicable in cross-border cases involving Switzerland. That said, certain foreign restructuring proceedings (including a UK scheme of arrangement) may not be viewed as insolvency type of proceedings from a Swiss perspective but rather as court rulings or contractual matters where recognition may be available. This will have to be looked at on a case by case basis.
Switzerland has not adopted the UNCITRAL Model Law on Cross Border Insolvency and it is neither under consideration to do so. However, it is being proposed to facilitate cross-border insolvencies by lowering the currently strict requirements for recognition of foreign insolvency proceedings in Switzerland (cf. section 17 below). Is is currently expected that this amendment will enter into force either in 2019 or 2020.
Pursuant to the Foreign Judgments Enforcement Law, 1958, a recognition of foreign judgment will be recognized only to the extent there is an agreement between Israel and the foreign country allowing recognition of such types of judgments, in accordance with the terms of such agreement ("Direct Recognition"), or as a side effect for another matter.
The Israeli Supreme court determined in the recent case of Civil Appeal 1297/11 Levin v. Zohar, that a Direct Recognition of foreign judgments in the fields on insolvency is only possible through the Direct Recognition route as set forth above.
The new Insolvency Law set forth specific provisions, based on the UNCITRAL Model Law on Cross-Border Insolvency, and international standards, for recognition of foreign proceedings. Under such provisions, the court will recognize a foreign main proceeding or a secondary foreign proceeding, if the foreign proceeding is an insolvency proceeding supervised by a foreign authorized authority and the foreign office holder files an application together with evidence for the opening or conduct of the insolvency proceeding in the foreign jurisdiction.