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 member of the European Union, Hungary also applies the 2015/848 Regulation (the “Regulation”) of the Council on insolvency proceedings. If the centre of the debtor's main interests is situated within the territory of a Member State, the courts of another Member State shall have jurisdiction to open insolvency proceedings against that debtor only if it possesses an establishment within the territory of that other Member State. The effects of those proceedings shall be restricted to the assets of the debtor situated in the territory of the latter Member State. Where main insolvency proceedings have been opened by a court of a Member State and recognised in another Member State, a court of that other Member State which has jurisdiction may open secondary insolvency proceedings in accordance with the provisions set out in this Chapter. Where the main insolvency proceedings require that the debtor be insolvent, the debtor's insolvency shall not be re-examined in the Member State in which secondary insolvency proceedings may be opened. The effects of secondary insolvency proceedings shall be restricted to the assets of the debtor situated within the territory of the Member State in which those proceedings have been opened.
IBL adopts the principle of territoriality. Foreign court judgment cannot be recognized and enforced in Indonesia, unless there is an applicable convention by the State where the judgment is rendered and Indonesia (which currently is unavailable). As such, foreign court judgments, orders, or reliefs made during the foreign restructuring or insolvency PKPUproceedings cannot be recognized and enforced in Indonesia. Nevertheless, in practice under certain circumstances on a case-by-case basis, the extension of effects of the foreign insolvency proceedings (e.g.: power conferred on foreign receiver based on foreign insolvency proceedings) to assets situated in Indonesia may be recognized by the Indonesian private institutions administering the assets.
Indonesia is not a signatory to any treaty on international insolvency or on the recognition of foreign court judgments. Furthermore, Indonesia has not adopted UNCITRAL Model Law on Cross-Border Insolvency.
The core of the UNCITRAL Model Law on Cross-Border Insolvency was incorporated into the BIA and the CCAA. Canadian Courts are supportive of international cooperation and comity in the context of cross-border insolvency proceedings involving property situated in Canada or under Canadian jurisdiction but commenced elsewhere in the world. Hence, upon application, Canadian Courts will recognize foreign bankruptcy and insolvency proceedings if satisfied that:
- the foreign proceeding is a judicial or administrative proceeding dealing with creditors’ collective interests under a law which provides for a foreign Court’s control or supervision of the property or affairs of a debtor for purposes of reorganization or liquidation; and
- the applicant is a “foreign representative” within the statutory definition, that is, a person or body, including one appointed on an interim basis, who is authorized, in the foreign proceeding, to administer the debtor’s property or affairs for purposes of reorganization or liquidation, or was appointed as the foreign representative of the debtor by the foreign Court.
If those conditions are met, the Court will issue an order recognizing the foreign proceeding as either a “foreign main proceeding” or a “foreign non-main proceeding”.
The recognized foreign proceeding will be a “foreign main proceeding” if it is ongoing in the jurisdiction where the debtor has the center of its main interests, which, in the absence of proof to the contrary, is the jurisdiction of, in the case of a corporation, its registered office, and, in the case of an individual, his or her ordinary place of residence. Any other recognized foreign proceeding will be recognized as a “foreign non-main proceeding”.
It is possible for a foreign representative to apply to the Canadian Court for the recognition of many foreign proceedings. For example, the Court could recognize a US proceeding as the “foreign main proceeding” in respect of a debtor, and Mexico, France and UK proceedings as “foreign non-main proceedings” in respect of the same debtor or group of companies.
If the foreign proceeding is recognized as a “foreign main proceeding”, the Canadian Court is statutorily obliged to make an order, subject to any terms and conditions it considers appropriate, staying proceedings against the debtor in Canada and prohibiting the debtor from selling its property located in Canada outside of the ordinary course of business. In the case of a “foreign non-main proceeding”, such an order is not mandatory, but rather left within the Canadian Court’s discretion.
In the context of both “foreign main proceedings” and “foreign non-main proceedings”, the Canadian Court retains wide discretion to make, on application by the foreign representative, “any order that it considers appropriate”, provided that it is necessary for the protection of the foreign debtor’s property or the interest of a creditor or creditors. This includes, among other things, the power to order and supervise the examination of witnesses and authorize the foreign representative to monitor the debtor company’s business and financial affairs in Canada for the purpose of reorganization. The Canadian Court also retains the discretion to refuse to do anything that would be contrary to Canadian public policy.
In most recognition proceedings commenced in Canada, the Court will also appoint an information officer (typically an accounting, or financial advisory firm) who will be mandated to keep the Canadian Court and the Canadian creditors informed of any substantial developments in the recognized foreign proceeding.
The opening of insolvency proceedings by a competent court in an EU member state shall be recognized in all other EU member states (Article 19 European Insolvency Regulation 2015/848) to the extent the effects of such recognition violate German public policy (ordre public) (Article 33 EU Regulation 2015/848).
The opening of insolvency proceedings in other states is automatically recognized in Germany without formal proceedings, unless (i) the court of the state opening the proceedings is not competent pursuant to German law or (ii) the recognition leads to results that are obviously incompatible with major principles of German law, particularly basic rights.
The UNCITRAL Model Law on Cross Border Insolvency has not been adopted in Germany and such adoption is not currently under consideration. The standards of German international insolvency law are similar to the standards of European Insolvency Regulation 2015/848 and thus are more liberal than the UNCITRAL rules.
Enforcement of foreign judgments:
South Africa is not currently a signatory to a general treaty on the enforcement of foreign judgments, but an applicant may apply to court for recognition of a foreign court order (such as orders regarding restructuring or insolvency proceedings).
A foreign judgment constitutes a cause of action that will be enforced by the South African courts provided that it satisfies certain relevant requirements, such as not being against public policy.
The Cross-Border Insolvency Act 42 of 2000 came into force on 28 November 2003. It is based on the UNCITRAL Model Law on Cross-Border Insolvency. This notwithstanding, South Africa has no cross-border insolvency treaty with any other states and for all intents and purposes the Cross-Border Insolvency Act is not yet operational given that the Minister of Justice is still to designate the foreign jurisdictions to which this Act is to apply.
Unfortunately, Brazil still does not have a legal structure to handle, with the due legal certainty, transnational restructuring or insolvency proceedings. Also, Brazil is not a signatory to any international treaty relating to insolvency and does not follow the insolvency model adopted by EC regulations or UNCITRAL.
The BRBL adopted a purely territorialist approach and Brazilian courts will only enforce a restructuring or insolvency proceeding if the proceeding occurs in the district of the debtor’s main place of business, meaning that Brazilian Courts will not recognize foreign bankruptcies procedures if the mains the debtor’s main place of business is Brazil .
In Brazil, a bankruptcy decision by a foreign court must, like any other foreign decision, be first recognized by the Superior Court of Justice to be considered enforceable in Brazil, which can make the enforcement of the decision in Brazil slow and lengthy.
Pursuant to the Federal Constitution, Resolution No 9 of the Superior Court of Justice, the Code of Civil Procedure and the Law of Introduction to the Civil Code, to be recognized by the Superior Court of Justice, a foreign decision must:
- be in compliance with Brazilian public policy, sovereignty and good moral principles;
- be rendered by a competent authority;
- have had a valid service of process on the parties or duly certified default of the defendant party, in the country where each party needs to be summoned;
- be final and binding, and vested with all the formalities necessary for execution in the place in which it was issued; and
- be certified by the Brazilian consul residing in the country where the decision was issued, together with a sworn trans¬lation of the decision or award in Portuguese.
Moreover, when filing for homologation before the Superior Court of Justice, the party must attach to the request a certified copy of the case records, a certified and legalized copy of the judgment, and a certified and legalized copy of the document attesting that the judgment is final and binding. The Superior Court of Justice only analyses the formal aspects of foreign judgments or awards; the merits of the decision are not the object of examination.
The EC Regulation on Insolvency Proceedings (including the recognition provisions) applies to companies from other EU member states in the Czech Republic.
If the given company is incorporated under the laws of a non-EU member, the enforcement of foreign court decisions in the Czech Republic, and the enforcement of decisions by the Czech insolvency courts in foreign countries, are in each case subject to the relevant international treaties. Some such decisions may turn out to be unenforceable.
The UNCITRAL Model Law on Cross Border Insolvency has not been adopted in the Czech Republic.
The Cayman Court is willing to co-operate with foreign courts and foreign representatives in cross-border restructurings and insolvency proceedings based on the principle of comity.
Section 241 of the Companies Law also allows a foreign representative (defined as a trustee, liquidator or other official appointed for the purposes of a foreign bankruptcy proceeding) to apply to the Cayman Court to make orders ancillary to the foreign bankruptcy proceeding for the purposes of:
- recognising the right of a foreign representative to act in the Cayman Islands on behalf of or in the name of a debtor;
- enjoining the commencement or staying the continuation of legal proceedings against a debtor;
- staying the enforcement of any judgment against a debtor;
- requiring certain persons in possession of information relating to the business or affairs of a debtor to be examined by and/or produce documents to a foreign representative; or
- ordering the turnover to a foreign representative of any property belonging to the debtor.
In exercising its discretion, the Cayman Court will look to ensure an economic and expeditious administration of the debtor's estate consistent with:-
- the just treatment of all holders of claims against or interests in a debtor’s estate wherever they may be domiciled;
- the protection of claim holders in the Cayman Islands against prejudice and inconvenience in the processing of claims in the foreign proceedings;
- the prevention of preferential or fraudulent dispositions of property comprised in the debtor’s estate;
- the distribution of the debtor’s estate amongst creditors substantially in accordance with the statutory order of priority;
- the recognition and enforcement of security interests created by the debtor;
- the non-enforcement of foreign taxes, fines and penalties; and
In addition, the Companies Winding Up Rules 2018 provide for a Cayman Islands appointed liquidator to enter into protocols with foreign officeholders appointed by a foreign court for the purpose of promoting the orderly winding up of the company's affairs and avoiding duplication or conflicts between the competing proceedings in the Cayman Islands and the foreign jurisdiction. Any international protocol agreed between a Cayman liquidator and foreign officeholder will not take effect and become binding until it has been approved by the Cayman Court and the foreign court or relevant authority.
It is a requirement under Cayman Islands law that where a Cayman company is the subject of a foreign bankruptcy proceeding, notice of this fact is required to be filed by the company with the Registrar of Companies in the Cayman Islands and also published in the Cayman Islands Gazette.
While the Cayman Islands has elected not to adopt the UNCITRAL Model Law on Cross Border Insolvency, the Cayman Court is willing to exercise its powers in aid of foreign insolvency proceedings based on comity. Such powers and the basis upon which they will be exercised follow many of the principles enshrined in the UNCITRAL Model Law.
A local court in Japan may recognise foreign restructuring or insolvency proceedings. The process is initiated by a debtor’s filing to the Tokyo District Court, which has exclusive jurisdiction on such recognition proceedings. The test for recognition is based mainly on the necessity of such recognition. For example, if foreign restructuring or insolvency proceedings are obviously ineffective over assets in Japan, such recognition would be denied.
Singapore has adopted the UNICITRAL Model Law on Cross Border Insolvency. Under Article 15, an application may be made to the High Court for the recognition of foreign insolvency proceedings. An application must be accompanied by:
a. a certified copy of the decision commencing the foreign proceeding and appointing the foreign representative;
b. a certificate from the foreign court affirming the existence of the foreign proceeding and of the appointment of the foreign representative; or
c. in the absence of evidence mentioned in sub paragraphs (a) and (b), any other evidence acceptable to the Court of the existence of the foreign proceeding and of the appointment of the foreign representative.
An application must also contain a statement identifying all foreign proceedings and proceedings under Singapore insolvency law in respect of the debtor that are known to the foreign representative, and should also provide English translations of all documents provided in support of the application.
However, applicants should take note that the public policy exception under Article 6 has been modified, such that the threshold for rejecting an application is lower than that of other Model Law adopters. It remains to be seen what factors would trigger the modified Article 6.
Singapore is also a founding member of the Judicial Insolvency Network, which aims to promote greater cooperation amongst insolvency judges, and to develop best practices for cross border insolvencies. As part of this initiative, the Judicial Insolvency Network is exploring the possibility of having insolvency hearings live-streamed across multiple jurisdictions to allow greater cooperation between insolvency courts.
British Virgin Islands
Part XVIII of the IA adopts the UNCITRAL Model Law on Cross-Border Insolvency for recognising foreign office holders, and for giving and seeking assistance in insolvency proceedings; however, this Part has not been brought into force, and the generally held view is that it is unlikely to come into force in the near future. As such, there is no formal procedure by which foreign office-holders may seek recognition in the BVI courts and thereby be afforded the same powers as a locally appointed office-holder.
The position is ameliorated somewhat by Part XIX of the IA, which provides the basic statutory framework for judicial assistance in insolvency proceedings. It allows foreign representatives in certain types of insolvency proceedings to apply to the BVI court for assistance. It also preserves the court’s common-law powers to provide aid in relation to foreign proceedings. The proceedings to which Part XIX applies are collective judicial or administrative proceedings in which the property and affairs of the debtor are subject to control or supervision by a foreign court taking place in designated territories. This definition is wide enough to encompass certain types of foreign restructuring procedures.
The BVI court, when faced with such an application, is required to do what will best ensure the economic and expeditious administration of the foreign proceedings, to the extent that this is consistent with certain guiding principles. Section 467 IA states that the orders that the court can make in aid of the foreign proceedings are wide, and include orders—
- restraining the commencement or continuation of proceedings against a debtor or in relation to the debtor’s property,
- restraining the creation, exercise or enforcement of any rights against the debtor’s property,
- requiring a person to deliver up the property of the company to the foreign representative,
- making any order or granting any relief the court considers appropriate to facilitate, approve or implement arrangements that will result in the coordination of BVI insolvency proceedings with foreign insolvency proceedings,
- appointing an interim receiver of any property of the debtor, and
- making such other order or granting such other relief as it considers appropriate.
The provisions appear to be wide enough for the BVI court not only to provide procedural assistance but also to apply substantive principles of BVI insolvency law, and the BVI court has discretion whether to apply the law of the BVI or the law applicable to the foreign proceedings.
It is important to note that the court will only be able to assist the foreign office holder under these statutory provisions if the proceedings are taking place in one of the following jurisdictions: Australia; Canada; Finland; Hong Kong; Japan; Jersey; New Zealand; the UK; and the USA. If the foreign office-holder was appointed in proceedings in a different jurisdiction, the support they may receive will be very limited, though they will be able to bring certain claims based on their title to assets contained in the insolvent estate (including causes of action), if sufficient title is vested in them.
The BVI courts have had a number of opportunities to consider the scope of Part XIX. In Irving H Picard v. Bernard L Madoff Investment Securities LLC BVIHCV 140 of 2010, unreported (2010), Mr Pickard, the trustee appointed in the US liquidation of Bernard L Madoff Investment Securities LLC, sought (1) recognition in the BVI as a foreign representative, (2) permission to apply to the BVI court for orders in aid of the foreign proceedings, and (3) permission to require any person to deliver up to him any property belonging to the company. Deciding the case against Mr Pickard, Bannister J held that foreign representatives are confined to relying upon Part XIX, because the legislature had decided not to bring the alternative provisions in Part XVIII into force. The key difference between the two Parts was that whereas Part XVIII conferred status on foreign representatives through recognition of the foreign proceedings, Part XIX merely gave the foreign representative express rights to apply to the court for orders in aid, but without conferring status. The codification of rules on recognition of foreign office holders in Part XVIII had resulted in the implied repeal of the common-law rules of recognition, so Mr Pickard could only rely on the support afforded by Part XIX. The court then held that because Part XIX operated on an ‘application-by-application’ basis it could not give Mr Pickard any general authority or special status, but would have to hear individual applications for specific orders.
In Re FuturesOne Diversified Fund SPC Ltd BVIHCM (COM) 113, 114, 115 and 116 of 2012, unreported (2013), the court had to consider the position of a receiver appointed by the United States District Court for the Northern District of Illinois on the application of the United States Commodity Futures Trading Commission. An application had been made by the joint liquidators of certain funds incorporated in the BVI for a declaration that they had been validly appointed. The receiver applied to be added to the proceedings, either under the court’s inherent jurisdiction or under Section 273 of the IA as a person ‘aggrieved by an act, omission or decision’ of a company liquidator so that he could oppose the liquidators’ application and seek orders reversing everything that had been done, on the basis that it was done to avoid the effect of the order by which the receiver had been appointed. He also sought an order under Section 467 of the IA in support of the Illinois proceedings staying the BVI liquidations.
This case was also heard by Bannister J. In relation to the latter application, his Lordship held that the ability to make orders in aid of foreign proceedings was limited to foreign proceedings for the purpose of ‘reorganisation, liquidation or bankruptcy’, and that on the evidence before the court it appeared that the purpose of the US receivership was to protect investors rather for any of the specified purposes. Accordingly, Bannister J held that the US-court-appointed receiver had no standing to make any application under Section 467 of the IA. In relation to the receiver’s application to reverse the acts of the liquidators, the court held that the liquidators’ claim that they had been appointed was not an ‘act, omission or decision’ of the joint liquidators within the meaning of the Act, so the receiver did not have standing under Section 273 of the IA. In any event, having concluded that the liquidators were validly appointed, the judge held that there was nothing that could have prejudiced the receiver.
The case of In the Matter of C (a bankrupt) concerned an application brought by trustees in bankruptcy who had been appointed under the laws of Hong Kong for recognition in the BVI of the Hong Kong proceedings and the trustees’ appointment. Bannister J reviewed his earlier decision in Pickard v. Bernard Madoff Investment Securities LLC (supra) and stated that Part XIX was not an exhaustive code in relation to the court’s jurisdiction to assist foreign insolvency officials: the effect of Section 470 of the IA was to preserve the common-law jurisdiction to assist foreign representatives as defined in Section 466 IA. (This Section requires that the foreign office holder be a person acting as an office holder in insolvency proceedings in a relevant foreign country designated as such by the Financial Services Commission of the BVI. If the jurisdiction in which the foreign office holder was appointed has not been designated by the FSC, Section 470 is of no assistance. This does however conflict with an earlier unreported decision where assistance pursuant to the common law was granted to a foreign insolvency professional from Curaçao, a jurisdiction lying outside FSC designation.) If the foreign office-holder came within that definition, the powers of the court in Part XIX would be available in addition to the common-law powers that had existed prior to the enactment of the IA. His Lordship also clarified the scope of that jurisdiction, stating that it was effectively limited to making orders for the purposes of preserving the integrity of the foreign bankruptcy procedures. He rejected submissions that if a foreign insolvency official were recognised by the BVI courts, they should be treated as having all the powers of an equivalent insolvency official under BVI law.
The question who may make an application under section 273 IA as a person aggrieved by an act, omission, or decision of an office holder for an order reversing, modifying, or confirming the act, was revisited in In re Fairfield Sentry Limited (in liquidation) and others BVIHCMAP 11, 12, 13, 14, 15, 16, 23, 24, 25, 26, 27, and 28 of 2016, unreported (20 November 2017). This was another case that arose out of the discovery of the long-running frauds perpetrated by Bernard Madoff. The appellants were former shareholders of Fairfield Sentry, which operated as a feeder fund to Madoff’s company BLM Investment Securities (BLMIS).
The liquidators of Fairfield Sentry had brought claims in the BVI against former shareholders of the company in respect of redemption payments they had received that were allegedly based on a mistaken calculation of the shares’ value. These claims were appealed to the Privy Council, which ultimately dismissed them. The liquidators then brought proceedings in the USA for recovery of different sums in respect of redemption payments. The former shareholders applied to the BVI court for an order under section 273 IA for an order reversing the liquidators’ decision to bring the US proceedings, and in the alternative sought an anti-suit injunction. They argued that the liquidators’ US claims were an attempt to relitigate the issues already decided by the Privy Council. The liquidators argued that the former shareholders were not ‘persons aggrieved’ by their acts, but were merely defendants to the US proceedings. At first instance, Leon J held that the former shareholders did not have standing because they did not have a legitimate interest in the relief they sought, referring to the case of Deloitte & Touche AG v Johnson  1 BCLC 485.
The former shareholders appealed to the Eastern Caribbean Court of Appeal. The court noted that in Intertrade Corporation v Windjammer Landing Co Ltd SLUHCVAP 1 of 1996, unreported (24 November 1997), it had held that the term ‘persons aggrieved’ should be given a generous interpretation, though it should not permit claims by a ‘meddlesome busybody’. The key question was whether, having regard to the context of section 273 of the IA and the remedy that was available there, a person who had no proper or legitimate interest in a liquidator’s conduct may be said to be ‘a person aggrieved’. It was therefore necessary to determine the capacity in which the person was bringing a section 273 application. A creditor of an insolvent company, a contributory of a solvent company, and a debtor would all have standing, and a person directly affected by the exercise of the power given to the office-holder would have standing if they would not otherwise have the right to challenge the exercise of the power. However, even if the applicant were a creditor or contributory, they would not have standing unless the relief they sought were brought in that capacity.
The former shareholders did not have any interest in the assets of Fairfield Sentry or the manner in which those assets were to be realised, distributed, or spent. Their complaint was that the US proceedings were vexatious, oppressive, or an abuse of process. The capacity in which they brought their application under section 273 was plainly as defendants in the US proceedings, not as creditors of the funds. In that capacity they were strangers to the liquidation and their interests were adverse to the liquidation. As such, they had no legitimate interest in the relief they sought, and had no standing to bring the applications.
If a BVI company has been wound up or is in the process of being wound up by a foreign court, it can nevertheless be placed in liquidation in the BVI by either of the two routes available (ie, the appointment of a liquidator by the court or by the members of a company). A foreign company that is in liquidation abroad may also be placed in liquidation in the BVI, but only through the mechanism of a court-appointed liquidator.
In such situations, the liquidation of the company in its place of incorporation will generally be regarded as the primary liquidation and, in common-law countries at least, all others will be treated as ‘ancillary’ or secondary liquidations in which the liquidator’s powers will be confined to collecting and distributing the assets in that jurisdiction.
If a liquidator is appointed over a BVI company, he or she becomes the appropriate person to deal with the company’s assets in place of the directors. The liquidator will be recognised as having the authority to administer the assets of the company worldwide, but the recognition of his or her authority abroad is effectively a matter for the foreign courts in the relevant jurisdiction. Most common-law jurisdictions will generally recognise a liquidator of a foreign company appointed by the court of the place of incorporation.
Recently, the BVI has taken steps to promote the efficient management of cases involving concurrent insolvency or restructuring proceedings in multiple jurisdictions. In May 2017 the BVI Commercial Court formally adopted new guidelines for communication and cooperation between courts in cross-border insolvency matters. The initiative, which was the fruits of the Judicial Insolvency Network’s activities (the JIN), has proved very popular among offshore practitioners and judges alike. The BVI is the latest key commercial jurisdiction to adopt the JIN guidelines this year, joining New York, Delaware, Singapore, and Bermuda.
The guidelines are designed primarily to enhance communication between courts, insolvency representatives, and other parties as they deal with the vicissitudes of global restructurings and insolvency. One of the key objectives is that with the increase in efficiency stakeholders will see a reduction in delay and cost.
Key elements of the guidelines include the following:
- Courts are encouraged to communicate directly with one another. There has traditionally been inconsistency and caution between judges to communicate, and a question as to its appropriateness. The guidelines actively promote case management and planning that—
(a) provide for the orderly making of submissions by the parties and decisions by the courts,
(b) provide court documents including judgments and orders to another court, and
(c) require legal teams to share documentation with other courts
- The risk that parties might have behind-the-scenes communications are largely addressed by a guideline that provides a default position giving parties a general entitlement to be present during discussions. Communications will be transcribed and form part of the record in the relevant proceedings.
- Foreign parties and appropriate persons may be permitted to appear before a local court: the generic guidelines provide a safe harbour for appearances in foreign courts without submission to jurisdiction; however, in the BVI version the standard BVI rules relating to submission to the jurisdiction are not waived or suspended by the JIN guidelines, and the normal principles of private international law will apply; additionally, foreign counsel may be heard according to existing practices.
- There is a presumption that foreign laws, regulations, and orders referred to in cross-border proceedings under the JIN guidelines have been properly enacted or issued. This is designed to streamline the unnecessary baggage of additional evidence in confirming the validity of an act of a foreign court. A similar provision enables courts to provide updates to other courts involved in related proceedings.
- Perhaps the most ambitious aspect of the guidelines is the provision for joint hearings: an annexe anticipates that holding hearings in different jurisdictions simultaneously will often be expeditious, and so provides that the two courts may be connected by video-link, enabling judges and counsel in both courts to participate as appropriate in the concurrent proceedings; however, there remains some questions as to the circumstances in which a party participating in a hearing conducted in this way may be taken to have submitted to the jurisdiction of a court by way of submissions made over the video-link.
- Courts in different jurisdictions that are concerned with connected insolvency proceedings are granted more freedom to communicate with one another in order to establish procedures for joint hearings and subsequent issues without the attendance of counsel.
- Finally, it is recommended that where the guidelines are to be followed they be embodied either in a protocol or an order of the court in the relevant proceedings. Given the status of the guidelines – which are not embodied in a statutory instrument or practice direction – it is likely that they will be used to supplement existing legislative and procedural frameworks.
The guidelines are intended to be flexible and subordinate to local laws and sovereignty; however, they reflect the view of the judiciary on the importance of coordination and cooperation in cross-border insolvency proceedings: for example, the first guideline encourages practitioners to communicate and cooperate with their foreign counterparts from the outset of proceedings.
Although the JIN guidelines may not end turf wars between appointees, they are likely to bring these disputes before the courts at an earlier stage, to open the debate to the relevant courts, and to promote collaboration rather than conflict, and these aspects alone may well promote a culture of cooperation that will benefit stakeholders in cross-border insolvency procedures.
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.
Given the reality that Bermuda companies are often part of a group of companies which carry on business outside of Bermuda, the courts have adopted a flexible and pragmatic approach using common law principles. Rather than requiring parallel schemes of arrangements to be promulgated in Bermuda in all cases of a global restructuring, the courts have instead held that they may recognise and enforce (by way of a stay of any Bermuda proceedings) a foreign restructuring order which extinguishes claims against an insolvent Bermuda company.
There is no statutory provision regarding the treatment of concurrent proceedings in other jurisdictions. Bermuda courts, however, have historically co-operated with foreign proceedings, allowing them to take the lead role where it can be shown that to do so would be in the best interests of the company, especially where the foreign court has the closest connection to the business of the company or is the most appropriate jurisdiction to make an order.
More recently, in March 2017, the Bermuda courts adopted new rules for communication and co-operation between courts in cross-border insolvency matters. The Commercial Court Practice Direction No. 6 of 2017 gives effect, with minor modifications, to the Singapore-founded Judicial Insolvency Network (JIN) Guidelines. Bermuda is one of the key commercial jurisdictions to adopt the JIN Guidelines (with minor modifications), along with the United Kingdom, the US Southern District of New York, Delaware, Singapore and the British Virgin Islands.
The JIN Guidelines are designed primarily to enhance communication between courts, insolvency representatives and other parties in the context of global restructurings and insolvency. As a result of the increased efficiency, it is hoped that stakeholders will see a reduction in delay and cost. The guidelines address issues including communication between courts, acceptance of foreign process, and joint hearings.
Bermuda has not adopted the UNCITRAL Model Law on Cross-Boarder Insolvency or any similar cross-border initiatives.
Regulation (EC) 1346/2000 (the “Insolvency Regulation”) is applied in Ireland and provides that where a company has its centre of main interests (COMI) in an EU member state, except Denmark, the courts of that member state have control of the insolvency process even if the company carries out business elsewhere. Secondary proceedings can be opened concurrently in another EU jurisdiction in which the company carries out business and /or has company assets located.
The Insolvency Regulation does not apply in the context of receiverships or schemes of arrangement. In addition, insolvency processes outside the EU are not covered by the Regulation. As such, recognition of these insolvency processes is determined on a case-by-case basis in accordance with conflict-of-law rules. Ireland is not a signatory to the UNCITRAL Model Law and therefore US Chapter 11 bankruptcy proceedings are not automatically recognised.
There are no current plans to adopt the UNCITRAL Model Law in this jurisdiction.
The UK is, currently, party to the Insolvency Regulation recast which governs the recognition of foreign insolvency regimes in Europe. As a result, any proceedings opened in other Member States will be recognised in England and Wales upon application to the court. Where the debtor is local and has its COMI in England and Wales, proceedings opened in England will be considered as main proceedings and secondary proceedings may be opened where the debtor carries out non-transitory economic activity with human means and goods (an “establishment”). Secondary proceedings may only be: winding up proceedings, limited to the assets in that Member State and run in parallel with the main proceedings.
Beyond this, the UK is a signatory to the UNCITRAL Model Law, which provides the framework for recognition of proceedings opened in other jurisdictions (and has been implemented in England by the Cross Border Insolvency Regulations 2006). However, not all major jurisdictions have implemented the Model Law. In that scenario, a scheme of common law rules govern how any foreign proceedings over a local debtor could potentially be recognised. These rules are somewhat vague and offer far less certainty.
The Insolvency Law provides that foreign restructuring or insolvency proceedings may be recognized by local Insolvency Courts, provided that the following requirements are met: (i) the respective proceeding must be a foreign collective proceeding (judicial or administrative in nature), carried out pursuant to a law regulating the insolvency, bankruptcy or reorganization of insolvent entities and in which the assets and business of such insolvent entities are subject to the control or surveillance of a foreign court for their restructuring or liquidation; (ii) the recognition must be requested by a foreign representative that must be a person or corporate body duly appointed in a foreign proceeding to manage the restructuring or liquidation of the assets or business of insolvent entities or to act as a representative of the foreign proceeding; and (iii) the recognition request must meet certain requirements provided by the Insolvency Law (e.g. it must be filed together with certain documents and with the competent court).
Mexico is a member of the UNCITRAL and has adopted UNCITRAL Model Law on Cross Border Insolvency.
The Spanish legal system recognizes sentences that come from others countries. However, the proceeding to recognize foreign sentences is different according with the origin country.
Sentences that come from UE countries:
- The Regulation (EU) 2015/848 of the European Parliament and of the Council, of 20 May 2015, on insolvency proceedings (“RIP”) establishes in the articles 19, 20 and 32 that any judgment initiating insolvency proceedings handed down by a court of a member state which has jurisdiction according with article 3 of the Regulation, shall be recognized in all other member states from the moment that it becomes effective in the State of the opening of proceedings. In addition, these judgements shall, with no further formalities, produce the same effects in any other member state as under the law of the state of the opening of proceedings, unless this Regulation provides otherwise and as long as no proceedings referred to in article 3.2 of RIP (When the interest center of the debtor is situated within the territory of a member state, the courts of another member state shall have jurisdiction to open insolvency proceedings against that debtor only if it possesses an establishment within the territory of that other member state) are opened in that other member state. Any restriction of creditors' rights, in particular a stay or discharge, shall produce effects vis-à-vis assets situated within the territory of another member state only in case of those creditors who have given their consent. Furthermore, the resolution concerning of insolvency proceedings, and compositions approved by that court, also shall be recognized with no further formalities.
Sentences that come from to member states :
- First of all, it is necessary to check if the countries involved in the sentence are part to a convention.
- Secondly, in case that the affected countries did not agree a convention, it will be necessary the application of the rule of the reciprocity. By this rule, if the affected country recognizes the other´s country national sentences, the counterparty will recognize the foreign sentences in reciprocity.
- Finally, if the affected countries do not accomplish the previous requirements, this sentence will be subject to the proceeding of the exequatur in order to be recognized. This proceeding is regulated in art 951-958 of the Spanish Civil procedure Act and article 220 of SIA. The proceeding of exequatur, consists of a procedure in which the interested person has to file an application to recognition a sentence to the commercial court, that is to say, the judge competent to know the sentence related to the insolvency proceedings. The court will notify Crown Prosecute services and the affected persons in the country where they are established, in order to inform them that there is a subject interested in executing the sentence. At last, the judge shall decide recognize or not the sentence. This resolution is subjected to be appealed to Provincial Court.
Lastly, RIP has been implemented in Spain, as we have indicated in the proceeding of recognition of sentence between UE’s countries. The CNUDM has been also implemented in Spain and as consequently, some Acts have been amended in order to be suited to it, for example the Spanish Arbitration Act.
A judgment given in any EU Member State is recognized in Portugal without any special procedure being required. Regulation (EU) 2015/848 applies to cross-border insolvency proceedings within the EU.
For judgements of non-EU states, a review of the judgement or orders is required. Generally, foreign insolvency and restructuring proceedings will be recognized as long as the foreign court that declared the insolvency based its competence on the criteria of the location of the residence or headquarters of the debtor or of its center of main interests and the recognition does not violate public order.
Note that, according to Portuguese Law, Portuguese courts have exclusive jurisdiction for the declaration of insolvency of companies which have their headquarters in Portugal, meaning that no foreign judgements (outside the EU) will be recognized in this regard.
The UNCITRAL Model Law on Cross Border Insolvency was not adopted nor is it under consideration in Portugal.