Leiden Law Blog

Towards a UNCITRAL Model Law on Cross-border Insolvency 2.0?

Posted on by Bob Wessels in Private Law
Towards a UNCITRAL Model Law on Cross-border Insolvency 2.0?

The UNCITRAL Model Law on Cross-Border Insolvency, celebrating its 20th year of existence, is regarded worldwide as a valuable tool for organising a country’s provisions of international insolvency law. The core of the Model Law deals with the recognition of foreign insolvency proceedings, communication and cooperation of proceedings (by insolvency practitioners and courts) concerning the same debtor and the rights of foreign creditors.

Presently, the Model Law is used as guidance for enacting national international insolvency law provisions in over 40 countries. Alphabetically these countries are: Australia (2008), British Virgin Islands (2003), Canada (2009), Chile (2014), Colombia (2006), Eritrea (1998), Great Britain (England, Wales and Scotland, 2006, Northern Ireland, 2007), Greece (2010), Japan (2000), Mauritius (2009), Mexico (2000), Montenegro (2002), New Zealand (2006), The Philippines (2010), Poland (2003), Republic of Korea (2006), Romania (2003), Serbia (2004), Slovenia (2008), South Africa (2000), United States (2005) and 17 members of OHADA, the mid-African Organisation for the Harmonisation of Business Law in Africa. More recently, Chile, the Philippines and Singapore have adopted the Model Law.

Chilean Insolvency Law incorporated the Model Law nearly in full in 2014. However, the changes have turned out to be quite substantial, for instance the national provision for the public policy exception (refusing to take action when the action would be ‘manifestly contrary to public policy of this State’) has not included the word ‘manifestly’, evidently giving much more room for Chilean courts to halt foreign insolvency effects. In the Philippines the provisions of the Model Law have been interwoven with recently (in 2012 and 2015) adopted national laws and practices on a broad set of proceedings available for companies and natural persons. In Singapore, the Model Law forms part of a recent larger development of modernising substantive law to strengthen Singapore as a Centre for Debt Restructuring. The English example is followed where courts do not have an obligation to cooperate with foreign courts or Insolvency practitioners, rather they ‘may’.   

I am not aware of a study that provides a detailed country-by-country analysis of the Model Law. Active international scholars could certainly contribute significantly to developments in international insolvency law if a systematic synthesis of the differences in national enactment of the core topics of the Model Law were available. Such a study would also reveal gaps or inadequacies in national laws. On the basis of the outcomes, UNCITRAL could study these and could discuss the development of a Model Law II (or: Model Law 2.0) to further contribute to the development of harmonising certain ‘international’ aspects of national insolvency laws. Such a Model Law 2.0 could also reflect that the text itself goes back more than 20 years. One wonders whether more recently developed concepts and themes are not ready to be promoted to the league of the Model Law. Examples could be: rules on applicable law (the ones contained in the Legislative Guide are not nuanced enough), data protection, group insolvency provisions, registration of insolvency decisions, the main insolvency practitioner’s power to give a unilateral undertaking (in order to prevent opening of proceedings in another state), professional and ethical rules for insolvency practitioners or rules for recognition of for instance decisions on director’s disqualification. Or is an international convention on these and other matters still on UNCITRAL’s agenda?

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