English and American Courts Apply Global Principles for Cooperation in International Case

English and American Courts Apply Global Principles for Cooperation in International Case

Courts rely on soft law principles for cooperation in international insolvency cases

On July 1, 2013, I posted “EU promotes Judicial Cooperation in Cross-Border Insolvency Cases”. The post explains that within Europe a set of Guidelines, tentatively called “EU Cross-Border Insolvency Court-to-Court Cooperation Guidelines” is under construction. These would be the outcome of a programme of study, research and discussion for which the Leiden Law School, in cooperation with Nottingham Law School, has been awarded an EU Action Grant ‘Civil Justice’ from the European Commission, with third-party funding by the International Insolvency Institute. These (legally non-binding) EU Cross-Border Insolvency Court-to-Court Cooperation Guidelines will build further on a set of Global Principles for Cooperation in International Cases (“Global Principles”), which were published in June 2012 by the American Law Institute (ALI) and International Insolvency Institute (III). These Global Principles were drafted by professor Ian Fletcher (University College London) and myself. See this website or this document for more information and see my blog “Cross-border Insolvency: Judicial Cooperation”, posted on July 9, 2012.

A strong signal of the fact that the June 2012 Global Principles are capable of providing practical use and guidance comes from two courts in the UK and in the USA.

The Supreme Court of The United Kingdom (Conjoined Appeals in (1) Rubin & Anor v Eurofinance SA & Ors and (2) New Cap Reinsurance Corp Ltd & Anor v Grant and others) [2012] UKSC 46 (24), has referred to “…the modern approach in the primary international and regional instruments, the EC Insolvency Regulation on Insolvency Proceedings … and the Model Law, which is that the jurisdiction with international competence is that of the country of the centre of main interests of the debtor (an expression not without its own difficulties).” It is ultimately derived from the civil law concept of a trader’s domicile, and was adopted in substance in the draft EEC Convention of 1980 as a definition of the debtor’s centre of administration: see Report by M Lemontey on the draft EEC Bankruptcy Convention, Bulletin of the European Communities, Supp 2/82, p 58; American Law Institute, Transnational Insolvency: Global Principles for Co-operation in International Insolvency Cases (2012), Principle 13, pp 83 et seq. See also this website.

The United States Court of Appeals for the Third Circuit (in re ABC Learning Centres Ltd., No. 12-2808 (3rd Cir. 2013)) made references on 27 August 2013 to Global Principle 1, citing that it sets out “… the overriding objective [which is to] enable … courts and insolvency administrators to operate effectively and efficiently in international insolvency cases with the goals of maximizing the value of the debtor’s global assets, preserving where appropriate the debtors’ business, and furthering the just administration of the proceeding.” Another part of the Global Principles report is also cited by this Court of Appeal: “[T]he emphasis must be on ensuring that the insolvency administrator, appointed in that proceeding, is accorded every possible assistance to take control of all assets of the debtor that are located in other jurisdictions. Id. at cmt. to Global Principle 24.”

On 12 December 2012 the European Commission published a Proposal for a Regulation amending the EU Insolvency Regulation [COM(2012) 744], which includes a Report on the application of the EIR [Com(2012) 743]. In the Proposal itself, in Recital 20, it is expressed that main insolvency proceedings in one Member State and secondary proceedings opened in other States can only contribute to the effective realisation of the total assets if all the concurrent proceedings pending are coordinated. Then follows (the words underlined are new in comparison to the existing text): “(20) … The main condition here is that the various liquidators and the courts involved must cooperate closely, in particular by exchanging a sufficient amount of information. …” The proposal then sets out several articles with duties and requirements regarding cross-border cooperation and communication between insolvency liquidators, between courts and between these liquidators and courts. In the Proposal the final sentence of Recital 20 reads as follows: “In their cooperation, liquidators and courts should take into account best practices for cooperation in cross-border insolvency cases as set out in principles and guidelines on communication and cooperation adopted by European and international associations active in the area of insolvency law.”

In the light of these developments it is submitted that within the EU, there is an open attitude towards “best practices” such as those under review in the EU Cross-Border Insolvency Court-to-Court Cooperation Guidelines. Indeed, an endorsement to take into account the June 2012 Global Principles follows from European Commission Staff Working Document (Impact Assessment, SWD(2012) 416 final), p. 24), where it is stated: “In order to ensure the coordination of proceedings opened in several Member States, the Regulation obliges insolvency practitioners to communicate information and cooperate with each other. Several guidelines for practitioners on cooperation and communication in cross-border insolvencies have been developed by associations of practitioners [51]”. Footnote [51] reads: “The most recent example are the Global Principles for Cooperation in international insolvency cases from the American Law Institute and the International Insolvency Institute, elaborated by Ian Fletcher and Bob Wessels (2012).”

At the Leiden Law School we feel that our work is in line with international developments and other attempts at developing modes of international cooperation in the area of international insolvency. For further information or expressions of interest to participate please contact Dr. Bernard Santen or prof. Bob Wessels.


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