Academic journal article Business Law International

Towards an International Insolvency Convention: Issues, Options and Feasibility Considerations

Academic journal article Business Law International

Towards an International Insolvency Convention: Issues, Options and Feasibility Considerations

Article excerpt

Introduction

Multinational corporate groups'1 financial crises and failures (carr ying the potential to disrupt national and international economic and financial systems) are unavoidable amid steadily increasing globalisation of business enterprises. Nonetheless, most of the world, measured both by number of nations and volume of international trade, remains without an agreed framework for cross-border restructuring, reorganisation or liquidation of distressed multinational businesses in an equitable, coordinated and cooperative manner.2

There is not, for example, an agreement on cross-border insolvency between the North American nations and the European Union (EU), which includes many leading architects of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency ('Model Law CBI').3 Even though a small number of EU countries have enacted Model Law CBI-based legislation - which could be changed unilaterally at the whim of national legislatures - the world's largest regional trading blocs remain disunited when it comes to cross-border insolvency cooperation.

Against this backdrop, many proponents of international insolvency law reform now view an international insolvency convention, developed and monitored under the United Nations' auspices, as the most (and perhaps, only) effective means of achieving a competent, reliable regime for coordinated, cooperative international administration of cross-border insolvency cases, particularly those of multinational corporate groups. The key to this remains international judicial cooperation. Considering that intergovernmental cooperation is traditionally achieved by consent of sovereigns memorialised in a formal treaty or convention, with ongoing support and compliance monitoring at the international organisation level, there is ever y reason to expect that this would be true for courts as well in the case of cross-border judicial cooperation.4

UNCITRAL's insolvency law reform and harmonisation efforts to date have played an invaluable role in laying the groundwork for a binding international regime. The Model Law CBI might properly be viewed from this perspective not as an end in itself, but as a consensus-building predicate to a formal international agreement-based regime yet to be established.

The purpose of this article is to set out the case for such a United Nations (UN) insolvency convention from this perspective - an instrument rooted in private international law and insolvency practice and theory, which builds on the principles of cross-border cooperation and coordination established by the UNCITRAL Model Law CBI and practices developed pursuant thereto over the last two decades.5 This is not meant to make light of factual and empirical questions to be addressed as UNCITRAL studies the feasibility of a convention.6 Rather, this first step is to explore an insolvency convention's theoretic premises and historical foundations.

Histor y and context of the insolvency convention proposal

Formal cooperation in cross-border insolvency cases began with deliberations on an international insolvency convention in 18947 and recommenced with two International Bar Association (IBA) instruments (1989 and 1994),8 followed in 1995 with UNCITRAL Working Group V's deliberations on a model law to promote international trade through harmonious insolvency law standards.9 Through recent decades, a growing consensus favouring increasing international cooperation has been discernible, corresponding with articulation of 'best practices' to guide insolvency systems at the national level. These culminated in the Model Law CBI's introduction of an approach to promote judicial and administrative coordination in cross-border insolvency cases (with many other important and helpful guides and texts introduced along the way).

The World Bank has simultaneously played a leading role in facilitating development of national insolvency regimes embodying practices and policies essential to economic development and global financial stability. …

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