www.ebook3000.com INTERNATIONAL COOPERATION IN BANKRUPTCY AND INSOLVENCY MATTERS This page intentionally left blank www.ebook3000.com INTERNATIONAL COOPERATION IN BANKRUPTCY AND INSOLVENCY MATTERS A J O I N T RE S E A RC H PROJ E C T OF A MERI CA N CO LLE G E OF B AN K RU PT C Y A ND I N T E RN AT I O N A L I N SOLV E N C Y INSTITUTE BOB WESSELS BRUCE A MARKELL JASON J KILBORN 1 Oxford University Press, Inc., publishes works that further Oxford University’s objective of excellence in research, scholarship, and education Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Madrid Melbourne Mexico City Nairobi New Delhi Shanghai Taipei Toronto With offices in Argentina Austria Brazil Chile Czech Republic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore South Korea Switzerland Thailand Turkey Ukraine Vietnam Copyright © 2009 by Oxford University Press, Inc Published by Oxford University Press, Inc 198 Madison Avenue, New York, New York 10016 Oxford is a registered trademark of Oxford University Press Oxford University Press is a registered trademark of Oxford University Press, Inc All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of Oxford University Press, Inc _ Library of Congress Cataloging-in-Publication Data Wessels, B International cooperation in bankruptcy and insolvency matters / A joint research-project of American College of Bankruptcy and International Insolvency Institute ; Bob Wessels, Bruce A Markell, Jason J Kilborn p cm Includes bibliographical references and index ISBN 978-0-19-534017-4 ((hardback) : alk paper) Conflict of laws—Bankruptcy I Markell, Bruce A II Kilborn, Jason J III International Insolvency Institute IV American College of Bankruptcy V Title K7510.W47 2009 340.9’78—dc22 2009000025 _ Printed in the United States of America on acid-free paper Note to Readers This publication is designed to provide accurate and authoritative information in regard to the subject matter covered It is based upon sources believed to be accurate and reliable and is intended to be current as of the time it was written It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services If legal advice or other expert assistance is required, the services of a competent professional person should be sought Also, to confirm that the information has not been affected or changed by recent developments, traditional legal research techniques should be used, including checking primary sources where appropriate (Based on the Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations.) You may order this or any other Oxford University Press publication by visiting the Oxford University Press website at www.oup.com www.ebook3000.com Contents Authors’ Note xiii About the Authors xv Chapter General Introduction A Insolvency and Bankruptcy B Roman Times C Middle Ages D Commercial Code of Napoleon and the Rise of General Bankruptcy Law E Emerging Tendencies from History F Our Stance Today: Differences in National Legal Systems 10 13 A Widely Accepted Broad Principles of Insolvency Systems 13 Maximization of Asset Value for All Creditors 14 Recognizing/Preserving Existing Creditor Rights 16 Equitable Treatment of Similarly Situated Creditors 16 B Wide Disparities with Respect to Specific Procedures and Rules 17 (Un)Equal Treatment of Prepetition Claims 18 a Priorities and Preferred Claims 18 b Excluded Claims 21 c Avoidance of Pre-Insolvency Transactions 23 Maximizing Value in a Common Pool 25 Chapter Prominent Principles of Domestic Law a Included/Excluded Assets 26 v b Stay/Moratorium 29 c Operation of the Business 30 Preparation and Voting on a Plan of Reorganization 32 a Flexibility and Options 32 b Who Drafts the Plan, Timing 33 c Creditor Voting, Dissent, and Court Approval 33 C Principles-Based Approaches to Modernization and Harmonization 35 Chapter Guiding Approaches to International Insolvency Law 39 A The Basic Theoretical Divide: Territorialism v Universalism 40 40 a The Strained Process of Territorial Insolvency Administration 41 b Sovereignty, Democracy, and a New Commercial Demos 43 c A Misfit Solution to an Outsized Problem 46 48 B Weighing the Advantages and Practical Impediments of the Competing Approaches 50 Predictability and Prevention of Forum Shopping 50 Upholding Legitimate Expectations: “Vested Interests” and Fairness 53 Minimizing Losses and Transaction Costs, Maximizing Value 57 Territorialism and Its Discontents Universalism and Market Symmetry C Alternatives 60 Strengthening Universalism 60 Cooperative Territorialism 62 Mixing Universalism and Territorialism 63 Choice of Law 64 D Modified Universalism 67 Chapter Unilateral and Bilateral Forms of National Cooperation 71 A Bilateral Treaties: From Medieval Origins to Nineteenth and Twentieth Century Expansion 71 B Anglo-American Unilateral Cooperation: Legislation and Case Law 75 United Kingdom: Common Law Cooperation and the Limited Role of § 426 76 vi CONTENTS www.ebook3000.com United States: Early Resistance Gives Way to Statutory Cooperation, § 304 77 Ambiguous Results on Both Sides of the Atlantic 81 C Several Unilateral Regimes in Modern Europe 87 Germany 88 Spain 90 Belgium 93 95 Italy 95 The Netherlands 96 Eastern European States 98 France Chapter Regional Cooperation and Regulation 101 A North America 101 The Draft United States–Canada Bankruptcy Treaty 102 The ALI “Principles of Cooperation among the NAFTA Countries” 103 a Preserving Value 105 b Maximizing Value 106 c Equitably Distributing Value 108 B The European Union 109 Judicial Cooperation in Civil Matters 109 Coordinated Universality as Basic Model 111 International Jurisdiction 113 a Judgment Opening Main Insolvency Proceedings: Center of Main Interests 113 b Judgment Opening Secondary Proceedings: Establishment 116 c Other Judgments 116 (1) Judgments Deriving Directly from the Insolvency Proceedings and Which Are Closely Linked with Them 118 (2) Recognition and Enforcements of Judgments beyond the Scope of Article 25(1) Insolvency Regulation 120 d Treatment of Multinational Groups of Companies: The Problem 122 e Treatment of Multinational Groups of Companies: A Solution? 126 CONTENTS vii Applicable Law 132 a Conflict of Law Rules 132 b Meaning of Lex Concursus 134 c Exclusions from the Lex Concursus 135 (1) Opening of Insolvency Proceedings 135 (2) Shall Not Affect 136 (3) State 138 Recognition of Insolvency Proceedings 140 a Automatic Recognition of a Judgment Opening Insolvency Proceedings 140 b Recognition of Other Judgments 141 c Public Policy 143 Secondary Insolvency Proceedings 143 a Specifics of Secondary Insolvency Proceedings 143 b Communication and Cooperation 144 The Position of Creditors 148 Reorganization and Winding Up of Financial Institutions 148 Conclusion 151 C Other Regional Arrangements 154 Latin America 154 Northern Europe 157 Central Africa 159 Southeast Asia 162 Chapter Convergence through Legislation and Professional Cooperation 167 A Harmonization through Legislation 167 B Alignment by Courts and Practitioners 174 The Model International Insolvency Cooperation Act 175 Governance by Private Agreement: Cross-Border Insolvency Protocols 176 a Macfadyen 176 b Maxwell 177 c Olympia and York 180 viii CONTENTS www.ebook3000.com d Nakash 181 e Commodore 182 The Cross-Border Insolvency Concordat and Recent Protocols 183 a Everfresh and Other Early Post-Concordat Protocols 184 b The Loewen Model 187 c Other Protocols 188 Private Workouts and INSOL International’s Statement of Principles 189 a The London Approach 190 b INSOL International’s Statement of Principles for a Global Approach to Multi-Creditor Workouts 192 Chapter Modeling Cross-Border Insolvency: The Role of UNCITRAL 197 A A Fair Framework for Effectively Addressing Cross-Border Insolvency Cases 197 B The Model of the Model Law Limited Character 199 199 Legislative Tool 202 Practical Scope of the Model Law 204 C General Provisions 205 Scope of Application 205 Definitions 206 Public Policy Exception 207 Interpretation 207 D Access 208 Unhindered Access 208 Procedural Standing 209 Position of Foreign Creditors E 211 Recognition of Foreign Proceedings Recognition and Its Effects 212 212 Application for Recognition 213 Decision to Recognize a Foreign Proceeding 214 CONTENTS ix provider of such soft law principles, UNCITRAL, more specifically rules regulating group insolvencies (the term enterprise group has been adopted) and guidance for cross-border coordination of transnational cases by courts Other issues have been tabled, such as post-commencement finance and the impact of insolvency on security rights in intellectual property In whatever way or form, improvements to the existing international insolvency regimes could include the creation of certainty and predictability of norms used to determine international jurisdiction (“center of main interest,” “opening” of insolvency proceedings, “establishment”) with the aim being to protect creditors from the potential detriment of mobility of corporations, including forum shopping These norms should include further detail of the specific effects that result from an individual judicial decision of recognition and enforcement of a foreign judgment to open insolvency proceedings or of judgments related to such proceedings The time seems ripe to address the need for a system of rules of law applicable to cross-border insolvency proceedings Also not touched upon in this publication is the concern regarding the way to improve all forms of security,11 such as how to prevent fraudulent transfers or measures neccesary on a global scale to uphold the integrity of insolvency office holders and the impartiality of courts, which can be guaranteed by transparent rules for proceedings We may not expect international insolvency to achieve the status of a uniform utopia—and we may not even want that Many parts of law, including commercial law and insolvency law, reflect values and policy considerations that hold the upper hand in States or certain regions in which businesses operate that share a historic heritage and language or economic interests However, diversity in law is not equal to different laws as diverse concepts may allow for application alongside or in addition to existing rules.12 Although the process may be hampered by the “awful autumn” of 2008 and its ramifications in several parts of the world, globalization and cross-border trade and investment will result in economic cooperation in certain regions within which, in the long run, the desirability for a system of international insolvency law will become apparent Models such as the EU Insolvency Regulation or the OHADA treaty, although different in many ways, may serve as precedents, benchmarks, or even models for further regional initiatives.13 These are needed because presently, Latin America “is not a destination where reliable, predictable and effictive multinational proceedings can be had.”14 In the larger part of Asia, the conclusion reached is similar.15 11 12 13 14 15 See also Wood, supra note 1, at 234, mentioning insolvency setoff, security interests, and trusts as a means to protect against the insolvency of an intermediary For instance, an increasing convergence can be noted in the methods of interpretation between the European continent and England, as demonstrated by Peter Huber, Kulturelle Identität von Rechtssystemen—Das Common Law und die Deutsche Praxis, in KULTURELLE IDENTITÄT UND INTERNATIONALES PRIVATRECHT 51 (Eric Jayme ed., 2003) FLETCHER, supra note 10, at 23 Josefina Fernandez McEvoy & Jorge Queiroz, An Overview of Recent Bankruptcy Reforms in Latin America, ABI JOURNAL 40 (Apr 2007) Manoj Sandrasegara, Bracing for the Crash: New Insolvency Legislation?, INSOLVENCY & RESTRUCTURING INT’L 15 (Oct 2007) 254 EPILOGUE www.ebook3000.com Finally, what these developments also demonstrate is the large number of international organizations and institutions that define principles and create benchmarks to solve the global insolvency puzzle Although significant improvements can be seen over the last twenty years, it also reflects the reluctance of States to cooperate with each other and better align, for instance, the international insolvency law provisions in States that neighbor each other The present approach is an old-fashioned, uncoordinated country-by-country way to deal with insolvency issues, leading to partial, crumbled collaboration in rather an ineffective (and not legally enforceable) way.16 A sound and well-tailored framework for international cooperation in bankruptcy and insolvency matters requires the most effective form of regulation: a convention on certain matters, such as procedural safeguards that ensure all stakeholders in a transnational restructuring or insolvency have the information they need to make informed decisions, transparent rules to ensure the integrity and effectiveness of courts’ judgments, and rules to determine the law applicable.17 May we expect in another twenty years the emergence of a more consistent inter-regional system of “a unitary bankruptcy proceeding in the court of the bankrupt’s domicile which receives world-wide recognition and should apply universally to all the bankrupt’s assets,” as characterized by Lord Hoffman in HIH,18 as such a “potent” principle? 16 17 18 On the question of which body or organization is best equipped to draft documents promoting harmonization and unification of commercial or trade law in general, see Jeffrey Wah-Tech Chan, Allocation of Work Among Formulating Agencies, Paper delivered at the Congress to celebrate the fortieth annual session of UNCITRAL, Vienna, 9–12 July 2007, at www.uncitral org/pdf/english/congress/Chan.pdf Recently the possible role of the Hague Conference on Private International Law in matters of international cooperation in insolvency cases has been stressed by Bob Wessels, Judicial Cooperation in Cross-Border Insolvency Cases, Inaugural lecture Leiden, Deventer: Kluwer 2008, and by the Honorable J.J Spigelman, Chief Justice of New South Wales, Cross-Border Insolvency: Co-operation or Conflict?, Address to INSOL International, Annual regional Conference, Shanghai, September 16, 2008 (forthcoming in THE AUSTRALIAN L.J.) McGrath & another & others v Riddell & others (HIH Casualty & General Insurance Ltd) [2008] UKHL 21 EPILOGUE 255 This page intentionally left blank www.ebook3000.com APPENDIX List of Websites with Freely Downloadable International Insolvency Cooperation Resources 1a EU Insolvency Regulation http://bobwessels.nl/wordpress/wp-content/uploads/2008/09/insreg-consolidatedtext-2008-02000r1346-20080101-en1.pdf 1b EU Insolvency Regulation—Annexes http://bobwessels.nl/wordpress/wp-content/uploads/2008/09/insreg-2008annexes-l_21320080808en000100131.pdf 2a UNCITRAL Model Law on Cross-Border Insolvency http://www.iiiglobal.org/component/option,com_jdownloads/Itemid,1056/task,finish/ cid,1450/catid,399/ 2b Title 11 United States Code, Chapter 15 http://www.abiworld.org/wiki/usc_sup_01_11_10_15.html American Law Institute—Court to Court Communications Guidelines http://www.iiiglobal.org/component/option,com_jdownloads/Itemid,1081/task,finish/ cid,1506/catid,394/ Cross-Border Insolvency Concordat and Collected Protocols in Individual Cases (including Maxwell, Loewen, and others) http://www.iiiglobal.org/component/option,com_jdownloads/Itemid,1080/task, viewcategory/catid,395/ INSOL International’s Statement of Principles for a Global Approach to Multi-Creditor Workouts http://www.insol.org/pdf/Lenders.pdf 257 This page intentionally left blank www.ebook3000.com Table of Cases In re Accounting of Waite, 99 N.Y 433, N.E 440 (1885) 77 Anguilo v Kedzep Ltd., 29 B.R 417 (S.D Tex 1983) 81 In re Axona Int’l Credit & Commerce Ltd 88 B.R 597 (Bankr S.D.N.Y 1988) 85, 85n68 Banque Worms, Cass le civ, 19 Nov 2002, Bull Civ I No 275 (Fr) 95, 95n113 Barclays Bank plc v Homan [1992] BCC 757, 240n152 In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 374 B.R 112 (Bankr S.D.N.Y 2007) 247 In re Blackwell, 270 B.R 814 (Bankr W.D Tex 2001) 86, 86n74 Cambridge Gas Transport Co v Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] UKPC 26; [2007] AC 508 (PC) 240n152 In re Commodore International Ltd, 231 B.R 175 (Bankr S.D.N.Y 1999), aff’d 253 B.R 336 (S.D.N.Y 2000) 221 In re Culmer, 25 B.R 621 (Bankr S.D.N.Y 1982) 82, 82n51, 84 Cunard Steamship Co., Ltd v Salen Reefer Services, A.B., 49 B.R 614 (S.D.N.Y.) 82–83n53 Disconto Gesellschaft v Umbreit, 208 U.S 570 (1908) 78, 78n36 Drexel Burnham Lambert Group Inc v Galadari, 610 F Supp 114 (S.D.N.Y 1985) 83 European Court of Justice February 22, 1979 (Case 133/78) (Gourdain/Nadler) 110, 142 European Court of Justice 17 January 2006 (Case C-01/04) (Suzanne Staubitz-Schreiber) 52, 115–16, 120 European Court of Justice May 2006 (Case C-341/04) (Eurofood) 107, 114–15, 122, 124–27, 141, 143 259 Felixstowe Dock & Railway Co v U.S Lines Inc., [1987] Lloyd’s Rep 76; [1989] 83, 83n56, 84 In re French, 440 F.3d 145 (4th Cir 2006) 24 In re Garcia Avila, 296 B.R 95 (Bankr S.D.N.Y 2003) 86, 86n72 In re Hackett, 184 B.R 656, 658 n.3 (Bankr S.D.N.Y 1995) 184 Harrison v Sterry, U.S 289, 302 (1809) 77 HIH Casualty and General Insurance Ltd [2008] UKHL 21; [2008] All ER (D) 116 (Apr) 240, 255 Hilton v Guyot, 159 U.S 113 (1895) 77 Hoffman v Bullmore, 306 B.R 614 (B.A.P 8th Cir.), aff’d 384 F.3d 959 (8th Cir 2004) 55 Interpol, Ltd v Certain Freights, 102 B.R 373 (D.N.J 1988) 20, 20n32, 84n58 In re Ionica PLC 241 B.R 829 (Bankr S.D.N.Y 1999) 86, 86n70 In re Koreag, Controle et Revision S.A., 130 B.R 705 (Bankr S.D.N.Y 1991) 84, 84n61, 85 In re Lernout & Hauspie Speech Products N.V v Stonington Partners, Inc., 268 B.R 395 (D Del 2001) 20, 20n29, 221, 221n79 In re Lineas Aereas de Nicaragua, S.A., 10 B.R 790 (S.D Fla 1981) 82, 82n49 In re Maxwell Communication Corp 170 B.R 800 (Bankr S.D.N.Y 1994) 25, 69, 178 McGrath v Riddell, Re HIH Casualty and General Insurance Ltd [2008] UKHL 21; [2008] All ER (D) 116 (Apr) 240n152 In re Midland Euro Exch., 347 B.R 708 (Bankr C.D Cal 2006) 24 Ogden v Saunders, 25 U.S 213 (1827) 77 Overseas Inns, S.A P.A v U.S., 911 F.2d 1146 (5th Cir 1990) 83n53 In re Papeleras Reunidas, S.A., 92 B.R 584 (Bankr E.D.N.Y 1988) 84, 84n59, 85 In re People of New York (Norwegian Receiver of Norske Lloyd Ins Co.), 242 N.Y 148, 151 N.E 159 (1926) 78–78 , 78n37 In re Toga Mfg Ltd., 28 B.R 165 (Bankr E.D Mich 1983) 83, 83n54, 84–85 In re Treco 240 F.3d 148 (2d Cir 2001) 85, 85n64 Waxman v Kealoha, 296 F Supp 1190 (D Hawaii 1969) 79 260 TABLE OF CASES www.ebook3000.com Index agrarian societies, use of credit in, ALI See American Law Institute Alphatec Electronics PCL, insolvency of, 170, 170n18 American Law Institute, 69, 187, 187n87, 246–47, 247n188 Ammanati Bank of Pistoia, 2–3 ancient Rome, 3–5 ancillary proceedings, asset-hosting nations, 57–58 ancillary receiverships, unilateral national cooperation, 78–79 antagonistic unsecured creditors, reorganization plan, 34 Antwerp ordinances, AP&P conglomerate See Asia Pulp & Paper conglomerate Argentina, 248 Asia Pulp & Paper conglomerate, 162–63, 162n214 Asian Bankers Association, 195 Asian Development Bank, 37, 194, 236, 236n135 Asia-Pacific Business Advisory Council, 195, 195n114 asset value, maximization for creditors, 14–16 ATEC See Alphatec Electronics PCL Avianca, cross-border insolvency, 201 Bankruptcy Act of 1898, Bankruptcy Act of 1914, 8, 8n348 Bankruptcy and Insolvency Act, 238 Bankruptcy Convention of 1995, 88 Bear Stearns, cross-border insolvency, 201, 247–48 Belgium, 93–95 BenQ Holdling, cross-border insolvency, 201 BIA See Bankruptcy and Insolvency Act bilateral forms of national cooperation, 71–99 broad-based universalism, practical prerequisite to, 59 Brozman, Tina, 178–79 Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters, 110, 118, 120, 128 Business and Law Research Centre, 37 Bustamante Code, 156 Buxbaum, Hannah, 60 Case Law on UNCITRAL Texts (CLOUT) information system, 203 cash collateral use, consent of secured creditors, 31–32 Cayman Islands, 248 CCAA See Companies’ Creditors Arrangement Act CEL See Commodore Electronics Limited Cenargo, cross-border insolvency, 201 central Africa, 159–62 Chambers of Desolated Estates, 7, 7n31 Chapter 11 of U.S Bankruptcy Code, 8, 8n38, 68–69, 83, 123, 167–68, 170, 173, 178–79, 181–82, 252 Chapter 15 of U.S Bankruptcy Code, 80, 188, 232n120, 245–48, 245n180, 249, 257 choice of law, 64–67 CIL See Commodore International Limited CISG See Vienna Convention on International Sales of Goods claims surplus jurisdictions, 58–59, 58n65 CLERP See Corporate Law Economic Forum Program CLOUT See Case Law on UNCITRAL Texts (CLOUT) information system CoCo Guidelines See European Communication and Cooperation Guidelines for Cross-Border Insolvency 261 Code de Commerce, French colonial law, 7, 9, 160, 251 Code on Private International Law, 93–95 collapse reputable financial institutions, 251–52, 254 collective enforcement of insolvency case, 45–46 collective insolvency proceedings, 109, 150–51 Collins & Aikman Corporation Group, 123–24, 189, 201 commercial code of Napoleon, 7–8 Committee J of the International Bar Association, 183 Commodore Electronics Limited, 182–83 Commodore International Limited, 182–83 Commodore protocol, 182–83 common pool, maximizing value in, 25–32 cash collateral, consent of secured creditors, 31–32 continued operation of debtor’s business, 30–31 creditor involvement in business, 31 included/excluded assets, 26–29 operation of business, 30–32 stay/moratorium, 29–30 Companies’ Creditors Arrangement Act, 238 Compilatae of 1608, bankrupt debtors, debtors on run, distinction, conflict of law rules, 132–34 consent of secured creditors, cash collateral use, 31–32 continued operation of debtor’s business, 30–31 contractualism, 64–65 control center, location of, 42–43 cooperative territorialism, 62–63 coordinated universalism, 68, 111–13 See also Universalism “corporate charter contractualism,” 64–65 corporate groups, universalism challenges, 52–53 Corporate Law Economic Forum Program, 237 court approval, reorganization plan, 33–35 creditor involvement in business, 31 creditor voting, dissent, reorganization plan, 33–35 Cross-Border Insolvency Concordat of Section of Insolvency and Creditors’ Rights, 183–89, 183n66, 199–200, 199n10 cultural preferences of individual nations, societies, 44, 58–59 Daisytek, cross-border insolvency, 201 de Groot, Hugo, Debtors Act of 1869, Des Cessions de Biens, Des faillites et banqueroutes, model for legislation, discretionary relief, 218, 221 dissent, creditor voting, reorganization plan, 33–35 domestic law principles, 13–38 antagonistic unsecured creditors, 34 Asian Development Bank, 37 asset value, maximization for creditors, 14–16 avoidance of pre-insolvency transactions, 23 Business and Law Research Centre, 37 cash collateral, consent of secured creditors, 31–32 common pool, maximizing value in, 25–32 continued operation of debtor’s business, 30–31 creditor involvement in business, 31 creditor voting, dissent, court approval, 33–35 disparities, 17–35 drafting plan, timing, 33 equity holders, subordination, 20 European Council, 35 excluded claims, 21–23 existing creditor rights, recognizing/ preserving, 16 fixed charges, 19 flexibility, 32–33 floating charges, 19–20 friendly unsecured creditors, 34 harmonization, principles-based approaches, 35–38 included/excluded assets, 26–29 insiders, subordination, 20 insolvency Best Project, 37 International Monetary Fund, 37–38 Lisbon Agenda, 35 operation of business, 30–32 parties related to debtor, subordination, 20 preferred claims, 18–21 preparation, 32–35 Principles and Guidelines for Effective Insolvency and Creditor Rights Systems, 38 priorities, 18–21 prisoner’s dilemma, 14 similarly situated creditors, equitable treatment, 16–17 small- and medium-sized enterprises, 36–37 stay/moratorium, 29–30 Taiwanese BenQ Corporation, collapse, 20–21 treatment of prepetition claims, 18–25 UNCITRAL, Legislative Guide on Insolvency Law, 37 UNCITRAL Model Law on Cross-Border Insolvency, 37–38 262 INDEX www.ebook3000.com unsecured creditors, 34 voting on, 32–35 World Bank, 37–38 Dominican Republic, 249, 249n203 Dubai International Financial Center, insolvency law, 169, 169n12 Eastern European states, 98–99 Enron, cross-border insolvency, 201 enterprise group, rules regulating, 254 equitable treatment, similarly situated creditors, 16–17 European Communication and Cooperation Guidelines for Cross-Border Insolvency, 147–48, 147n176 European Convention on Certain International Aspects of Bankruptcy, 87 European Council, 35 European Insolvency Regulation, 70, 77, 87, 91, 95, 162, 189, 189n91, 254, 254n13 European unilateral national cooperation, 87–99, 95n113 Bankruptcy Convention of 1995, 88 Belgium, 93–95 Code on Private International Law, 93–95 Eastern European states, 98–99 European Convention on Certain International Aspects of Bankruptcy, 87 European Insolvency Regulation, 87, 91, 95 French Civil Code, 95 Germany, 88–90 Italy, 95–96 Netherlands, 96–98 Spain, 90–93 Spanish Insolvency Act, 90–93 UNCITRAL Model Law on Cross-Border Insolvency, 87, 90–91, 99 European Union, 59, 109–54 See also European Insolvency Regulation applicable law, 132–40 automatic recognition of judgment opening insolvency proceedings, 140–41 Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters, 110, 118, 120, 128, 142 collective insolvency proceedings, 109, 150–51 Collins & Aikman Corporation Group, 123–24 communication, 144–48 conflict of law rules, 132–34 cooperation, 144–48 coordinated university as basic model, 111–13 INDEX European Communication and Cooperation Guidelines for Cross-Border Insolvency, 147–48, 147n176 Gold-Zack AG, insolvency of, 119 headquarters functions, 124 international jurisdiction, 113–32 judgment opening main insolvency proceedings: center of main interests, 113 judgment opening secondary proceedings: establishment, 116 judgments deriving directly from insolvency proceedings, closely linked, 118–20 judicial cooperation in civil matters, 109–11 Lennex Holdings PLC, 125 lex concursus principle, 132–38, 140 lex rei sitae, limitations of, 136–37 MG Rover, cross-border insolvency, 131 model of constrained forum choice, 127–28 modified, limited, or mitigated universalism, 112 Moss, Gabriel, 127 multinational groups of companies, 122, 126–32 opening of insolvency proceedings, 135–36 place of operations, 116 position of creditors, 148 public policy, 143 recognition of insolvency proceedings, 140–43 recognition of other judgments, 141–43 reorganization of financial institutions, 148–51 secondary insolvency proceedings, 143–48 shall not affect, 136–38 specifics of secondary insolvency proceedings, 143–44 state, 138–40 Staubitz-Schrieber, Susanne, 120 third parties’ rights in rem, 133 UNCITRAL Model Law on Cross-Border Insolvency, 132 van Galen, Robert, 129–30n127 Virgós/Schmidt Report, 125–26 vis attractiva concursus, 119 winding up of financial institutions, 148–51 Eurotunnel, cross-border insolvency, 201 excluded claims, 21–23 execution, for overdue debt, 3–4 existing creditor rights, recognizing/ preserving, 16 expectations, 53–57 ex-post judgment, outcome based on, 61 fairness, 53–57 Federal Mogul, cross-border insolvency, 201 263 financial crisis, 251–52, 254 first English bankruptcy statute, fixed charges, 19 flexibility of reorganization plan, 32–33 floating charges, 19–20 Florence, execution of assets for benefit of creditors, foreign proceedings, 212 forum shopping, 50–53, 85 French colonial law, Code de Commerce, 7, 9, 160, 251 friendly unsecured creditors, reorganization plan, 34 Gauls, treatment of debtors, 3–4 Genua, execution of assets for benefit of creditors, Gitlin, Richard, 69, 181 Global Crossing, cross-border insolvency, 201 Gold-Zack AG, insolvency of, 119 Greece, ancient, 3–4 GTS, cross-border insolvency, 201 Guide to Enactment, 203, 206, 225, 225n95, 233–34 “Guidelines Applicable to Court-to-Court Communications in Cross-Border Cases,” 187, 187n87, 246–47, 247n188 harmonization, principles-based approaches, 35–38 Havana Convention, 156 headquarters, location of, 42–43 headquarters functions, 124 Henry, Jabez, 73 historical emerging tendencies, Holy Roman Empire, 73 IMF See International Monetary Fund Indian Insolvent Debtors Act, 177–78, 178n55 individual actions, 216–17, 217n68 INSOL, Statement of Principles for a Global Approach to Multi-Creditor Workouts, 189–95, 257 INSOL International, 225, 225n94 Insolvency Act 1914, 76–77 Insolvency Act of 1986, 8, 8n348, 76–77 Insolvency and Restructuring Law, 243–44, 243n172 insolvency Best Project, 37 Insolvent Court at Madras, 177–78, 178n55 integrity of insolvency office holders, 254 international commerce, assets moving across borders, 55, 55n49–55n50 international cooperation, local protection, competing interests, 40 international jurisdiction, 113–32 International Monetary Fund, 37–38, 236, 236n135, 252 internationalist principle, 70 Inter-Nordic Insolvency Convention See Nordic Bankruptcy Convention inter-state cooperation, unilateral national cooperation, 80 Inverworld Inc., 188 ipso iure, effect of relief, 216 Islamic banking law restrictions, 168–69 Italian mercantile centres, execution of assets for benefit of creditors, Italy, 95–96 Jeddah Chamber of Commerce, 169 judgment opening main insolvency proceedings: center of main interests, 113 judgment opening secondary proceedings: establishment, 116 judgments deriving directly from insolvency proceedings, closely linked, 118–20 judicial cooperation in civil matters, 109–11 judicial reorganization model, 168 judicial system accountability, 44–45 jurisdiction-selection regime, 60–61 Justinian period, transfer of title of ownership to pay debt, 4–5, Kirchmedia, cross-border insolvency, 201 Latin America, 154–57 law of insolvency, defined, Law on Business Organization Insolvency, 242–43, 242n165 legislation, harmonization through, 167–74 Legislative Guide on Insolvency Law, 37, 198–99, 198n4 Lehman Brothers, cross-border insolvency, 201 Lennex Holdings PLC, 125 Lernhout & Hauspie, cross-border insolvency, 201 lex concursus principle, 63, 132–36, 138, 158 lex rei sitae, limitations of, 136–37 limitations of, 136–37 opening of insolvency proceedings, 135–36 shall not affect, 136–38 state, 138–40 lex fori concursus, 199 application of, 67, 67n104 Lex Julia of Emperor Augustus, lex loci contractus proviso, 184 264 INDEX www.ebook3000.com “Ley Consursal,” 171, 171n26 limitations on sovereignty, 48 Lisbon Agenda, 35 local protection, international cooperation, competing interests, 40 location of debtor’s principal assets, 42–43 locus standi, 209 Loewen model, 187–88 London Approach, 190–91, 190n93, 192 advantage of, 191, 191n97–98 phases of, 190 mandatory effects of relief, 216 Manhattan Investment Fund Limited, 188 market symmetry, 48–50 Martin, Nathalie, 10 maximizing value, 25–32, 57–60 cash collateral, consent of secured creditors, 31–32 continued operation of debtor’s business, 30–31 creditor involvement in business, 31 included/excluded assets, 26–29 operation of business, 30–32 stay/moratorium, 29–30 Maxwell protocol, 68–69, 177–80 Mercantile Insolvency Law, 241 MG Rover, cross-border insolvency, 131, 201 Middle Ages, 5–6 MIICA See Model International Insolvency Cooperation Act minimizing losses, 57–60 mobile phone manufacturer Sendo, 189 Model International Insolvency Cooperation Act, 175, 199–200, 199n10 Model Law on International Commercial Arbitration of 1985, 197 model of constrained forum choice, 127–28 modified universalism, 67–70, 112 See also Universalism Montevideo Treaty, 154–56 moral failure, transformation of bankruptcy from, 8, 8n35 Moss, Gabriel, 127 multilateralist regime, 60–61 multinational groups of companies, 122, 126–32 Multinational Judicial Colloquium on CrossBorder Insolvency, 225, 225n94 Nakash, Joseph, 181–82 Nakash protocol, 181–82 Napoleon, commercial code of, 7–8 national legal system, differences in, 10–12 Netherlands, 96–98, 249 new commercial demos, 42–46 INDEX Nordic Bankruptcy Convention, 157–59 North America courts of non-forum state, 103 equitably distributing value, 108–9 ex parte communications, 107 first draft United States–Canada bankruptcy treaty, 102–3 Guidelines Applicable to Court-to-Court Communications in Cross-Border Cases, 107 INSOL International, 103 inter-court communications policy, 107 maximizing value, 106–7 North American Free Trade Agreement, 103–5, 164 preserving value, 105–6 “Principles of Cooperation in Transnational Insolvency Cases Among Members of North American Free Trade Agreement,” 103 Transnational Insolvency Project, American Law Institute, 104 trustee, debtor-in-possession, access, 103 UNCITRAL Model Law on Cross-Border Insolvency, 101, 103–4 (See also UNCITRAL Model Law on Cross-Border Insolvency) North American Free Trade Agreement, 236, 247 office holders, changing role, 253 Official Receiver, creation of function, OHADA See “Organisation pour ‘l Harmonisation en Afrique du Droit des Affaires” Olympia & York petition under Canadian Companies’ Creditors Arrangement Act, 180–81, 181n64 Olympia and York Developments Ltd., 180–81 Ordonnance de Louis XIV pour le commerce, 6–7 “Organisation pour ‘l Harmonisation en Afrique du Droit des Affaires,” 69, 159–61 Organization for Harmonization of Business Law in Africa, 159 “Outline of Plan of an International Bankrupt Code for Commercial States of Europe,” 73 P Macfadyen & Co., 176–78, 178n55 Pakistan, 248, 248n201 Papal Court, Roman, 2–3 parallel proceedings, 57–58 Parmalat, cross-border insolvency, 201 Philipp Holzman, cross-border insolvency, 201 philosophical underpinnings in solvency law, 253 place of operations, 116 265 Plautus, treatment of debtor, 5n16 plurality, 67 political underpinnings in solvency law, 253 Pope Boniface VIII, 2–3 position of creditors, 148 post-concordat protocols, 184–87 preferred claims, 18–21 pre-insolvency transaction avoidance, 23 preparation of reorganization plan, 32–35 pre-recognition period, 218 Price Waterhouse, 179 principal place of business, location of, 42–43 Principles and Guidelines for Effective Insolvency and Creditor Rights Systems, 38 “Principles of Cooperation in Transnational Insolvency Cases Among Members of North American Free Trade Agreement,” 69, 164, 247 priorities, 18–21 prisoner’s dilemma, 14 private agreement, cross-border insolvency protocols, 176–83 procedural rules, administering insolvent estate, 46 provisional relief, 218 public confidence in financial system, 252, 254 public policy, defined, 207 Quebeccor World, cross-border insolvency, 201 recognition of insolvency proceedings, 140–43 automatic recognition of judgment opening insolvency proceedings, 140–41 Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters, 142 lex concursus principle, 140 public policy, 143 recognition of other judgments, 141–43 Regional Technical Assistance principles, 194 registered office, 214 Reorganization of Business Act, Sweden, 172–73, 173n33 reorganization of financial institutions, 148–51 reorganization plan antagonistic unsecured creditors, 34 creditor voting, dissent, court approval, 33–35 drafting plan, timing, 33 flexibility, 32–33 friendly unsecured creditors, 34 preparation, 32–35 unsecured creditors, 34 voting on, 32–35 Republic of Slovenia, 248, 248n202 RETA, 163–64 Roman, use of credit, Roman creditors, seeking intervention from, Roman Holy See, 2–3 Rome, ancient, 3–5 Sabena, cross-border insolvency, 201 Saudi Royal Decree on Law on BankruptcyProtection Settlement, 169, 169n7 scope of relief, 218 secondary insolvency proceedings, 143–48 communication, 144–48 cooperation, 144–48 specifics of secondary insolvency proceedings, 143–44 similarly situated creditors, equitable treatment, 16–17 small- and medium-sized enterprises, 36–37 SMEs See small- and medium-sized enterprises social-philosophical underpinnings in solvency law, 253 South Korea, Corporate Reorganization Act, 170 Southeast Asia, 162–65 sovereignty, 42–46 Spain, 90–93, 171, 171n26 Spanish Insolvency Act, 90–93 Statement of Principles for a Global Approach to Multi-Creditor Workouts, 189–95, 257 Staubitz-Schrieber, Susanne, 120 Swiss Confederation, 73 Swissair, cross-border insolvency, 201 Taiwanese BenQ Corporation, collapse, 20–21 territorial insolvency administration, process, 41–42 territorialism, 40–50, 53–54, 60, 62–64, 67, 233 universalism, mixing, 63–64 usage of term, 67 vs universalism, 40–50 third parties’ rights in rem, 133 timing of drafting reorganization plan, 33 transaction costs, minimizing, 57–60 Transnational Insolvency Project, 246 treatment of prepetition claims, 18–25 equity holders, subordination, 20 excluded claims, 21–23 fixed charges, 19 floating charges, 19–20 insiders, subordination, 20 parties related to debtor, subordination, 20 preferred claims, 18–21 pre-insolvency transaction avoidance, 23 266 INDEX www.ebook3000.com priorities, 18–21 Taiwanese BenQ Corporation, collapse, 20–21 Twelve Tables, treatment of debtor in, Tyco International, cross-border insolvency, 201 UNCITRAL, 197, 225, 225n94 Legislative Guide on Insolvency Law, 37 UNCITRAL Arbitration Rules 1976, 197 UNCITRAL Convention on Assignment of Receivables in International Trade, 197 UNCITRAL Model Law on Cross-Border Insolvency, 37–38, 52–53, 76, 80, 87, 90–91, 99, 132, 188, 197–250 access, 208–12 additional relief available under Model Law, 219–21 adoption of, 235–49 application for recognition, 213–14 appreciation in legal doctrine, 231–33 Australia, 237 British Virgin Islands, 238 Canada, 238–39 Colombia, 239 cooperation by courts with foreign courts and foreign representatives, 223–25 cooperation by insolvency office holder with foreign courts and foreign representatives, 225 coordination of concurrent proceedings, 226–31 coordination of proceedings, 229–30 cross-border cooperation and communication, 222–26 decision to recognize foreign proceeding, 214–17 definitions, 206 enacting model law, 233–35 framework, 197–99 global support, 235–37 Great Britain, 239–40 hotchpot rule, 230–31 interesto of foreign creditors, 211–12 international practice, 222–23 interpretation provision, 207–8 Japan, 241 legislative tool, 202–3 means of cooperation, 225–26 Mexico, 241–42 model of concurrent proceedings, 226–27 Montenegro, 242–43 New Zealand, 243 Poland, 243–44 procedural standing of foreign representative, 209–11 INDEX protection of interests, 221–22 provisional relief, 218–19 public policy exception in law’s application:, 207 purpose of relief, 217–18 recognition and its effects, 212–13 recognition of foreign proceedings, 212–17 relief provisions, 217–22 Romania, 244 scope, 204–5 scope of application, 205 South Africa, 244–45 structure, 231–35 territorial proceedings, 227–29 unhindered access of foreign representatives to courts of enacting State, 208 United States, 245–48 UNCITRAL Model Law on Electronic Commerce of 1996, 197 unilateral forms of national cooperation, 71–99 ancillary receiverships, 78–79 Anglo-American, 75–87 Bankruptcy Convention of 1995, 88 Belgium, 93–95 Code on Private International Law, 93–95 Eastern European states, 98–99 European, 87–99, 95n113 European Convention on Certain International Aspects of Bankruptcy, 87 European Insolvency Regulation, 77, 87, 91, 95 France, 95 Germany, 88–90 Insolvency Act 1914, 76–77 Insolvency Act 1986, 76–77 Insolvency Act of 1986, 76–77 inter-state cooperation, 80 Italy, 95–96 Netherlands, 96–98 Spain, 90–93 Spanish Insolvency Act, 90–93 UNCITRAL Model Law on Cross-Border Insolvency, 76, 80, 87, 90–91, 99 United Kingdom, 76–77 United States, 77–81 United Kingdom, unilateral national cooperation, 76–77 United Nations Commission on International Trade Law See UNCITRAL United Pan Europe Communications, cross-border insolvency, 201 United States, unilateral national cooperation, 77–81 unity of administration, 45 267 universalism, 40–50, 52–53, 58–61, 63–65, 67–70, 112, 216, 232–33 advantages, 50–60 impediments, 50–60 strengthening, 60–61 territorialism, mixing, 63–64 usage of term, 67 unsecured creditors, reorganization plan, 34 UPC See United Pan Europe Communications van Galen, Robert, 129–30n127 Venice, execution of assets for benefit of creditors, vested interests, 53–57 vested rights approach to choice of law, 53–54 Vienna Convention on International Sales of Goods, 197 Virgós/Schmidt Report, 125–26 vis attractiva concursus, 119 voting on reorganization plan, 32–35 Wachovia Mutual, cross-border insolvency, 201 Warren, Charles, websites, International Insolvency Cooperation Resources, 257 Widjaja-controlled companies, 162–63 winding up of financial institutions, 148–51 Wood, Philip, 251, 251n World Bank, 37–38, 236, 236n135, 252 World War I, 74 Worldcom, cross-border insolvency, 201 XL.Hollidays, cross-border insolvency, 201 Zoom, cross-border insolvency, 201 268 INDEX www.ebook3000.com .. .INTERNATIONAL COOPERATION IN BANKRUPTCY AND INSOLVENCY MATTERS This page intentionally left blank www.ebook3000.com INTERNATIONAL COOPERATION IN BANKRUPTCY AND INSOLVENCY MATTERS A... specifics of international insolvency, beginning in Chapter with its key theories and continuing in later chapters with early attempts at and modern developments in international cooperation and communication... of stunning speed and sophistication in overcoming differences and coordinating multicountry cases These are very interesting days to be engaged with the discipline of international insolvency