There has been growing debate in recent years over the continued relevance of the common law rule in Antony Gibbs & Sons v La Societe Industrielle et Commerciale des Metaux (1890) LR 25 QBD 399 (the “Gibbs Principle”). The Gibbs Principle basically means that where a contract is governed by the law of a particular country, it cannot be discharged or compromised under the insolvency law of another country — unless the creditor has submitted to that other jurisdiction.
The competing approaches to the application of the Gibbs Principle were highlighted in the conflicting decisions delivered this year by Mr. Justice Harris of the High Court of the Hong Kong Special Administrative Region in Rare Earth  and U.S. Bankruptcy Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York in Modern Land.  This article presents arguments for and against the retention of the Gibbs Principle in today’s practice of cross border insolvency.
Arguments for the Gibbs Principle
The Gibbs Principle is often summarized as meaning, in effect, that an English court will not recognize the discharge of an English law-governed debt in a foreign insolvency proceeding. However, the principle is more nuanced. Taking the English courts as an example, an English court will only recognize the discharge of a debt in a foreign insolvency process if that discharge would be effective under the governing law of the debt. Clearly, that means that English law debts cannot be discharged by foreign insolvency processes — but it also means that debts governed by French, Chinese or Australian law would not be treated by the English courts as being discharged by a foreign insolvency process, unless that discharge would be effective as a matter of French, Chinese or Australian law.
The Gibbs Principle is, therefore, more accurately characterized as a rule that prioritizes the contractual autonomy of the parties by according deference to their choice as to the governing law of the contract. The Gibbs Principle remains good law in England (it was most recently upheld by the Court of Appeal in 2018 in Bakhshiyeva v Sberbank of Russia).  Other common law jurisdictions take a variety of approaches. It has been followed in Hong Kong  and Cayman, but rejected in Singapore.  Its status is uncertain in Australia. 
The principal benefit of the Gibbs Principle is, therefore, that it provides creditors with certainty and predictability. When a creditor enters into a contract, it can have confidence that the law that governs the debt will also govern its discharge. Moreover, any discharge of the debt will also be within the purview of the courts of that jurisdiction — so, in the case of an English law-governed debt, a creditor can predict that it will only be discharged in accordance with English principles of law applied by an English court. An equivalent result would follow in relation to a Hong Kong law-governed debt (e.g., because Hong Kong adopts the Gibbs Principle, it will only be discharged in accordance with Hong Kong law). That certainty presumably has value for lenders, and therefore would tend to reduce the cost of credit.
There are exceptions to the Gibbs Principle. First, a debt will be treated as discharged by the foreign insolvency proceeding where the creditor has submitted to that jurisdiction. This is consistent with the concept of prioritizing the autonomy of the contracting parties and upholding the decisions that they have made. Second, the Gibbs Principle might be disapplied through specific provisions (in the English context, for example, the EU regulations modified the position prior to Brexit). However, this is again a predictable result, which a creditor can consider when it enters into the agreement.
Arguments Against the Gibbs Principle
It may be argued that the continued adherence to the Gibbs Principle is antithetical to the otherwise broad acceptance across the common law world that the principles of comity and modified universalism ought to underpin the practice of modern cross-border insolvency law. The principle of modified universalism, which is enshrined in the UNCITRAL Model Law and the practice and laws of numerous onshore and offshore jurisdictions, is that the interests of creditors are self-evidently best served where courts, as far as possible, cooperate with the courts in the country of the principal insolvency proceeding to ensure that all the company’s assets are distributed under a single system of distribution. The Gibbs Principle fundamentally undermines this objective, which not only gives rise to legal inconsistencies, but also potentially significant (and entirely avoidable) practical difficulties.
The Legal Inconsistencies of the Gibbs Principle
Insolvency proceedings, by their nature, resolve claims and determine distributions to creditors in a collective manner that is invariably inconsistent with the terms of parties’ pre-petition contracts. As noted above, the Gibbs Principle prioritizes party autonomy, but there are two reasons to question whether this is indeed desirable.
First, it is questionable whether party autonomy and contractual bargaining ought to be relevant at all in the context of insolvency proceedings, in which considerations of public policy, and the rights of creditors as a whole, are the focus of a court’s exercise of jurisdiction. Even in the context of interpreting arbitration agreements, where the primacy of party autonomy is largely undisputed,  courts have nevertheless recognized that where the issue in question is not of a private nature, public-interest considerations override the terms of a bilateral contract. Courts have distinguished mere claims for repayment of a debt from the presentation of a winding-up petition,  and they will treat disputes arising from the operation of the statutory provisions of the insolvency regime per se as nonarbitrable, even if the parties expressly included them within the scope of their arbitration agreement. 
This same balancing of private and public interests ought to apply in the context of the discharge of debts in insolvency, as the principle deals with the post-insolvency enforceability of a creditor’s pre-insolvency rights against not only the insolvent estate, but also the rights and claims of competing creditors to that estate (who were not parties to the bilateral contract). 
Second, one may question whether the intention imputed to the contracting parties in these scenarios is accurate or reasonable. While a creditor may include a generic English governing law clause in a contract to ensure that pre-petition and ordinary-course-of-business disputes may be resolved by the English courts, it does not follow that this illustrates an expectation, in the absence of express language, that their claims ought to be dealt with outside of the principal insolvency, nor that such an expectation was reasonable given the nonconsensual nature of insolvency.
The Practical Difficulties of the Gibbs Principle
Even if the conceptual difficulties outlined above can be overcome, the practical obstacles presented by the enforcement of the Gibbs Principle strike at the heart of the objectives of modified universalism and are invariably contrary to the collective interests of creditors. Suggestions that the issues raised by the Gibbs Principle can be dealt with in practice by promoting a parallel scheme of arrangement or some other mechanism  frequently do not grapple with the reality that this approach is duplicative and more time-consuming and costly, to the detriment of all creditors. Moreover, where parallel proceedings are initiated in an uncollaborative manner across multiple jurisdictions by those with competing interests in the insolvent estate, there is increased uncertainty as to the viability and efficacy of a proposed restructuring plan, particularly where orders are made outside of the primary insolvency proceedings. 
Given the increasing complexity and multijurisdictional nature of modern insolvency proceedings, and having regard to the “true spirit of international comity,”  courts ought to adopt a broad internationalist outlook rather than a narrow, insular territorial approach.  Accordingly, as Judge Kannan Ramesh of the Supreme Court of Singapore has urged,  the antiquated Gibbs Principle should be “consigned to the scrapyard of history because it is out of touch with modern business practices and the push towards legal convergence.”
 Rare Earth Magnesium Technology Limited  HKCFI 1686.
 Modern Land (China) Co. Ltd., 2022 WL 2794014 (Bankr. S.D.N.Y. July 18 2022).
  EWCA Civ 2802.
 Rare Earth Magnesium Technology Limited  HKCFI 1686.
 Pacific Andes Resources Development Ltd  SGHC 210.
 In the Matter of Wollongong Coal Limited and Jindal Steel & Coal Australia Pty Ltd  NSWSC 73, -.
 The Singapore Court of Appeal in Larsen Oil and Gas Pte Ltd v Petroprod Ltd (in official liquidation in the Cayman Islands and in compulsory liquidation in Singapore)  SGCA 21 explained, “On the one hand, arbitration embodies the principles of party autonomy and the decentralisation of private dispute resolution. On the other hand, the insolvency process is a collective statutory proceeding that involves the public centralisation of disputes so as to achieve economic efficiency and optimal returns for creditors.”
 Salford Estates (No. 2) Ltd v Altomart Ltd (No. 2)  EWCA Civ 1575 at  to .
 Larsen Oil and Gas at .
 Look Chan Ho, Cross-Border Insolvency: Principles and Practice (Sweet & Maxwell 2016), at [4-096-4-107]. See also the discussion of these arguments in Pacific Andes Resources Development Ltd & Ors  SGHC 210 at -.
 See, e.g., the English Court of Appeal in Bakhshiyeva v Sberbank of Russia  EWCA Civ 2802 and the decision of Harris J. in China Oil Gangran Energy Group Holdings Ltd  HKCFI 1592.
 As Millett L.J. noted in Re International Tin Council  1 Ch 419 at 447, “[A]lthough a winding up in the country of incorporation will normally be given extra-territorial effect, a winding up elsewhere has only local operation.”
 Per Chief Justice Waite in Canada Southern Ry. Co. v. Gebhard, 109 U.S. 527 (1883) at 548, “[T]he true spirit of international comity requires that schemes of this character, legalized at home, should be recognized in other countries.” Cited in Modern Land at p. 9.
 In the Matter of GTI Holdings Ltd (Grand Court of the Cayman Islands, Unreported, 15 March 2022, Doyle J.) at .
 Ramesh J., The Gibbs Principle: A Tether on the Feet of Good Forum Shopping (2017), 29 SAcLJ 42 at .