Key points
- Automatic stays on proceedings are imposed by Article 20 of the UNCITRAL Model Law (and mirrored in s.130(2) IA 1986)
- The case reinforces the principle that automatic stays are designed to avoid the unnecessary expenditure of assets otherwise available for distribution amongst creditors
The facts
Given the current worldwide economic climate, the number of companies facing insolvency that have assets in multiple jurisdictions around the world has increased dramatically. It is not unusual in today’s global economy for a corporation to have commercial offices, production plants and/ or research facilities in many different countries. A company that is faced with the bleak picture of insolvency may be forced to make decisions on whether to seek protection under a number of different statutory structures.
The shipping industry was arguably one of the hardest hit by the downturn that spread around the world late last year. The severe shipping slump, evidenced by a 93.5 per cent fall in the Baltic Dry Index between the summer of 2008 and December 2008, inevitably led to insolvencies of shipping companies across the globe1. This article briefly considers the unique challenges that insolvency practitioners face when balancing insolvency procedures against the application of maritime law.
Summary
On 1 July 2009, UNCITRAL adopted the Practice Guide on Cross-Border Insolvency Cooperation. The Practice Guide provides a useful reference source on some practical aspects of cooperation and communication to deal with many of the conflicts and tensions between stakeholders and jurisdictions inevitable in cross-border cases. To ease these tensions, it is often essential for creditors and, importantly, the courts concerned to reach agreement about how the process will be handled.
International context
Introduction
Hong Kong has not adopted into domestic legislation the UNCITRAL Model Law on Cross Border Insolvency.
Unlike jurisdictions which have adopted the Model Law, e.g. the United Kingdom, an application to the Hong Kong Courts for recognition of foreign insolvency proceedings requires a balancing exercise of competing aims: assisting the foreign court conducting the main insolvency proceedings in achieving a universal distribution of assets, and ensuring that creditors seeking the Hong Kong Courts' assistance are treated fairly and equitably in enforcing their rights.
The number of international arbitrations involving the Hong Kong International Arbitration Centre doubled between 2004 and 2008. The number of winding up petitions is also currently on the rise because of the poor global economic environment. This article discusses conflicts that may arise between the statutory insolvency regime and the contractual rights of parties to arbitrate their disputes in Hong Kong.
Can Arbitration Be Used To Circumvent Statutory Insolvency Regimes?
I. NCLAT approves the resolution plan submitted by ArcelorMittal in the resolution proceedings in respect of Essar Steel India Limited while modifying the distribution of money to the financial and the operational creditors
On 20 June 2018, the Indian Government released a suggested draft chapter on cross-border insolvency to be included into the Insolvency & Bankruptcy Code, 2016 (Code). This addresses a missing link in the ambitious reforms of the Indian insolvency framework and is to be welcomed.