After MFone, Insolvency Perils Remain Numerous In Kingdom

Uncertainty over the law, inexperienced judges and a total lack of precedent have made bankruptcy in Cambodia a decidedly worrisome proposition, The Phnom Penh Post reported. Two years ago yesterday, on January 9, 2013, telecommunications operator MFone filed for insolvency in the Phnom Penh courts. The failure of the company, which had run up too much debt and could no longer compete in the crowded telco sector, left more than 1,000 workers jobless - many of whom hit the streets in protest. Creditors as large as Chinese telco provider Huawei Technologies, owed more than $65 million, quickly emerged, while small claimants like mobile credit vendors owed as little as $20 also demanded their money back. After years of legal wrangling, Cambodia’s first bankruptcy case is still being unravelled. One complexity is the sell-off of telecommunications assets – such as the towers scattered all over the country – whose value was severely diminished from the moment they were no longer transmitting a signal. But the other, more pertinent issue brought to light by the case, is the holes in Cambodia’s insolvency law itself and the lack of judicial experience in its application. “There is a problem regarding the procedures: the law is not really clear,” said Ouk Ry, a senior partner at Cambodian law firm Bou Nou Ouk and Partners and court-appointed MFone liquidator. “The law is written before it is applied,” he said. This is a common theme in many of Cambodia’s commercial laws, which according to Ry, remain largely untested. And even when those laws are cited in court cases, the findings are not made public, meaning no precedent is established for judges, lawyers and – importantly for Cambodia’s economic prospects – businesses. Read more.
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