Hannan, Neil - Cross-Border Insolvency - The Enactment and Interpretation of The UNCITRAL Model Law (2017, Springer)

Neil Hannan
Cross-Border
Insolvency
The Enactment and Interpretation
of the UNCITRAL Model Law
Cross-Border Insolvency
Neil Hannan
Cross-Border Insolvency
The Enactment and Interpretation
of the UNCITRAL Model Law
123
Neil Hannan, B.Ec, LLB (Monash) Ph.D
(UWA)
Honorary Fellow, University of Western
Australia and Partner
Thomson Geer
Melbourne, Victoria
Australia
ISBN 978-981-10-5875-2 ISBN 978-981-10-5876-9 (eBook)

DOI 10.1007/978-981-10-5876-9
Library of Congress Control Number: 2017946660
© Springer Nature Singapore Pte Ltd. 2017

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Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Theoretical Basis for International Cross-Border
Insolvency Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Development of the Model Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Model Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3 Manner of Introduction of the Model Law . . . . . . . . . . . . . . . . . . . . 15
3.1 Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.2 Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.3 New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.4 United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.5 USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4 How Does the Model Law Affect Existing Principles
of Recognition? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1 Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1.1 Statutory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.1.2 Common Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.2 Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.3 New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.4 United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.5 USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5 Concepts of Centre of Main Interest and Establishment . . . . . . . . . 43
5.1 Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.2 Factors Determining COMI . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
v
vi Contents
5.3 Factors Considered When Determining Establishment . . . . . . . . 48

5.3.1 Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.3.2 Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.3.3 New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.3.4 United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.3.5 USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.3.6 Establishment Generally . . . . . . . . . . . . . . . . . . . . . . . 53
5.4 Time of Recognition of COMI and Establishment . . . . . . . . . . . 53
5.4.1 Difficulties with Present Proposed Dates . . . . . . . . . . . 55
5.4.2 Suggested Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
6 Comparative Analysis of the Enactment and Interpretation of the
Preamble and Chapter I of the Model Law on Cross-Border
Insolvency—General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.1 Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.2 Article 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.3 Article 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.3.1 Foreign Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.3.2 Centre of Main Interest (COMI) . . . . . . . . . . . . . . . . . 66
6.3.3 Collective Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 67
6.3.4 Foreign Main Proceeding . . . . . . . . . . . . . . . . . . . . . . 70
6.3.5 Foreign Non-main Proceeding . . . . . . . . . . . . . . . . . . . 70
6.3.6 Foreign Representative . . . . . . . . . . . . . . . . . . . . . . . . 71
6.3.7 Foreign Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.3.8 Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.3.9 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.3.10 Practical Implications of the Definitional Section . . . . 75
6.4 Article 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
6.5 Article 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
6.6 Article 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
6.7 Article 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
6.7.1 USA Legal System . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
6.7.2 Practical Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
6.8 Article 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
6.9 Article 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
6.10 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
7 Comparative Analysis of the Enactment and Interpretation
of the Chapter II of the Model Law on Cross-Border
Insolvency—Access of Foreign Representatives and Creditors
to Courts in This State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
7.1 Article 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
7.2 Article 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
7.3 Article 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Contents vii
7.4 Article 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
7.5 Article 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
7.6 Article 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
7.7 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
of Chapter III of the Model Law on Cross-Border Insolvency—
Recognition of Foreign Proceeding and Relief. . . . . . . . . . . . . . . . . . 101
8.1 Article 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
8.2 Article 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
8.2.1 Rebuttable Presumptions . . . . . . . . . . . . . . . . . . . . . . . 104
8.3 Article 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
8.3.1 Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
8.3.2 Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
8.3.3 New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
8.3.4 United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
8.3.5 USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
8.4 Article 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
8.5 Article 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
8.5.1 Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
8.5.2 New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
8.5.3 USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
8.6 Article 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
8.6.1 Exceptions to Stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
8.7 Article 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
8.7.1 Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
8.7.2 Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
8.7.3 New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
8.7.4 United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
8.7.5 USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
8.7.6 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
8.8 Article 22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
8.8.1 Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
8.8.2 Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
8.8.3 New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
8.8.4 United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
8.8.5 USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
8.9 Article 23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
8.9.1 Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
8.9.2 Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
8.9.3 New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
8.9.4 United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
8.9.5 USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
8.9.6 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
viii Contents
8.10 Article 24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

8.11 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
9 Comparative Analysis of the Enactment and Interpretation of
Chapter IV of the Model Law on Cross-Border Insolvency—
Operation with Foreign Courts and Foreign Representatives . . . . . 147
9.1 Article 25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
9.1.1 Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
9.1.2 Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
9.1.3 United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
9.1.4 USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
9.1.5 Canada and USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
9.2 Article 26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
9.3 Article 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
9.4 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
of Chapter V of the Model Law on Cross-Border
Insolvency—Concurrent Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 159
10.1 Article 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
10.2 Article 29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
10.3 Article 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
10.4 Article 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
10.5 Article 32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
10.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
11 Conflict of Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
11.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
11.2 Common Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
11.2.1 Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
11.2.2 Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
11.2.3 New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
11.2.4 United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
11.2.5 USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
11.3 Model Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
11.3.1 Concurrent Administrations . . . . . . . . . . . . . . . . . . . . . 172
11.3.2 Excluded Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
11.3.3 Exempt Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
11.3.4 Conflict of Laws Provision in Different States . . . . . . . 179
11.3.5 Nature of Stay Under Article 20 . . . . . . . . . . . . . . . . . 185
11.3.6 Worldwide Effect of Some States’ Insolvency
Regimes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
11.3.7 Priority of Domestic Laws in Administrations . . . . . . . 195
11.3.8 Effect of Discharge Under Domestic Law . . . . . . . . . . 197
11.3.9 Inconsistency with Other International Laws Treaties
and Conventions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198
Contents ix
11.3.10 Protection of Creditors Interests. . . . . . . . . . . . . . . . . . 202

11.4 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204
12 Present Issues with Concepts of Centre of Main Interest and
Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
12.1 Courts Obligation to Review Decisions in Relation to COMI
and Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
12.2 Inappropriate Recognition of Centre
of Main Interest (COMI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208
12.3 Inconsistency of Court Decisions . . . . . . . . . . . . . . . . . . . . . . . . 209
12.4 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
13 Applicability of Rules of Private International Law . . . . . . . . . . . . . 213
13.1 Private International Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213
13.1.1 Choice of Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213
13.1.2 Recognition and Choice of Law . . . . . . . . . . . . . . . . . 214
13.2 Model Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215
13.3 Private International Law in Interpretation of Model Law . . . . . 219
13.3.1 Extrinsic Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
13.3.2 Vienna Convention . . . . . . . . . . . . . . . . . . . . . . . . . . . 222
13.3.3 Model Law Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 223
13.4 Uniform Choice of Law Rules . . . . . . . . . . . . . . . . . . . . . . . . . . 224
13.5 ALI and IIL Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224
13.6 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224
14 Interrelationship Between the Model Law
and the EC Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
14.1 Interrelationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
14.1.1 COMI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229
14.1.2 Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230
14.1.3 Date of Recognition of COMI . . . . . . . . . . . . . . . . . . . 231
14.1.4 EC Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231
14.1.5 Predilection of Insolvency Laws . . . . . . . . . . . . . . . . . 232
14.1.6 Changes to EC Regulation Since Model Law . . . . . . . 233
14.1.7 Other Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234
14.2 Reconciliation—ALI and LLI Guidelines . . . . . . . . . . . . . . . . . . 235
14.3 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235
15 Current Proposals Which May Affect the Model Law . . . . . . . . . . . 237
15.1 Model Law Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238
15.2 Directors’ Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239
15.3 Enterprise Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240
15.4 Micro, Small and Medium Enterprises . . . . . . . . . . . . . . . . . . . . 242
15.5 Financial Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242
x Contents
15.6 Recognition of Foreign Insolvency Judgments . . . . . . . . . . . . . . 244

15.7 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244
16 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245
16.1 Present Status of Model Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 245
16.2 Does the Model Law Achieve Its Objectives? . . . . . . . . . . . . . . 247
16.3 Factors Giving Rise to Inconsistencies . . . . . . . . . . . . . . . . . . . . 250
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253
Abbreviations
Amended Regulation EC No. 848/2015 of the European Council on

EC Regulation Insolvency Proceedings [2015] OJ L 141/19. (commences
26 June 2017).
Bankruptcy Code 11 USC.
BIA Bankruptcy and Insolvency Act, RSC 1985, c B-3.
CCAA Companies Creditors Arrangement Act, RSC 1985, c
C-36.
COMI Centre of Main Interest.
Corporations Act Corporations Act 2001 (Cth).
EC Regulation Regulation EC No. 1346 /2000 of the European Council on
Insolvency Proceedings [2000] OJ L 160/.
IBA International Bar Association.
INSOL INSOL International, International Association of
Restructuring, Insolvency and Bankruptcy Professionals.
Legislative Guide United Nations Commission on International Trade Law,
General Assembly, ‘Legislative Guide on Insolvency Law’
UN Publications Sales No E.05.V.10 (United Nations,
2005).
Model Law Model Law on Cross-Border Insolvency of the United
Nations Commission on Trade Law, GA Res 52/158,
UN GAOR, 6th Comm, 52nd sess, Agenda Item 148, UN
Doc A/RES/52/158 (30 January 1998).
UNCITRAL United Nations Commission on International Trade Law.
UNCITRAL Guide United Nations Commission on International Trade Law,
Guide to Enactment of the UNCITRAL Model Law on
Cross-Border Insolvency, UN Doc A/CN.9/442 (19
December 1997) as approved by GA Res A/RES/52/158
(1997) (30 January 1998) and amended by GA Res
A/RES/68/107 (2013) (16 December 2013).
UK United Kingdom of Great Britain and Northern Ireland.
xi
xii Abbreviations
UK Insolvency Act Insolvency Act 1986 c 45 (UK).

US United States.
USA United States of America.
Chapter 1
Introduction
1.1 Theoretical Basis for International Cross-Border

Insolvency Laws
Insolvency law plays a vital part in a modern free enterprise economy as it provides for
an equitable distribution of an insolvent debtor’s assets to its creditors. The effect and
reach of a State’s insolvency laws has become more important as the world’s
economies have become more consolidated and interdependent. As a result, laws
relating to cross-border insolvency have acquired a high profile and greater impor-
tance since the mid-twentieth century. Such laws deal with the situation where an
insolvent debtor trades, or has assets or creditors, in more than one jurisdiction.
During the twentieth century, and in particular following the world recession in
the early 1990s, a number of practical deficiencies with the existing systems of
recognition were identified, especially when more than one jurisdiction was
involved. As a result, academics began to examine the theoretical basis underpin-
ning both national and international insolvency laws. Leading these discussions
were Professors Westbook, LoPucki and Janger in the USA, Professor Fletcher,
Lord Justice Hoffman and Professor Goode in the UK, Professor Wessels in the
Netherlands, Professor Sarra in Canada and Professor Mason in Australia.
The main theoretical questions in cross-border insolvency concern the number of
proceedings that should operate and which States’ laws should govern the assets
and claims in respect of the debtor. The answer to these two issues is not always the
same as a number of States have existing rules in relation to the choice of the
applicable law in different insolvency circumstances. Such rules are not universal.
A number of theories were advanced as set out below in relation to the correct
underpinning of international insolvency laws and how such laws should be
developed including the applicable choice of law principles1:
1
Sefa M Franken, ‘Cross-Border Insolvency Law: A Comparative Institutional Analysis’ (2014)
34.1 Oxford Journal of Legal Studies 97, 102–4.
© Springer Nature Singapore Pte Ltd. 2017 1

N. Hannan, Cross-Border Insolvency,
DOI 10.1007/978-981-10-5876-9_1
2 1 Introduction
(a) Universalism;
(b) Modified Universalism;
(c) Territorialism;
(d) Cooperative Territorialism; and
(e) Universal Proceduralism.
The universal model is based upon the debtor’s estate including the totality of
their worldwide assets. Furthermore, all their worldwide creditors have their claims
dealt with in that one insolvency proceeding. The insolvency proceeding is gov-
erned by the laws of the place most closely connected with the debtor, being what
under other models is called the place of the main proceeding.2 No State to date has
adopted this model.
Modified Universalism advocates the acceptance of a centralised administration
of the debts and assets, but allows local jurisdictions to have separate proceedings
and to assess the fairness of the main proceedings including the creditor priority
regime, and determine whether they breach of that local jurisdiction’s public policy.
Priority regarding choice of law rule is given to the jurisdiction of the main pro-
ceeding, subject to a contrary ruling by the local courts. The role of the courts in
non main proceedings is generally to cooperate with the courts controlling the main
proceedings.3 This is the type of model that is advocated by insolvency and banking
industries bodies.
Modified Universalism has been described by Lord Hoffman as the ‘golden
thread’ of cross-border insolvency.4 His Honour has applied this principle in
dealing with an application to remit assets held in England and Australia. His
Honour, in applying this principle, stated that ‘the existence of foreign preferential
creditors who would have no preference in an English distribution has never
inhibited the courts from ordering remittal.’5 His Honour went on to state:
2
See Jay Lawrence Westbrook, ‘Breaking Away: Local Priorities and Global Assets’ (2011) 46
Texas International Law Journal 601; Robert K Rasmussen, ‘Where are all the Transnational
Bankruptcies? The Puzzling Case for Universalism’ (2007) 32 Brookland Journal of International
Law, 983; Rosalind Mason, ‘Local Proceedings in a Multi-State Liquidation: Issues of
Jurisdiction’ (2006) 30 Melbourne University Law Review 145, Jay Lawrence Westbrook ‘A
Global Solution to Multinational Default’ (2000) 98 Michigan Law Review 2276; Alexander M
Kipnis, ‘Beyond UNCITRAL: Alternatives to Universality in Transnational Insolvency’ (2008) 36
Denver Journal of International Law and Policy 155; Jay Lawrence Westbrook (ed) et al., A
Global View of Business Insolvency Systems (Martinus Nijhoff, 2010) 230–1.
3
See Ian Fletcher, “‘Le enfer, c’est les autres’: Evolving Approaches to the Treatment of Security
Rights in Cross-Border Insolvency’” (2011) 46 Texas International Law Journal 489, 498–501;
Mason, ‘Local Proceedings in a Multi-State Liquidation: Issues of Jurisdiction’ see footnote 2;
Westbrook, ‘Breaking Away: Local Priorities and Global Assets’ see footnote 2; Kipnis, see
footnote 2.
4
McGrath v Riddell [2008] 3 All ER 869, 881[30], cited in Ackers v Saad Investment Company Ltd
(in liq) (2010) 190 FCR 285, 295 [47]; See also Lord Collins comments in Rubin v Eurofinance SA
[2012] 3 WLR 1019, 1030.
5
McGrath v Riddell [2008] 3 All ER 869 [44].
1.1 Theoretical Basis for International Cross-Border Insolvency Laws 3
It follows that in my opinion the court had jurisdiction at common law, under its established
practice of giving directions to ancillary liquidators, to direct remittal of the English assets,
notwithstanding any differences between the English and foreign systems of distribution.6
The Territorialism model is premised upon each jurisdiction dealing with the
assets and creditors of the debtor within that jurisdiction. The insolvency pro-
ceedings do not have any extraterritorial effect and each State applies its own choice
of law provisions.7 This is the traditional model that existed in the majority of States
until the early twentieth century. This model sees separate insolvency proceedings
being issued in each State which deal only with the assets and creditors within their
respective jurisdiction. This can lead to an inequitable return to creditors between
different States. This is not a viable ongoing model given the extent of multinational
corporations and the problems experienced.
Cooperative Territorialism was advanced by LoPucki and advocates that each
jurisdiction deal with the assets within that jurisdiction, but allows foreign creditors
to claim in the local administration although some local creditors may have their
claims prioritised over the claims of foreign creditors. In addition, the different
administrations in each State work cooperatively with each other, whilst still
applying their own choice of law provisions.8 This is the model that existed in a
large number of developed States until the late twentieth century and until the
enactment of the Model Law and other legislation.
Universal Proceduralism is advocated by Janger who suggests that the admin-
istration of the debtor’s estate be centralised. The choice of law applicable is to be
determined in accordance with local law. The domestic laws of individual States
apply when determining the assets that are to be administered by the debtor’s
representative, including the ability to seek recovery of antecedent transactions.
This model envisages that the debtor’s assets and claims will be administered
centrally, using the ordinary non-bankruptcy principles of law in each jurisdiction
to identify the claims against the assets of the debtor the subject to the insolvency
administration and to determine the distribution priorities to be accorded to credi-
tors.9 This model has not been adopted by any State.
6
Ibid.
7
Lynn M LoPucki, ‘ Cooperation in International Bankruptcy: A Post-Universalist Approach’
(1999) 84 Cornell Law Review 696, 750; Contra, Jay Lawrence Westbrook, ‘A Global Solution to
Multinational Default’ see footnote 2, 2307–2326; Mason, ‘Local Proceedings in a Multi-State
Liquidation: Issues of Jurisdiction’, see footnote 2; Kipnis, see footnote 2; Westbrook et al., A
Global View of Business Insolvency Systems, see footnote 2, 229–30.
8
Judge Leif M Clark and Karen Goldstein, ‘Scared Cows: How to Care for Secured Creditors’
Rights in Cross-Border Bankruptcies’ (2011) 46 Texas International Law Journal 513; Mason,
‘Local Proceedings in a Multi-State Liquidation: Issues of Jurisdiction’, see footnote 2; Kipnis, see
footnote 2.
9
Edward J Janger, ‘Universal Proceduralism’ (2007) 32 Brookland Journal of International Law
818.
4 1 Introduction
In practice, during the last 20 years, major trading States have taken the ‘sharp
edges’ off these theories and have introduced modified or mixed models involving
an element of Universalism.10
UNCITRAL’s Model Law on Cross Border Insolvency was introduced in
response to a perceived need to have a more consistent approach to cross-border
insolvency issues, especially after the recession of the early 1990s. The Model
adopted by the Model Law was one of Modified Universalism
This book examines how the Model Law as it was introduced in Australia,
Canada, New Zealand, UK and the USA and the variations made to each by each
State by their enacting legislation and it’s interpretation by the Courts of each of
those States. In this book I identify where the interpretative differences have been
brought about by changes to the text of the Model Law, and how the courts have
attempted to reconcile the differences and work around issues created by their
domestic enactments in an attempt to adopt an approach of modified universalism in
accordance with the spirit of the Model Law. The five States were chosen based
upon being common law countries with a common language and who had to
different degrees modified the text of Model Law in their domestic enactment. The
United Kingdom as a present member of the European Union is subject to the EC
Regulation and has to consider how to deal with both the EC Regulation and the
Model Law and the extent to which they should be interpreted consistently.
This book also discusses the predisposition a States domestic insolvency laws
have. The USA and Canada have, since the mid to late-twentieth century, adopted a
predisposition towards restructuring with their laws encouraging and facilitating a
debtor to consider restructuring before liquidation. Europe on the other hand have
recently announced a proposal for European Union rules for all members to put into
place key principles on effective preventive restructuring and second chance
frameworks.11
10
Bob Wessels ‘Cross-Border Insolvency Law in Europe: Present Status and Future Prospects’
(2008) 11 Potchefstroom Electronic Law Journal 68, 71-2; Anthony V Sexton, ‘Current Problems
and Trends in the Administration of Transnational Insolvencies Involving Enterprise Groups: The
Mixed Record of Protocols, the UNCITRAL Model Insolvency Law, and the EU Insolvency
Regulation’ (2012) 12 Chicago Journal of International Law 811, 815.
11
European Commission ‘Proposal for a Directive of the European Parliament and of the Council
on preventive restructuring frameworks, second chance and measures to increase efficiency of
restructuring, insolvency and discharge procedures and amending Directive 2012/30/EU’
2016/0359 (COD).
Chapter 2
Development of the Model Law
Overview
This Chapter examines:
• The history of the development and introduction of the Model Law.
• Historical background to the creation of laws dealing with cross-border
insolvencies.
• The need identified following the recession in the 1980s for a better system of
recognising cross-border insolvencies as a result of a number of high profile
insolvencies of individuals and corporate entities who had assets and creditors in
multiple States.
2.1 Background
The free enterprise economic system is premised upon people being willing to take
a risk in establishing businesses by contributing their capital with the anticipation
that the risk associated with running a business will attract a return. In any business,
the recognition and presence of an element of risk means that a proportion of people
who commence a business must fail. Legal systems have for a long time developed
rules to deal with the consequences of these businesses failures including an orderly
and equitable distribution of the assets which are left to the creditors of the failed
business.1
1
See, eg, Philip R Wood, Principles of International Insolvency (Sweet & Maxwell, 2nd ed, 2007),
891 [29-074] referring to Treaty between Verona and Trent in 1204 regarding transfer of debtors’
assets and to a Treaty between Verona and Venice in 1306 in respect of extradition of fugitive
debtors; Kurt H Nadelmann Conflict of Laws: International and Interstate (Martinus Nijhoff,
1972) 302 n15, 303 referring to a treaty between Verona and Trent of 1204 providing for the
transfer of assets to the place where the insolvency had occurred and the insolvency convention
between Holland and Utrecht in 1679.

DOI 10.1007/978-981-10-5876-9_2
6 2 Development of the Model Law
When the assets of a business have been spread across more than one State, it is
difficult to conduct an orderly and equitable distribution of the assets due to dif-
ferences in laws, legal systems, political interests and self-interest that characterise
each State.2 In the Middle Ages, non-secular intervention was sometimes sought to
achieve equitable outcomes, an example of which was the Pope’s intervention in
the affairs of the Ammanati Bank of Pistoia following its collapse in 1302.3 The
Pope arranged for the safe conduct of the owners back to Rome and directed the
clergy in a number of European countries to collect the debts on behalf of the Bank
and transmit the funds to Rome for distribution among all the Bank’s creditors.
Over time, a number of bilateral and multilateral treaties have been adopted
between different States. They have largely been concluded between States that are
not only geographical neighbours, but also have close legal traditions and consistent
cultural, linguistic and political affiliations.4
The wide use of corporations in the nineteenth century complicated this issue
further as corporations commenced trading in multiple States. When a corporation
became insolvent, it had to liquidate/bankrupt its assets in each State in which they
were held. In order to facilitate this, it was necessary for the liquidator/trustee to be
recognised by the local laws of that State or for a separate liquidator/trustee to be
appointed in each State in which assets were held.5 This led to a number of different
representatives being appointed to the one legal entity, each of whom dealt with the
assets in their respective jurisdictions in accordance with their local laws. In some
cases, the representatives attempted to coordinate their efforts, but not always.6
During the eighteenth and nineteenth centuries when the British Empire was the
most dominant in the world and Britain was the foremost trading nation, the British
Commonwealth countries developed a common law principle of ‘comity’. Comity
was a principle whereby a court in one member of the British Empire or common
law world would recognise a court in another member of the British Empire and
assist it in the enforcement of its judgements to the extent permitted by the latter
2
In this paper, the word ‘State’ has the same meaning as that used in the Model Law on
Cross-Border Insolvency issued by UNCITRAL. Cross-border insolvency issues may arise not
only between different countries but also between different States in which the country has adopted
a federal system.
3
Kurt H Nadelmann, ‘Bankruptcy Treaties ‘(1944) 93 University of Pennsylvania Law Review 58,
58–9; Kurt H Nadelmann Conflict of Laws: International and Interstate (Martinus Nijhoff, 1972)
299–300; Bob Wessels, Bruce A Markell and Jason J Kilborn, International Cooperation in
Bankruptcy and Insolvency Matters (Oxford, 2009) 2.
4
Anton Trichardt ‘The Uncitral Model Law on Cross-Border Insolvency’ (2002) 6 Flinders
Journal of Law Reform 95 [101–102].
5
For example, in the case of National Employers Mutual General Insurance Association Limited, a
company incorporated in England, and recognised as a foreign corporation in three other States:
Australia, Canada and South Africa. The writer acted for the Australian liquidators in this
liquidation.
6
See Lord Justice Leonard Hoffman, ‘Cross-Border Insolvency: A British Perspective’ (1996) 64
Fordham Law Review, 2507 and reference to Maxwell Communication Corporation
administration.
2.1 Background 7
court’s laws and give assistance to the foreign court by allowing nominated persons
to obtain the assistance of the foreign court. This included assisting liquidators
appointed by those courts by either allowing them to sell assets or examining
witnesses within the second court’s jurisdiction or appointing local liquidators to
assist.7 This principle was not universally recognised by countries outside the
Commonwealth because of issues of sovereignty.
The United States however adopted a similar principle which was explained by
the US Supreme Court as follows:
“Comity”, in the legal sense, is neither a matter of absolute obligation, on the one hand, nor
of mere courtesy and good will, upon the other. But it is the recognition which one nation
allows within its territory to the legislative, executive or judicial acts of another nation,
having due regard both to international duty and convenience, and to the rights of its own
citizens or of other persons who are under the protection of its laws.8
In the late nineteenth and early twentieth century’s several States introduced
legislation to allow their courts to assist foreign courts to deal with insolvency
matters.9 Problems arose regarding the laws that should apply (especially with the
advent of multinational corporations); how the members of such groups should be
treated; and, how creditors should be dealt with by the different jurisdictions in
order to ensure equality. In common law countries this legislation extended the
existing principles of comity in relation to the nominated States referred to the
legislation.
At its twenty sixth session the UNCITRAL decided to pursue the issue of cross
border insolvency following a proposal made at the UNCITRAL Congress titled
“Uniform Commercial Law in the 21st Century” and a proposal for future possible
work being presented.10
7
See, eg, Schmitt v Deichmann [2012] 2 All ER 1217, 1232–1233 [62–65].
8
Hilton v Guyot (1895) 159 US 113, 163–4.
9
For example see Montevideo Treaty on Commercial International Law Argentina, Bolivia,
Columbia, Paraguay, Peru and Uruguay ( entered into force 1889) Articles 35–48; 11 USC §304
(2012); Insolvency Act 1986 c 45s 426; Corporations Act 2001 (Cth) ss 580, 581; Bankruptcy Act
1966 (Cth) s 29; Bankruptcy and Insolvency Act, RSC 1985, c B-3 s271. The Bankruptcy Act 1869
32 & 33 Vict c 71 (Eng) required Her Majesty’s Courts to act in aid of each other. Its subsequent
incorporation into many of the Commonwealth Colonies’ laws had the effect of British colonial
courts recognising and acting in aid of each other. However, each colony’s court was restricted to
dealing with the property within its own respective jurisdiction. See Rosalind Mason,
‘Cross-border insolvency: Adoption of CLERP 8 as an evolution of Australian insolvency law’
(2003) 11 Insolvency Law Journal 62, 68–7.
10
See United Nations Commission on International Trade Law, Possible Future Work, Note by
Secretariat addendum, Cross Border Insolvency UN DocA/CN.9/378 (23 June 1993).
In 1994 UNCITRAL and INSOL held a colloquium at which it was recognised

that ‘the practical problems caused by the disharmony among national laws gov-
erning cross-border insolvencies warranted further study of legal issues in
cross-border insolvencies and possible internationally acceptable solutions’.11
There was a high degree of support expressed at the colloquium for the
Commission to commence a project on cross border insolvency.12 A second col-
loquium was held in March 1995 for judges and government officials.13 At the same
time UNCITRAL’s Working Group V was reconstituted and commenced working
on the issue of cross border insolvency.
In 1995, the European Community proposed the introduction of the European
Convention on Insolvency Proceedings which faltered due to the UK failing to
agree to it in protest against the European Commission’s refusal to lift the embargo
on British beef and cattle imposed during the mad cow disease threat.14
In 1996, Virgos & Schmidt15 prepared a Report on the European Convention on
Insolvency Proceedings which has been considered the leading text on the same,
even though that convention was not enacted. The report has been extensively cited
in the interpretation of the meaning of COMI,16 and the assumptions contained in it
which both the later EC Regulation and the UNCITRAL Guide refer to. This is
discussed below in Sects. 8.2, 8.3 and Chaps. 12, 13.
In May 1997 UNICTRAL adopted the Model Law on Cross Border Insolvency
which had been prepared by it’s Working Group V.
On 29 May 2000, the European Council adopted the Regulation on Insolvency
Proceedings (‘EC Regulation’).17 This followed ‘almost forty years’ efforts to
establish a framework within which insolvency proceedings taking place in any
Member State of the [European Union (EU)] could be recognised and enforced
throughout the rest of the Union’.18
11
United Nations Commission on International Trade Law, Report on UNCITRAL-INSOL
Colloquium on Cross Border Insolvency (Vienna, 17–19 April 1994) UN Doc A/CN.9/398
(19 May 2014) 2 [1].
12
Ibid [15].
13
See United Nations Commission on International Trade Law, Report on UNCITRAL-INSOL
Colloquium on Cross Border Insolvency (Toronto, 22–23 March 1995) UN Doc A/CN.9/413
(19 May 2014) 2 [1].
14
See Paul J Omar, The European Insolvency Regulation 2000: A Paradigm of International
Cooperation (2003) 15 Bond Law Review 215, 215–7.
15
Miguel Virgos & Etienne Schmidt, Report on the Convention on Insolvency Proceedings [1996]
OJ L 6500/96 (3 May 1996) <http://aei.pitt.edu/952/01/insolvency_report_schmidt_1988.pdf>.
16
See Omar, see footnote 25, 218, 232.
17
Regulation EC No 1346/2000 of the European Council on Insolvency Proceedings [2000] OJ L
160/1, preamble 13.
18
Ian Fletcher,’The European Union Regulation on Insolvency Proceedings’ as published in ‘Cross
-Border Insolvency A Guide to Recognition and Enforcement’, Insol International (2003).
2.1 Background 9
In 2003 in North America, the American Law Institute published Transnational

Insolvency: Cooperation Among the NAFTA Countries, Principles of Cooperation
Among The NAFA Countries in an attempt to develop principles and procedures for
managing cross-border insolvency within NAFTA countries.19 This report, amongst
other things, recommended that both the United States and Canada adopt the
UNCITRAL Model Law.20 An amended version of these principles has recently
been adopted by the International Insolvency Institute and the American Law
Institute with a view to them being used more widely.21 These principles have been
developed to encourage discussion on a wider acceptance of these principles to be
used in conjunction with the Model Law, as it is the case in Australia.22
2.2 Model Law
On 30 May 1997, UNCITRAL adopted the Model Law which was subsequently
adopted by the General Assembly of the United Nations in January 1998.23
Subsequently in 1997, UNCITRAL also adopted the Guide to Enactment of
The UNCITRAL Model Law on Cross-Border Insolvency (UNCITRAL Guide)
which has been varied over time. The Model Law has adopted several concepts
such as COMI and ‘establishment’ similar to those contained in the EC Regulation
19
The American Law Institute, Transnational Insolvency: Cooperation Among the NAFTA
Countries, Principles of Cooperation Among The NAFA Countries (Jirus Publishing, 2003).
20
Ibid Sec V Recommendation 1.
21
See American Law Institute and International Insolvency Institute, ‘Global Principles for
Cooperation in International Insolvency Cases and Global Guidelines for Court to Court
Communications in International Insolvency Cases’ (10 January 2012) <http://iiiglobal.org/
component/jdownloads/viewdownload/36/5897.html>; Ian F Fletcher and Bob Wessel, ‘Global
Principles for Cooperation in International Insolvency Cases (1 January 2013)’ <www.bobwessels.
nl/wordpress>.
22
Federal Court of Australia Cross Border insolvency Practice Note: Cooperation with Foreign
Courts of Foreign Representatives (GPN-XBDR) (25 October 2016) <http://www.fedcourt.gov.au/
law-and-practice/practice-documents/practice-notes/gpn>-xbdrNew South Wales Supreme Court,
Practice Court SC Eq 6, Supreme Court Equity Division—Cross-Border Insolvency: Cooperation
with Foreign Courts or Foreign Representatives (11 March 2009) <http://www.lawlink.nsw.gov.
au/practice_notes/nswsc_pc.nsf/a15f50afb1aa22a9ca2570ed000a2b08/db2a09ee87866a04ca2575
77007983ae?OpenDocument>; Supreme Court of Victoria, Cross-Border Insolvency Applications
and Cooperation with Foreign Courts or Foreign Representatives and Coordination Agreements
(30 January 2017), <http://assets.justice.vic.gov.au//supreme/resources/77e1a5a7-3748-4131-
a7d4-ddd5cd72b881/cc6crossborderinsolvency.pdf>.
23
Model Law on Cross-Border Insolvency of the United Nations Commission on Trade Law, GA
Res 52/158, UN GAOR, 6th Comm, 52nd sess, Agenda Item 148, UN Doc A/RES/52/158 (30
January 1998).
and it was envisaged that a similar interpretation would apply to such concept and
that the Model Law would complement the EC Regulation.24
The Model Law was established as a result of work done and pressure exerted by
a number of groups including the IBA and the INSOL.25 During its development,
the working group took into account other international regulations and proposals
from various non-government bodies including the Model International Insolvency
Act and the Cross-Border Insolvency Concordat which had been developed by
Committee J of the IBA.26
The Model Law was created out of the necessity to have some uniformity in the
way multinational companies were dealt with when they experience insolvency or
require restructuring and to avoid having multiple insolvency administrations over
different States as had been experienced during the recessions of the early 1990s.27
The Model Law does not attempt to substantively unify the insolvency laws of
States.28 UNCITRAL recognised that national laws have generally not kept pace
with the trend of cross-border insolvency; nor have they been able to deal with
cross-border cases adequately, which in part has arisen out of insolvent debtors
concealing assets in foreign jurisdictions.29 The Model Law is not a treaty and does
not contain any requirement of reciprocity, although some countries have incor-
porated this requirement into their domestic enactment of the same.30 The Model
Law is premised on four primary concepts: access, recognition, relief and
cooperation.31
The Model Law in general has three key elements:
(a) It provides for expedited control of the debtors’ local assets and their protection
from unilateral actions by creditors.
(b) It then gives the local court considerable discretion to grant all sorts of relief to
an administrator from a foreign main proceeding.
24
United Nations Commission on International Trade Law, Guide to Enactment of The UNCITRAL
Model Law on Cross-Border Insolvency, UN Doc A/CN.9/442 (19 December 1997) as approved
by GA Res A/RES/52/158 (1997) (30 January 1998) and amended by GA Res A/RES/68/107
(2013) (16 December 2013) [11, 81, 82, 83, 87 88, 141].
25
Ibid [10, 12].
26
Ibid [18].
27
For a history of the introduction of the Model Law see Rosalind Mason ‘Cross-border insol-
vency: Adoption of CLERP 8 as an evolution of Australian insolvency law’ (2003) 11 Insolvency
Law Journal 62, 63–5.
28
(2013) (16 December 2013) [3].
29
Ibid [5].
30
Eg, Cross Border Insolvency Act 2000 (South Africa) s 2.
31
Ian F Fletcher, ‘Insolvency in Private International Law, National and International
Approaches’ ( Oxford University Press, 2nd ed, 2005), 453, [8.17].
2.2 Model Law 11
(c) The discretion is accompanied by a statutory mandate to cooperate subject to

ensuring that the debtor and its creditors are adequately protected.32
The UNCITRAL Guide states that the purpose of the Model Law is to assist
States ‘to equip their insolvency laws with a modern, harmonized and fair frame-
work to address more effectively instances of cross-border insolvency’.33 It reflects
practices in cross-border insolvency matters that are characteristic of ‘modern,
efficient insolvency systems’.34 The UNCITRAL Guide also acknowledges that
fraud by insolvent debtors is an increasing problem and indicates that the
cross-border co-operation mechanisms established by the Model Law are ‘designed
to confront such international fraud’.35 The UNCITRAL Guide provides that the
Model Law may exist as an integral part of a State’s legislation when dealing with
cross-border insolvency issues.36 It was not designed to replace all of a State’s
existing legislation dealing with cross-border insolvency.37
The UNCITRAL Guide has been described as ‘less specific’ and ‘less binding’
than the Model Law.38 The purpose of the UNCITRAL Guide is to provide
background and explanatory information about the Model Law and while the
information would primarily be used by legislators and government; it may provide
insights to judges, practitioners and academics.39 It is argued that the UNCITRAL
Guide pursuant to Article 8 may be consulted as extrinsic material when inter-
preting a section within the Model Law which is not clear.
The UNCITRAL Guide recognises that the Model Law is only a recommen-
dation rather than a convention. It also recognises ‘that the degree of and certainty
about, harmonization achieved through a model law is likely to be lower than in the
case of a convention’.40 Therefore, in order to achieve a satisfactory degree of
32
Rosa M Lastra (ed) Cross-Border Bank Insolvency (Oxford University Press, 2011) 189 [8.12].
33
(2013) (16 December 2013) [1].
34
Ibid [2].
35
Ibid [6].
36
(2013) (16 December 2013) [21].
37
See generally, Re HIH Casualty & General Insurance Ltd [2007] 1 All ER 177.
38
Susan Block-Lieb and Terence C Halliday, ‘Incrementalisms in Global Lawmaking’ (2007) 32
Brooklyn Journal of International Law 851, 886.
39
(2013) (16 December 2013) [9].
40
Ibid [20].
harmonisation and consistency between States, States must make as few changes as
possible.41
The UNCITRAL Guide accepts that the Model Law was drafted to take into
account that the EC Regulation on Insolvency was to come into effect to ‘establish a
cross- border insolvency regime within the European Union for cases where the
debtor has the centre of its main interests in a State member of the Union’. The
guide goes onto note that it ‘offers to States members of the European Union a
complementary regime of considerable practical value that addresses the many
cases of cross-border cooperation not covered by the EC Regulation’.42
In 2005, UNCITRAL adopted its Legislative Guide which was designed to
foster and encourage the adoption of effective national insolvency regimes. The text
of the Legislative Guide represented a five-year effort to derive a best practice guide
to the enactment of a modern insolvency law and as an aid to countries engaged in
that task.43 In the Legislative Guide, UNCITRAL makes several comments about
the Model Law and how it should be interpreted and its interrelationship with the
EC Regulation,44 whilst acknowledging that the Model Law is used for a purpose
different from that of the Legislative Guide.45
On 1 July 2009, UNCITRAL adopted a Practice Guide on Cross-Border
Insolvency Cooperation46 which was designed to provide information for practi-
tioners and judges on the practical aspects of cooperation and communication as
was envisaged in Article 27 of the Model Law.47
Subsequently on 1 July 2010, UNCITRAL adopted the Legislative Guide on
Insolvency Law—Part Three which dealt with the treatment of enterprise groups in
insolvency. This guide was developed as an aid to States looking to legislate in
respect of enterprise groups. As the Model Law requires debtor company’s to be
dealt with individually and not as a group, the legislative guide does not deal with
enterprise groups’ interrelationship with the Model Law.48
41
Ibid.
42
Ibid 188 [19].
43
Clark & Goldstein, see footnote 8, 541.
44
See, eg, Legislative Guide, 41 [13].
45
Ibid 1 [2].
46
United Nations Commission on International Trade Law, UNGOAR, 64th sess, 890th mtg, Supp
No 17, UN Doc A/64/17 (1 July 2009), [24].
47
See United Nations Commission on Trade Law, UNCITRAL Practice Guide on Cross-Border
Insolvency Cooperation, GA Res 64/112, (16 December 2009) UN Publication Sales No E.10.V.6
(June 2010), [1–3].
48
United Nations Commission on International Trade Law, ‘Legislative Guide on Insolvency Law,
Part three: Treatment of enterprise groups in insolvency’ UN Publication Sales No E.12.V.16, GA
Res 65/24 (6 December 2010).
2.2 Model Law 13
In December 2011, the UN General Assembly adopted the UNCITRAL publi-

cation relating to a judicial prospective on the Model Law.49 This paper discusses the
Model from a judge’s perspective and offers to judges a guide to its interpretation.50
The Model Law is designed to provide a system of procedural recognition in part
under the principles of comity and court intervention to assist any recognised
foreign insolvency proceeding with a view to achieving a more efficient disposition
of cases and distribution of the assets of an insolvent debtor.51
In July 2013, UNCITRAL adopted a number of amendments to the UNCITRAL
Guide with a view to further clarifying some of the central concepts within the
Model Law. Most importantly, the amendments sought to address the meaning and
interpretation of the phrase ‘centre of main interest’ and the applicability of the
rebuttable presumption contained in Article 16. On 16 December 2013 these
amendments were adopted by the UN General Assembly.52
Despite the recommendations made in the UNCITRAL Guide and because of
several variations allowed under the Model Law itself, the law has not been uni-
formly enacted into the domestic law of the five States examined in this book. This
has led to States interpreting differently the provisions of the Model Law because of
the differences in their domestic legislation. This issue is addressed in more detail in
Chaps. 8–10 and Sect. 13.2.
2.3 Summary
The Model Law was created as a result of difficulties arising from the recessions in
the early 1990s. This experience showed the need for some uniformity or har-
monisation in the way multinational companies are dealt with when they experience
some form of insolvency, with a view to avoiding multiple insolvency adminis-
trations and allowing creditors in one State access to the assets of the insolvent
entity in another.
The Model Law is designed to provide a system of procedural recognition in part
under the principles of comity and court intervention to assist any recognised
foreign insolvency proceeding to achieve a more efficient disposition of cases and
distribution of the an insolvent debtor’s assets whilst protecting the interests of all
49
United Nations Commission on International Trade Law ‘The UNCITRAL Model Law on Cross-
Border Insolvency: the judicial perspective’ UN Doc A/CN.9/732 (21 December 2011).
50
Ibid 1.
51
Whilst the Model Law is designed to be enacted into the domestic law of each country, it is not a
convention that is adopted by countries and as such there may be variations.
52
United Nations Information Service Press Release UN Commission on International Trade law
Concludes 46th Session in Vienna UNIS/L/189 (31 July 2013); United Nations Commission on
International Trade Law, Report of Working Group V (Insolvency Law) on the work of its 42nd
session (Vienna, 26–30 November 2012) UN Doc A/CN.9/763 (7 December 2012) adopted
UN GOAR 68th sess, 68th plen mtg, UN Doc A/RES/68/107 A–B (16 December 2013).
creditors and other parties including the debtor. The Model Law is also designed to
assist in the maximisation of the debtor’s assets and to create greater legal certainty
for trade and investment.53
It was envisaged that essential concepts such as COMI and ‘establishment’
would be interpreted consistently since similar terms were contained in the EC
Regulation.
53
See UNCITRAL Model Law on Cross-Border Insolvency, UN Doc A/CN.9/442 (19 December
1997), Preamble.
Chapter 3
Manner of Introduction of the Model Law
Overview
Australia, Canada, New Zealand, UK and the USA have each adopted a different
method for introducing the Model Law into its domestic law. This chapter analyses:
• how the manner of enactment in the States under consideration affects the terms
and meaning of the Model Law;
• how the insertion of the Model Law by Canada and the USA into their existing
domestic legislation has required those States to make it consistent with their
domestic insolvency provisions. This is reflected in the inconsistent way that the
Model Law has been enacted in those States; and
• whether in States where the substance of the legislation does not vary from the
Model Law; the differences in the legislation can be overcome by the courts
relying upon the interpretative provisions in Article 8 of the Model Law.
3.1 Australia
Australia enacted the Model Law per se by annexing the Model Law as Schedule 1
to the Cross-Border Insolvency Act 2008 (Cth) (the Act). Where options or inser-
tions are provided for in the Model Law, these have been set out in the Act to which
the Model Law is annexed.
The Act deals solely with the issue of the Model Law and applies it to both
corporate and personal insolvency. It does not attempt to amend or otherwise insert
itself into the domestic law relating to insolvency, although it does draw upon that
law to set out the powers a foreign representative may have and the mechanism for
using those powers.1 There are no special provisions contained in the Act relating to
1
See, eg, Article 21 of the Model Law allows a foreign representative to conduct examinations;
however sections 596A–596F of the Corporations Act 2001 (Cth) and the Supreme Courts and
Federal Court Corporations Rules made under that Act set out the procedural aspects of how to
summon a person and the procedures for conducting an examination.

DOI 10.1007/978-981-10-5876-9_3
16 3 Manner of Introduction of the Model Law
the interpretation of the Model Law. Consequently, courts in Australia and else-
where have adopted different methods in the Models Law’s interpretation including
using the Vienna Convention in its interpretation.2 This issue is discussed further in
Sects. 11.3.9 and 13.3.2.
3.2 Canada
Canada has based its legislation on the Model Law by incorporating the spirit and
purpose of the Model Law in their domestic legislation.3 The Model Law was
enacted by An Act to Amend the Bankruptcy and Insolvency Act, the Companies’
Creditors Arrangement Act, the Wage Earner Protection Program Act and Chapter
47 of the Statutes of Canada 2005,4 which inserted the same into Part IV of the
CCAA5 in respect of large corporate insolvency, and restructuring and by inserting
it into Part XIII of the BIA6 in respect of other insolvencies.7
As both pieces of legislation in which the provisions of the Model Law have been
inserted were pre-existing, the language of the Model Law has been adapted so as to
make it consistent with the terminology and definitions contained in that legislation.
These definitions are not always consistent between the two pieces of legislation.
The Model Law has been dealt with in 20 sections in their domestic legislation.8
Not all provisions of the Model Law have been incorporated into the Canadian
domestic law. Furthermore, they have inserted provisions that are not contained in
the Model Law, and amended definitions which have the effect of changing the
2
Ackers v Saad Investments Company Limited (in liq) (2010) 190 FCR 285, 295, [45] referring to
Vienna Convention on the Law of Treaties 1969, opened for signature 30 November 1969, [1974]
ATS 2 (entered into force in Australia 27 January 1980); Gainsford v Tannenbaum (2012) 293
ALR 699, 707 [37].
3
Marcia Jones, Library of Parliament (Can) ‘Bill C-12: An Act to amend the Bankruptcy and
Insolvency Act, the Companies’ Creditors Arrangement Act, the Wage Earner Protection Program
Act and chapter 47 of the Statutes of Canada, 2005’ (Legislative Summary No LS-584E,
Parliament of Canada, 14 December 2007) 29.
4
An Act to Amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act,
the Wage Earner Protection Program Act and Chapter 47 of the Statutes of Canada, SC, 2005, c
C-47.
5
Companies Creditors Arrangement Act, RSC 1985, c C-36.
6
Bankruptcy and Insolvency Act, RSC 1985, c B-3.
7
This Act was deemed approved at all stages by the House of Commons pursuant to an order made on 25
October 2007. See LEGISinfo, Library of Parliament (Can), House Government Bill—39th
Parliament, 2nd Session: October 16, 2007—September 7: C-12: An Act to amend the Bankruptcy and
Insolvency Act, the Companies’ Creditors Arrangement Act, the Wage Earner Protection Program Act
and chapter 47 of the Statutes of Canada, 2005, Parliament of Canada, <http://www.parl.gc.ca/
LegisInfo/BillDetails.aspx?Bill=C12&Language=E&Mode=1&Parl=39&Ses=2&View=0>.
8
Companies Creditors Arrangement Act, RSC 1985, c C-36 ss 44–61; Bankruptcy and Insolvency
Act, RSC 1985, c B-3 ss 267–284.
3.2 Canada 17
remedies available under the Model Law.9 In addition, they have not included the
interpretative provisions contained in Article 8. No explanation or reasons have
been given for these exclusions by the Canadian parliament or government and
there is no reference to it in the parliamentary debate.10
More generally, the provisions of the CCAA, deals primarily with the restruc-
turing of larger corporations11 and have been described as being skeletal in nature
and as a ‘sketch, an outline, a supporting framework for the resolution of corporate
insolvencies in the public interest’.12 The Act has been designed ‘to permit the
debtor to continue to carry on business and, where possible, avoid the social and
economic costs of liquidating its assets’.13 It has been stated that this promotes
flexibility and is particularly useful in complex insolvency cases.14 If this is the
stated purpose of that enactment, it may explain the deletion, from the Model Law,
of several articles as they left those matters to the discretion of the court.
Girgis has argued that since the public interest test in the CCAA can be defined
to include the continuance of value in the economy in any form, then that legislation
can also be used to achieve a liquidation of a company’s assets as long as the value
to be obtained is more than the sum of the parts achieved by a formal liquidation.
Hence, it should not be confined to formal restructuring proceedings at the end of
which a business or entity continues.15
The interrelationship between the CCAA and the BIA is that the BIA has been
described as serving:
9
Articles 3, 4, 7, 8, 10, 11, 12, 13, 14, 22, 24 and 31 are not replicated in the Canadian version of
the Model Law.
10
See, eg, Canada Parliamentary Debates, House of Commons Debates, 9 October 2007, 1509,
1515, (Peter Milliken). <http://www.parl.gc.ca/HousePublications/Publication.aspx?Pub=
Hansard&Doc=171&Parl=39&Ses=1&Language=E&Mode=1>; Standing Senate Committee on
Banking Trade and Commerce, Parliament of Canada, Seventeenth Report of the 38th Parliament
(2005), <http://www.parl.gc.ca/Content/SEN/Committee/381/bank/rep/rep17nov05-e.htm>,
Standing Senate Committee on Banking Trade and Commerce, Parliaments of Canada, Fifth
Report of the 40th Parliament ( 2007), does not mention the cross-border provisions, <http://www.
parl.gc.ca/Content/SEN/Committee/392/bank/rep/rep05dec07-e.htm>.
11
The Act deals with debtors and their affiliated companies where their debts exceed Canadian $5
million and foreign corporations with assets or businesses in Canada; see Steven Goldick and Marc
Wasserman, ‘Canada’ in Look Chan Ho (ed) Cross-Border Insolvency, A Commentary on the
UNCITRAL Model Law (Global Law and Business, 3rd ed, 2012), 76; Janis Sarra, ‘Northern
Lights, Canada’s Version of the UNCITRAL Model Law on Cross-Border Insolvency’ (2007) 16
International Insolvency Review 19, 22.
12
ATB Financial v Metcalfe & Mansfield Alternative Investments II Corp (2008) 45 CBR (5th)
163, [44], [61].
13
Century Services Inc v Canada [2010] 3 SCR 379, 394 [15].
14
Re Nortel Networks Corporation (2009) 55 CBR (5th) 229 [28].
15
Jassmine Girgis, ‘Corporate Restructuring, the Evolution of Corporate Assets and the Public
Interest’ (2013) 22 International Insolvency Review <http://0-onlinelibrary.wiley.com.library.vu.
edu.au/journal/10.1002/(ISSN)1099-1107/earlyview> (last viewed 1 March 2013).
the same remedial purpose, though this is achieved through a rules-based mechanism that
offers less flexibility. Where reorganization is impossible, the BIA may be employed to
provide an orderly mechanism for the distribution of a debtor’s assets to satisfy creditor
claims according to predetermined priority rules.16
In enacting the Model Law, Canada has changed the definition of a non-main
proceeding by not requiring such a proceeding to have an ‘establishment’ in the
State where the foreign representative was appointed.
Ziegel has questioned why a number of the provisions in the Model Law have not
been incorporated into the Canadian domestic law as there appears to be no reason for
their deletion.17 Arguably such changes and, most importantly, the discretion allo-
cated to courts, allow the Canadian courts to recognise a larger group of insolvency
administrations. Once such insolvency administrations are recognised, the courts can
grant the stays and other types of orders envisaged under the Model Law. It is
arguable that this has allowed Canada to recognise the majority of insolvency pro-
ceedings issued in the USA. This issue is elaborated in Sects. 8.7 and 9.1.
3.3 New Zealand
New Zealand enacted the Model Law with minor variations as Schedule 1 to the
Insolvency (Cross-border) Act 2006. This Act attempts to not only enact the Model
Law but also deal with cross-border insolvency generally by making specific
provisions in relation to the High Court of New Zealand acting in aid of overseas
courts.18 Whilst provision was made for the Model Law application to be restricted
by regulation, this has not occurred to date.19
All amendments to the Model Law are contained within the law as it appears in
the Schedule and there is no need to refer to that Act to determine what options
have been chosen or amendments made, although a number of definitions are
contained in the Act. Throughout the Model Law, where there is a reference to a
domestic court, the New Zealand law refers to the High Court of New Zealand.
Unlike other States’ in their interpretation of the Model Law, the High Court of
New Zealand has been given power to refer to:
any document that relates to the Model Law on Cross-Border Insolvency that originates
from the United Nations Commission on International Trade Law, or its working group for
the preparation of the Model Law on Cross-Border Insolvency.20
16
Century Services Inc v Canada [2010] 3 SCR 379, 394 [15].
17
Jacob Ziegel, ‘Canada- United States Cross Border Insolvency Relations and the Uncitral Model
Law’ (2007) 32 Brooklyn Journal of International Law 1041, 1055–61.
18
Insolvency (Cross-border) Act 2006 ss 3, 8.
19
Ibid s 10.
20
Ibid s 5(1)(b).
3.3 New Zealand 19
It is argued that this does not restrict the court to making reference only to the
versions of those documents that existed at the date of enactment of the Model Law
in New Zealand, but to also take account of updates to those documents, including
the UNCITRAL Guide. This would appear to accord with the principles behind
Article 8.
3.4 United Kingdom
The Insolvency Act 2000 authorised the introduction of the Model Law with or
without modification by regulation.21 The Secretary of State enacted an amended
form of the Model Law in The Cross-Border Insolvency Regulations 2006.22 The
regulation does not deal exclusively with the issue of cross-border insolvency.
The Insolvency Act 1986 also deals with the issue of cross-border insolvency and
allows a court to take action to assist a foreign court in a designated country.23 The
regulation requires the courts when interpreting the Model Law to refer to the
Model Law, any documents of UNCITRAL relating to the preparation of the Model
Law, and the UNCITRAL Guide.24 However, unlike New Zealand, the regulation
prescribes that reference can be made to any documents of UNCITRAL ‘and its
working group relating to the preparation of the UNCITRAL Model Law’ and the
UNCITRAL Guide including reference to UNCITRAL Guide’s document number
and date made in May 1997. It is argued this may prevent the UK Courts from
taking into account the updates to that Guide.25
An amendment to Article 3 of the Model Law as enacted in the UK makes it
clear that the provisions of the European Insolvency Regulation prevail over the
provisions of the Model Law. Hence, any application for recognition of a foreign
representative from a European Union State will be considered under the EC
Regulation and not the Model Law, which is in keeping with its obligations under
the EC Regulation, and the Treaty on the Functioning of the European Union.26
21
Insolvency Act 2000 c39 s 14(1).
22
Cross-Border Insolvency Regulations 2006 SR 2006/1030.
23
Insolvency Act 1986 c45 s 426.
24
Cross-Border Insolvency Regulations 2006 reg 2(2).
25
See generally Fibria Celulose S/A v Pan Ocean Co Ltd [2014] EWHC 2124 (Ch) (30 June 2014)
[88].
26
Treaty on Functioning of the European Union [2010] OJ C 83/49, Article 16, 223.
3.5 USA
The USA enacted the Model Law by the Bankruptcy Abuse Prevention and
Consumer Protection Act27 which replaced section 304 of the Bankruptcy Code28
with Chap. 15 of that Code. Chapter 15 alters some of the language of the Model
Law to make it consistent with the existing provisions of the Bankruptcy Code and
does not contain its own exhaustive definition section, but cross-references its
definition with other chapters within the Code. Chapter 15 also picks up a number
of exclusions contained in other Chapters which are not present in the Model Law;
these are discussed in Sect. 6.2. A knowledge of the concepts contained in the other
chapters of the Code is necessary in order to understand the meanings of terms
contained in Chap. 15.
Section 103 stipulates that the general provisions in Chap. 1 of the Bankruptcy
Code apply to Chap. 15 cases. In addition, the following sections apply to these
cases:
(a) Section 307 granting standing to the US Trustee to act in Chap. 15 cases;
(b) Section 362(n) excepting from the automatic stay cases involving certain small
business debtors;
(c) Sections 555–557 and 559–562, protecting broad rights under financial con-
tracts from stay, avoidance or other limitation in any proceeding under the
Bankruptcy Code.29
As a result of Chap. 1 of the Bankruptcy Code applying to Chap. 15 of the
Bankruptcy Code, the US Court of Appeals has found that Chap. 15 applies only to
debtors which fit within the definition of section 109 of the Bankruptcy Code.
A debtor must reside, have a domicile, a place of business, or property in the United
States.30 This would appear to contradict the underlying principles of Universality
underpinning the Model Law. However this issue may be overcome practically in
the majority of cases as the requirement to have an asset in the jurisdiction is simply
achieved.31
Chapter 15 also includes additional provisions which are territorialist in nature in
order to protect local interests. It addresses concerns that USA creditors may be
prejudiced in foreign proceedings.32 This is evidenced by a requirement that the
27
Pub Law No 109-8, 119 Stat 23 (2005).
28
11 USC § 304.
29
Daniel M Glosband et al., ‘The American Bankruptcy Institute Guide to Cross-Border Insolvency
in the United States’ (American Bankruptcy Institute, 2008), 89. They comment that the inclusion
of section 362(n) was a legislative error as the exception was intended to cover provisions
excepting financial contracts from the automatic stay.
30
Re Barnet, 737 F 3d 238 (2nd Cir, 2013); 11 USC § 109 (a).
31
See Re Octaviar Administration Pty Ltd, 511 BR 361 (Bankr, SD NY, 2014).
32
Elizabeth J Gerber, ‘Not All Politics Is Local: The New Chapter 15 to Govern Cross-Border
Insolvencies’ (2003) 71 Fordham Law Review 2051, 2084–6.
3.5 USA 21
court, pursuant to section 1522, can only make interim orders or other orders
following recognition that the interests of creditors are sufficiently protected. This is
discussed further in Sect. 8.8.5.
Despite the variations to the Model Law provisions the US Congress has rec-
ommended the UNCITRAL Guide ‘for guidance as to the meaning and purpose of
the Model Law’s provisions’.33 The issue remains as to whether amendments to the
UNCITRAL Guide since the enactment of Chap. 15 can be taken into account by
US courts. This issue is discussed further in Sect. 15.1.
3.6 Summary
As identified above, there has been no uniformity in the manner in which the Model
Law has been adopted into the domestic law of each of the States reviewed.
In Canada and the USA where the Model Law has been inserted into pre-existing
legislation, arguably this may result in the courts of those States imposing pre-
conceptions associated with the other parts of the legislation upon the domestic
provisions of the Model Law. The UK and the USA have also altered some of the
definitions of essential concepts contained within the Model Law, presumably to
satisfy their domestic requirements.
The domestic legislation of both New Zealand and the UK allow reference to be
made to the relevant UNCITRAL documents including the UNCITRAL Guide. In
the case of New Zealand, this may include the UNCITRAL Guide as amended from
time to time. In the UK it is restricted to a specific version of the UNCITRAL
Guide. In relation to other States examined, it will depend upon their domestic rules
of interpretation as to whether their courts take such material into account in their
interpretation of the Model Law as enacted domestically. It is argued that the above
issues will lead to inconsistencies in the interpretation of the Model Law.
It is also argued that States which amend the terms in the Model Law when
adopting it domestically are not taking a truly Universalist approach as they are
imposing domestic concepts or priorities on a proposed international harmonised
law. As stated above, some of these amendments are clearly designed to protect
domestic creditors. The same can also be said of Canada which has not enacted all
of the provisions of the Model Law.
As discussed below in Chaps. 6–9, this lack of consistency has led to some
provisions of the Model Law being interpreted differently by the various States.
33
US House of Representatives Committee on the Judiciary, Bankruptcy Abuse Prevention and
Consumer Protection Act (8 April 2005), HR Report Pub L No 109–31, 106 n 101; Re Fairfield
Sentry Ltd 714 F 3d 127 (2nd Cir 2013) 132.
Chapter 4
How Does the Model Law Affect Existing
Principles of Recognition?
Overview
This chapter introduces the notion that the Model Law has attempted to provide an
internationally uniform approach to the recognition of foreign insolvency pro-
ceedings based upon the concepts of ‘foreign main proceedings’ and ‘foreign
non-main proceedings’. In particular, the following points will be discussed:
• how each of the States reviewed has dealt differently with its pre-Model Law
systems for recognition;
• how each of the States has inserted the Model Law into its existing system of
recognition of foreign proceedings and whether there concurrently exists the
ability to bring applications for assistance using principles such as comity;
• the relevance of the Model Law in relation to bringing applications in respect of
these types of entities that are excluded its operation; and
The issue of excluded entities is discussed further in Sects. 6.2 and 11.3.2.
4.1 Australia
The Model Law does not seek to amend the existing statutory provisions allowing
the courts to assist foreign courts, nor to change the common law in relation to the
recognition and assistance to be granted to foreign proceedings.1 These provisions
also continue to apply in respect of foreign proceedings that do not fit or invoke the
local provisions of the Model Law or which do not satisfy the tests for recognition
under the Model Law.2
1
Corporations Act 2001 (Cth) s 581; Bankruptcy Act 1966 (Cth) s 29.
2
Mason, Cross-border insolvency: Adoption of CLERP 8 as an evolution of Australian insolvency
law’ see footnote 20, 89; see generally Ackers v Deputy Commissioner of Taxation [2014] FCAFC
57 (14 May 2014) [99–106].

DOI 10.1007/978-981-10-5876-9_4
24 4 How Does the Model Law Affect Existing Principles of Recognition?
4.1.1 Statutory Provisions
The existing provisions require the Courts to assist the courts of prescribed coun-
tries3 whilst giving the court discretion as to whether to assist the court of other
non-prescribed States.4 As a condition of any order made, the court has power to
obtain undertakings as part of any orders granted.5 These provisions continue to
apply except to the extent to which they are inconsistent with the provisions of the
Model Law, in which case the provisions of the Model Law prevail.6 These pro-
visions will continue to be used in respect of those classes of debtors who are
specifically excluded from the provisions of the Model Law.7
The Full Federal Court has held that, were an application for assistance comes
from a prescribed country under the statutory provisions in respect of personal
bankruptcy, recognition must be granted and the court does not have discretion in
this regard, as the section uses the word ‘shall’.8 The court has power to order a
foreign representative to take control of the debtor’s assets, both movable and
immovable, and to distribute the same. Furthermore, the court held that the
mandatory statutory provisions excluded the operation of the public policy
exception against the enforcement of foreign revenue debts, so far as prescribed
countries were concerned. Hence, recognition is given to a foreign representative
who does not seek to enforce a revenue claim, but rather collects the debtor’s
property and then distributes it according to law.9 The Federal Court has also
indicated that it is not necessary for an application for recognition to be made under
the Model Law where an application for assistance can be made under the provi-
sions of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act), and that there is no
inconsistency between the provisions of the Model Law and section 29 of the
Bankruptcy Act which allows the court to extend assistance to other foreign courts
in nominated countries exercising bankruptcy jurisdiction.10
After examining the interrelationship between the statutory provisions and the
Model Law in relation to corporate insolvency proceedings, the New South Wales
Supreme Court indicated that the duty to cooperate under Article 25 exists
3
Corporations Regulations 2001 (Cth) reg 5.6.74; Bankruptcy Regulations 1996 (Cth) reg 3.01.
4
See, eg Mason, ‘Local Proceedings in a Multi-State Liquidation: Issues of Jurisdiction’ see
footnote 2, for a summary of the pre-existing provisions and the basis of the same.
5
Radich v Bank of New Zealand (1993) 45 FCR 101, 105; Re Osborn Ex Parte Trustee [1931–
1932] B & CR 189, 194.
6
Cross-Border Insolvency Act 2008 (Cth) s 22.
7
Cross-Border Insolvency Act 2008 (Cth) s 9; Cross-Border Insolvency Regulations 2008
(Cth) sch 1.
8
Re Ayres; Ex parte Evans (1981) 56 FLR 235, 240; Radich v Bank of New Zealand (1993) 45
FCR 101, 105 referring to Bankruptcy Act 1966 (Cth) s 29(2)(a); The Corporations Act 2001(Cth)
s 581(2) uses the word ‘must’.
9
Re Ayres; Ex parte Evans (1981) 56 FLR 235, 238.
10
Levy v Reddy [2009] FCA 63 (6 February 2009) [15–17].
4.1 Australia 25
concurrently with a separate duty under s 581(2)(a) of the Corporations Act and that
it ‘is therefore possible for this court to perform the s 581(2)(a) duty without
thereby potentially failing to perform an Article 25 duty or otherwise acting
inconsistently with Article 25’.11 The court held that if the country from which the
request was made was a prescribed country, then the requirement to give cooper-
ation was mandatory, unlike Article 25 which gives the court discretion.12
Foreign corporations can be wound up under the provisions of the Corporations
Act, either voluntarily or by the courts where such corporations are registered or
recognised under the Corporations Act, including those that are registered as for-
eign corporations.13 The courts also have the power to wind up other body cor-
porates that have a principal place of business in Australia.14 The courts’ power to
wind up such body corporates is discretionary.15 The New South Wales Supreme
Court has held that the antecedent transactions provisions of the Corporations Act
apply to such liquidations.16 Once a registrable body that is a foreign corporation
becomes registered under Division 2 of Part 5B.2 of the Corporations Act or carries
on business in Australia, it becomes a Part 5.7 body and a court in Australia has the
power to wind it up regardless of whether it subsequently becomes deregistered or
ceases carrying on business in Australia. The Australian courts have held that once
it has become a Part 5.7 body, it has effectively submitted to the Australian juris-
diction and its laws, including the laws for winding up.17
The Act provides that to the extent that the provisions of the existing law are
inconsistent with the Model Law, the provisions of the Model Law prevail.18
4.1.2 Common Law
Where a body corporate owns assets in Australia but does not carry on business or
have a principal place of business in Australia, it will fall outside the provisions of
Part 5.7 of the Corporations Act. This may occur where the company only holds
assets such as real estate in Australia as a passive investment. Australian courts can
wind up foreign corporations that are not Part 5.7 bodies if Australia is an ‘ap-
propriate forum’. They will decline such jurisdiction only if it is an appropriate
11
Re Chow Cho Poon (Private) Limited [2011] 249 FLR 315, 330 [67].
12
Ibid 322–23 [28–30].
13
Corporations Act 2001 (Cth) s 57A for definition of ‘corporation’ and ss 459A, 461 and 491.
14
Corporations Act 2001 (Cth) Part 5.7. ‘Principal place of business is defined in s 583(a) as being
the place of its registered office’.
15
Titchfield Management Ltd v Vaccinoma Inc (2008) 68 ACSR 448, 450–1 [7].
16
Ibid [32].
17
See, eg, Australian Securities & Investments Commission v Edwards (2004) 22 ACLC 1469,
1480; Application of Campbell, Re Gebo Investments (Labuan) Ltd v Signatory Investments Pty
Ltd (2005) 190 FLR 209, 217–8.
18
Cross-Border Insolvency Act 2008 (Cth) ss 29–30.
forum when the exercising of jurisdiction is ‘clearly inappropriate’.19 Such a sit-

uation would be rare but possible.20
The common law developed various principles with a view to promoting con-
sistency and co-operation in cross-border insolvency matters. These principles were
somewhat ad hoc and not always consistent.21 In Australia, the position in respect
of an individual’s bankruptcy is slightly different from the position of a corporation.
In a corporation, that is being wound up the assets remain the property of the
corporation unless a vesting order is made to vest them in the liquidator.22 The
traditional rule in personal bankruptcy that was confirmed by the High Court of
Australia in relation to the operation of foreign bankruptcy laws was that the
assignment of the divisible bankruptcy assets to the foreign representative affected
by a foreign States bankruptcy laws in which the debtor was domiciled operated
only as an assignment of the debtor’s movable assets wherever located within the
world and as an assignment of the immovable assets owned by the bankrupt within
that foreign State. However, once the debtor ceases to be domiciled in that State, the
bankruptcy order ceases to have application to moveable’s acquired thereafter and
situated outside that jurisdiction.23 The Full Federal Court more recently brought
into question the extent to which the traditional approach applied in the modern
world. The court stated movable property in Australia belonging to a bankrupt in
New Zealand vested in his trustee in New Zealand as did the ability to avoid
antecedent transactions.24 The court went on to state:
While the principle of Hall v Woolf raises difficulties, the actual result seems to be unjust.
…Of course, with today’s federal legislation involving prescribed countries and automatic
discharge, it is highly unlikely that the fact situation in Hall v Woolf will be repeated.
Furthermore, in general circumstances, there seems no significant injustice in allowing
after-acquired property to vest in a foreign trustee, even where there are domestic creditors,
and there appear to be good reasons of comity for the courts to allow this result.25
The Court confined the reasoning in Hall v Woolf to denying to a foreign trustee
recognition of title to the bankrupt’s moveables under foreign bankruptcy laws after
the bankrupt ceased being domicile in a foreign country.26 The court further pointed
19
Martin Davies, Andrew Bell and Justice Paul Le Gay Brereton, Nygh’s Conflict of Laws in
Australia, (Lexis Nexis, 8th ed, 2010), 167 [8.13]; MGR Gronow and Rosalind Mason
‘McPherson’s Law of Liquidation’ (Thomson Lawbook Co 5th ed 2006), 17-3052 [17.300]; see
Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, 559–60.
20
For example a type of semi incorporated body that is has no equivalent in Australia.
21
Davies, Bell and Brereton, see footnote 116 725 and see generally Ackers v Deputy
Commissioner of Taxation [2014] FCAFC 57 (14 May 2014) [99–105].
22
See Corporations Act 2001 (Cth) s 474(2).
23
Hall v Woolf (1908) 7 CLR 207, 211.
24
Radich v Bank of New Zealand (1993) 45 FCR 101, 106.
25
Ibid 110 (Einfield J); Drummond J stated that he shared Einfields J’s dissatisfaction that was an
acceptable statement of the modern law–Ibid 116.
26
Ibid 118–9.
4.1 Australia 27
out that insofar as immovable assets are concerned, the court has regularly
recognised foreign trustees’ right to such assets by granting assistance under
section 29.27
The common law principles of comity also apply in Australia which means that
foreign representatives can be recognised using this common law principle. Comity
will allow a court, when requested by a foreign court to recognise a foreign rep-
resentatives to whom the Model Law does not apply or who cannot avail them-
selves of the statutory rights of recognition.28 This includes the case of corporate
debtors that operate as banks or insurance companies in Australia. In such cases,
greater Australian court involvement and supervision may be warranted in order to
protect the interests of Australian creditors.
If recognition is granted under either Statute or the principles of comity the court
has a discretion as to what assistance it will give to that court or representative. The
Full Federal Court has summarised the position as follows:-
It can be accepted that recognition will be given to a winding up in the place of incor-
poration in the manner described by Millett J (as he then was) in In re International Tin
Council [1987] 1 Ch 419 at 446-447. See also Motor Terms Co Pty Ltd v Liberty Insurance
Ltd [1967] HCA 9; 116 CLR 177 at 180 (per Kitto J)…. That, however, does not lead to the
conclusion that local creditors have their rights destroyed such that they could not seek
leave to proceed under a provision such as s 471B of the Corporations Act, or, if the
creditor had rights under the Taxation Administration Act properly construed, to proceed
thereunder.
If there were a local winding up, and also a foreign winding up in the place of incorpo-
ration, the former would generally be treated as ancillary to the latter. For a discussion of
the nature of the ancillary winding up and the operation of the general law on local
insolvency statutes, see Re Bank of Credit and Commerce International SA (No 10) [1997]
Ch 213 at 238-248 (“Re BCCI”); Re English Scottish & Australian Chartered Bank [1893]
3 Ch 385 at 394; and In re HIH at 856-862, [8]-[30] and 870–872, [59–62]. The practical
and legal consequences of an ancillary winding up are of significance to the resolution of
this matter, and are questions to which I will return.
If there were an ancillary winding up of a foreign company in Australia, it may take place
under the Corporations Act, s 601CL(14) or Pt 5.7, in particular, s 583. The nature of the
winding up and the responsibilities of the liquidator would be assessed, in the first instance,
by reference to the provisions of the Corporations Act. Under s 601(15)(c), the assets the
subject of realisation are limited to those within the jurisdiction, but that is subject to an
order of the Court otherwise. Also, under s 601(15)(b) a local liquidator must not pay out a
creditor of a foreign company to the exclusion of another creditor; but, again, that is subject
to an order of the Court. Under s 583(d), a winding up under Pt 5.7 deals only with the
affairs of the body outside its place of origin.
The funds collected in the local (ancillary) winding up would generally be remitted to the
winding up in the place of incorporation where local creditors may prove: In re Oriental
Bank Corporation at 176; In re The Australian Midas Gold Estates Ltd (in liq) [1916]
VicLawRp 64; [1916] VLR 526 at 529; In re Alfred Shaw at 95-96; In re The Australian
Federal Life and General Assurance Co Ltd in liq) [1931] VicLawRp 56; [1931] VLR 317
27
Ibid 119.
28
See, eg, Gainsford v Tannenbaum (2012) 293 ALR 699.
at 322. But as Lowe J said in In re The Australian Federal Life at 322 on the authority of In
re Matheson Brothers Ltd, the court, in the ancillary winding up, will not release the assets
until it is clear that they will be made available to the local creditors pari passu with other
creditors.29
It is uncertain whether an Australian Court in the absence of a treaty would

enforce a foreign judgment in relation to recovery of assets or antecedent pro-
ceedings where the defendant did not participate in the proceedings. Australian
courts, are not bound by the United Kingdom’s Supreme Court decision in Rubin v
Eurofinance SA30 (Rubin), but may find it persuasive subject to appropriate facts
existing.31 On the other hand, it is argued that the High Court of Australia may not
necessarily follow the decision in Rubin but rather find that insolvency law has its
own rules for recognition and are not bound by the general rules that exist for
recognition of foreign judgments. As discussed in Chaps. 11 and 13 it is argued that
this is desirable.
4.2 Canada
Section 48(4) of the CCAA makes it clear that seeking an order for recognition
under the provisions of their enactment of the Model Law does not prevent pro-
ceedings being commenced under the BIA or the Winding-up and Restructuring
Act.32 Section 61 of the CCAA and section 284 of the BIA provide that nothing in
those Acts prevents a court from applying legal or equitable rules governing
recognition of foreign insolvency orders.
Section 284 of the BIA provides that nothing in that Act prevents a court, on the
application of any foreign representative or other interested party, from applying
under the legal and equitable rules governing recognition of foreign insolvency
orders and to provide assistance to foreign representatives which are not incon-
sistent with the Act.
In Beals v Saldanha the Supreme Court of Canada confirmed that in order to
apply the principles of international comity and recognise a foreign judgement,
there must be a real and substantial connection with Canada.33 The Court also
determined that the presence of more traditional indicia of jurisdiction such as
29
De Ackers as joint foreign representative of Saad Investments Company Ltd (in Official
Liquidation) v Deputy Commissioner of Taxation [2014] FCAFC 57 (14 May 2014) [100–103].
30
Rubin v Eurofinance SA [2013] 1 AC 236, 250–1.
31
See, eg, Ackers v Deputy Commissioner of Taxation [2014] FCAFC 57 (14 May 2014) [150].
32
Winding-up and Restructuring Act, RSC 1985, c.W-11; Re Straumur-Burdaras Investment Bank
hf (2009) 57 CBR (5th) 256 [14–16].
33
[2003] 3 SCR 416, 437 [29].
4.2 Canada 29
residence, presence in the foreign jurisdiction and attornment will serve to

strengthen the real and substantial connection to the action or parties.34 In
Morguard Investments Ltd v De Savoye, the Supreme Court of Canada set out
considerations to be employed in establishing the ‘real and substantial connec-
tion’.35 In Re Lear Canada, the Ontario Superior Court stated that the jurisdiction to
which the debtor is most closely connected should exercise primary control of the
insolvency process and be afforded comity in order to avoid multiple proceedings.36
Where the debtor is not connected to the jurisdiction whose representatives are
seeking comity the court may not grant comity. The Queen’s Bench in Alberta has
refused to recognise under comity Chap. 11 proceedings in the USA of a Canadian
company where the company was neither carrying on business nor had any assets in
the USA.37
Justice Morawetz has described Canada’s insolvency statues as, although ‘based
upon English common law, many of the significant amendments over the past
20 years have been made in order to adopt and follow US practices’.38 This his-
torical tie is evidenced by Canada having also applied the English common law
principle of hotchpot in relation to the distribution of dividends to foreign
creditors.39
4.3 New Zealand
Section 8 of the Insolvency (Cross-border) Act 2006 provides that if a court of

another country in an insolvency proceeding makes an order requesting the aid of
the High Court in respect of a person to whom Article 1 of the Model Law applies,
the High Court may, if it thinks fit, act in aid of and be auxiliary to that court in
insolvency proceedings. The High Court can act as if the proceedings had been
originated as its own.
The Companies Act 1993 allows an application to be made to the High Court for
the liquidation of a foreign company.40 Such applications are not contingent upon
the debtor having assets in New Zealand.41
The New Zealand Law Reform Commission recognised that in common law
jurisdictions such as New Zealand, the doctrine of comity will apply to assist
34
Ibid, 440–1, [37].
35
[1990] 3 SCR 1077, adopted Re Lear Canada (2009) CanLii 37931 (ON SC) ( 14 July 2009).
36
Re Lear Canada (2009) CanLii 37931 (ON SC) (14 July 2009) [15].
37
Re Singer Sewing Machine Company of Canada Limited (2000) 259 ABR 364 [8], [26].
38
Justice Geoffrey Morawetz, ‘Acceptance Remarks of the Honourable Geoffrey Morawetz’
(2012) 29 Emory Bankruptcy Development Journal 5, 10.
39
Sarra, see footnote 75, 24–7.
40
Companies Act 1993 s 342.
41
Ibid.
insolvency administrators appointed in one jurisdiction to gain recognition in other

jurisdictions.42 The Commission further stated that:
The justification for granting comity to foreign insolvency proceedings is the need to ensure
that a debtor’s property is realised as quickly as possible for the benefit of all creditors
entitled to participate in the distribution of assets ….to ensuring maximum returns to
creditors on a pari passu basis.43
Gollin has summarised the New Zealand position as follows:

• A New Zealand liquidation of the assets of an overseas company should, in the
event of a primary liquidation proceeding elsewhere, be ancillary to the foreign
proceeding.
• In principle, the liquidators in the primary overseas proceeding should be
recognised as having the right to administer the assets of the debtor in New
Zealand, and the New Zealand courts should actively assist the foreign liq-
uidators in carrying out their duties in that respect.
• New Zealand assets should be made available for distribution to creditors uni-
versally on a pari passu basis, subject to the retention for New Zealand creditors
of any preferential status recognised by New Zealand law.
• Although an overseas liquidator could apply to be a liquidator in a New Zealand
liquidation, it was generally preferable to appoint a New Zealand liquidator to
act in an ancillary capacity (unless the New Zealand court could be satisfied that
an overseas liquidator could give undertakings to protect all creditors entitled to
protection under New Zealand law).44
This position, it is argued, has not changed as a result of the introduction of the
Model Law. This was confirmed by the New Zealand High Court in Williams v
Simpson, wherein Mr. Simpson was a psychiatrist who had originally practised in
London but had moved to New Zealand many years earlier and commenced
practice in New Zealand. He had children who were born, lived and were being
educated in New Zealand. Mr. Simpson would also spend several months of each
year in England. Mr. Simpson held both UK and New Zealand passports. Mr.
Simpson, as part of his investments, became a name in a Lloyds syndicate and when
a call was made, he did not pay the same. By reason of being a Lloyds’ name, he
was deemed under English law to be carrying on business in that jurisdiction and
was made bankrupt. The English Trustee applied for recognition under both the
Model Law and for assistance under section 8 of the Insolvency (Cross-border) Act
2006 based upon a letter of request. The court determined that as Mr. Simpson’s
42
New Zealand Law Reform Commission, Cross-border Insolvency: Should New Zealand Adopt
the UNCITRAL Model Law on Cross-border Insolvency? Report No 52 (1999) [20].
43
New Zealand Law Reform Commission, Cross-border Insolvency: Should New Zealand Adopt
the UNCITRAL Model Law on Cross-border Insolvency? Report No 52 (1999) [24].
44
Sean Gollin, ‘New Zealand’ in Ho see footnote 75, 332–3.
4.3 New Zealand 31
habitual place of residence was New Zealand, and he did not have an establishment
in the UK, the English trustee was not recognised under the Model Law.45 The
court did, however, recognise and act in aid of the trustee pursuant to its statutory
obligations under section 8. The court adopted the reasoning of Lord Hoffman in
the Cambridge Gas Transport Corporation Limited v Official Committee of
Unsecured Creditors (of Navigator Holdings PLC & Ors) (Isle of Man (Cambridge
Gas) in holding that a Universalist approach to international insolvency should be
adopted.46
4.4 United Kingdom
The English courts have traditionally indicated that in order to exercise jurisdiction
to wind up a foreign entity, it was ‘necessary to establish that a foreign company
has a ‘sufficient connection’ with England’.47 The English courts have also tradi-
tionally considered that their winding-up orders to have worldwide effect even
though they may not be recognised under other States’ rules of private international
law.48 Further, where a company is simultaneously being wound up in the country
of its incorporation and in England, the English courts will naturally seek to avoid
unnecessary conflict, and as far as possible will ensure that the English winding up
is conducted as ancillary to the principal liquidation.49 The default position is that
the principle liquidation would be deemed to be the place of incorporation of the
company.50 The English courts have traditionally been able to wind up companies
that have been dissolved in their place of incorporation or in another jurisdiction,
save where the effect of its dissolution in its place of incorporation is such that it is
deemed to have never existed.51
It is argued that under the English common law, the courts have the power to
assist foreign courts to help a foreign representative pursuant to the principles of
comity by doing whatever it can pursuant to domestic English law.52
In Agbaje v Akinnoye-Agbaje, the United Kingdom Supreme Court described
‘comity’ as a having elastic content and being relevant in three respects:
45
Williams v Simpson [2011] 2 NZLR 380, 393–5.
46
Williams v Simpson [2011] 2 NZLR 380, 399 citing Lord Hoffman in Cambridge Gas Transport
Corporation v Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] 3
All ER 829.
47
Re Real Estate Development Co [1991] BCLC 210, 217.
48
Re International Tin Council [1987] Ch 419, 446; Bilta (UK) Ltd (In Liq) v Nazir [2013] 1
All ER 375, 391–2 [42–43].
49
Ibid; see generally Richard Sheldon (ed), Cross-Border Insolvency (Bloomsbury Professional,
3rd ed, 2011) 481–2.
50
Sheldon, see footnote 146, 127 [3.87].
51
Ibid 238 [6.24].
52
Schmitt v Deichmann [2012] 2 All ER 1217, 1232–3 [62–65]; Sheldon, see footnote 146 11 [1.30].
1. First, comity is sometimes used not simply in the sense of courtesy to foreign
states and their courts, but also in the sense of rules of public international law
which establish the proper limits of national legislative jurisdiction in cases
involving a foreign element. In that sense it will be contrary to comity for United
Kingdom legislation to apply in a situation involving a foreign country when the
United Kingdom has no reasonable relationship with the situation…
2. The second relevant sense in which comity is used is that a court in one country
should not lightly characterise the law or judicial decisions of another country as
unjust.
3. The third sense in which comity may be relevant is that it is said to be the basis
for the enforcement and recognition of foreign judgments.53
In Swiss Air, the English High Court commented that there was nothing that
prevented an English Court from ordering remittal of assets to a foreign liquidator if
the local law of that liquidator provided for a pari passu distribution to creditors.54
The Court went on to confirm that there are a number of alternate and supple-
mentary ways by which foreign representatives can seek its assistance in the UK.55
In AWB Geneva, the English High Court confirmed that there were various ways in
which the Court could assist by recognising a Canadian foreign insolvency pro-
ceeding. This was an admiralty case involving two Swiss companies (AWB and
Pioneer) suing a Canadian company (NASL) which was subject to restructuring
proceedings. The court stated the following in relation to the English common law
position:
Not only will the English Court recognise the existence of NASL’s bankruptcy and the
restructuring proceedings under the CCAA since these are occurring in NASL’s place of
incorporation, but also it will regard itself as under a duty to give such aid and assistance to
the foreign court as it is able to give. This duty is a matter of common law56
The Insolvency Act 1986 (UK Insolvency Act) provides that a court having
insolvency jurisdiction shall assist the court of another relevant jurisdiction as
prescribed.57 This power has been said to be limited to requests made by foreign
court where there is an insolvency proceeding on foot in that State.58 Recognition
can occur as a result of an application under the Model Law or by way of a letter of
request from a foreign court.59 It common law allows the court to apply either the
UK domestic law or the law of the relevant State and apply the rules of private
53
[2010] 1 AC 628, 650–1 [51–54].
54
Re Swissair Schweizerische Luftverkehr-Aktiengesellschaft [2010] BCC 667, 671 [10].
55
Ibid [12].
56
AWB Geneva S.A. v North America Steamships Limited [2007] 1 CLC 749, 760 [32].
57
Insolvency Act 1986 c45 ss 426 (4),(11).
58
HSBC Bank v Tambrook Jersey Ltd [2013] 2 WLR 1249, 1252–3 [10–13].
59
See, eg, McGrath v Riddell [2008] 3 All ER 869; Fourie v Le Roux [2006] 2 BCLC 531 upheld
on appeal [2007] 1 All ER 1087.
4.4 United Kingdom 33
international law.60 Nothing in these provisions restricts the UK courts’ power to

request assistance from a foreign court which is derived from the common law.61
Fletcher comments that section 426 of the UK Insolvency Act was more than a
re-enactment of the previous section 122 of the Bankruptcy Act 1914 and that it
was ‘so drafted as to make its provisions applicable to corporate as well as to
individual insolvency. The hope was also expressed that the remodelled provisions
would apply for reciprocal enlargement of the power to give international assis-
tance, particularly within the Commonwealth’.62
The situation in relation to the recognition of foreign judgments arising out of
insolvency proceedings is slightly different. Whilst the English Court of Appeal in
New Cap Reinsurance Corporation v Grant (New Cap Reinsurance) found that a
request under section 426 of the UK Insolvency Act can be used for enforcement of
a foreign judgement and allowed it to be used to enforce an Australian judgement in
respect of an antecedent transaction,63 the United Kingdom Supreme Court found
that section 426 does not apply to the enforcement of foreign judgments.64 The
United Kingdom Supreme Court in Rubin found that judgements in foreign
insolvency proceedings for the recovery of moneys are in personam proceedings
and that no special rules exist.65 Further the Court found that even where the
application is under the Model Law that such proceedings are bound by the general
rules in relation to the recognition of such proceedings namely ‘where (among other
cases) the judgment debtor was present in the foreign country when the proceedings
were instituted, or submitted to the jurisdiction of the foreign court by voluntarily
appearing in the proceedings’.66 The court found that as Articles 21 and 25 of the
Model Law say nothing about enforcement of foreign judgements and that it could
not be implied that the Model Law was as a basis for a court to allow enforcement
of a foreign judgement. The court rejected the approach adopted by the Privy
Council in Cambridge Gas.67 The court adopted ‘Dicey Rule’ 4368 which states:
[A] court of a foreign country outside the United Kingdom has jurisdiction to give a
judgment in personam capable of enforcement or recognition as against the person against
whom it was given in the following cases:
60
Insolvency Act 1986 c45 s 426 (5).
61
Sheldon, see footnote 146, 142 [4.3]; Lord Collins et al. (eds), Dicey, Morris and Collins on The
Conflict of Laws (Sweet & Maxwell, 15th ed, 2012), 1703 [30–371].
62
Fletcher, ‘Insolvency in Private International Law, National and International Approaches’ see
footnote 42, 227 [4.04].
63
New Cap Reinsurance Corporation v Grant [2012] 1 All ER 755, 769, 776–7, [58], [84–85].
64
Rubin v Eurofinance SA [2013] 1 AC 236, 281 [152].
65
Ibid 272 [105], 274 [115–117].
66
Ibid 250 [6].
67
Rubin v Eurofinance SA [2013] 1 AC 236, 276–8 [128, 132] confirmed in Singularis Holdings
Ltd v PricewaterhouseCoopers [2014] UKPC 36, [18].
68
Ibid 250 [7].The courts judgement was written by Lord Cross who is the editor of the text.
First Case? If the person against whom the judgment was given was, at the time the
proceedings were instituted, present in the foreign country.
Second Case? If the person against whom the judgment was given was claimant, or
counterclaimed, in the proceedings in the foreign court.
Third Case? If the person against whom the judgment was given, submitted to the juris-
diction of that court by voluntarily appearing in the proceedings.
Fourth Case? If the person against whom the judgment was given, had before the com-
mencement of the proceedings agreed, in respect of the subject matter of the proceedings, to
submit to the jurisdiction of that court or of the courts of that country.69
The court when comparing the decision in New Cap Reinsurance found that as the
creditor had participated in the liquidation by lodging proofs of debt, attending credi-
tors’ meetings and voting on resolutions, the creditor had participated in the liquidation
which amounted to a ‘step which is only necessary or only useful if’ an objection to
jurisdiction ‘has been actually waived, or if the objection has never been entertained at
all’.70 The court found that by taking such steps, in particular lodging a proof of debt, the
creditor had submitted to the Australian court’s jurisdiction and the judgement was
therefore registrable in England under the basic common law principles.71
In Vizcaya Partners the Privy Council considered what was required for a party to
submit to a foreign courts jurisdiction and the court found that in the absence of an
express written agreement, such submission had to be implied or inferred. In
assessing whether it could be implied or inferred the court should look at whether
such a term could be implied under the law of the jurisdiction whose laws governed
the contract. To imply a term it was necessary for expert evidence to be given as to
the relevant rules of construction and any terms implied by law. Any implied term
must not only be as to the law applicable to the contract but to an agreement to
submit to the courts of that State.72
The decision in Rubin, it is argued, is a intended move by the UK Supreme Court
away from a modified Universalist approach that was adopted by Lord Hoffman in
McGrath v Riddell (HIH)73 and Cambridge Gas and a step back towards a more
Territorialist approach as has been confirmed in Singularis:
69
Rubin v Eurofinance SA [2013] 1 AC 236, 250–1 citing Collins, et al., see footnote 158, 689–90
[14R-054].
70
Rubin v Eurofinance SA [2013] 1 AC 236, 282 [159] citing Williams & Glyn’s Bank plc v Astro
Dinamico Compania Naviera SA [1984] 1 WLR 438, 444 (HL) approving Rein v Stein (1892) 66
LT 469, 471.
71
Rubin v Eurofinance SA [2013] 1 AC 236, 283–4 [165–167] referring to judgement obtained in
New Cap Reinsurance Corporation Ltd v A E Grant (2009) 257 ALR 740.
72
Vizcaya Partners Ltd v Picard [2016] Bus LR 413.
73
McGrath v Riddell [2008] 3 All ER 869.
The extreme version of the “principle of universality”, as propounded by Lord Hoffmann in

Cambridge Gas, has, as Lord Sumption explains, effectively disappeared, principally as a
result of the reasoning of Lord Collins speaking for the majority in Rubin, and speaking for
the Board in this appeal.74
The decision in Rubin has also been criticised for not taking into account the
ability to recognise a foreign judgement pursuant to the principles in comity.75 It is
questionable the extent to which Lord Collins was simply adopting the position he
set out as editor in Dicey, Morris and Collins76 and not seeking to address the
underlying principles associated with cross-border insolvency.
In Singularis the Privy Council the committee was asked to determine two issues
namely ‘whether the Bermuda court has a common law power to assist a foreign
liquidation by ordering the production of information (in oral or documentary
form), in circumstances where:-
(i) the Bermuda court has no power to wind up an overseas company such as
Singularis and
(ii) its statutory power to order the production of information is limited to cases
where the company has been wound up in Bermuda. The second issue is
whether, if such a power exists, it is exercisable in circumstances where an
equivalent order could not have been made by the court in which the foreign
liquidation is proceeding.’77
The Board confirmed that English Courts for over a century and a half had
exercised power to assist foreign liquidations and would order the winding up in
England of a company already under liquidation or likely to go into liquidation in
its place of incorporation provided there was a sufficient connection with England
and a reasonable prospect of benefit to the petitioners. The English Court would
treat the English winding up as ancillary to the winding up in the place of incor-
poration and limit the English liquidators powers and functions to getting in the
English assets and to dealing with them in such a way as to bring about a distri-
bution of the company’s world-wide assets on as uniform a basis as was consistent
with certain overriding principles of English insolvency law.78
The Board went on to consider what power a court has to assist a foreign
liquidation without conducting an ancillary liquidation of its own and determined
that it depended upon the nature of the assistance being sought.79 The Board
74
Singularis Holdings Ltd v PricewaterhouseCoopers [2014] UKPC 36, [157] per Lord
Neuberger.
75
Jodie Kirshner ‘The (false) conflict between due process rights and universalism in cross-border
insolvency’ (2013) 72 Cambridge Law Journal 27, 30.
76
Lord Collins et al. see footnote 158.
77
Singularis Holdings Ltd v PricewaterhouseCoopers [2014] UKPC 36 [8].
78
79
concluded that ‘even without a winding up, the court could, on ordinary principles
of private international law, have recognised as a matter of comity the vesting of the
company’s assets in an agent or office-holder appointed or recognised under the law
of its incorporation’.80
In the circumstances of the case the Board was asked to consider whether at
common law the court could assist a foreign court by ordering a third party in their
jurisdiction to produce documents in aid the administration of a foreign winding
up. Lords Sumption and Clarke found that such a power existed at common law
however indicated that such common law power should only be exercised:-
(a) in relation to court ordered winding up but not voluntary winding up;
(b) when such power existed in the place of incorporation;81
(c) should only be available to allow when it is necessary for the performance of
the officeholders functions;
(d) the exercise of the power should be consistent with the substantive law and
public policy of the assisting court.82
Lord Collins found that the type of assistance that had previously given under
the common law fell into two types:-
(a) ‘where the common law or procedural powers of the court have been used to
stay proceedings or the enforcement of judgments;’83 and
(b) ‘where the statutory powers of the court have been used in aid of foreign
insolvencies. The best known example is the use of the long-standing power to
wind up foreign companies which are being wound up (or even have been
dissolved) in the country of incorporation’.84 In this circumstance Lord Collins
adopted the reasoning of Sir Richard Scott V-C In re Bank of Credit and
Commerce International SA (No 10) in relation to the terms upon which such
assistance would be given who concluded:85
(1) Where a foreign company was in liquidation in its country of incorporation,
a winding up order made in England would normally be regarded as giving
rise to a winding up ancillary to that being conducted in the country of
incorporation.
(2) The winding up in England would be ancillary in the sense that it would not
be within the power of the English liquidators to get in and realise all the
assets of the company worldwide: they would necessarily have to con-
centrate on getting in and realising the English assets.
80
81
Singularis Holdings Ltd v PricewaterhouseCoopers [2014] UKPC 36 [25, 113, 134].
82
Singularis Holdings Ltd v PricewaterhouseCoopers [2014] UKPC 36 [25, 113].
83
84
85
[1997] Ch 213, 246.
(3) Since in order to achieve a pari passu distribution between all the com-
pany’s creditors it would be necessary for there to be a pooling of the
company’s assets worldwide and for a dividend to be declared out of the
assets comprised in that pool, the winding up in England would be ancillary
in the sense, also, that it would be the liquidators in the principal liquidation
who would be best placed to declare the dividend and to distribute the
assets in the pool accordingly.
(4) None the less, the ancillary character of an English winding up did not
relieve an English court of the obligation to apply English law, including
English insolvency law, to the resolution of any issue arising in the winding
up which was brought before the court.86
Lord Collins otherwise did not agree with the position of Lords Sumpton and
Clarke and found that the common law did not extend to granting assistance of the
type requested. Lords Mance and Neuberger found that the the common law did not
give a court the power to subpoena documents from third parties and to order the
examination of witnesses to assist a foreign insolvency proceeding.87 Lord Mance
described the situation as follows:-
There is a step leap between enforcing rights to identifiable assets and obliging third parties
to assist with documentation and information in order to discover a company’s assets (or,
still more widely, in order to enable insolvency practitioners to understand a company’s
affairs).
The Board of the Privy Council was concerned to ensure that the common law
did not in this case extend to provide a remedy equivalent to that available under
statue in respect of a domestic proceeding.
Appreciating the limits on the common law power of recognition, the courts in
England in cases involving the reorganisation of insolvency companies, have not
automatically recognised the USA Chap. 11 proceedings and the world wide stays
applicable thereunder under the common law. The courts have generally required a
proceeding in their jurisdiction to be commenced and to make an assessment in that
proceeding of the reasonableness of the proposed reorganisation in light of their
domestic regime.88 In the majority of cases however recognition would be sought
under the Model Law.
The UK common law position will become more important shortly due to
Britain existing the European Union and therefore unless a treaty is entered into
between Europe and the UK in relation to insolvency and reconstruction pro-
ceedings any such proceedings seeking recognition will have to be submitted
pursuant to Model Law or where it does not apply pursuant to the common law.
86
87
Singularis Holdings Ltd v PricewaterhouseCoopers [2014] UKPC 36 [135] – [136]; 156].
88
Re T&N Ltd [2005] 2 BCLC 488 [121–123].
4.5 USA
Prior to enacting Chap. 15 of the Bankruptcy Code the ‘United States followed a
modified Universalist approach both on pre-Bankruptcy Code case law and as
embodied in former Bankruptcy Code §304 which provided for comity and in the
case law interpreting it’.89 The United States Supreme Court stated, in applying
comity, that US bondholders were bound by a Canadian reorganisation proceeding
as:
… every person who deals with a foreign corporation impliedly subjects himself to such
laws of the foreign government, affecting the powers and obligations of the corporation
with which he voluntarily contracts, as the known and established policy of that govern-
ment authorize.90
The common law position of comity has been recognised by the courts in the
USA as early as 1883 and continues to apply.91 The USA had one rarely-invoked
exception to ensure that it ‘does not prejudice the rights of United States citizens or
violate domestic public policy’.92 The Restatement (second) of the Conflict of Laws
expresses the position on comity as follows:
A valid judgement rendered in a foreign nation after a fair trial in a contested proceeding
will be recognized in the United States so far as the immediate parties and the underlying
cause of action are concerned.93
In a number of cases in relation to companies that have operated in both Canada

and the United States, due to the commercial imperatives, the courts of those States
have required proceedings to be issued in both jurisdictions. This is easily achieved
due to the similarity that exists between the procedures for reorganisation under
both Chap. 11 of the US Bankruptcy Code and the provisions of the
Canadian CCAA.94 The courts in both States have been willing to enter into
insolvency agreements/protocols to coordinate their activities and recognise each
other’s decisions in the insolvency proceedings.95
In cases involving the reorganisation of insolvent companies, the US courts have
not automatically recognised English Company Voluntary Arrangements and
89
Glosband et al., see footnote 93, 39.
90
Canada Southern Railway Company v Gebhard, 109 U.S. 527, 537 (1883).
91
Canadian Southern Railway Co v Gebhard, 109 US 527 (1883).
92
Vitrix SS Co v Salen Dry Cargo AB, 825 F 2d 709, 713.
93
American Law Institute, Reinstatement (Second) of Conflict of Laws (1971) § 98.
94
Re Muscletech Research and Development Inc (2006) 19 CBR (5th) 54 [4] Farley J stated that
‘the courts of Canada and of the US have long enjoyed a firm and ongoing relationship based upon
comity’.
95
See Ziegel, see footnote 81; See e.g., Re Ephedra Products Liability Litigation, 349 BR 333
(Dist, SD NY, 2006).
4.5 USA 39
would generally require proceedings in their jurisdiction to be commenced and in

those proceedings an assessment to be made of the reasonableness of the proposed
reorganisation in light of their domestic regime.96
Chapter 15 of the Bankruptcy Code recognises that the granting of recognition,
and any assistance given following recognition of a foreign proceeding, must be
consistent with the principles of comity.97 The Bankruptcy Appeal Panel has held
that ‘Chap. 15 is fundamentally procedural in nature and does not constitute a
change in the basic approach of United States law, which, as we have explained,
has long been one of honouring principles of comity’.98 This concept has also been
expressed that a ‘central tenet of Chap. 15 is comity in cross border proceedings’99
The US Court of Appeals has stated that the principles of recognition are not only
governed by the Model Law, but by the principles of comity as determined by State
law. Where the party seeking recognition of a foreign judgment is not a foreign
representative that the relevant State law principles for recognition apply. The court
did not address the issue of whether the common law principles of comity continue
to apply in circumstances where Chap. 15 would otherwise apply.100
Further, in respect of insolvency and reorganisation proceedings in Canada or
Mexico, the American Law Institute published Transnational Insolvency:
Cooperation Among the NAFTA Countries, Principles of Cooperation Among
The NAFA Countries,101 the principles of which have been adopted, applied or
approved by a number of courts.
The US Bankruptcy Court has stated that granting comity is appropriate so long
as US parties are ‘provided the same procedural protections that litigants in the
United States would receive.’102 The court went onto to state:
Chapter 15 does not attempt to unify insolvency law of various countries. It does not
address issues such as choice of law, conflict of laws, attachment, set-off, recoupment, or
similar property rights. Instead, it leaves such decisions to the discretion of courts. In
determining whether comity should be extended, a bankruptcy court’s authority to grant
‘any appropriate relief’ under § 1521 is ‘exceedingly broad’.103
This position is not universally supported by the US Bankruptcy Court which

has commented that, as the Bankruptcy Code
… does not expressly deal with a proceeding from a foreign country that satisfies neither of
these requirements, i.e., a proceeding that is not or was not the debtor’s “center of main
interests” or a place where the debtor has or had an ‘establishment.’ Id. BCP draws the
96
Re T&N Ltd [2005] 2 BCLC 488 [2004] EWHC 2361 (Ch) [121–123].
97
11 USC §§ 1507, 1509 (2012).
98
Re Iida, 377 BR 243, 256 (BAP, 9th Cir, 2007).
99
Re Vitro SAB De CV, 701 F 3d 1031, 1043 (5th Cir, 2012); Re Rede Engeria SA, 2014 WL
4248121 (Bankr, SD NY, 2014).
100
Trikona Advisers Ltd v Chugh 846 F 3d 22 (2nd Cir, 2017).
101
The American Law Institute, see footnote 30.
102
Re Sivec SRL, 476 BR 310, 323 (Bankr, ED Okla, 2012).
103
Ibid.
implication that in such circumstances the foreign representative is completely shut out of
the U.S. judicial system and can obtain no substantive relief whatsoever.104
However, it is argued that this comment must be taken in context, wherein the
US Bankruptcy Court is a statutory court with limited jurisdiction confined to the
jurisdiction granted to the Court under the Bankruptcy Code. The court has indi-
cated that it does not have a general equitable jurisdiction.105 This position has been
confirmed by the US Supreme Court which has determined that the Bankruptcy
Court only has original jurisdiction in relation to ‘core’ matters under the
Bankruptcy Code and that whilst it can hear ‘non core’ matters these matter are
subject to a de novo review by the US District Court which must enter judgement
with respect to non-core matters.106
The issue remains as to whether by using the word ‘comity’ in Chap. 15, it is a
core matter under the Bankruptcy Code and whether the US Bankruptcy Court can
continue to apply the common law principle of comity since the introduction of the
Model Law provisions in Chap. 15. If the enactment of Chap. 15 in the Bankruptcy
Code has excluded the ability of the Bankruptcy Court to grant recognition under
the common law principles of comity, then it follows that no recognition can be
granted in relation to those debtors who are excluded from the operation of
Chap. 15 under section 561 and 1501 by that court. It is argued that any application
under common law principles of comity would have to be made to the US District
Court. Additional issues arising from the structure of the US legal system are
discussed in Sect. 6.7.1.
4.6 Summary
In Australia, New Zealand and the UK, there still exists an alternative statutory
regime to the Model Law pursuant to which recognition and assistance can be given
to a foreign proceeding and its foreign representative.
In all States examined, the principles of comity continue to apply. Although the
common law principles of comity and the tests applicable may differ between some
of the States examined, such differences are minor. Each of the States examined
104
Re Millennium Global Emerging Credit Master Fund Limited, 458 BR 63, 70 (Bankr, SD NY,
2011).
105
See, e.g., Re Loy 380 BR 154, 168 (Bankr, ED Va, 2007); Re Hellas Telecommunications
(Luxembourg) II 555 BR 323 (Bankr SD NY, 2016). It is suggested this is because the Bankruptcy
Court is an Article I and not an Article III court under the US Constitution and is vested with
limited jurisdiction. See generally Executive Benefits Insurance Agency v Arkison 134 S Ct 2165
(2014). The US District Court may withdraw cases from the Bankruptcy Court under 28 U.S.C. §
157(d); Re British American Insurance Co Ltd, 2013 WL 765373 (Bankr, SD Fla, 2013).
106
Executive Benefits Insurance Agency v Arkison 134 S Ct 2165 (2014); Re Bluberi Gaming
Technologies Inc 554 BR 841 (Bankr ND Ill 2016); Re Ace Track Co Ltd 556 BR 887 (Bankr ND
Ill, 2016).
4.6 Summary 41
would appear to have retained the common law principles of comity and their
courts’ ability to recognise foreign proceedings and provide assistance when
requested by foreign courts. The test promoted by Canada of a ‘real and substantial
connection’ has not been accepted by other jurisdictions.
In the USA, they have sought to link recognition under the Model Law to
granting comity, thereby arguably seeking to incorporate their common law prin-
ciples with those of Chap. 15. The extent of that link is not universally accepted by
its courts exercising bankruptcy jurisdiction. In the USA, there is also a question as
to whether the Bankruptcy Court has general power to grant common law comity
outside the provisions of Chap. 15. If not it may be necessary to make such
application in the US District Court. This issue requires further investigation and
perhaps legislative change.
Chapter 5
Concepts of Centre of Main Interest
and Establishment
Overview
This chapter introduces the reader to the perquisites for recognition under the
Model law namely:
• centre of main interest (COMI); and
• establishment.
and examines what is required for a foreign proceeding to be to fall within one of
these definitions.
5.1 Recognition
Pursuant to Article 17 the only types of foreign proceeds that can be identified are
those which are foreign main proceedings or foreign non main proceedings.
Article 2 of the Model Law defines a “foreign main proceeding” as a foreign pro-
ceeding taking place in the State where the debtor has the centre of its main interests.
A “foreign non main proceeding” is defined as a foreign proceeding, other than a foreign
main proceeding, taking place in a State where the debtor has an establishment.
It is therefore necessary to examine the definitions of centre of main interest
(COMI) and establishment and what factors the courts have taken into account in
determining the same.
5.2 Factors Determining COMI
As no definition of COMI is contained in the Model Law, UNCITRAL in its

Legislative Guide recommends that the appropriate meaning is that contained in the
EC Regulation.1 This definition differs between corporate and personal debtors.
1
United Nations Commission on International Trade Law, General Assembly, Legislative Guide
on Insolvency Law, UN Publications Sales No E.05.V.10 (United Nations, 2005), 41 [13].

DOI 10.1007/978-981-10-5876-9_5
44 5 Concepts of Centre of Main Interest and Establishment
The definition of COMI is contained in Article 3 of both the EC Regulation and

the Amended EC Regulation.2 It has been suggested that this has the advantage of
promoting a consistent approach to international recognition.3 The EC Regulation
provides that in respect of incorporated debtors that it ‘should correspond to the
place where the debtor conducts the administration of his interests on a regular basis
and is therefore ascertainable by third parties’.4 Article 16 deems that to be the
place of their registered office unless there is proof to the contrary.
In the case of individuals who are debtors Article 16 deems the individual COMI
to be their habitual place of residence.
The definition of this phrase under the EC Regulation was considered in
Eurofood wherein the European Court of Justice indicated that in referring to recital
13 of the EC Regulation, it should correspond to the place where the debtor con-
ducts the administration of its interests and is ascertainable by third parties.5 The
court went on to state that the relevant jurisdiction for determining rights and
remedies of creditors should be clear to investors at the time they make their
investment.6 If a party wishes to rebut the presumption, it must demonstrate ele-
ments relied upon that are transparent and ascertainable.7 The European Court of
Justice also requires an enquiry to be made if the place in which a company’s
central administration is located is not the same as that of its registered office, and in
such circumstances that a party cannot simply rely upon the presumption.8 This
concept is picked up in the Amended EC Regulation.9 These amendments as
contained in the Amended EC Regulation are discussed in Sect. 14.1.6.
Article 16 of the Model Law deems ‘in the absence of proof to the contrary’ for
the debtor’s registered office or habitual residence in the case of an individual, to be
the debtor’s COMI.10 There is a difference in the way the USA and Canada have
given effect to the rebuttable presumption as opposed to Australia, New Zealand
and the UK. This difference in approach is due in part to the different wording
adopted in their respective enactments of Article 16 as opposed to that contained in
the Model Law. Australia, New Zealand and the UK have adopted an interpretation
consistent with that taken by the European Court of Justice.11
2
United Nations Commission on International Trade Law Guide to Enactment of The UNCITRAL
Model Law on Cross-Border Insolvency UN Doc A/CN.9/442 [31, 72].
3
See Fletcher, see footnote 42, 458 [8.23].
4
Recital 13.
5
Re Eurofood IFSC Ltd [2006] Ch 508, 528 [107].
6
Ibid 530 [118].
7
Ibid 531 [122]; Re Northsea Base Investments Ltd [2015] EWHC 121 (Ch).
8
Re Interedil Srl [2012] Bus LR 1582, 1592 [51–53].
9
Recital 30.
10
Article 16(3).
11
See Ackers v Saad Investment Company Ltd (in liq) (2010) 190 FCR 285; Williams v Simpson
[2011] 2 NZLR 380; Re Stanford International Bank Ltd [2011] Ch 33 in which the courts
followed the European Court of Justices decision Re Eurofood IFSC Ltd, [2006] Ch. 508.
5.2 Factors Determining COMI 45
Several courts in different States have specified the factors that should be con-
sidered when determining a debtor’s COMI. These factors vary according to
whether the debtor is an individual or company.12 Dicey, Morris and Collins on the
other hand argue that the enquiry should be looked at from the perspective of both
the debtor and an objective observer.13 Professor Wade, after examining the dif-
ferent interpretations from the USA and the UK, and comparing those relating to the
interpretation of COMI under the EC Regulation, has stated that a court must make
an independent fact-based determination using objectively ascertainable factors.14
Ho has criticised the stance taken by the English Court of Appeal in Stanford
International Bank as following the interpretation of COMI under the EC
Regulation which looks at the head office function, whereas the interpretation
adopted by the courts in the USA has concentrated on the ‘principle place of
business’.15
Professor Westbrook has argued that the international interpretation of COMI
under the Model Law should consider the quality of the substantive law of the State
of the main proceedings as, otherwise, public policy may prevent courts from
recognising some jurisdictions which are recognised havens.16 Havens are gener-
ally described as jurisdictions which will protect the interests of directors and
management rather than creditors, and their local laws usually have secrecy pro-
visions. He suggests that a COMI rule should not be adopted that ‘is likely to permit
havens to serve often as the COMI of a corporation whose headquarters and
operations are elsewhere’.17
Westbrook further argues that the proper interpretation of the Model Law and
Chap. 15 of the US Bankruptcy Code should give only limited weight to the
presumption of the jurisdiction of incorporation as the COMI.18 This may be seen
as contrary to the European Court of Justice’s decisions on Eurofood and Interedil
which can be read as creating a presumption in favour of the State of incorporation
which can be rebutted should it be shown that their place of central administration is
in another State.19 This test has effectively been included in the Amended EC
Regulation, which requires a comprehensive understanding of all relevant factors
including to determine the place of the actual management and supervision and
12
See Williams v Simpson [2011] 2 NZLR 380,395; Re Angiotech Pharmaceuticals Ltd (2011) 76
CBR (5th) 317 [7]; Re Massachusetts Elephant & Castle Group Inc (2011) 81 CBR (5th) 102 [30];
Re Sphinx Ltd, 351 BR 103, 117 (Bankr, SD NY, 2006.); Re Ran, 607 F. 3d 1017, 1022–1023 (5th
Cir 2010).
13
Collins et al., see footnote 158, 1766 [31–108].
14
Judith May Wade, ‘Where is a corporation’s “centre of main interests” in international insol-
vency’ (2008) 16 Insolvency Law Journal 127, 144.
15
Ho, see footnote 75, 194–200.
16
Jay Westbrook, ‘Locating the Eye of the Financial Storm’ (2007) 32 Brooklyn Journal of
International Law 1019, 1030–1.
17
Ibid 1032.
18
Ibid 1033–4.
19
Re Eurofood IFSC Ltd [2006] Ch 508; Re Interedil Srl [2012] Bus LR 1582.
management of the debtor’s interests that is ascertainable by third parties.20 No list

has been specified of other relevant factors which has the potential of creating
inconsistency.
The UNCITRAL Guide was amended in 2014 to suggest that where on an
application for recognition there appears to be a separation between the debtor’s
registered office and it’s COMI, then the party alleging that the registered office is
not the COMI will need to satisfy the court of the debtor’s COMI. The court
hearing the application for recognition will need to consider independently the
debtor’s COMI.21 This test is different from that contained in the Amended EC
Regulation which provides that the registered office presumption can be rebutted
should it be shown that the debtor’s central administration is in the State of its
registered office, upon proof of which a comprehensive investigation has to be
conducted to determine the location of the actual centre of management and
supervision and the management of its interest.22
The amendments to the UNCITRAL Guide changes the factors to be considered
as a whole to indicate a debtor’s COMI to be:
(a) Where the central administration of the debtor takes place; and
(b) The location which is readily ascertainable by creditors.23
Where these factors do not yield a ready answer, a further 15 factors should be
considered after giving a relevant weight to each.24 These amendments require a
20
141/19 recital 30.
21
United Nations Commission on International Trade Law, Report of Working Group V
(Insolvency Law) on the work of its forty-third session (Vienna, 15–19 April 2013) UN Doc
A/CN.9/766 (26 April 2013), 7 [36]; United Nations Commission on International Trade Law,
Interpretation and application of selected concepts of the UNCITRAL Model Law on Cross-
Border Insolvency relating to centre of main interests (COMI) 43rd session, UN Doc A/CN.9/WG.
V/WP.112, (11 February 2013) 21.
22
141/19 recital 30.
23
United Nations Commission on International Trade Law, UNCITRAL Model Law on Cross
Border Insolvency with Guide to Enactment of The UNCITRAL Model Law on Cross-Border
Insolvency (United Nations, 2014) 71 [145–147].
24
A/CN.9/766, 7 [39]; United Nations Commission on International Trade Law, Report of the
United Nations Commission on International Trade Law 46th session (Vienna, 8–26 July 2013)
UN Doc A/68/17; United Nations Commission on International Trade Law, Interpretation and
application of selected concepts of the UNCITRAL Model Law on Cross-Border Insolvency
relating to centre of main interests (COMI) forty third session, UN Doc A/CN.9/WG.V/WP.112
(11 February 2013) 21–2; Revision of the Guide to Enactment of the Model Law on Cross-Border
Insolvency GS Res 68/107 UN GOAR 68th sess, UN Doc A/Res/68/107A (16 December 2013);
United Nations Commission on International Trade Law, UNCITRAL Model Law on Cross Border
Insolvency with Guide to Enactment of The UNCITRAL Model Law on Cross-Border Insolvency
(United Nations, 2014).
5.2 Factors Determining COMI 47
court to look at more factors than the Amended EC Regulation discussed below in
Sect. 14.1.4. This may of itself lead to further inconsistent decisions.25 In an
attempt to link the concept of COMI as it appears in both the Model Law and the
EC Regulation, the UNCITRAL Guide has been amended to provide that,
notwithstanding the different purpose for which COMI is used, that the EC
Regulation jurisprudence may be relevant to the interpretation of the Model Law.26
However, it is argued that there is an issue regarding the extent to which the
courts of States which have enacted the Model Law can consider the amendments to
the UNCITRAL Guide after their domestic enactment of the Model Law. This
would involve issues of the domestic rules of interpretation and may be seen as a
breach of the principles of legislative sovereignty. It is argued that where major
amendments have been made to the UNCITRAL Guide since the date of enactment
of the domestic provisions of the Model Law, a court may refuse to consider such
amendments. This is especially the case in the UK wherein the domestic legislation
enacting the Model Law specially allows the courts to refer to the UNCITRAL
Guide by document number, thereby giving rise to a possible inference that the
amendments to the UNCITRAL Guide cannot be referred to.27 This is in contrast to
the position in New Zealand where the courts can refer to any document relating to
the Model Law that originates from UNCITRAL.28 The adoption of the amend-
ments in the USA may be difficult as their legislature intentionally amended their
version of the Model Law in relation to this issue. To date, the courts’ approaches to
assessing COMI differ: the approach taken in Europe is consistent with the EC
Regulation, which sets a high threshold to rebut the presumptions contained in
Article 16(3), while that adopted in Canada and the USA is a ‘command and
control’ test.29
Given these different views, it is not clear what factors should be considered
when determining a debtor’s COMI. However, it is clear that the class of factors
that are to be looked at is not closed and may depend upon the jurisdiction in which
the application for recognition is being heard. It is argued that, considering the
weighting that different courts give to these factors, inconsistent findings may be
made.
25
See generally, Look Chan Ho, ‘The Revised UNCITRAL Model Law Enactment Guide—A
Welcome Product?’ [2014] Journal of International Banking Law and Regulation 325.
26
A/CN.9/766, 21 (26 April 2013) [123A]; United Nations Commission on International Trade Law,
Border Insolvency relating to centre of main interests (COMI) forty third session, UN Doc
A/CN.9/WG.V/WP.112 (11 February 2013) 7 [36].
27
Cross-Border Insolvency Regulations 2006 SR 2006/1030 reg 2(2)(c).); see generally, Fibria
Celulose S/A v Pan Ocean Co Ltd [2014] EWHC 2124 (Ch) (30 June 2014) [88].
28
Insolvency (Cross-border) Act 2006 s 5.
29
Janis Sarra ‘Oversight and Financing of Cross-Border Business Enterprise Group Insolvency
Proceedings’ (2009) 44 Texas International Law Journal 547, 558.
It is, however, suggested that should a definition of COMI be inserted into the
EC Regulation as has been proposed, then it is desirable for the definitions con-
tained in the EC Regulation and the Model Law to be consistent. This will avoid
difficulties in interpretation for those States, such as the UK, which have both the
EC Regulation and the Model Law as part of their domestic law. This can easily
be done by inserting the list of relevant factors from the UNCITRAL Guide into
the EC Regulation. The weight to be given to the presumption should also be
consistent.
Arguably therefore uniformity between the European position and that in North
America will be achieved only when a consistent decision is arrived at in a case in
which the debtor company has a registered office and there is no evidence regarding
its place of central management. It appears that this would not be achieved in all
circumstances by the Amended EC Regulation and the recent amendments to the
UNCITRAL Guide which will provide different threshold tests for rebutting
the registered office presumption in respect of corporate debtors. The test in the
Amended EC Regulation for rebutting the presumption appears to require a higher
standard than do the amendments to the UNCITRAL Guide.
5.3 Factors Considered When Determining Establishment
Article 2 of the Model Law defines an establishment as “any place of operations

where the debtor carries out a non-transitory economic activity with human means
and goods or services.” This was inspired by the same term contained in Article 2 of
the EC Regulation, except that the EC Regulation does not include the words ‘or
services’.
Virgos and Schmidt when explaining the definition in relation to the EC
Regulation state that the mere presence of assets is not sufficient to amount to an
establishment. The definition contained in the Model Law requires a place of
operations which Virgos and Schmidt describe as ‘a place from which economic
activities are exercised on the market (i.e. externally), whether the said activities are
commercial industrial or professional’.30 They further state that:
The emphasis on an economic activity having to be carried out using human resources
shows the need for a minimum level of organization. A purely occasional place or oper-
ations cannot be classified as an “establishment”. A certain stability is required. The
negative formula (non-transitory”) aims to avoid minimum time requirements. The decisive
factor is how the activity appears externally, and not the intention of the debtor.31
30
Virgos & Schmidt, see footnote 26 [71].
31
Ibid.
5.3 Factors Considered When Determining Establishment 49
5.3.1 Australia
The Federal Court of Australia after referring the authorities from New Zealand,
UK and USA has equated establishment to a place of operations.32 The Federal
Court has looked at various factors including:
(a) The place of residence of the directors;
(b) The place of incorporation;
(c) The place all executive decisions as to employee remuneration, business
strategy and what to do with any cash generated through the company’s
business in Australia were made in the UK;
(d) The place of residence of the majority of employees;
(e) The place of residence of the majority of the company’s creditors;
(f) The place the company paid tax and whether it paid tax in Australia;
(g) The state in which the majority of the company assets (including residence)
were located.33
5.3.2 Canada
The Canadian version of the Model Law does not contain a definition of or a
reference to an establishment; nor does it state that it is a necessary element of a
non-main proceeding that the debtor has an establishment in the State.
5.3.3 New Zealand
The New Zealand High Court has considered this term and noted that it has the
same definition in the EC Regulation. The court referred to the Virgos–Schmidt
Report which describes a ‘place of operations’ as one from which ‘economic
activities are exercised on the market (that is externally), whether the said activities
are commercial industrial or professional. The court noted that the authors’
emphasis on economic activity using human resources demonstrated a need for ‘a
minimum level of organisation’. The Court also noted that a ‘certain stability is
required for there to be an establishment’.34
32
Gainsford v Tannenbaum(2012) 293 ALR 699 [51].
33
Wild v Coin Co International PLC (Administrators Appointed)[2015] FCA 354 (16 April
2015) [66].
34
Williams v Simpson [2011] 2 NZLR 380 at 393 quoting paragraph [71] of the Virgos-Schmidt
Report.
5.3.4 United Kingdom
In the UK, the word ‘assets’ has been substituted for ‘goods’ in the definition of
establishment, thereby covering both land and intangible property. The effect of this
difference has not to date been investigated by the courts of any State examined.
This amendment to the Model Law would appear, however, to allow the UK courts
to recognise a larger number of foreign proceedings than Australia, New Zealand or
the United States, including those where the establishment was a real estate owning
and leasing business and those that provide finance.
The English Court of Appeal in Shierson v Vlieland-Boddy considered the
definition of an establishment under the EC Regulation. The court found that, as the
bankrupt held a beneficial interest in a property that was leased out as a multi-let
business premises, the debtor was a landlord. Further, as a landlord, the debtor
would need to manage the property (even if done through an agent) and was
therefore carrying out a non-transitory economic activity with human needs and
goods and as such this was an establishment. It is argued that this decision is not
consistent with the definition of establishment as contained in the EC Regulation or
what is stated by Virgos and Schmidt, and should be not be followed in other States
in respect of the definition of that term under the Model Law other than in the UK
where the definition of that term has been changed. Simply put Shierson should be
confined to its facts as the court spent considerable time explaining the steps taken
by the bankrupt to hide this asset and was seeking to find a way to assist the foreign
representative to obtain control of the assets. It is argued that it is not the purpose of
the definition of establishment contained in the Model Law to recognise as an
establishment one based upon only equitable interests as this would lead to the
absurd result of investors who own units in a listed units property trust carrying out
a non-transitory economic activity in each jurisdiction in which the trust owns
property.
More recently, the English Court of Appeal has relied upon the Virgos and
Schmidt report in stating that it depends on ‘whether it has in that other country a
“place of operations” where non-transitory “economic activity” is carried on “with
human means and goods”, i.e. with human and physical resources’. The court
further stated that more is required than simply having a branch office or place
where the debtor is located.
The English High Court has also stated in cases involving the EC Regulation,
that the date for determining the existence of an establishment is the date of pre-
sentation of the petition. Justice Mann went on to state that the concept of estab-
lishment involves:
… 3 ingredients for these purposes – (i) a place where things happen, and (ii) sufficient
things (iii) of sufficient quality happening there. The concept of non-transitoriness goes to
the third of them. In my view the converse of something being transitory is not confined
merely to things which are “fleeting” (to use one English synonym) but is also intended to
encapsulate such things as the frequency of the activity; whether it is planned or accidental
or uncertain in its occurrence; the nature of the activity; and the length of time of the
activity itself.35
The court held that the term ‘goods’ in the definition should correctly be
interpreted as ‘assets’. This amendment has been incorporated into the definition
contained in their domestic version of the Model Law. The Court also determined
that if all that is left by the debtor is assets in the jurisdiction, then it is not enough
to found an establishment. This would appear to be inconsistent with the UK
definition contained in the Model Law although it is consistent with a Universalist
approach to the term.
In Olympic Airways SA, the Court of Appeal noted that the concept of an
‘establishment’ was the same under the Model Law and that in considering whether
there was an establishment the court should look for a location where there is still,
at the critical date, ‘a business operation such as will justify secondary proceedings
in a State outside the State of the centre of main interests…’.36 The court went on to
state:
The question is whether at that point it has an establishment in a country other than the
country of its “main interests”, and that depends on whether it has in that other country a
“place of operations” where non-transitory “economic activity” is carried on “with human
means and goods”, i.e. with human and physical resources.37
The difficulty in establishing the factors that should be considered when deter-
mining whether a debtor had an establishment in the jurisdiction of the represen-
tative who is seeking recognition, has been appreciated in both New Zealand and
the USA. There is no defined list of factors that a court should consider; moreover,
the courts state that they are not attempting to define the scope of possible activities
that would suffice to demonstrate the existence of an individual debtor’s
establishment.
As in the case of the corporate COMI, it is arguable that the list of factors to be
taken into account by a court when determining whether an establishment exists, is
not closed.
Dicey, Morris and Collins when commenting upon the term ‘establishment’ in
the EC Regulation, state that the term ‘non-transitory’ indicates that an occasional
or temporal place of operations does not qualify. The reference to human means
would ‘appear to connote operations conducted through personnel including
employees and some forms of agent which in effect give the debtor a degree of
stability’ in that State.38 Furthermore, they speculate that the term ‘goods’ is more
problematic because in the French version of the text this is referred to as biens
which means property or assets of any kind. They also indicate that the term
35
Re Office Metro Limited [2012] BCC 829, 839 [33].
36
The Trustees of the Olympic Airlines SA Pension & Life Insurance Scheme v Olympic Airlines
SA [2013] 2 BCLC 171; [2013] EWCA Civ 643 (6 June 2013) [31].
37
Ibid [32].
38
Lord Collins et al., see footnote 158, 1634 [30–186].
‘goods’ does not include services, although if they are provided by human means, it
would fit within the definition of biens.
It is argued that the intention of obtaining consistency between the provision of
the EC Regulation and the Model Law in the UK may be a reason for the change in
the definition of establishment in the Model Law provisions in the UK. If this is the
case, it is evidence of a territorialist European stance as it will not achieve uni-
formity with States outside Europe.
5.3.5 USA
The definition contained in the US Bankruptcy Code does not include the words
‘with human means and goods or services’. The US House of Representatives
report states that the change to the definition ‘has been necessary to comport with
United States terminology’.39 The US Bankruptcy Court has found that an estab-
lishment should constitute a ‘seat for local business activity’ for the debtor. The
terms ‘operations’ and ‘economic activity’ ‘require showing of a local effect on the
marketplace, more than mere incorporation and record-keeping and more than just
the maintenance of property’.40
In Ran, the US Court of Appeals after referring to the above passages, stated:
recognition based on the existence of the bankruptcy proceeding and debts alone poses
problems. First, a bankruptcy proceeding is by definition a transitory action, but recognition
as a nonmain proceeding requires that the debtor carry out nontransitory activity in a
location… To permit a transitory action, i.e., the existence of the Israeli bankruptcy pro-
ceeding and corresponding debts alone to constitute the basis for finding nontransitory
economic activity, would be inappropriate because it would go against the plain meaning of
the statute. Second, if Ran’s bankruptcy proceeding and associated debts, alone, could
suffice to demonstrate an establishment, this would render the framework of Chap. 15
meaningless.41
The US Court of Appeals found that as Mr. Ran had moved from Israel to the
USA more than eight years previously, and was not involved in any business in
Israel, he did not have an establishment in Israel. At the time of issue of the petition
seeking recognition, Mr. Ran’s only connection with Israel was the debts he had
there. The court rejected a submission that his trustee was his agent and in that
capacity carried out an economic activity in Israel.
In Lavie v Ran, the US District Court commented that the US Congress had
lowered the threshold to demonstrate the existence of an establishment by deleting
the phrase ‘with human means and goods and services’. The Court further found
39
US House of Representatives Committee on the Judiciary, United States Congress, Bankruptcy
Abuse Prevention and Consumer Protection Act (8 April 2005), HR Report Pub L No 109–31.
40
Re British American Insurance Co Ltd, 425 BR 884, 915 (Bankr, SD Fla, 2010).
41
Re Ran, 607 F 3d 1017, 1028 (5th Cir, 2010).
that the date for determining whether an establishment existed was the date when
the foreign representative filed a petition seeking recognition.
5.3.6 Establishment Generally
As can be seen from the above, there is no uniformity in the positions taken by the
UK and the USA courts. Both States have also altered the wording of that defi-
nition. The courts in the USA seemingly indicate that a lower standard is required in
the USA because of the different wording in their legislation. If this is correct, then
it is argued that both the UK and the USA may have put their domestic interests
above the desire to achieve a degree of uniformity and certainty in the recognition
of foreign insolvency and reconstruction proceedings between States. In so doing,
they are working against the Universalist principles they espouse and upon which
the Model Law is based.
5.4 Time of Recognition of COMI and Establishment
For recognition to occur, the debtor must have either their COMI or an establish-
ment in the State from which the foreign representative is seeking recognition.
There is no unanimity in the position of courts in relation to the time at which this is
assessed. There are different dates proposed even by the same court.
In Australia and the USA, the date of hearing of the application for recognition
has been proposed as the relevant date.42 In Australia the court has however stated
that they can look at historical facts that have led to the position as it is at the time
for determination.43
In Australia, the Federal Court in recognising that different decisions exist in
terms of the time for determining a habitual residence, stated:
I have focussed upon the position as at the time when the application to this Court, was filed,
rather than some anterior time, first and foremost because Article 16, para 3 of the Model Law
uses the present tense. It also coincides with the focal point adopted by Heath J in Williams v
Simpson for determining habitual residence. That is not to exclude reference to an individual
debtor’s historical position. Indeed, reference to that may be critical in determining whether
the present residential position is “habitual”. The scope for factual inquiry is broad and, though
a debtor’s subjective intention is not irrelevant, the conclusion as to habitual residence must be
reached after an objective examination of the whole of the evidence.44
42
Moore v Australian Equity Investors (2012) 30 ACLC 629, 633) [18]; Young v Buccaneer
Energy Ltd [2014] FCA 711 (2 July 2014) [5]; Re British American Insurance Co Ltd 425 BR 884,
910 (Bankr, SD Fla, 2010).
43
Young v Buccaneer Energy Ltd [2014] FCA 711 (2 July 2014) [5].
44
Gainsford v Tannenbaum (2012) 293 ALR 699, 711 [44].
In New Zealand, the UK and the USA, courts have also held that the time for
determining the COMI and establishment is the date on which the respective
application or petition is issued in the jurisdiction in which recognition is being
sought.45 The US Court of Appeals has recently extended this by stating that:
COMI should be determined based on its activities at or around the time the Chap. 15
petition is filed, as the statutory text suggests. But given the EU Regulation and other
international interpretations, which focus on the regularity and ascertainability of a debtor’s
COMI, a court may consider the period between the commencement of the foreign
insolvency proceeding and the filing of the Chap. 15 petition to ensure that a debtor has not
manipulated its COMI in bad faith.46
The US Bankruptcy Court has advocated the date of hearing of the petition on
the following basis:
Section 1517(d) authorizes the court to modify or terminate recognition based on changed
circumstances. These provisions exhibit a policy that the recognition process remains
flexible, taking into account the actual facts relevant to the court’s decision rather than
setting an arbitrary determination point. In light of these provisions, if the location of a
debtor’s COMI changes between the date a Chap. 15 petition is filed and the date a court
makes a determination on recognition, the court may look to the facts on the latter date for
purposes of COMI.
Selecting the latest possible date for the COMI analysis is consistent with the aim of
international uniformity stressed in Ran and Betcorp. Over time, the circumstances affecting
recognition may change.47
This issue was also addressed by the US Bankruptcy Court in relation to

determining the date for recognition of establishment. The court held that as a result
of the use of the present tense, it is determined as being the date of filing the petition
for recognition.48
In the UK, an alternate date has been stated by the Chancellor as being appli-
cable, namely the time at which the proceeding for which recognition is sought
were issued.49 This would appear to be similar to an alternate date put forward in
the USA, namely the date on which the foreign proceedings commenced for which
recognition is sought.50
45
Williams v Simpson [2011] 2 NZLR 380, 396 [65]; Re Office Metro Limited [2012] BCC 829,
838 [27]; Re British American Isle of Venice (BVI) Ltd 441 BR 713, 720–21 (Bankr SD Fla,
2010); Re Ran, 607 F. 3d 1017,1025 (5th Cir 2010), Re Betcorp Ltd, 400 BR 266, 290–2 (Bankr,
D Nev, 2009); The Trustees of the Olympic Airlines SA Pension & Life Insurance Scheme v
Olympic Airlines SA [2013] 2 BCLC 171; [2013] EWCA Civ 643 (6 June 2013) [35].
46
Re Fairfield Sentry Ltd 714 F 3d 127 (2nd Cir 2013) 137.
47
48
See Lavie v Ran 406 BR 277, 284-5 (Dist, SD Tex, 2009); Re British American Insurance Co
Ltd 425 BR 884, 915–6 (Bankr, SD Fla, 2010).
49
Re Stanford International Bank Ltd [2011] Ch 33, 59 [30].
50
Re Millennium Global Emerging Credit Master Fund Ltd, 458 BR 63, 76 (Bankr, SD NY,
2011); Re Gerova Financial Group Ltd, 482 BR 86 (Bankr, SD NY, 2012); Re Kemsley 489 BR
5.4 Time of Recognition of COMI and Establishment 55
The UNCITRAL Guide has been amended to provide that the relevant date
should be the date of commencement of the foreign proceeding.51 It is noted that
under domestic laws of the foreign State, this date may be backdated in which case
it should be that earlier date.52 It is argued that this test may not prevent the shifting
of assets where a non-main proceeding is commenced first and ultimately leads to
the commencement of the main proceedings. Further States may not consider these
amendments due to legislative sovereignty.53
5.4.1 Difficulties with Present Proposed Dates
If the date for determining COMI is the date of issuing the application for recog-
nition, and this position is adopted in other States, different factors could lead to
different results as assets and business units are shifted between jurisdictions by the
foreign representatives or the officers of the debtor in the case where there is a
debtor in possession.
If the date of the issue of the foreign proceedings for which recognition is sought
is adopted, it is arguable that this may also cause problems where a non-main
proceeding was issued before the proceeding in which recognition is being sought,
or where recognition is sought of foreign proceedings which were not the first
proceedings issued in respect of that debtor.
If the date of hearing the application is adopted, this will lead to different
decisions being made in different jurisdictions, especially if some asset shifting has
(Footnote 50 continued)
346, 359–60 (Bankr, SD NY, 2013); Contra Re Fairfield Sentry Ltd, 714 F 3d 127 (2nd Cir 2013)
134–5.
51
(2013) (16 December 2013) [141].
52
A/CN.9/766 (26 April 2013) 7; United Nations Commission on International Trade Law, Report of
the United Nations Commission on International Trade Law 46th session (Vienna, 8–26 July
2013) UN Doc A/68/17; United Nations Commission on International Trade Law, Interpretation
and application of selected concepts of the UNCITRAL Model Law on Cross-Border Insolvency
(11 February 2013) 25; Revision of the Guide to Enactment of the Model Law on Cross-Border
Insolvency GS Res 68/107 UN GOAR 68th sess, UN Doc A/Res/68/107A (16 December 2013).
53
See discussion in Sect. 5.2.
occurred since the appointment of the foreign representatives as occurred in Bear

Stearns.54 It may lead to a competition between representatives to secure the assets
and bring them within their home jurisdictions. This competition will not lead to
cooperation between States.
History has shown us examples of assets and business back offices being moved at
very short notice prior to insolvency proceedings being issued.55 In the case of
bankruptcies of individuals, this could be further complicated by the bankrupts
themselves moving jurisdiction post-bankruptcy as occurred in Australia with Mr.
Christopher Charles Skase who moved to Spain, reportedly after loading assets onto a
boat from a beach in Northern Queensland and in England with Mr. Martin
Vlieland-Boddy.56 Similar issues are highlighted by Mr. Tannenbaum’s actions in
moving from South Africa to Australia before being made bankrupt in South Africa.57
By way of comparison, the European Court of Justice when considering this
issue, determined that the appropriate time for determining the issue under the EC
Regulation is the date on which the request to open insolvency proceeding is
lodged.58 This was based upon the Court not wanting to have the purpose of the EC
Insolvency regulation frustrated by a debtor moving its COMI between the date of
issue of the proceedings and the making of any insolvency order.59
Wade notes that there is a difference between the test under the Model Law and
the EC Regulation namely that under the Model Law, the COMI is determined at
the time recognition is granted; under the EC Regulation, it is determined at the
time the request to open insolvency proceedings is filed and not when the opening
decision is made.60
5.4.2 Suggested Reform
It is argued that the time at which the debtors COMI or establishment is to be

determined requires clarification and that a consistent date for recognition exist
54
See Re Bear Stearns High Grade Structured Credit Strategies Master Fund Ltd, 374 BR 122
(Bankr, SD NY, 2007); Re Bear Stearns High-Grade Structured Credit, 389 B.R 325 (Dist
SD NY, 2008).
55
John A.E Pottow, ‘The Myth (and Realities) of Forum Shopping in Transnational Insolvency’
(2006) 32 Brooklyn Journal of International Law 785, 797–802, 805–6; Hoffman v Bullmore (Re
National Warranty Insurance Risk Retention Group) 306 BR 614 (BAP, 8th Cir, 2004) affirmed
384 F.3d 959 (8th Cir, 2004).
56
See Re Skase (1991) 32 FCR 212, 213; Re Skase, Ex parte Donnelly (1992) 37 FCR 509, 510;
Shierson v Vlieland-Boddy [2005] 1 WLR 3966, [5–10].
57
Gainsford v Tannenbaum (2012) 293 ALR 699, 700–2.
58
Re Interedil Srl [2012] Bus LR 1582, 1592–3 [55]; Re Staubitz-Schreiber [2006] BCC 639.
59
Re Staubitz-Schreiber [2006] BCC 639, 644 [24].
60
Judith May Wade, ‘Where is a corporation’s “centre of main interests” in international insol-
vency’ (2008) 16 Insolvency Law Journal 127, 136.
5.4 Time of Recognition of COMI and Establishment 57
between the Model Law and the EC Regulation. Further it is suggested that the
correct date for determining both COMI and establishment should be the earlier of:
(a) The date the foreign main proceeding was commenced;
(b) The date of commencement of a foreign non-main proceeding that is still on
foot as at the date of issue of the proceedings seeking recognition in the
Contracting State in which recognition is sought.
It is argued that the above formulation takes account of the issues identified
above and will avoid forum shopping as the time for recognition would be deter-
mined at the time the debtor is still trading. This proposed test considers the
circumstance where a non-main proceeding prompts the issuing of the main
proceeding.
Alternatively for consistency with the Amended EC Regulation the Model Law
could be amended to provide that recognition should not be granted under the
debtor has had that COMI or establishment for 3 months prior to the foreign
proceeding being issued.
Chapter 6
Comparative Analysis of the Enactment
and Interpretation of the Preamble
and Chapter I of the Model Law
on Cross-Border Insolvency—General
Provisions
Overview
Chapters 6–10 identify where there is a significant variation in the domestic

enactment of a provision of the Model Law or where that provision has not been
enacted. They further examine how those provisions have been interpreted by the
courts of those States.
The UNCITRAL Guide has been referenced by a number of courts when
interpreting their domestic version of the Model Law. Chapters 6–10 examine
whether it is the basis upon which some uniformity has been achieved in the
interpretation of the Model Law, despite the differences in manner in which the
Model Law has been enacted in those States.
This chapter:
• examines how the provisions of the Preamble and Chapter I of the Model Law
are enacted by the five nominated States.
• sets out the definitional and interpretative provisions of the Model Law,
including the types of debtors and representatives to which the Model Law
applies, and shows how it interacts with other treaties.
Canada introduced the Model Law by inserting the same into Part IV of the
CCAA in respect of large corporate insolvency and restructuring and by inserting it
into Part XIII of the BIA in respect of other insolvencies. As their provisions are not
identical; the provisions of both acts have been dealt with separately in Chaps. 6–10.
6.1 Preamble
The purpose of the present Law is to provide effective mechanisms for dealing with
cases of cross-border insolvency so as to promote the objectives of:
(a) Cooperation between the courts and other competent authorities of this State
and foreign States involved in cases of cross-border insolvency;

DOI 10.1007/978-981-10-5876-9_6
60 6 Comparative Analysis of the Enactment and Interpretation …
(b) Greater legal certainty for trade and investment;

(c) Fair and efficient administration of cross-border insolvencies that protects the
interests of all creditors and other interested persons, including the debtor;
(d) Protection and maximization of the value of the debtor’s assets;
(e) Facilitation of the rescue of financially troubled businesses, thereby protecting
investment and preserving employment.
The preamble sets out purposes of the Model Law. All of the States examined,
other than the UK, have chosen to include the preamble in their version of the Model
Law. No explanation has been given as to why it is not included in the UK version of
the Model Law. The Canadian version of the Preamble amends the same to make it
consistent with the definitions contained in their existing domestic legislation.
In the USA they substitute for ‘other competent authorities’ in paragraph (a) the
‘United States trustees, trustees, examiners, debtors and debtors in possession’. On
one reading this makes the purpose wider than that envisaged by the Model Law. In
the USA, the Bankruptcy Court has also highlighted the added flexibility given to
the court by the provisions of the Model Law.1
6.2 Article 1
Scope of application
The present Law applies where:
(a) Assistance is sought in this State by a foreign court or a foreign representative
in connection with a foreign proceeding; or
(b) Assistance is sought in a foreign State in connection with a proceeding under
[identify laws of the enacting State relating to insolvency]; or
(c) A foreign proceeding and a proceeding under [identify laws of the enacting
State relating to insolvency] in respect of the same debtor are taking place
concurrently; or
(d) Creditors or other interested persons in a foreign State have an interest in
requesting the commencement of, or participation in, a proceeding under
[identify laws of the enacting State relating to insolvency].
The present Law does not apply to a proceeding concerning [designate any types of
entities, such as banks or insurance companies, that are subject to a special insol-
vency regime in this State and that this State wishes to exclude from the present Law].
Article 1 sets out the scope of the Model Law which is designed to be an
inclusive approach so as to catch all types of foreign proceedings other than those
1
Re Sphinx Ltd, 351 BR 103, 112–4 (Bankr, SD NY, 2006).
6.2 Article 1 61
excluded.2 The Model Law envisages the inclusion of a number of local exclusions
in its operation in different States.3 There appears to be no consistency between the
five identified States as to the type of debtors that are to be excluded from their
domestic versions of the Model Law.
In Australia, the following types of insolvencies are excluded:
(a) Parts 5.2 of the Corporations Act which relates to Receivers and Controllers4;
(b) Part 5.4A of the Corporations Act which relates to the winding up on grounds
other than insolvency5;
(c) Section 601CL of the Corporations Act which relates to the winding up of
Foreign Companies6; Mason has commented that this section reflects an anomaly
as it deals with the appointment of a local liquidator where a foreign company
registered under Part 5B.2 is being wound up in its place of incorporation.7
(d) Australian Deposit Taking Institutions (ADIs) as defined under the Banking Act
1959 (Cth)8;
(e) General Insurers as defined under the Insurance Act 1953 (Cth)9; and
(f) Life Insurance companies as defined under the Life Insurance Act 1995 (Cth).10
The exclusion in Australia of receivers and controllers appears to be largely
unnecessary as these types of administrations would not generally fit within the
definition of a foreign proceeding as they are not usually collective proceedings as
they tend to be private appointments by a secured creditor seeking to enforce their
security. It can only be speculated that the draftsperson inserted a reference to
receivers and controllers so as to give some indication to both domestic represen-
tatives and foreign courts that representatives in these types of positions should not
be able to avail themselves of the corresponding provisions in other States.
In the case of court-appointed receivers in Australia, whilst such proceedings can be
collective in nature, such administrations are unusual for corporations and are gen-
erally only an interim measure whilst a determination is made of the entities’ solvency
and future, and as such may not be seen as proceedings relating to insolvency.
Court-appointed receivers of trust assets under the Trustee Acts of the relevant
Australian States or of managed investment schemes under the Corporations Act are
2
(2013) (16 December 2013) [20].
3
Article 1(2).
4
5
Ibid.
6
Ibid.
7
Mason, see footnote 38, 217. Section 601CL is in Chapter 5B of the Corporations Act 2001
(Cth);
8
Cross-Border Insolvency Regulations 2008 (Cth) reg 4.
9
Ibid.
10
Ibid.
not excluded and may fit within the definition of a foreign proceeding depending
upon the relevant domestic law of the State in which recognition is being sought.
Canada has no equivalent to para 1 of this article in either of their enactments.
However, there is a provision for the existing law to continue to apply.11 New
Zealand excludes registered banks whilst the UK and USA versions, in addition to
entities involved in the finance and insurance industries, exclude debtors involved
in railroads and other public infrastructure within their jurisdictions.
Furthermore, the UK excludes European Economic Area credit institutions and
third country credit institutions that have permission to operate in the UK.12 These
exclusions do not appear to extend to debtors who operate in those industries in
other States outside Europe. The courts’ powers to grant relief are further restricted
by the provisions of a number of other domestic enactments. Both Lastra and Ho
have commented that the exclusion of UK credit institutions and insurers may be
defensible in light of the special resolution regime under the Banking Act 2009 and
given the special rules applying to insolvency of those types of institutions and the
compensation scheme available.13 However, they see the exclusion of European
Economic Area (EEA)14 credit institutions, third country credit institutions, EEA
Insurers and third party insurers as creating unnecessary inconsistencies,15 since the
English courts have previously recognised some foreign banks.16 Lastra has com-
mented that the exclusion of credit institutions was not driven by well-reasoned
principles but rather by legislative agenda and the government’s intention to extend
it to credit institutions although it has not done so to date.17
The USA also excludes stockbrokers and debtors who are individuals and citi-
zens or residents of the USA with a small amount of income.18 It would therefore
appear that it would not be possible to seek recognition in respect of an individual
debtor who has no property in the United States and who is not a citizen or
permanent resident of the United States. No other State examined has this exclusion
and it should be seen as being territorialist as this provision will limit the ability of
the trustees of individuals to collect assets for their administration based upon the
provisions of the Model Law. Melnik has commented that residents of other
countries, other than the USA, are not affected by this exclusion and thus their
proceedings can be recognised.19
11
Companies Creditors Arrangement Act, RSC 1985, c C-36 s 61.
12
Cross-Border Insolvency Regulations 2006 SR 2006/1030 reg 36.
13
See Banking Act 2009 c 1, Parts 2, 3 and 4.
14
See Agreement on the European Economic Area [1994] OJ L 1/3 as amended.
15
Lastra, see footnote 43, 217 [9.41]; Ho, see footnote 75, 144–5.
16
E.g. Re Stanford International Bank Ltd [2011] Ch 33; Awal Bank BSC v Al-Sanea [2011]
EWHC 1354 (Comm) (27 May 2011).
17
Lastra, see footnote 75, 218 [9.44].
18
11 USC § 1501(c)(2) (2012).
19
Selinda A Melnik, ‘United States’ in Ho, see footnote 75, 448.
6.2 Article 1 63
In the USA, in addition to the type of debtors set out in s 1501, Chap. 15 of the
Bankruptcy Code does not apply to enforcement of:
(a) security contracts;
(b) commodity contracts;
(c) forward contracts;
(d) repurchase agreements;
(e) swap agreements; and
(f) master netting agreements.20
These provisions therefore require a foreign representative to review the purpose
for which they are seeking recognition and restrict a foreign representative’s right to
recover some contractual assets in the USA. The USA version of this article also
creates larger purposes for the legislation than is set out in the Model Law and must
be read with that part of the section that incorporates the Model Law’s preamble.
The reasonableness and effect of these exclusions are discussed further in
Sect. 11.3.2. UNCITRAL is also looking at dealing with Financial Institutions
separately because of the special domestic regimes that exist in States to protect
consumers. Their discussion paper is analysed in Sect. 15.5.
6.3 Article 2
Definitions
For the purposes of the present Law:
(a) “Foreign proceeding” means a collective judicial or administrative proceeding
in a foreign State, including an interim proceeding, pursuant to a law relating to
insolvency in which proceeding the assets and affairs of the debtor are subject to
control or supervision by a foreign court, for the purpose of reorganization or
liquidation;
(b) “Foreign main proceeding” means a foreign proceeding taking place in the State
where the debtor has the centre of its main interests;
(c) “Foreign non-main proceeding” means a foreign proceeding, other than a for-
eign main proceeding, taking place in a State where the debtor has an estab-
lishment within the meaning of subparagraph (f) of the present article;
(d) “Foreign representative” means a person or body, including one appointed on
an interim basis, authorized in a foreign proceeding to administer the reorga-
nization or the liquidation of the debtor’s assets or affairs or to act as a rep-
resentative of the foreign proceeding;
(e) “Foreign court” means a judicial or other authority competent to control or
supervise a foreign proceeding;
(f) “Establishment” means any place of operations where the debtor carries out a
non-transitory economic activity with human means and goods or services.
20
11 USC § 561(d) (2012).
The definitions contained in Article 2 have not been adopted by all States.
This has and will lead to different meanings being given to equivalent phrases in
different States. In Australia, there is no alteration to the Model Law definitions.
In Canada a ‘company’ is defined as including any incorporated body or income
trust.21 An income trust is defined as one that is listed on a prescribed stock
exchange or the majority of which units are held by another trust listed on a
prescribed stock exchange.22
In New Zealand, definitions have been added in relation to ‘insolvency admin-
istrator’ and ‘New Zealand insolvency proceeding’. An insolvency proceeding
includes bankruptcy, liquidation, receivership, judicial management, statutory man-
agement, voluntary administration or reorganisation. In New Zealand, it is also
noteworthy that a private insolvency representative appointed by a corporate body is
not required to be licensed and any independent individual can be appointed.23
In the UK, a number of definitions have been added including those relating to
‘British insolvency law’, ‘British insolvency officeholder’, ‘secured creditor’ and
‘security’. The definition of the law of Britain that is included in the definition of
‘British insolvency law’ specifically includes a reference to the British rules of
private international law. This article also requires the British courts to look at the
Model Law, UNCITRAL Guide and any other documents from the UNCITRAL
working groups created in the preparation of the Model Law when interpreting the
Model Law.24 The issue as to how the Model Law should be interpreted is dis-
cussed in Sects. 11.3, 13.3 and 14.1.
In the UK, the definition of ‘establishment’ has also been changed by substi-
tuting the word ‘assets’ for ‘goods’ thereby covering land and intangible property.25
In the USA, a number of the definitions are contained in the general definitions
section of the Bankruptcy Code.26 A limited definition of ‘debtor’ is included for
the purposes of Chap. 15 which defines it as ‘an entity that is the subject of a
foreign proceeding’.27 An entity is defined as including a person, estate, trust,
government unit and the United States trustee.28
It is argued that a substance over form analysis should be conducted in order to
determine which type of debtors fit within definitions contained in the Model Law.
The laws of the State of origin of the foreign proceeding must be taken into account
when making that analysis. In addition individual States should not be bound by
their own domestic rules of interpretation, rather, given the international origin of
21
Companies Creditors Arrangement Act, RSC 1985, c C-36 s 2(1).
22
Ibid.
23
Companies Act 1993 ss 239F, 280.
24
The Cross-Border Insolvency Regulations 2006 SI 2006/1030, reg 2(b).
25
Roy Goode Principles of Corporate Insolvency Law (Sweet & Maxwell, 4th ed, 2011), 801
[16–27].
26
11 USC § 101 (2012).
27
Ibid § 1502(1).
28
Ibid § 101(15).
6.3 Article 2 65
the Model Law, it is intended to apply regardless of the system of law that operates
within a State domestically. Furthermore, Article 8 compels a court interpreting its
definitions and other provisions to construe it without any assumptions arising from
the domestic legal system. This analysis is also consistent with the modified
Universalist approach which is the principle behind the Model Law.
In relation to the specific definitions and phrases contained in the Model Law, a
comparative analysis is set out below:
6.3.1 Foreign Proceedings
A foreign proceeding is required to be a collective proceeding in which the debtor’s

assets are realised for the benefit of all creditors.29
Australia, New Zealand and the UK have not changed this definition. The
Canadian definition of foreign proceedings appears to require the same elements as
the Model Law but is worded differently.
In the USA, the purpose of a foreign proceeding is extended to include not only
insolvency but also ‘adjustment of debt’. The House Report indicates that this
amendment was designed to make it consistent with the US law.30 It is argued that
it does more than this as it anticipates debtors seeking recognition when the purpose
of the appointment of the foreign representative is to restructure the debt of the
debtor which may otherwise be solvent.
The US Bankruptcy Court, has also determined that the word ‘proceeding’
requires a broader definition than that used in American domestic law, ‘in order to
achieve the statutory directive of interpretation consistent with the understandings
and usages of international law and the UNCITRAL Model Law’.31
Consistent with the above argument in respect of the interpretation of the Model
Law requiring a court to look at the international origin, the English High Court and
the US Bankruptcy Court have both stated that foreign proceedings should be
determined according to the law of the State in which the proceedings are issued.32
This has led to the recognition under the Model Law of legal structures of debtors,
the subject of foreign proceedings that are not recognised under a State’s domestic
laws.33
29
Williams v Simpson [2011] NZLR 380, 383.
30
Abuse Prevention and Consumer Protection Act (8 April 2005), HR Report Pub L No
109–31, 107.
31
Re Betcorp Ltd, 400 BR 266, 280 (Bankr, D.Nev, 2009).
32
See, eg Rubin v Eurofinance SA [2010] 1 All ER (Comm) 81, 94 [46]; Re Betcorp Ltd 400 BR
266, 280 (Bankr, D Nev, 2009).
33
Eg in Rubin v Eurofinance SA ibid, the High Court recognised a US trust which was the subject
of Chapter 11 proceedings. Trusts are not separate legal entities under English law and therefore
could not be the subject of restructuring proceedings through an administration proceeding.
It is argued that the definition of ‘Foreign Proceeding’ envisages a separate

proceeding in respect of each debtor by reason of the use of the word ‘the’ before
the word ‘debtor’ in the definition. This necessarily means that it is not intended to
deal with corporate groups as part of a single application for recognition.34
In the USA, it is not uncommon for more than one debtor within a corporate
group to apply for restructuring under Chap. 11.35 This appears to require separate
applications for recognition to be made in respect of each of the debtors, which may
give rise to issues of uncertainty where those entities may possibly have different
centre’s of main interest. The issue of corporate groups is discussed further in
Sect. 15.3.
6.3.2 Centre of Main Interest (COMI)
COMI is not defined in the Model Law, but is referred to in the EC Regulation as
corresponding ‘to the place where the debtor conducts the administration of his
interests on a regular basis and there is therefore ascertainable by third parties’.36
Virgos and Schmidt have stated that in respect of the EC Regulation, in the case of
professionals, it will be the place of their professional domicile.37
The EC Regulation also contains a registered office rebuttable presumption.38 In
the EC Regulation COMI is used to determine which member States’ courts have
power to open a proceeding. Another member State is able to open an insolvency
proceeding only if the debtor has assets within that member State.39 There is a
controversy regarding the interpretation of this phrase which is dealt with under
Article 17 below.
Justice Lewison at first instance in Re Stanford International Bank Ltd com-
mented that it is a reasonable inference that COMI under the Model Law would
have the same meaning as in the EC Regulation as the Model Law was designed to
provide a ‘complementary regime’ to the EC Regulation.40 His Honour considered
that he did not need to decide if he was strictly bound to follow Re Eurofood IFSC
Ltd (Eurofood)41 and therefore did not consider the effect of Article 2 which in the
34
UNCITRAL has dealt differently with the issue of corporate groups and has issued the United
Nations Commission on International Trade Law, Legislative Guide on Insolvency Law, Part
three: Treatment of enterprise groups in insolvency UN Publication Sales No E.12.V.16.
35
See Re Lehman Brothers Holdings Inc, 422 BR 407 (Bankr, SD NY, 2010).
36
160/1, Preamble 13.
37
Virgos & Schmidt, see footnote 26, [75].
38
160/1. Article 3.1.
39
Ibid Article 3.2.
40
Re Stanford International Bank [2009] BPIR 1157; [2009] EWHC 1441 (Ch) (3 May 2009) [45].
41
Re Eurofood IFSC Ltd, [2006] Ch 508.
6.3 Article 2 67
English version of the Model Law required him to apply the EC Regulation in the
case of an inconsistency between the Model Law and the EC Regulation. The Court
of Appeal in Re Stanford International Bank Ltd (Stanford International Bank)42
commented that as both the Model Law and EC Regulation apply in England and
Wales, it was essential that the phrase be interpreted ‘in a manner consistent with
each other’.43 This view has been subsequently supported in both Australia and
New Zealand.44
Despite the provisions of Article 8 requiring that the Model Law’s international
origin be taken into account, and to promote uniformity in its application, the issue
that must be examined in looking at the UK decision in Stanford International Bank
is the extent to which the court considered or relied upon the UK amendment to
Article 3 and Regulation 2(d).45 Those provisions required the court to give pref-
erence to the interpretation offered in Eurofood rather than looking to independently
determine the meaning of COMI for the purposes of the Model Law. No mention is
made in either the judgement at first instance of Justice Lewison or the decision of
the Court of Appeal of the amended version of Article 3 as it appears in the UK
regulation, which provides that to the extent that the Model Law conflicts with the
EC regulation, the provisions of the EC Regulation prevail.
The courts in the USA have adopted a different position in relation to the
interpretation of the meaning of COMI and the rebuttable presumption contained in
Article 16. The interpretation of COMI and the interrelationship of its meaning in
the EC Regulation are discussed further in Chaps. 5, 12 and Sects. 8.2, 8.3.
6.3.3 Collective Proceedings
The term ‘collective proceedings’ is not defined in the Model Law but is in the EC
Regulation which defines it by reference to a list of types of insolvency proceedings
which is set out in an annexure to the regulation.46 No such list is contained in the
Model Law and it is therefore up to the courts to determine whether foreign insolvency
proceedings fit within the definition. It is arguable that the courts can rely upon Article
8 to refer to decisions in other States that consider the meaning of this term.
UNCITRAL Guide has been amended to give further guidance on the term
‘collective proceeding’ so as to ensure that the name or type of proceeding is not
42
Re Stanford International Bank Ltd [2011] Ch 33.
43
Re Stanford International Bank Ltd [2011] Ch 33, 67 [54].
44
See comments under Article 17.
45
46
160/1, annex A.
determinative.47 This followed UNCITRAL Working Group V’s recommendation

that it was necessary to look at the substance of the same, in particular the following
four factors:
(a) ‘Whether substantially all of the assets and liabilities of the debtor are dealt
with in the proceeding, subject to local priorities and statutory exceptions, and
to local exclusions relating to the rights of secured creditors;
(b) Whether creditors that are adversely affected by the proceeding have a right
(though not necessarily the obligation) to submit claims for determination, and
to receive an equitable distribution or satisfaction of their claims;
(c) Whether such creditors have a right to meaningful participation in the
proceeding;
(d) Whether there are procedures in place for notice to such creditors so that they
can meaningfully participate in the proceedings’.48
In amendments to the UNCITRAL Guide, it is states that the Model Law is not
intended to be used merely as a collection device for a particular creditor or group
of creditors who might have initiated a collection proceeding in another State.49 It
further states that a ‘proceeding should not be considered to fail the test of col-
lectivity purely because a class of creditors is unaffected by it’.50 It offers the
example of secured creditors not being bound by the collective proceedings. In
Australia, for the reasons expressed above, court-appointed receivers and receivers
of trusts may fit within the definition of a collective proceeding.
The situation in Canada is not as clear. The Ontario Superior Court of Justice
recognised the appointment of a US court-appointed receiver as the first stage of a
process which would lead to liquidation as assets were recovered and distributed to
investors in a Ponzi scheme. The investors did not comprise the total group of
creditors as there were other unsecured creditors who would not benefit from the
receiver’s recoveries. The receiver had been appointed only for the purpose of
recovering assets for the investors in the Ponzi scheme. The Court found that it
should give a ‘purposive interpretation to the definition of ‘foreign proceeding’ and
in part based its reason upon the fact that recognition of the receivership as a foreign
proceeding obviates the need for the Canadian courts to appoint parallel receiver-
ship proceedings.51 It is argued that this decision appears to ignore the necessity for
an insolvency administration to be a collective proceeding in order to be a foreign
47
See Guide to Enactment of The UNCITRAL Model Law on Cross-Border Insolvency, UN Doc
A/CN.9/442 (19 December 1997) as approved by GA Res A/RES/52/158 (1997) (30 January
1998) and amended by GA Res A/RES/68/107 (2013) (16 December 2013) [70–72].
48
UNCITRAL Report of Working Group V (Insolvency Law) on the work of its forty-first session
(New York, 30 April–4 May 2012) UN Doc A/CN.9/742 7–8.
49
See Guide to Enactment of The UNCITRAL Model Law on Cross-Border Insolvency, UN Doc
A/CN.9/442 (19 December 1997) as approved by GA Res A/RES/52/158 (1997) (30 January
1998) and amended by GA Res A/RES/68/107 (2013) (16 December 2013) [69].
50
Ibid [70].
51
Zayed v Cook (2009) 62 CBR (5th) 114 (ONSC).
6.3 Article 2 69
proceeding under the Model Law, which is a necessary element according to the
definition contained in Article 2. It is noted that under the Canadian legislation, it is
only necessary for the proceedings to deal ‘with creditors’ collective interests
generally’. There is no need for the proceeding itself to be collective in nature.
It is argued that unless a substance over form analysis is conducted in Canada and
this decision is followed, it will have the effect of greatly widening the type of
insolvency administrations to be recognised and create a potential for inconsistent
recognition.
In New Zealand and the UK, the Model Law provides that it applies to receivers
where they are acting for the benefit of all creditors or appointed by the court.52 The
New Zealand High Court considered the term collective as distinguishing ‘a formal
regime (under which the debtors assets are realised for the benefit of all creditors)
from private proceedings against a debtor, in which a single creditor seeks judge-
ment for its own benefit’.53 In Stanford International Bank, the English Court of
Appeal determined that as the application for recognition was by a receiver
appointed by a regulator under a law that was to protect investors, it was not a law
relating to insolvency; nor was it a collective proceeding as it was for the benefit of
the investors and not the wider class of creditors.54
In Re ABC Learning Centres Ltd, Judge Gross of the US Bankruptcy Court
stated that a proceeding ‘is collective if it considers the rights and obligations of all
creditors’.55 In Betcorp, Judge Markell found that it ‘is one that considers the rights
and obligations of all creditors. This is in contrast to a receivership remedy insti-
gated at the request and for the benefit of a single secured creditor’.56 The US
Bankruptcy Court has also held that a collective proceeding:
… contemplates both the consideration and eventual treatment of claims of various types of
creditors, as well as the possibility that creditors may take part in the foreign action…. In
determining whether a particular foreign action is collective… it is appropriate to consider
both the law governing the foreign action and the parameters of the particular proceeding as
defined in, for example, orders of a foreign tribunal overseeing the action.57
52
In the United Kingdom, privately appointed administrative receivers are practically no longer
appointed as their appointment is terminated by the appointment of an administrator: Enterprise
Act 2002 c40 sch 16 [41, 43].
53
Williams v Simpson [2011] 2 NZLR 380, 383.
54
[2011] Ch 33, [27].
55
Re ABC Learning Centres Ltd, 445 BR 318, 328 (Bankr, D Del, 2010) affirmed Re ABC
Learning Centres Ltd 728 F 3d 301 (3rd Cir, 2013).
56
Re Betcorp Ltd 400 BR 266, 281 (Bankr, D Nev, 2009).
57
and
Other characteristics of a collective proceeding include: adequate notice to creditors under
applicable foreign law, provisions for the distribution of assets according to statutory
priorities, and a statutory mechanism for creditors to seek court review of the proceeding.
However, the standard for notice is not a demanding one.58
The US District Court has held that when considering whether a proceeding is
collective, the court is concerned with ‘not just what statutory mechanisms exist but
also how involved creditors are in practice’.59
As indicated above, courts in New Zealand, the UK and the USA have recog-
nised collective proceedings as a formal regime which takes into account the
interests, and is for the benefit, of all creditors as opposed to a representative
appointed to look after the interests of one or more creditors.
Ho has commented that US case law has confirmed that equity receiverships in
the USA perform the same function as bankruptcy proceedings and may avoid the
need for bankruptcy proceedings.60 He postulates that these types of administra-
tions may be recognised. f he is correct, then by applying the proper analysis
referred to above, such proceedings may be recognised.
6.3.4 Foreign Main Proceeding
All States examined have essentially adopted the definition of a foreign main
proceeding as set out in the Model Law. This definition requires that the proceeding
take place in the State where the debtor has its COMI. The meaning of this phase is
considered further in Sect. 8.2.
6.3.5 Foreign Non-main Proceeding
In all States examined other than Canada, in order for there to be foreign non-main
proceeding, the debtor must have an establishment in the State of that proceeding.
In Canada, there is no need for there to be an ‘establishment’. There is no
definition or mention of the word ‘establishment’ or any similar word in their
legislation. If there is a foreign proceeding and it is not a foreign main proceeding,
then it can be recognised as a foreign non-main proceeding. It is argued that one
explanation for this difference in the Canadian legislation may be the American
58
Re Ashapura MineChem Ltd, 480 BR 129, 137 (Dist, SD NY, 2012).
59
Ibid 141.
60
Ho, see footnote 75, 160; Look Chan Ho ‘Misunderstanding the Model Law Insolvency: Re
Stanford International Bank’ (2011) 26 Butterworths Journal of International Banking and
Financial Law 395, 403.
6.3 Article 2 71
Law Institute’s Report which recommended a procedure be adopted such that once
a main proceeding for reorganisation is recognised in a NAFTA country, other
NAFTA States should adopt the plan by opening non-main proceedings.61 Hence, a
debtor is not required to have an establishment within Canada in order to be able to
recognise such non-main proceedings. This has meant that the Canadian courts
have tended to recognise proceedings, where such proceedings are based upon a
debt being incurred in the foreign jurisdiction or where a business has been con-
ducted within the jurisdiction of the foreign proceedings.62 The Canadian courts
have been able to recognise all US-based foreign proceedings, with the real issue
being what remedies or orders should be granted as a matter of discretion if the
foreign proceeding is not a foreign main proceeding.63
The Canadian position, to all appearances, adopts a more Universalist approach
by allowing recognition of a wider range of insolvency administrations. However it
is argued that it also defeats the Model Law’s attempt to achieve a degree of
uniformity, harmonisation and certainty in the recognition of foreign insolvency and
reconstruction proceedings between States as it will inevitably lead to inconsistency
in relation to proceedings that are recognised and may lead to forum shopping.
6.3.6 Foreign Representative
The States examined, other than Canada, have essentially adopted the definition of
‘foreign representative’ contained in the Model Law.
Canada’s definition of foreign representative is different in that it only requires a
representative to monitor rather than administer a reorganisation. It is argued that
this may give rise to a broader category of person being recognised and will allow
examiners with appropriate powers under Chap. 11 proceedings and holders of
other statutory appointments issued in the USA to be recognised. Debtors in pos-
session in respect of companies subject to Chap. 11 proceedings in the USA have
been recognised as foreign representatives even though they are generally officers
of a corporate debtor.64 The US courts have also recognised representatives of
61
The American Law Institute, see footnote 30, Rec 5.
62
See, eg, Re Magna Entertainment Corp (2009) 51 CBR (5th) 82.
63
See Re Probe Resources Ltd [2011] BCSC 552 [31–32].
64
See, eg, Board of Directors of Rizzo-Bottiglieri-De Carlini Armatori SpA as Debtor-in-
Possession Of Rizzo-Bottiglieri-De Carlini Armatori SpA v Rizzo-Bottiglieri-De Carlini Armatori
SpA [2013] FCA 157; Moore v Australian Equity Investors (2012) 30 ACLC 629; Re Graceway
Canada Company (2011) 209 ACWS (3d) 555; [2011] ONSC 6262 (4 October 2011); Re
Hartford Computer Hardware Inc (2012) 94 CBR (5th) 20; Re Pacific Northstar Property Group
LLC [2009] NZHC 965 (29 September 2009); Rubin v Eurofinance SA [2010] 1 All ER (Comm)
81; Rubin v Eurofinance SA [2011] Ch 133.
entities that are subject to debtor in possession proceedings including those

appointed under a power of attorney as foreign representatives.65
6.3.7 Foreign Court
The definition of ‘foreign court’ includes both judicial and other authorities which
are competent to control or supervise a foreign proceeding. Such authorities can be
administrative. In Re Betcorp, the US Bankruptcy Court expressed the view that the
phrase ‘foreign court’ ‘should be given a broad meaning and include a person or
body empowered by national law to open insolvency proceedings’.66 The court was
satisfied that an Australian voluntary liquidator was supervised by both the
Australian courts and the Australian Securities and Investments Commission which
was an administrative body.
In Re Tradex Swiss AG, the US Bankruptcy Court recognised a Swiss investi-
gator appointed by the Swiss Federal Banking Commission over the company’s
assets as a foreign representative as it was an administrative proceeding and the
administration as a foreign main proceeding since the Swiss Federal Banking
Commission fitted within the definition of foreign court being an administrative
authority that supervised a foreign proceeding.67
6.3.8 Establishment
The definition of ‘establishment’ and the time it is to be determined in discussed in

Sects. 5.3 and 5.4.
6.3.9 Other Definitions
In all States examined other than Australia, additional definitions have been inserted
into the Model Law. Not all of these additional definitions are examined in this
book.
Questions have been raised as to what is meant by an ‘interim appointment’ and
whether it includes someone who has been appointed but whose appointment has
65
See Re Vitro SAB De CV, 701 F 3d 1031, 1038 (5th Cir, 2012); Re Oas SA [2015] WL 4197076
(Bankr, SD NY, 2015).
66
Re Betcorp Ltd, 400 BR 266, 277 (Bankr, D Nev, 2009).
67
384 BR 34 (Bankr, D Mass, 2008).
6.3 Article 2 73
not yet commenced (e.g. stay of order making appointment). This is currently being
looked at by UNCITRAL.68
In New Zealand, definitions have been added in relation to ‘insolvency admin-
istrator’ which is defined as including a statutory manager, the Official Assignee,
a receiver, liquidator or administrator.69 The definition of ‘receiver’ is not confined
to court-appointed receivers.70
In the UK, the definition of ‘British insolvency officeholder’ has been added and
refers to an official receiver (appointed by the Court), liquidator, provisional liq-
uidator, trustee, interim receiver or nominee or supervisor of a voluntary arrange-
ment, the Accountant in Bankruptcy in Scotland and a person acting as an
insolvency practitioner except as an administrative receiver.71
Although there is a reference to private international law in the definition of
‘British insolvency law’ in the UK version of the Model Law, it is argued that the
non-inclusion of a reference to the rules of private international law in the other
States’ definitions does not mean that those rules otherwise apply to proceedings for
which recognition has been sought.72 This issue is discussed further in Chap. 14.
In Canada, in the CCAA the terms ‘debtor’ and ‘company’ also include an
income trust which is a unit trust that is listed or a unit trust the majority of whose
units are held by a listed trust.73 A similar provision is not contained in the BIA.74
The definition of ‘debtor’ in the USA Chap. 15 refers to an ‘entity’ which is
defined as including an estate and a trust which are not under general common law
principles separate legal entities.
In the USA, a definition of ‘trustee’ has been added which includes a trustee
under another chapter, debtor and a debtor in possession.75 Section 1501 states that
one of the purposes of Chap. 15 is to encourage cooperation between foreign
authorities and debtors in possession. A debtor in possession therefore has the
ability to make applications under section 1505 to act in a foreign country on behalf
of the estate and has the right to communicate with and cooperate with a foreign
representative under section 1526. This is inconsistent with other provisions in the
Model Law, as a debtor in possession may not fit within the definition of a foreign
68
United National Commission on International Trade Law Working Group V, The UNCITRAL
Model Law on Cross Border Insolvency: the judicial perspective GA Res 66/96 A/CN.9/732 (1
July 2011).
69
Article 2(h).
70
Receiverships Act 1993 s 2(1).
71
Article 2(b).
72
See, eg, Mason, ‘Cross-border insolvency: Adoption of CLERP 8 as an evolution of Australian
insolvency law’, see footnote 38, 218.
73
Companies Creditors Arrangement Act, RSC 1985, c C-36 s 2(1).
74
Bankruptcy and Insolvency Act, RSC 1985, c B-3.
75
11 USC § 1101 (2012).
representative as it is a debtor which is subject to proceedings under the Bankruptcy

Code that still remains in the control of its management rather than an independent
person or trustee.76 However, in order to allow all Chap. 11 reorganisation pro-
ceedings to fit within the Model Law, it has been necessary to expand this
definition.
The phrase a ‘law relating to insolvency in which proceeding the assets and
affairs of the debtor are subject’ was considered in Australia by the Supreme Court
of New South Wales in Re Chow Cho Poon, where the court after referring to the
English decision in Stanford International Bank77 and the USA decisions in
Betcorp78 and ABC Learning Centres79 stated that the test does not involve whether
the debtor’s insolvency resulted in the foreign representatives appointment but
rather that the foreign representatives appointment was under law relating to
insolvency.80
In Stanford International Bank, the English Court of Appeal also looked at the
meaning of a ‘law relating to insolvency’ and agreed that this law did not have to be
statutory or relate exclusively to insolvency.81
Ho and Sheldon have suggested that the Model Law is not intended to apply to
members’ voluntary liquidations in the UK and possibly Australia as they are not
based upon a resolution or finding of insolvency.82 By extension it is argued that
this could also be said of just and equitable windings up where insolvency is not an
issue. It is argued that this gives too narrower interpretation of this phrase and
ignores that such proceedings may relate to reorganisation.83
In Betcorp,84 the US Bankruptcy Court after determining that the word ‘pro-
ceeding’ requires a broader definition than that used in American domestic law
adopted what is said in
Paragraph 10 of the introductory recitals of the EU Regulation states:
Insolvency proceedings do not necessarily involve the intervention of a judicial authority; the
expression “court” in this Regulation should be given a broad meaning and include a person or
body empowered by national law to open insolvency proceedings. In order for the Regulation
to apply, proceedings (comprising formalities set down in law) should not only have to comply
76
Ibid.
77
Re Stanford International Bank Ltd [2011] Ch 33.
78
Re Betcorp Ltd, 400 BR 266 (Bankr, D Nev, 2009).
79
Re ABC Learning Centres Ltd, 445 BR 318 (Bankr, D Del, 2010).
80
Re Chow Cho Poon (Private) Limited [2011] 249 FLR 315, 325–6, [43–48].
81
Re Stanford International Bank Ltd [2011] Ch 33, 57, [24].
82
Ho, see footnote 75, 166,168; Sheldon, see footnote 146, 111–2 [3.35].
83
See, eg, Article 2(a); United Nations Commission on International Trade Law, Guide to
Enactment of The UNCITRAL Model Law on Cross-Border Insolvency, UN Doc A/CN.9/442 (19
December 1997) as approved by GA Res A/RES/52/158 (1997) (30 January 1998) and amended
by GA Res A/RES/68/107 (2013) (16 December 2013), [21, 25].
84
Re Betcorp Ltd, 400 BR 266 (Bankr, D Nev, 2009), adopted in Re ABC Learning Centres Ltd
728 F 3d 301 (3rd Cir, 2013).
6.3 Article 2 75
with the provisions of this Regulation, but they should also be officially recognised and legally
effective in the Member State in which the insolvency proceedings are opened.85
Judge Markell further stated that a proceeding is:

acts and formalities set down in law so that courts, merchants and creditors can know them
in advance, and apply them evenly in practice. In the context of corporate insolvencies, the
hallmark of a “proceeding” is a statutory framework that constrains a company’s actions
and that regulates the final distribution of a company’s assets.86
The court recognised an Australian creditor’s voluntary liquidation as a foreign

proceeding even though no court had been involved in the appointment of the
liquidators, but rather they had been appointed initially as administrators by the
company’s directors. The court further found that the liquidators were supervised
by the Australian Securities and Investments Commission that was an administra-
tive body that supervised foreign proceedings as well as the courts of Australia.
In JSC BTA Bank, the US Bankruptcy Court held that the term ‘debtor’ upon
recognition of a foreign proceeding was restricted to a debtor within the jurisdiction
of the USA and to foreign debtors in respect of property located within the USA.87
6.3.10 Practical Implications of the Definitional Section
It is argued that differences in the interpretation of the Model Law arise in part
because not all States that have adopted the Model Law are necessarily required to
give the same weight to the UNCITRAL Guide as they must be interpreted in
accordance with the provisions of the domestic enactment in which they are
incorporated. It is questionable whether the interpretation of similar phrases by the
European Courts in respect of the EC Regulation can be classed as admissible
extrinsic material. However, there is an argument that in places where the EC
Regulations and the Model Law track each other, such decisions should carry
persuasive value.
Article 8 obliges courts to take into account the international origin of the Model
Law and the need to promote uniformity in its application and the ‘observance of
good faith’. However, it is arguable whether this apply in circumstances where a
State that has adopted the Model Law has not enacted it by adopting the Model Law
per se but rather, as Canada has done, has sought to incorporate the spirit of the law
into its domestic legislation. The same can be said about those States that have
intentionally amended definitions within their domestic version of the Model Law
as has occurred in the UK and the USA.
85
Ibid, 277–8 (Bankr, D Nev, 2009).
86
Ibid 278.
87
Re JSC BTA Bank, 434 BR 334, 343 (Bankr, SD NY, 2010).
It is arguable whether in all States examined other than Canada, the provision of
Article 8 would allow those States to obtain guidance for the UNCITRAL Guide in
their interpretation in their domestic version of the Model Law. Canada does not
incorporate in its domestic legislation the provisions of Article 8. This may in the future
give rise to tension between courts of different States on how phrases within the Model
Law are to be interpreted. This issue is discussed further in Sects. 11.3.9 and 12.4.
There is also a difference in judicial interpretation as to the date upon which the
COMI and establishment is to be determined. This issue is dealt with further in
Sect. 1.1.
Despite the UNCITRAL Guide referring to the EC Regulation as the origin of
certain concepts within the Model Law, it is questionable that States would be
obliged to follow the previous European interpretations of similar provisions if they
believe them wrong merely because of the provisions of Article 8. This aspect is
discussed further in Sect. 14.1.
6.4 Article 3
International obligations of this State

To the extent that the present Law conflicts with an obligation of this State arising
out of any treaty or other form of agreement to which it is a party with one or more
other States, the requirements of the treaty or agreement prevail
As the Model Law is designed to be a domestic law, this Article gives the
enacting States the opportunity to comply with their international obligations by
providing that to the extent that the Model Law is inconsistent with an obligation of
a State under a treaty or other agreement, the provisions of the treaty and the
agreement prevail.
Canada has no equivalent of this Article which may cause some issues in the
future as there is no certainty as to whether the domestic provisions of the Model
Law will prevail over other treaties or international agreements. This will depend
upon Canada’s domestic conflict of law provisions.
The alteration to the UK version makes it clear that the provisions of the EC
Regulation prevail over the provisions of the Model Law. This necessarily means
that where a debtor conducts business and has an establishment outside the
European Union, there is the possibility of inconsistent findings regarding the
location of the debtor’s main centre of interest and whether recognition should be
granted. A question exists as to the extent (if any) to which the UK courts have
sought to interpret the provisions of the Model Law consistently with the provisions
of the EC Regulation to avoid such inconsistencies. The Court of Appeal in
Stanford International Bank stated that this was its main reason for determining that
the meaning of COMI should follow the pre-existing decision in respect of the EC
6.4 Article 3 77
Regulation.88 The Court also referred to the fact that the UNCITRAL Guide refers
to the EC Regulation which shows that it should have a similar meaning.89
The UNCITRAL Guide also refers to the EC Regulation in respect of a number of
provisions However, the Court did acknowledge that this may still not lead to
consistent decisions if different facts are presented to different courts.90 Further, in
relation to a number of provisions of the Model Law, the UNCITRAL Guide
specifically refers to terms in the EC Regulation as having a similar meaning to
those in the Model Law.91 It is arguable that this is evidence of the intention to
interpret those provisions consistently as suggested by the Court of Appeal in
Standford. It is unknown whether this position will change once the United
Kingdom exists the European Union.
As this Article has been modelled on similar provisions in other model laws
prepared by UNCITRAL, there is no explanation as to what is to occur if there is an
inconsistency with the provisions of another model law that has a similar provision.92
In such circumstances, it is argued that it would be necessary to revert to Article 8 and
its equivalent provision in the other model law and to look at international materials
with a view to establishing what it was intended should occur in such an eventuality.
UNCITRAL has not sought to address the issue of the interrelationship between its
model laws and any inconsistencies which may exist.93 It is argued that this is in part
due to its expert working groups who draft its model laws and conventions being
largely industry-based and there being no overriding forum where these issues can be
identified and solutions discussed. Another possible issue that prevents such forums
from being conducted is the limited funding available to bodies such as UNCITRAL.
6.5 Article 4
[Competent court or authority]

The functions referred to in the present Law relating to recognition of foreign
proceedings and cooperation with foreign courts shall be performed by [specify the
court, courts, authority or authorities competent to perform those functions in the
enacting State]
88
Re Stanford International Bank Ltd [2011] Ch 33, 60, [53–54], 93, [150].
89
Ibid 60 [53].
90
Ibid 93 [150].
91
See, eg, United Nations Commission on International Trade Law, Guide to Enactment of
The UNCITRAL Model Law on Cross-Border Insolvency, UN Doc A/CN.9/442 (19 December
1997) as approved by GA Res A/RES/52/158 (1997) (30 January 1998) and amended by GA Res
A/RES/68/107 (2013) (16 December 2013) [10, 11, 81, 82, 83, 87, 88, 141].
92
See, ibid [77].
93
See, eg, Neil Hannan, ‘International Commercial Arbitration and Cross Border Insolvency’
(2014) XVII International Trade and Business Law Review 447.
Article 4 is a procedural article which specifies the courts with jurisdiction

under the Model Law.
In Australia, the Federal Court of Australia has jurisdiction in relation to matters
involving individuals, and the Federal Court of Australia and the Supreme Courts of
each of the States and Territories has jurisdiction to make orders in relation to
corporations.94 If the debtor is a partnership which includes individuals, then any
order sought in respect of those individuals would generally be dealt with in
Australia by the Federal Court of Australia as the State Supreme Courts do not have
jurisdiction in respect of individuals’ bankruptcy.95 It is speculated that where
recognition is sought in relation to trusts or other types of entities that do not exist
under Australian domestic law, that jurisdiction will vest in the same courts that has
the corporate jurisdiction.
In Canada, there is no equivalent section in either of their enactments. Both the
Canadian Acts vest jurisdiction in the relevant Supreme or Superior Court of each
Province or Territory.96 There is no trial jurisdiction vested in a federal court. In the
case of larger companies which operate in more than one province, the court’s
jurisdiction is based upon the location of the company’s head office or chief place of
business.97
In New Zealand, the High Court of New Zealand is nominated as the Court to
exercise jurisdiction under their version of the Model Law.
In the UK, the High Court (Chancery Division) in respect of England and Wales
and the Court of Session Scotland are nominated as the appropriate courts. Their
version also provides that jurisdiction within the UK shall be determined by a
debtor’s place of business or in the case of an individual, their place of residence or
where the debtor’s assets are situated.98
As discussed in Sect. 4.5, in the USA, jurisdiction under the Bankruptcy Code is
given exclusively to the US District Court of which the US Bankruptcy Court is a
unit.99 They also make it clear that procedurally a petition under Chap. 15 starts the
process for recognition.100 Such petitions are usually issued out of the US
Bankruptcy Court if such court exists in that district.101
Both Canada and the USA, by incorporating the Model Law into pre-existing
legislation, have avoided the need to specifically grant jurisdiction to courts in
separate legislation.
94
95
Bankruptcy Act 1966 (Cth) s 27.
96
Bankruptcy and Insolvency Act, RSC 1985, c B-3 s 183; Companies Creditor Arrangement Act
RSC 1985, c C-36 s 2(1) under definition of “court”.
97
Companies Creditor Arrangement Act, RSC 1985, c C-36 s 9(1).
98
Article 4(2).
99
28 USC §§ 151, 157, 1334 (2012).
100
11 USC § 1504 (2012).
101
See 11 USC appendix rr 9001–02.
6.5 Article 4 79
The issue of jurisdiction is also discussed in Sect. 11.3 as some conflicts that arise
require the court to have either a general common law jurisdiction or a specialist
jurisdiction and knowledge (e.g. when dealing with matters involving admiralty law).
6.6 Article 5
Authorization of [insert the title of the person or body administering a reorganization

or liquidation under the law of the enacting State] to act in a foreign State
Authorization of [insert the title of the person or body administering a reorganization
or liquidation under the law of the enacting State] to act in a foreign State
A [insert the title of the person or body administering a reorganization or liqui-
dation under the law of the enacting State] is authorized to act in a foreign State on
behalf of a proceeding under [identify laws of the enacting State relating to insol-
vency], as permitted by the applicable foreign law.
This Article authorises domestic representatives of debtors to act in a foreign

State where they have been appointed under nominated provisions of their domestic
legislation, including making application for recognition in foreign States as per-
mitted by the applicable State laws.
The definition or designation of the domestic representative for the purposes of
this article is not determinative of whether they can seek recognition in a foreign
State as that application will be determined in accordance with the domestic law
(including their version of the Model Law) of the State in which recognition is
sought. Such courts may, however, take into account the laws of the State in which
the foreign representative was appointed. However, if necessary, this article does
give the domestic representative power to act in a foreign jurisdiction if that is
required because they do not otherwise have that power under their domestic law.
At most, it is argued that this provision can provide some guidance to a foreign
court only in regards to whether the foreign representative’s home jurisdiction
believes they are an appropriate class of representative to seek recognition and seek
to apply Article 8 in order to promote uniformity. It should be noted that Canada
does not have an equivalent to Article 8.
In Australia, trustees in bankruptcy and registered liquidators are nominated as the
domestic representatives to whom this article applies.102 By Australia listing registered
liquidators as authorised persons for the purposes of this Article, it is intended that the
Model Law apply to voluntary administrators and to administrators of insolvent
schemes of arrangement who must be registered liquidators.103
102
103
See, eg, Mason, ‘Cross-border insolvency: Adoption of CLERP 8 as an evolution of Australian
insolvency law’, see footnote 38, 221; Explanatory Memorandum, Cross-Border Insolvency Bill
2008 (Cth) 9 [18–19].
In Canada, the court may authorise any person to act as a representative for the
purpose of seeking recognition in a foreign jurisdiction.104
In New Zealand, an insolvency administrator is defined as the type of repre-
sentative to which this article applies. This term is defined in Article 2 and includes
privately appointed receivers. This Article may allow privately appointed receivers
to seek recognition in jurisdictions such as Canada even though they are not col-
lective proceedings.
In the UK, a British insolvency officeholder is a person authorised to act under
this Article. This term is defined in Article 2.
In the USA, the court may authorise a trustee or other person to act in a foreign
country on behalf of the estate of the debtor.105
In both the Canadian and USA versions of this article, it would appear that a
representative has an obligation to seek authorisation from the court prior to seeking
recognition in a foreign State. Such an authorisation would not necessarily ensure
that the representative would obtain recognition as they would have to otherwise fit
within the definition of a foreign representative in the jurisdiction in which they are
seeking recognition.
6.7 Article 6
Public policy exception

Nothing in the present Law prevents the court from refusing to take an action
governed by the present Law if the action would be manifestly contrary to the public
policy of this State.
Article 6 allows a court to refuse recognition of a foreign proceeding if it

appears to be manifestly against the public policy of the respective State. All States
examined in this book have enacted a version of this article. Public policy is always
a difficult area as each State has its own international and political agenda which
affects it and changes over time. Politics is often governed by public opinion which
is influenced by high profile incidents and press reporting.106
The UNCITRAL Guide indicates that the term ‘public policy’ should be given a
broad meaning but is clarified by the word ‘manifestly’ and should be restricted to
fundamental principles of law. Further, it states that it should be restricted to
104
Companies Creditors Arrangement Act, RSC 1985, c C-36 s 56; Bankruptcy and Insolvency
Act, RSC 1985, c B-3 s 279.
105
11 USC § 1505 (2012).
106
Eg in Australia, at present the arrival of boat people and the government attempts to stop it and
secure Australia’s borders may be argued to be issues of public policy.
6.7 Article 6 81
fundamental points of law, in particular constitutional guarantees.107 The

UNCITRAL Guide also suggests that this exception to the Model Law should be
interpreted so as to limit its application to what is recognised internationally as being
a breach of public policy.108 If this interpretation is to be accepted, then the decision
in Gold & Honey109 mentioned below has to be questioned, given the Israeli Court’s
decision to proceed in the knowledge of the US proceedings.
In Australia, the explanatory memorandum states that the ‘public policy
exceptions should be interpreted restrictively and that Article 6 is only intended to
be invoked under exceptional circumstances concerning matters of fundamental
importance for the enacting State’.110
The Canadian version of this Article does not require the proposed action to be
‘manifestly’ in breach of public policy. This is a lower standard than that applied
under the Model Law. However, the courts of that country in interpreting the
domestic version of this article have referred to the UNCITRAL Guide and indi-
cated that it should be interpreted restrictively and in accordance with the provisions
of the UNCITRAL Guide, this Article should be interpreted restrictively.111
In the USA, there have been a number of decisions that have considered their
version of this article and whose interpretation of this article has not been consis-
tent. Some decisions have applied this exception in circumstances where ordinarily
in other States would not be seen as being manifestly against public policy. The
majority position has been that this article should only be invoked only in
‘exceptional circumstances concerning matters of fundamental importance for the
United States.’112 It has been said that it should only be applied narrowly and only
invoked ‘when the most fundamental policies of the United States are at risk’.113
Further it has been held that there is a prerequisite to applying this article, namely
‘that there exist a conflict between foreign and U.S. law’—however ‘that fact alone
is not dispositive’.114 It has further been held that the mere identification of a
contrary statute to the US public policy is insufficient as it must be manifestly
contrary to US public policy.115 On the other hand it has been stated that ‘deference
107
United Nations Commission on International Trade Law, Guide to Enactment of
The UNCITRAL Model Law on Cross-Border Insolvency, UN Doc A/CN.9/442 (19 December
1997) as approved by GA Res A/RES/52/158 (1997) (30 January 1998) and amended by GA Res
A/RES/68/107 (2013) (16 December 2013) [102].
108
Ibid [88–89].
109
Re Gold & Honey Ltd, 410 BR 357 (Bankr, ED NY, 2009).
110
Explanatory Memorandum, Cross-Border Insolvency Bill 2008 (Cth) 21 [21]; Ackers v Deputy
Commissioner of Taxation [2014] FCAFC 57 (14 May 2014) [40–41].
111
Ibid.
112
Re Ran, 607 F 3d 1017, 1021 (5th Cir, 2010) affirmed in Re Fairfield Sentry Ltd 714 F 3d 127
(2nd Cir 2013); Re Oas SA, 2014 WL 4197076 (Bankr, SD NY, 2015).
113
Re Ernst & Young Inc, as Receiver of Klytie’s Developments Inc, 383 BR 773, 781(Bankr, D
Colo, 2008); Re Rede Engeria SA, 2014 WL 4248121 (Bankr, SD NY, 2014).
114
Re Ashapura MineChem Ltd 480 BR 129, 139 (Dist, SD NY, 2012).
115
Re ABC Learning Centres Ltd 728 F 3d 301, 309 (3rd Cir, 2013); Re Irish Bank Resolution
Corporation Ltd 2014 WL 1884916 (Bankr, D Del, 2014).
should be withheld where appropriate to avoid the violation of the laws, public
policies, or rights of the citizens of the United States.’116 Further in Chap. 15 cases
under the Model Law the exception should only apply ‘where the procedural
fairness of the foreign proceeding is in doubt or cannot be cured by the adoption of
additional protections’.117 The US Bankruptcy Court has also held in response to a
submission put to it that the fact that an application for recognition is unnecessary
does not make it against public policy.118
The exception under this article has been argued in the following fact scenarios:
(a) In Re Toft, the US Bankruptcy Court refused to allow recognition of a German
insolvency administrator of Dr Toft, who sought it for the purposes of obtaining
access to his email accounts with a US internet service provider because to do
so without there being a criminal investigation afoot as the purpose for such
recognition would have been to breach of US statute law and therefore the
public policy of the USA, even though the orders sought were permissible in
the administrators home jurisdiction.119
(b) In Re Gold & Honey Ltd (Gold & Honey) the US Bankruptcy Court dealt in part
with a situation of a secured creditor continuing with an Israeli receivership
proceeding relating to Gold & Honey Ltd a company incorporated under the laws
of Israel and a partner in Gold & Honey LP, a limited partnership under New
York law. After Gold & Honey Ltd and Gold & Honey LP filed a Chap. 11
application under the US Bankruptcy Code, the First International Bank of Israel
(FIBI) filed receivership proceedings out of a District Court in Israel in purported
breach of the world-wide stay granted by the issue of Chap. 11 proceedings. The
Israeli court had been advised of the US Bankruptcy Court’s orders in relation to
the stays but refused to recognise the same, in part for procedural reasons and
because of a presumed illegitimacy of the Chap. 11 cases, as the COMI of both
the company and limited partnership were in Israel. In an application to recognise
the receivership proceedings as foreign main proceedings, the Bankruptcy Court
refused the application in part upon the grounds that the pursuit of a receivership
application in light of the Chap. 11 stay and subsequent stay order, was a breach
of public policy of the United States even though the Israeli court had refused to
recognise the same.120
(c) In Re Fairfield Sentry, the US Court of Appeals found that the ‘confidentiality
of BVI bankruptcy proceedings does not offend U.S. public policy.’121
(d) In Re Qimonda, (Qimonda) the US District Court stated prior to remittal and the
above decision of the Bankruptcy Court that three principles can be elicited
from the cases under this article:
116
Re Rede Engeria SA, 2014 WL 4248121 (Bankr, SD NY, 2014).
117
Re ABC Learning Centres Ltd 728 F 3d 301, 309 (3rd Cir, 2013).
118
Re Gerova Financial Group Ltd, 482 BR 86 (Bankr, SD NY, 2012).
119
Re Toft, 453 BR 186 (Bankr, SD NY, 2011).
120
Re Gold & Honey Ltd, 410 BR 357, 368–9 (Bankr, ED NY, 2009).
121
Re Fairfield Sentry Ltd 714 F 3d 127 (2nd Cir 2013) 140.
6.7 Article 6 83
(a) The mere fact of conflict between foreign law and U.S. law, absent other
considerations, is insufficient to support the invocation of the public policy
exception;
(b) Deference to a foreign proceeding should not be afforded in a Chap. 15
proceeding where the procedural fairness of the foreign proceeding is in
doubt or cannot be cured by the adoption of additional protections;
(c) An action should not be taken in a Chap. 15 proceeding where taking such
action would frustrate a U.S. court’s ability to administer the Chap. 15
proceeding and/or would impinge severely a U.S. constitutional or statutory
right, particularly if a party continues to enjoy the benefits of the Chap. 15
proceeding.122
(e) In Re Qimonda, following remission from the District Court, it was held that
industrial and competitive concerns are fundamental public policy issues and
that failure to apply them would ‘undermine a fundamental U.S. public policy
promoting technological innovation’.123
The later decision by the Bankruptcy Court in Qimonda, would appear to be
inconsistent with the interpretation of this provision by different circuits of the
Court of Appeals. It is argued that this decision may be due more to domestic
economic considerations and the more political nature of judges in the USA. This
decision, it is argued, is not a true interpretation of this provision.
6.7.1 USA Legal System
As indicated above, the majority of courts in the USA are of the view that this
public policy exception should be interpreted narrowly and was intended to be
invoked only in ‘exceptional circumstances concerning matters of fundamental
importance to the enacting State’.124
In reviewing the above US decisions, in particular the most recent decision by
the Bankruptcy Court in Qimonda, we must be mindful of issues that arise from
their federal judicial system which comprises a number of Courts of Appeals which
are appointed to a circuit. Each circuit has a number of district and specialist courts
from which appeals are heard. There is only one Court of Appeals that has a
national jurisdiction, namely the Federal Circuit which has a limited jurisdiction
122
Re Qimonda AG, 433 BR 547, 570 (Dist, ED Va, 2010) affirmed Re ABC Learning Centres Ltd
728 F 3d 301 (3rd Cir, 2013); Jaffe v Samsung Electronics Company Ltd, 737 F 3d 14 (4th Cir,
2013).
123
Re Qimonda AG 462 BR 165, 185 (Bankr ED Va, 2011) affirmed Jaffe v Samsung Electronics
Company Ltd, 737 F 3d 14 (4th Cir, 2013) indicating that it was appropriate to consider it under
the balancing exercise of factors required under section 1522.
124
Re Ephedra Products Liability Litigation, 349 BR 333, 336 (Dist, SD NY, 2006); Re Iida, 377
BR 243, 259 (BAP, 9th Cir, 2007).
that does not include bankruptcy. The lower courts of one circuit are not bound to
follow the decisions of a Court of Appeals in a different circuit. Each circuit is
treated as a different court with its own chief judge and procedures; hence, decisions
may not be consistent.
Different circuits of the Court of Appeals have made a number of inconsistent
decisions and there is no mechanism for resolving these differences without an
appeal to the US Supreme Court. The Supreme Court takes on appeal a very small
percentage of the overall decisions of the Courts of Appeals and therefore these
differences persist.
The Bankruptcy Courts are a division of the District Court with appeals being to
either a judge of the relevant District Court or to a Bankruptcy Appeal Panel
(BAP) appointed by that circuit, which is comprised of three Bankruptcy Court
judges. An appeal then goes from the District Court or a BAP to the relevant Court
of Appeals for that circuit. As discussed in Sect. 4.5 the Bankruptcy Courts also
only have a limited jurisdiction.
There is also no national law in respect of such areas as private international law
which is still an individual State-based law and is applied in a federal setting. This
system has the effect of protecting the parochial interests of the smaller States
within the USA. Whilst these issues arise for historical reasons, it is argued that in
order to achieve uniformity and international certainty without the need to change
their judicial system of appeal in respect of Chap. 15, cases should go to the Court
of Appeals for the Federal Circuit.
6.7.2 Practical Issues
As was highlighted in Gold & Honey, the issue of the supposed automatic
worldwide stay granted by the issue of Chap. 11 proceedings under the US
Bankruptcy Code, is likely to be a source of real tension between States on public
policy grounds, especially when such proceedings are not foreign proceedings or
foreign main proceedings within the definition of the Model Law.125 In that case,
the Israeli Court questioned the enforceability of the extra-territorial effect of the
stay without recognition of the same by foreign courts.126 This is a stance that may
well be taken by other courts based upon public policy and their inherent sover-
eignty. This is further complicated where such recognition would be against the law
or public policy of another State. This issue is discussed further in Sect. 11.3.6.
In the UK, it is foreseeable that in some circumstances where alternate pro-
ceedings are afoot in another European State, the EC Regulation may oblige the UK
125
Re Gold & Honey Ltd, 410 BR 357 (Bankr, ED NY, 2009).
126
Ibid 364.
6.7 Article 6 85
courts to give the other European proceedings precedence pursuant to Article 3 and
thereby not enforce the stay.127 It has further been suggested that the courts may be
unwilling to remit local assets to a foreign representative without appropriate
safeguards being given to local creditors in respect of the pari passu rule of dis-
tribution after taking account of rights of set-off.128
To the extent that the word manifestly is included in the local version of the
Model Law, it is argued that this exception should be applied in extreme cases and
not be used to achieve politically acceptable outcomes. Any attempt to enforce
worldwide stay, should be subject to recognition being obtained in the States in
which enforcement is sought.
Cyaganowski and Green have suggested that the way the US courts are inter-
preting this exception will result in ‘foreign policies or practices that are at odds
with express provisions of USA law or established case law will be subject to
greater scrutiny.’ They further suggest that national interests may signal a greater
willingness for US courts to use this exception in granting orders under Chap. 15
.129 It is argued that this attitude in the USA may also be due in part to the extra
provisions contained in section 1507(b) which do not appear in the Model Law and
which place additional obligations upon the courts in the USA to protect the
interests of local creditors. Further research in relation to the attitudes of the courts
in the USA is required as this issue lies outside the scope of this book.
6.8 Article 7
Additional assistance under other laws

Nothing in the present Law limits the power of a court or a [insert the title of the
person or body administering a reorganization or liquidation under the law of the
enacting State] to provide additional assistance to a foreign representative under
other laws of this State.
Article 7 confirms that the court or domestic representative can give assis-
tance to a foreign representative under another law without seeking recognition.
This provision has been adopted by Australia, New Zealand and the UK. There is
127
For example, a European subsidiary of a US based corporate group files Chap. 11 proceedings
in respect of the group. The subsidiary whilst having assets in the USA does not have an estab-
lishment there and has its main business premises in Italy. The subsidiaries registered office is in
the UK.
128
129
Melanie L Cyganowski and Lloyd M Green ‘The Evolving Application of the Public Policy
Exception in Cross-Border Insolvencies’ (2013) 1 INSOL International 12, 13.
no equivalent provision in Canada. However, Section 61(1) of the CCAA has been
described as being conceptually similar to this article.130
In the USA, in providing assistance, the court must ensure that it is consistent
with the principles of comity and take into account:
(1) just treatment of all holders of claims against or interests in the debtor’s property;
(2) protection of claim holders in the United States against prejudice and incon-
venience in the processing of claims in such foreign proceeding;
(3) prevention of preferential or fraudulent dispositions of property of the debtor;
(4) distribution of proceeds of the debtor’s property substantially in accordance
with the order prescribed by this title; and
(5) if appropriate, the provision of an opportunity for a fresh start for the individual
that such foreign proceeding concerns.131
Just treatment has been held not to exist where the proceeding “fails to provide
creditors ‘access to information and an opportunity to be heard in a meaningful
manner,’ which are ‘[f]undamental requisites of due process,’” or where the pro-
ceeding “would not recognize a creditor as a claimholder.”132
It is argued that this provision would allow a US court to refuse assistance if the
laws of the State in which the foreign proceedings are issued are not similar to those
of the USA. This, appears to be an attempt to impose the moral and social norms of
the USA upon foreign proceedings, instead of the Universalist approach upon
which the Model Law is based. These amendments to the Model Law’s provisions
imply that the US Congress is seeking to ensure that creditors in the USA have their
claims assessed in the same way as they would in the USA. If this is correct, it
illustrates that the US Congress was seeking to reserve for its courts the ability to
act in a more Territorialist manner, which of itself may defeat the principles of
modified Universalism upon which the Model Law is based. Thankfully, however,
it appears that this has not been borne out given the way in which US Courts have
interpreted the Model Law and their willingness to allow US assets to be admin-
istered by foreign representatives.133
The amendments further appear to prevent assistance being given to a debtor’s
appointed representative, without domestic proceedings being issued. This is con-
sistent with the House of Representatives’ Report.134 However, a foreign repre-
sentative can seek to recover the debtor’s property in the USA that existed at the
130
Steven Golick and Marc Wasserman, ‘Canada’ in Ho see footnote 75, 81. A similar comment
could also be made with respect of the Bankruptcy and Insolvency Act, RSC 1985, c B-3 s 284.
131
11 USC § 1507(b) (2012).
132
Re Board of Directors of Telecom Argentina, 528 F 3d 162, 170 (2nd Cir, 2008); Re Rede
Engeria SA, 2014 WL 4248121 (Bankr, SD NY, 2014).
133
Eg Re Lee 472 BR 156, 183 (Bankr, D Mass, 2012).
134
Abuse Prevention and Consumer Protection Act, (8 April 2005) HR Report Pub L No 109–31,
109.
6.8 Article 7 87
time of the representative’s appointment without having made an application for

recognition.135 It is argued that this may be due to the US’ bankruptcy system,
especially their laws in relation to restructuring which are largely judge-controlled
proceedings. However, on face value, it once again appears to confirm the USA
Congress giving its courts the ability to act in a more Territorialist way where this is
in the USA’s self-interest for political or other reasons.
The USA version further makes it clear that any additional assistance granted
must be consistent with the principles of comity. It is not necessary that the result
achieved in the foreign bankruptcy proceeding be identical to that which would be
had in the USA. It is sufficient for the result to be ‘comparable’.136 The US Court of
Appeals has found that a non-debtor’s discharge of liabilities is a relief that the
court can order under this section as part of restructuring proceedings. In Re Atlas
Shipping A/S, the US Bankruptcy Court confirmed that the discretionary orders that
can be made under Article 21 are subject to the factors set out in their domestic
enactment of this article.137
In Australia, the New South Wales Supreme Court has affirmed that the letter of
request procedure could still coexist with the provision of the Model Law.138
The UK Supreme Court has confirmed that Article 7 supplements the common
law and does not supersede it.139 The English High Court has also determined that
where neither the Model Law nor the EC Regulation is relied upon, the Court has
the common law power under the principles of international comity to recognise a
foreign representative and as a matter of discretion to give to them the power to
issue proceedings relying upon the UK insolvency statute law.140
6.9 Article 8
Interpretation
In the interpretation of the present Law, regard is to be had to its international origin and
to the need to promote uniformity in its application and the observance of good faith.
Article 8 obliges courts, when interpreting the Model Law, to take into
consideration ‘its international origin and to the need to promote uniformity in its
application and the observance of good faith’. Similar provisions are contained
135
11 USC § 1509(f) (2012); Re Iida 337 BR 243 (BAP, 9th Cir, 2007).
136
Re Vitro SAB de CV, 701 F.3d 1031 (5th Cir, 2012).
137
Re Atlas Shipping A/S, 404 BR 726, 740 (Bankr, SD NY, 2009).
138
McGrath as Liquidators of HIH Insurance Ltd [2008] NSWSC 881 (26 August 2008), [17].
139
140
Schmitt v Deichmann [2012] 2 All ER 1217, 1232–3 [62–65].
in other conventions and model laws.141 It is suggested that this provision will
allow a court to look to case law in other jurisdictions that have adopted the
Model Law.142
It has been suggested that in providing an interpretation that takes into con-
sideration the Model Law’s ‘international origin’, a court should be reluctant to
follow existing domestic rules of interpretation and follow a domestic interpretation
of a word or phrase used in the Model Law and give priority to its procedural text.
Further, the limited scope of the Model Law should be taken into account in its
interpretation.143
Australia, New Zealand and the UK have adopted the provision as drafted.
Canada has not included an equivalent provision.
In Australia, the explanatory memorandum that accompanied the bill enacting
the Model Law provides that it ‘is expected that Australian courts will make use of
international precedents in interpreting the provisions of the Model Law.’144
In the USA, the provision has been clarified by providing that ‘the court shall
consider its international origin, and the need to promote an application of this
chapter that is consistent with the application of similar statutes adopted by foreign
jurisdictions’.145 The reference to chapter refers to Chap. 15 of the Bankruptcy
Code.
Therefore, it can be suggested that the interpretative mandate extends to include
the EC Regulation in circumstances where it is clear that the local legislature has
not intended to change the local provision from that provided for in the Model Law.
The High Court of Australia, when considering a similar provision in the
UNCITRAL Model Law on International Commercial Arbitration, indicated the:
‘considerations of international origin and international application make imperative that
the Model Law be construed without any assumptions that it embodies common law
concepts or that it will apply only to arbitral awards or arbitration agreements that are
governed by common law principles.’146
It is argued that the same must apply to other UNCITRAL Model Laws.
The Federal Court of Australia has indicated that the Model Law should be
interpreted in accordance with the principles in the Vienna Convention on the Law
141
See, eg, United Nations Commission on International Trade Law ‘The UNCITRAL Model Law
on International Commercial Arbitration’ UN Doc A/57/172 GA Res 57/562 (19 November 2002),
Article 2(1); United National Convention on Contracts for the International Sale of Goods, opened
for signature 11 April 1980, [1988] ATS 32 (entered into force 1 April 1989), Article 7(1).
142
143
Wessels, Markell and Kilborn, see footnote 14, 208.
144
Explanatory Memorandum, Cross-Border Insolvency Bill 2008 (Cth) 21.
145
11 USC § 1508 (2012).
146
TCL Air Conditioning (Zhongshan) Co Ltd v Judges of the Federal Court of Australia (2013)
295 ALR 596, 599 [8] (French CJ and Gageler J).
6.9 Article 8 89
of Treaties 1969.147 The question arises whether it is necessary to consider this

convention in order to take the international origin of the Model Law into account,
or whether that convention should be used only to interpret Article 8 itself. This
issue is discussed further in Sect. 13.3.2.
The English Court of Appeal has confirmed that the Model Law should not be
construed by reference to any particular national system of law.148 The English Court
of Appeal in Eurofinance has relied upon this provision in recognising a judgement
of the US Bankruptcy Court seeking to overturn antecedent transactions.149 This
decision was, however, overturned by the United Kingdom Supreme Court.150
In the USA in Re Loy, the Bankruptcy Court stated in relation to section 1508:
As each section of Chap. 15 is based on a corresponding article in the Model Law, if a
textual provision of Chap. 15 is unclear or ambiguous, the Court may then consider the
Model Law and foreign interpretations of it as part of its ìnterpretive task.151
In Re International Banking Corp, the US Bankruptcy Court in dealing with the

interpretation of the Model Law, stated:
When interpreting Chap. 15, the Court should also consult the GUIDE TO ENACTMENT
OF THE UNCITRAL MODEL LAW ON CROSS-BORDER INSOLVENCY (the
“GUIDE”) promulgated by UNCITRAL… In addition, the Court should read Chap. 15
consistently with prior law under section 304
In such cases, deference to the foreign court is appropriate so long as the foreign pro-
ceedings are procedurally fair and (consistent with the principles of Lord Mansfield’s
holding) do not contravene the laws or public policy of the United States.152
The Court clarified the above position stating that ‘Section 1508 provides the Court
guidance in matters of statutory interpretation only, it does not grant the Court authority
to adopt a provision in a foreign statute that is contrary to the text of Chap. 15’.153
It is argued that the above decisions correctly interpret the meaning of Article 8
although the use of the word ‘comity’ must be taken in the context of the US
legislation which uses this phrase. In British Commonwealth common law coun-
tries, ‘comity’ may have a slightly different meaning as it is based upon different
common law principles. This issue has been discussed in Chap. 4.
147
Ackers v Saad Investments Company Limited (in liq) (2010) 190 FCR 285, 295 [45] referring to
the Vienna Convention on the Law of Treaties 1969, opened for signature 30 November 1969,
[1974] ATS 2 (entered into force in Australia 27 January 1980); Ackers v Saad Investment
Company Ltd (in liq) (2013) 31 ACLC 493, 504 [35]; Gainsford v Tannenbaum (2012) 293 ALR
699, 707 [37]; Ackers v Deputy Commissioner of Taxation [2014] FCAFC 57 (14 May 2014) [43].
148
Re Stanford International Bank Ltd [2011] Ch 33, 57, [23].
149
Rubin v Eurofinance SA [2011] Ch 133, 160–1 [63].
150
Rubin v Eurofinance SA [2013] 1 AC 236.
151
Re Loy, 432 BR 551, 561, (Bankr, ED Va, 2010).
152
Ibid 624–5.
153
Re Loy, 432 BR 551, 560 (Bankr, ED Va, 2010).
6.10 Summary
This chapter has dealt with the interpretative provisions of the Model Law. Not one
of the States reviewed has been consistent in terms of its exclusions to the operation
of the Model Law.
As was highlighted under the headings in respect of Articles 3 and 6, the
enactment of these provisions has not been consistent in the States examined. In the
UK and the USA, some of the provisions have been changed, whereas Canada does
not have an equivalent to Article 6.
These differences are further highlighted in the definitions set out in Article 2.
Using one example, Canada does not have the concept of an establishment and
therefore has not defined the term; whilst in the UK, the word ‘goods’ has been
replaced with ‘assets’ in the definition. These amendments were intentional and
therefore have to be taken into account by their domestic courts when interpreting
their domestic version of the Model Law.
The interpretation of the term ‘centre of main interest’, although not defined in
the Model Law, differs between the States in part due to amendments made to the
Model Law in both the UK and the USA. In the UK, there appears to be a deliberate
intention to apply to the Model Law the meaning of that phrase under the EC
Regulation in order to create consistency of meaning. In the USA, they do not have
the same intent. Application of a substance over form interpretation of the provi-
sions cannot get round the issue of intentional amendments being made by a State’s
legislature. The amendments made by the USA to Article 7 is further evidence of its
territorialist intent as are some of the interpretations made by the courts of that State
in respect of the public policy exception in Article 6.
It is argued that Article 8 requires courts to look at how the provisions of the
Model Law have been interpreted in other States and to examine the international
intent of the Model Law and not apply their domestic rules of interpretation to its
provisions.
Chapter 7
and Interpretation of the Chapter II
of the Model Law on Cross-Border
Insolvency—Access of Foreign
Representatives and Creditors to Courts
in This State
Overview
This chapter examines how the provisions of Chapter II of the Model Law have been
enacted by the five nominated States. In particular, the following points are made:
• Chapter II grants foreign representatives the right to approach the domestic
courts in each of the States, without conceding jurisdiction to those courts, as
well as to issue domestic insolvency proceedings and to participate in domestic
insolvency proceedings.
• Articles 13 and 14 provide for foreign creditors to have equality with domestic
creditors in relation to their rights before the domestic courts.
7.1 Article 9
Right of direct access

A foreign representative is entitled to apply directly to a court in this State.
Article 9 allows foreign representatives to apply directly to the courts of the

relevant State. Australia, New Zealand and the UK have adopted this article as drafted.
Both Canada and the USA have incorporated an amended version of this article.
It has been suggested that there is no requirement that the foreign proceedings be
recognised before the foreign representative can exercise this right of access to the
UK courts.1 If this is correct, it is argued that the issue as to which creditors
have rights in rem and over which other assets a local court can exercise control is
to be determined in accordance with the domestic law of the State in which the
1
See, eg, Fletcher, Insolvency in Private International Law, National and International
Approaches see footnote 42, 473 [8.49].

DOI 10.1007/978-981-10-5876-9_7
debtor holds the asset. This may lead to a number of conflicts between the courts of
different jurisdictions. This is especially the case if the local court wishes to exercise
control over assets in another jurisdiction in which a foreign representative has been
appointed. Such conflicts may lead to inconsistent decisions between courts in
respect of the assets of the same debtors. For this reason, if the power suggested
does exist, it is submitted that it should be used only in exceptional circumstances.
Further, it is argued that this jurisdiction should only be exercised consistently with
the provisions of Article 28.
In Australia, the Family Court has determined that until an application is made
for recognition, the court is free to deal with the assets in Australia of an insolvent
entity.2 This case does not, however, deal with whether proceedings can be issued
in the name of the insolvent debtor by the foreign representative.
The Canadian legislation allows a foreign representative to apply to a court for
recognition, but does not otherwise deal with a foreign representative’s power to
issue proceedings in the courts of Canada without seeking such recognition.3
In the USA, a foreign representative must apply for recognition before being
able to issue proceedings within the USA or seek relief from a court in the USA or
be sued in the USA.4 A foreign representative can, however, issue proceedings to
recover a claim that was the property of the debtor prior to the debtor’s insolvency
without seeking recognition if such proceedings do not require comity or cooper-
ation by courts.5 A claim is defined as a ‘right to payment or a right to an equitable
remedy for breach of performance if such breach gives rise to a right to payment’.6
In Re Iida, the US Bankruptcy Appellate Panel determined that section 1509(f)
permitted a foreign representative to sue in order to collect or recover a claim that
was the property of the debtor without obtaining prior permission or recognition
from a Bankruptcy Court.7 The US Bankruptcy Court has determined that sec-
tion 1509 is intended to function identically to the manner in which 28 USC §959
affects domestic trustees.8 This gives foreign representatives the right to be sued
without leave of the court appointing them and the obligation to manage and operate
the property in their possession in the same manner as the owner or possessor of it.9
The section does not mandate the type of orders to be made; the foreign represen-
tative must still make a case that the relief it seeks is warranted.10
2
Winter & Winter [2010] FamCA 933 (15 October 2010) [210].
3
Companies Creditors Arrangement Act, RSC 1985, c C-36, s 46(1); Bankruptcy and Insolvency
Act, RSC 1985, c B-3 s 269(1).
4
11 USC § 1509 (b) (2012); Re Loy 380 BR 154, 165 (Bankr, ED Va, 2007).
5
11 USC § 1509(f) (2012); Re Iida, 377 BR 243, 257–8 (BAP, 9th Cir, 2007).
6
11 USC § 101(5) (2012).
7
337 BR 243, 258 (BAP, 9th Cir, 2007).
8
Re Loy, 380 BR 154, 165 n.2 (Bankr, ED Va, 2007).
9
28 USC § 959 (2012).
10
CT Investment Management Co. LLC v Cozumel Caribe S.A de C. 482 BR 96 (Bankr, SD NY,
2012).
7.1 Article 9 93
In Cozumel Caribe, the US Bankruptcy Court also commented that:

Other than providing access to courts in the United States, section 1509 is not a
self-executing relief section of Chap. 15. Relief to a foreign representative must be based on
sections 1507, 1519, 1520 and 1521, subject to limitations that may be imposed under
section 1522.11
The USA version of this article associates recognition with the principles of comity.
If the court does not grant recognition, the court can issue an order preventing other
courts in the United States from granting comity or cooperation to the foreign repre-
sentative. The US Bankruptcy Court has stated that once a foreign proceeding has been
recognised, it is mandatory that US courts grant comity to the foreign representatives
upon request unless such request is in breach of the public policy of the USA.12 The US
Court of Appeals has indicated that by the provision, using the word ‘comity’ it con-
notes recognition of another judicial proceeding whilst the word ‘cooperation’ suggests a
much broader meaning’.13 This issue has been discussed previously in Chap. 4.
7.2 Article 10
Limited jurisdiction
The sole fact that an application pursuant to the present Law is made to a court in
this State by a foreign representative does not subject the foreign representative of
the foreign assets and affairs of the debtor to the jurisdiction of the courts of this
State for any purpose other than the application.
Article 10 is a safe conduct provision ‘aimed at ensuring that the court in the
enacting State would not assume jurisdiction over all the assets of the debtor on the
sole ground of the foreign representative having made an application for recogni-
tion of a foreign proceeding’.14
Australia, New Zealand and the UK have adopted this article in its original form.
This provision is not contained in the Canadian version of the legislation. No
explanation is given for this and it allows the Canadian courts to assert jurisdiction
over the foreign assets of the foreign administration if they concede jurisdiction to a
Canadian court by making application for recognition. As Article 8 has also not
11
Ibid.
12
CT Investment Management Co., LLC v Carbonell, 2012 WL 92359 (Dist, SD NY, 11 January
2012) 4.
13
14
(2013) (16 December 2013) [109].
been incorporated in the Canadian legislation, this article cannot be relied upon to
prevent a court taking jurisdiction over the foreign assets and affairs of the debtor
unlike in other jurisdictions.
The USA has adopted this article with amended wording which has the same
practical effect.
7.3 Article 11
Application by a foreign representative to commence a

proceeding under [identify laws of the enacting State
relating to insolvency]
A foreign representative is entitled to apply to commence a proceeding under
[identify laws of the enacting State relating to insolvency] if the conditions for
commencing such a proceeding are otherwise met.
Article 11 is a procedural provision which ensures that a foreign represen-

tative can apply for recognition and issue domestic insolvency proceedings against
the debtor.15 Such application can be made prior to recognition being granted where
there is an urgent need to do so in order to preserve the debtor’s assets.16 It has been
suggested that one of the purposes of this article is to allow a foreign representative
to block sales by local creditors who are seeking to enforce court judgements or
orders pertaining to the assets of the debtor.17 This is a desirable effect of this
article, should domestic insolvency proceedings provide for a stay of enforcement
proceedings. An alternative approach to protect assets would be for a foreign
representative to seek orders under Article 19.
The provision has been adopted in Australia, New Zealand and the UK as drafted.
There is no equivalent provision to this article in the Canadian version of the
Model Law. Given the differences in the Canadian version, it has been speculated
that a foreign representative may still have this power if so granted by the Canadian
courts pursuant to its inherent powers.18
In the USA, a foreign representative can only issue domestic proceedings fol-
lowing recognition.19 Further, a voluntary proceeding can be issued only if the
15
Ibid [98, 99].
16
Ibid.
17
Wood, see footnote 12, 957 [31-031].
18
See, eg, Golick and Wasserman, ‘Canada’ in Ho, see footnote 75, 82.
19
11 USC § 1511(a) (2012).
7.3 Article 11 95
proceeding recognised is a foreign main proceeding.20 There is also a procedural

obligation to file the order granting recognition with the domestic petition.21
In AWAL Bank, the US Bankruptcy Court considered the situation of a Foreign
Main Representative issuing Chap. 11 proceedings in an endeavour to bring
avoidance proceedings under Chap. 5 of the Bankruptcy Code in respect of pay-
ments that had been made into bank accounts in the USA. The Foreign
Representative sought orders to allow him not to disclose a detailed listing of all
creditors including set-off claims as part of the Chap. 11 proceedings. The Court
confirmed that the antecedent transaction proceedings could not be authorised under
Chap. 15 proceedings22 and that it was appropriate for Chap. 11 proceedings to be
issued.23 The Court went on to say that, notwithstanding the Chap. 11 proceedings,
‘the principles of cooperation and coordination embedded in Chap. 15 are still
applicable’.24 Applying those principles the court made the orders in relation to the
disclosure of a listing of creditors claim, given the disclosure had previously been
made in the Bahrain proceedings even though under Bahrain law such information
was confidential.25
The lack of consistency in the enactment of this article domestically, and
especially the amendments made by the USA, appears to indicate that the US
Congress seeks, as much as possible, to make their domestic law or similar laws
apply to foreign proceedings. Thankfully, US courts have not strictly enforced these
provisions and have sought to cooperate with foreign representatives and foreign
courts as is highlighted below. However, it is feared that if there is a change in
public sentiment in the USA, this position could change.
7.4 Article 12
Participation of a foreign representative in a proceeding under
[identify laws of the enacting State relating to insolvency]
Upon recognition of a foreign proceeding, the foreign representative is entitled to partici-
pate in a proceeding regarding the debtor under [identify laws of the enacting State relating
to insolvency].
Article 12 grants a foreign representative, following recognition, the right to

participate in local insolvency proceedings in their respective State. This right
extends to proceedings issued pursuant to their domestic insolvency legislation such
as those seeking recovery of antecedent transactions or those relating to the
20
Ibid.
21
11 USC § 1511(b) (2012).
22
Re AWAL Bank, BSC, 455 BR 73, 80 (Bankr, SD NY, 2011).
23
Ibid 77.
24
Ibid 81.
25
Ibid.
protection, realisation or distribution of assets of the debtor or cooperation with the

foreign proceeding.26
The legislation in Australia, New Zealand, and the UK adopts this article. There
is no equivalent provision in the Canadian legislation although they are given
standing as if they are a creditor of the debtor.27
The USA adopts the principles of this article, subject to the foreign represen-
tative having been recognised.
Fletcher has indicated that this article does not appear to have been intended to
allow a foreign representative to lodge a proof of debt in the local proceedings.28
This appears logical as debtors cannot be creditors of themselves. Whether or not
assets in a local proceeding should be handed over to a foreign representative is a
different issue.
7.5 Article 13
Access of foreign creditors to a proceeding under

1. Subject to para 2 of the present article, foreign creditors have the same rights
regarding the commencement of, and participation in, a proceeding under
[identify laws of the enacting State relating to insolvency] as creditors in this
State.
2. Paragraph 1 of the present article does not affect the ranking of claims in a
proceeding under [identify laws of the enacting State relating to insolvency],
except that the claims of foreign creditors shall not be ranked lower than [identify
the class of general non-preference claims, while providing that a foreign claim
is to be ranked lower than the general non-preference claims if an equivalent
local claim (e.g. claim for a penalty or deferred-payment claim) has a rank
lower than the general non-preference claims].
Article 13 gives to foreign creditors the same rights as domestic creditors

regarding the commencement of and participation in insolvency proceedings.
Paragraph 2 of the article excludes creditors, in relation to nominated types of
claims, from the provisions of this article. An alternate wording in para 2 allows the
exclusion of foreign tax and social security claims.
26
(2013) (16 December 2013) [115].
27
Bankruptcy and Insolvency Act, RSC 1985, c B-3, s274; Companies Creditors Arrangement Act,
RSC 1985, c C-36, s 51.
28
Fletcher, see footnote 42, 476 [8.54].
7.5 Article 13 97
The position in Australia and New Zealand is similar to the old common law
position in relation to the recognition of judgments in respect of foreign tax and
social security obligations.29 In Australia, the alternate wording is adopted with it,
providing that ‘the claims of foreign creditors, other than those concerning tax and
social security obligations, must not be ranked lower than the unsecured claims of
other creditors solely because the creditor concerned is a foreign creditor’.30 New
Zealand excludes foreign tax and social security obligations from proving their
debts pari passu with local creditors in local insolvency proceedings.
There is no equivalent provision in the Canadian legislation. Foreign creditors
have, however, always been granted the same rights as domestic creditors.31
The UK allows claims in relation to foreign tax and social security obligations
and excludes claims in relation to penalties and other types of debts not provable
under their domestic law.
The USA allows only foreign tax, social security and public law obligations
which are allowable under its domestic law based upon tax treaties.32 Melnik
comments that the USA version of this article extends not only to cases commenced
under Chap. 15, but also to other cases commenced under the Bankruptcy Code.33
Vattamala, on the other hand, argues that foreign tax and social security obligations
should be provable and accepted as debts within the Chap. 15 insolvency
administrations.34
It has been stated that this article does not require foreign employees and other
creditors with a priority in another State to be given an equivalent priority in the
State in which recognition is being sought. Rather, such creditors have only the
right to a priority equivalent to that of ordinary unsecured creditors.35
It is argued that this lack of uniformity is allowed under the Model Law and
therefore cannot be criticised as it complies with the provisions of the Model Law.
It is a different issue whether the Model Law should allow this lack of uniformity.
Given domestic priorities and the existing rules of conflicts of law in relation to
collection of foreign taxes, it would be difficult to ever achieve uniformity in
relation to a uniform list of priorities as domestic politics would play a large role in
establishing priorities in some States.
29
See Raulin v Fischer [1911] KB 93.
30
31
Steven Golick and Marc Wasserman, ‘Canada’ in Ho, see footnote 75, 82.
32
11 USC § 1513 (2012).
33
Selinda A Melnik, ‘United States’ in Ho, see footnote 75, 486.
34
Mathews Vattamala, ‘The Myth of Cross-Border Cooperation: Mutual Assistance for the
Collection of Tax Claims in Cross-Border Insolvencies (2012) 29 Emory Bankruptcy
Developments Journal <http://www.papers.ssm.com/sol3/papers.cfm?abstract_id=2128763>.
35
7.6 Article 14
Notification to foreign creditors of a proceeding under

1. Whenever under [identify laws of the enacting State relating to insolvency]
notification is to be given to creditors in this State, such notification shall also be
given to the known creditors that do not have addresses in this State. The court
may order that appropriate steps be taken with a view to notifying any creditor
whose address is not yet known.
2. Such notification shall be made to the foreign creditors individually, unless the
court considers that, under the circumstances, some other form of notification
would be more appropriate. No rogatory letters or other similar formality is
required.
3. When a notification of commencement of a proceeding is to be given to foreign
creditors, the notification shall:
(a) Indicate a reasonable time period for filing claims and specify the place for their
filing;
(b) Indicate whether secured creditors need to file their secured claims;
(c) Contain any other information required to be included in such a notification to
creditors pursuant to the law of this State and the orders of the court.
Article 14 mandates that when a notice is required to be given to creditors

under their domestic law, that it is given to all creditors including foreign creditors
individually, unless a court orders otherwise. It allows a reasonable period for
foreign creditors after being notified to file their claims. It further provides that no
formality is required before giving notice in a foreign jurisdiction.
This article is designed to ensure that all creditors are treated equally and receive
all relevant notifications, and that a court can control the process for the notification
of creditors. The variation that exists between the legislation in each State that has
adopted the article appears to be largely procedural in nature and does not appear to
alter the substance of the provision and none require excessive legal formality.
This article has been adopted in Australia and New Zealand as drafted. There is
no equivalent provision in Canada, although notice must be given to all known
creditors about the commencement of any proceedings within five days of the initial
order and advising them that they will be placed on the service list upon request.36
If they are placed on the service list, they must be served with all future documents
filed in the proceeding subject to any order of the court.37 The UK version allows
notice to be given by advertisement in appropriate foreign newspapers, where
notification of creditors in Great Britain is by advertising in newspapers. The USA
version provides that notice is to be given to the known foreign creditors
Golick and Wasserman, ‘Canada’ in Ho, see footnote 75, 83.

36
37
Ibid.
7.6 Article 14 99
individually or as the court determines. Further, if notification is given to foreign

creditors of the commencement of proceedings, they must also be notified of the
time by which and manner in which to submit their claims.38
Where there is a conflict between the domestic law and para 2 of this article in
respect of the manner in which such notice is to be given, Article 3 requires
compliance with the foreign law.39
7.7 Summary
The Model Law confers upon foreign representatives the right to be heard in the
domestic court of that State once recognition has been obtained. However, any
application for recognition does not mean that the foreign representative is con-
ceding to the jurisdiction of the courts of that State, thereby protecting those foreign
representatives whose applications are unsuccessful.
Consistent with the Universalist approach, all creditors of a debtor in a foreign
proceeding that has been recognised can approach the courts of a State in which
recognition has been granted and have an entitlement to receive all notices etc.
regarding any applications to be made. Thus, foreign creditors will not be disad-
vantaged in respect of applications made in a foreign jurisdiction.
Article 13 grants to foreign creditors the same rights as domestic creditors,
including the issuing of domestic insolvency proceedings without being contingent
upon recognition.
38
11 USC § 1514 (2012).
39
(2013) (16 December 2013) [124].
Chapter 8
and Interpretation of Chapter III
Insolvency—Recognition of Foreign
Proceeding and Relief
Overview
This chapter examines how the provisions of Chapter III of the Model Law which
deals with the procedural steps required for recognition of a foreign proceeding and
the types of orders that a court can take on an interim basis or following
recognition:
• Articles 16 and 17 address the central issues regarding recognition of foreign
proceeding and examine in particular the concepts of COMI and ‘establish-
ment’. These issues are also examined further in Chap. 12.
• Articles 19 to 21 deal with the types of orders that a court can make depending
upon whether a proceeding has been recognised as a ‘foreign main proceeding’
or a ‘foreign non main proceeding’.
• Article 20 confirms that upon recognition of a ‘foreign main proceeding’, an
automatic stay operates in relation to any proceedings against the debtor.
This chapter does not address the issues that arise in relation to the recognition of
COMI or establishment, or the problems that emerge due to inconsistent decisions
arising from the interrelationship with the EC Regulation, which issues are dealt
with in Chaps. 12 and 14.
8.1 Article 15
Application for recognition of a foreign proceeding

1. A foreign representative may apply to the court for recognition of the foreign
proceeding in which the foreign representative has been appointed.
2. An application for recognition shall be accompanied by:

DOI 10.1007/978-981-10-5876-9_8
102 8 Comparative Analysis of the Enactment …
(a) A certified copy of the decision commencing the foreign proceeding and
appointing the foreign representative; or
(b) A certificate from the foreign court affirming the existence of the foreign pro-
ceeding and of the appointment of the foreign representative; or
(c) In the absence of evidence referred to in subparagraphs (a) and (b), any other
evidence acceptable to the court of the existence of the foreign proceeding and
of the appointment of the foreign representative.
3. An application for recognition shall also be accompanied by a statement iden-
tifying all foreign proceedings in respect of the debtor that are known to the
foreign representative.
4. The court may require a translation of documents supplied in support of the
application for recognition into an official language of this State.
Article 15 lists the procedural requirements in relation to the documents

required to be submitted to a court when a foreign representative is seeking
recognition. All States examined require the documents listed to be put before the
court and to be translated into English.
Australia also requires the submission of a listing of all domestic proceedings
relating to the debtor.1 These additional documents inform the court whether there
are any domestic proceedings afoot in relation to the debtor, thereby ensuring that
orders can be made for the service of the domestic representative and potential
creditors.2
In the UK, in addition, the same types of documents must be submitted as are
required in relation to applications for assistance under section 426 following a
letter of request from a foreign court.
8.2 Article 16
Presumptions concerning recognition

1. If the decision or certificate referred to in para 2 of Article 15 indicates that the
foreign proceeding is a proceeding within the meaning of subparagraph (a) of
Article 2 and that the foreign representative is a person or body within the
meaning of subparagraph (d) of Article 2, the court is entitled to so presume.
1
2
See generally, Federal Court (Corporations) Rules 2000 (Cth) r 15A.3 and corresponding pro-
visions in the rules of each States and Territories Supreme Court Rules.
8.2 Article 16 103
2. The court is entitled to presume that documents submitted in support of the

application for recognition are authentic, whether or not they have been
legalized.
3. In the absence of proof to the contrary, the debtor’s registered office, or habitual
residence in the case of an individual, is presumed to be the centre of the
debtor’s main interests.
Paragraph 1 of Article 16 entitles a court to make presumptions regarding the

efficacy of the documents submitted to them in accordance with Article 15.
The entitlement given by para 2 to presume that documents submitted in support
of the application for recognition are authentic, whether or not they have been
legalised, is discretionary.3 Ultimately it is up to the court from which recognition is
sought to determine whether it requires the documents to be legalised through the
process of authentication, or in those countries that are party to the Hague con-
vention, the attachment of an apostille is required.4
As the definition of ‘court’ includes non-judicial bodies, and foreign proceedings
are conducted under the supervision of those administrative bodies,5 it may be possible
to use in some countries documents certified by Notary Publics to establish the nec-
essary facts required to conduct a foreign proceeding as such certifications will gen-
erally be accepted as stating the truth. This will help a foreign representative to establish
in appropriate cases the legislative regime pursuant to which they are appointed by
producing evidence of the foreign administrative proceeding. Alternatively, they could
seek declarations or other orders from their domestic courts recognising the pro-
ceeding, before seeking to obtain recognition in a foreign jurisdiction.
Paragraph 3 of this article sets out a presumption that:
In the absence of proof to the contrary, the debtor’s registered office, or habitual residence
in the case of an individual, is presumed to be the centre of the debtor’s main interests.
This presumption is contained in the versions of the Model Law as enacted by

Australia, New Zealand and the UK. In Canada, the presumption is worded slightly
differently in that it substitutes ‘ordinary place of residence’ for ‘habitual resi-
dence’.6 This would appear to lower the standard required.
3
(2013) (16 December 2013) [128].
4
See The Convention on Abolishing the Requirements of Legalisation for Foreign Public
Documents, Hague Conference on Private International Law [1995] ATS 11.
5
For example, creditor voluntary liquidations and voluntary administrations in Australia are pri-
marily supervised by the Australian Securities & Investments Commission, although a Court on
application has the power to supervise and give directions.
6
Companies Creditors Arrangement Act, RSC 1985, c C-36 s 459(2) and Bankruptcy and
Insolvency Act, RSC 1985, c B-3 s 268(2).
In the USA, a slightly different wording again was used as it substitutes ‘evi-
dence’ for ‘proof”.7 The US Congress has stated that it intentionally changed the
presumption in para 3 as referred to in the House report that accompanied the
Bankruptcy Abuse and Consumer Protection Act which provides:
The ultimate burden as to each element is on the foreign representative, although the court
is entitled to shift the burden to the extent indicated in section 1516. The word “proof” in
subsection (3) has been changed to “evidence” to make it clearer using United States
terminology that the ultimate burden is on foreign representative. “Registered office” is the
term used in the Model Law to refer to the place of incorporation or the equivalent for an
entity that is not a natural person. The presumption that the place of the registered office is
also the center of the debtor’s main interest is included for speed and convenience of proof
where there is no serious controversy.8
The effect of this change has been noted by the US courts in Tri-Continental and
Bearn Stearns decisions and recognised in England in the Stanford International
Bank decision which is discussed further in Sect. 8.2.1.
8.2.1 Rebuttable Presumptions
There are two rebuttable presumptions contained in Article 16, one relating to
corporations based upon their registered office, and the other pertaining to indi-
viduals regarding their habitual place of residence. The ability to rely upon the
rebuttable presumption has given rise to a number of contradictory decisions
between the English Court and the USA courts which are were previously discussed
in Chap. 5. Fletcher maintains that the purpose of the presumptions is to authorise
‘the court to proceed on the basis of prima facie evidence, but does not oblige it to
do so’.9
8.2.1.1 Registered Office
In Ackers v Saad Investments Company Ltd (in liq) (Ackers), Justice Rares of the
Federal Court of Australia stated that the purpose of the presumption was ‘to
provide a ready means of dispensing with formal proof but to leave the way open
for the Court to find that, on the evidence, the contrary is the case.’ The court went
7
11 USC §1516(3) (2012).
8
House of Representatives Committee on the Judiciary, United States Congress, Bankruptcy Abuse
Prevention and Consumer Protection Act (8 April 2005), HR Report Pub L No 109-31,112–3.
9
Fletcher, Insolvency in Private International Law, National and International Approaches see
footnote 42, 460 [8.27].
8.2 Article 16 105
on to state that they preferred to follow the English approach adopted in Eurofood
to the approach adopted in the USA.10 The court summarised the relevant test as:
If, after reviewing all the evidence before the court, the proper conclusion is adverse to the
presumption, then proof to the contrary will have been established. On the other hand,
where the position is left uncertain, the Model Law authorises the court to proceed upon the
deemed position, even if a more mature and thorough investigation eventually could
determine it to be an erroneous, or indeed, fictitious, position. Of course, the court can
revisit matters in the event provided in Article 17(4).11
In Gainsford v Tannenbaum. Justice Jagot of the Federal Court expressed the

test slightly differently from that expressed in Eurofood when he stated:
Thus the Model Law proceeds on the basis that, in the absence of proof to the contrary, in
the case of corporate debtors their COMI will be their registered office and in the case of
individual debtors, their place of habitual residence will be presumed to be their COMI.12
His Honour went on to state that ‘the inquiry as to COMI must remain a broad,
factual one’.13 His Honour subsequently confirmed that factors which are both
objective and ascertainable by third parties must establish that the COMI is in a
different location to the registered office.14
The test in Australia has been described thus: ‘if after an analysis of objectively
ascertainable factors the centre of main interest remains unclear, then the court will
apply the presumption to determine the location of the debtor’s registered office.’15
It is argued that this test is similar to that which is being promoted by the European
Court of Justice in Re Interedil Srl (Interedil)16 with respect to its interpretation of
the same phrase under the EC Regulation.17
In Canada, the Superior Court of Ontario in Re Lightsquared LP considered the
factors that must be taken into account in determining a debtor’s COMI, where it is
necessary to go beyond the registered office presumption by reason of it being
questioned, as being: (a) the location that is readily ascertainable by creditors; (b) the
location is one in which the debtor’s principle assets or operations are found; and
10
Ackers v Saad Investments Company Ltd (in liq) (2010) 190 FCR 285, 295–96 [46–49].
11
Ibid [53].
12
13
Ibid 712 [46].
14
15
Scott Atkins and Rosalind Mason, ‘Australia’ in Ho, see footnote 75, 32.
16
Re Interedil Srl [2012] Bus LR 1582.
17
Ibid; and that proposed under European Commission, ‘Proposal for a Regulation of the European
Parliament and of the Council amending Council Regulation (EC) No 1346/2000 on insolvency
proceedings’ 2012/0360 (COD) recital 13a.
(c) the location where the management of the debtor takes place.18 The court indi-
cated that it may have to give greater or lesser weight to each factor depending on the
circumstances. The court further stated that it ‘corresponds to where the debtor’s true
seat or principle place of business is, consistent with the expectations of those who
dealt with the enterprise, prior to commencement of the proceedings’.19
The Canadian courts appear to have taken a position closer to that of the USA than that
adopted by the UK and Australia in relation to the practical effect of the presumption, by
requiring only the presumption in respect of COMI to be questioned before opening the
issue for determination. This may be due to the Canadian courts’ general attitude in
relation to restructuring cases in order to adopt a flexible interpretation.20
In the UK, in Stanford International Bank, the English Court of Appeal held that
the presumption is rebuttable but the onus of proof lies with the person seeking to
rebut it to produce objective and facts ascertainable to third parties of an alternate
COMI.21 The English Court of Appeal in Shierson summarised their position in
determining a debtor’s COMI under the EC Regulation as follows:
(1) A debtor’s centre of main interests is to be determined at the time that the court is
required to decide whether to open insolvency proceedings… (2) The centre of main
interests is to be determined in the light of the facts as they are at the relevant time for
determination… (3) In making its determination the court must have regard to the need for
the centre of main interests to be ascertainable by third parties; in particular, creditors and
potential creditors. It is important, therefore, to have regard not only to what the debtor is
doing but also to what he would be perceived to be doing by an objective observer. And it is
important, also, to have regard to the need for… an element of permanence. The court should
be slow to accept that an established centre of main interests has been changed by activities
which may turn out to be temporary or transitory. (4) There is no principle of immutability.
A debtor must be free to choose where he carries on those activities which fall within the
concept of “administration of his interests”. He must be free to relocate his home and his
business… the court must recognise and give effect to that. (5) It is a necessary incident of
the debtor’s freedom to choose where he carries on those activities which fall within the
concept of “administration of his interests”, that he may choose to do so for a self-serving
purpose. In particular, he may choose to do so at time when insolvency threatens.22
The Court of Appeal went on to state that if there are grounds for suspecting that
a debtor has deliberately changed their COMI after they suspected insolvency, the
court will need to be satisfied of that fact and that it was intended to have
permanence.
The above decision in Shierson was handed down before the European Court of
Justice decision in Interedil which interpreted COMI in relation to the EC
18
Re Lightsquared LP (2012) CLR (5th) 321 [25] (ONSC) applied Re MtGox Co Ltd [2014]
ONSC 5811 (24 October 2014) [21]; Re Nortel Networks Corporation [2015] ONSC 2987 [4]-
[10] (12 May 2015) [33].
19
Ibid [26].
20
Re Straumar-Buraras Investment Bank hf (2009) 57 CBR (5th) 256 [24]; Re Digital Domain
Media Group, Inc (2012) 95 CBR (5th) 318; [2012] BCSC 1565 (18 September 2012) [15, 16].
21
[2011] Ch 33, 69 [57].
22
Shierson v Vlieland-Boddy [2005] 1 WLR 3966, 3985-6 [55].
8.2 Article 16 107
Regulation. The decision in Interedil, appears to have taken the middle ground
between the above position and that adopted in Canada and the USA in interpreting
the same phrase under the EC Regulation. This decision may result in the Court of
Appeal having to review this decision as discussed in Chap. 5.
The above position, may have altered due to the Amended EC Regulation. One
of those changes is to insert a definition of COMI which presumes a debtor’s
company’s COMI to be the debtor’s registered office, which is capable of rebuttal
when the company’s central administration is in a different State from its registered
office.23 This issue is discussed further in Sects. 5.2 and 14.1.6.
In the USA, the burden of proof is on the foreign representative seeking recog-
nition. The debtor’s registered office is probative and only one of the factors is taken
into account by the court when determining the location of the debtor’s COMI.
In Re Tri-Continental Exchange Ltd, the reason for the difference in the wording
of the presumption was explained by Judge Klein as:
Thus, if the foreign proceeding is not in the country of the registered office, then the foreign
representative has the burden of proof on the question of ‘center of main interest’…
Correlatively, if the foreign proceeding is in the country of the registered office, and if there is
evidence that the center of main interests might be elsewhere, then the foreign representative
must prove that the center of main interests is in the same country as the registered office.
It follows that the burden of proof as to the “center of main interest” is never on the party
opposing “main” status and that such an opponent has only a burden of going forward to
adduce some evidence inconsistent with the registered office warranting a conclusion of
“main” status.24
In Re Bear Stearns, Judge Lifland (who was involved with the drafting of the
Model Law), at first instance noted that the US Bankruptcy Code does not state the
type of evidence required to rebut the presumption in respect of COMI, and indi-
cated that it may include: the location of the debtor’s headquarters; the location of
those who actually manage the debtor; the location of the debtor’s primary assets;
the location of the majority of the debtor’s creditors or of a majority of the creditors
who would be affected by the case; and/or the jurisdiction whose law would apply
to most disputes.25 The District Court, in hearing the appeal, recognised that the US
Congress changed the relevant language of the Model Law by substituting rebuttal
by ‘evidence to the contrary’ for the Model Law’s ‘proof to the contrary’ in order to
clarify this very issue, and referred to the House report. That accompanied the bill
introducing Chap. 15 into the Bankruptcy Code.26
In Re Basis Yield Alphs Fund, the court considered the relevant test in relation to
the presumption in a slightly different way by stating:
23
141/19 Article 7.
24
Re Tri-Continental Exchange Ltd, 349 BR 627, 635 (Bankr, ED Cal, 2006).
25
Re Bear Stearns High Grade Structured Credit Strategies Master Fund Ltd, 374 BR 122, 128
26
Re Bear Stearns High-Grade Structured Credit 389 B.R 325, 334 (Dist SD NY, 2008).
Article 16 establishes presumptions that allow the court to expedite the evidentiary process;
at the same time they do not prevent, in accordance with the applicable procedural law,
calling for or assessing other evidence if the conclusion suggested by the presumption is
called into question by the court or an interested party it states, explicitly, that the con-
clusion suggested by the presumption may likewise be “called into question by the court”.27
As illustrated above, the wording used in the different States examined has given
rise to different interpretations of the effect of the presumption and the requirements
to rebut it. The main differences are between the USA and Canada on one hand, and
those that advocate consistency with the interpretation of COMI under the EC
Regulation, namely the UK, Australia and New Zealand on the other. Sarra explains
that the difference in approach when assessing COMI differs between that adopted
in Europe, which is consistent with the EC Regulation which sets a high threshold
to rebut the presumptions contained in Article 16(3), from that adopted in Canada
and the USA which is a ‘command and control’ test.28 Professor Westbrook, a
member of the committee that drafted the Model Law, has explained that the
purpose of the presumption is ‘for speed and convenience of proof where there is no
serious controversy.’29
Professor Wade has commented in relation to the registered office presumption
that it should not be a strong presumption because:
(a) Such an approach would enable havens serving as centres of main interest (i.e.
tax havens, bank secrecy laws havens) to draft laws favourable to certain
interests (i.e. director’s manager’s liability) in insolvency.
(b) The place of incorporation or registered office is too easily altered by vested
interests, e.g. to secure protection for directors/managers.
(c) The drafter of the Model Law and the EC Regulation would have resisted
locating the COMI in the States of a mailbox registration.30
Moss explains the reason for the presumption in relation to the registered office
being a debtor’s COMI as being based upon the different approaches by the law
taken in the UK and Europe. In the UK, if there were to be proceedings in more
than one country, then the common law would assume the main proceedings were
taking place in the State of registration and other proceedings would be deemed to
be ancillary. In Europe, the approach focuses on the ‘seat ‘of the company which ‘is
most likely the idea behind the ‘centre of main interest’ concept’.31
27
Re Basis Yield Alphs Fund, 381 BR 37, 51 (Bankr, SD NY, 2008).
28
Janis Sarra, “Oversight and Financing of Cross-Border Business Enterprise Group Insolvency
Proceedings” (2009) 44 Texas International Law Journal 547, 558.
29
Jay Lawrence Westbrook, ‘Locating the Eye of the Financial Storm’ (2007) 32 Brooklyn Journal
of International Law 1019, 1033.
30
Judith Wade, Where is a corporation’s “centre of main interests” in international insolvency’
(2008) 16 Insolvency Law Journal 127, 145.
31
Gabriel Moss, ‘Group Insolvency-Choice of Forum and Law: The European Experience Under
the Influence of English Pragmatism’, (2007) 32 Brooklyn Journal of International Law 1005,
1008.
8.2 Article 16 109
Ultimately, the difference in interpretation may boil down to who has the onus of
proof with respect to COMI not being the registered office, and that it will not affect
the substance of the outcome of the majority applications for recognition. However,
in more difficult cases, where there is a lack of evidence or there is contradictory
evidence as to where the COMI is, the presumption will play a more important role
particularly in Australia, New Zealand and the UK.
As discussed in Sect. 5.2 UNCITRAL has approved a change to the
UNCITRAL Guide to better clarify the interpretation of this phrase. Further, with
the Amended EC Regulation referred to in Sect. 14.1.6, the extent of this difference
may be reduced but there is still a difference in respect of the weight to be given to
the rebuttable presumption.
8.2.1.2 Habitual Residence
There are fewer cases dealing with this rebuttable presumption as it applies only to
the cases of individual debtors. Canada uses the phase ‘ordinary residence’ and is
distinguishable given the judicial comments set out below.
In Australia in Gainsford v Tannenbaum, the Federal Court determined that the
term should be interpreted in a manner consistent with the way that the term is used
in the Adduction Convention.32 The court went on to state:
The Model Law does not, in terms, make criteria readily ascertainable by third parties
determinative in the objective test for the identification of COMI which it posits….
Axiomatically, ascertainment “habitual residence” may entail the reception of facts which,
though relevant, are not readily ascertainable by third parties.33
The court considered various factors, including the fact that the bankrupt had
permanent residency in Australia, although he remained a South African citizen,
and determined that his habitual place of residence was in Australia as he had left
South Africa several years earlier and established himself and his family in
Australia and transferred his funds to Australia. However, the court noted that a
different test from that used in the case of corporate debtors was applicable when
determining an individual’s COMI.
In Williams v Simpson, the New Zealand High Court referred to the term ‘ha-
bitual residence’ as being well-known in international law.34 The court went on to
state:
… the inquiry into “habitual residence” was a “broad factual one, taking into account such
factors as settled purpose, the actual and intended length of stay in a state, the purpose of
the stay, the strength of ties to the State and to any other state (both in the past and
32
33
Ibid 712 [46].
34
Williams v Simpson [2011] 2 NZLR 380, 391 [41].
currently), the degree of assimilation into the State (including living and schooling
arrangements), and cultural, social and economic integration.”..35
In Re Ran, the US Court of Appeals considered the term ‘habitual residence ‘as
being identical to the term ‘domicile’, which ‘is established by the physical pres-
ence in a location coupled with intent to remain there indefinitely.’36 The court
found that the time for determining a person’s or entity’s COMI was the time at
which the petition for recognition was filed.37
In Re Kemsley, the US Bankruptcy stated:
Habitual residence is a concept implying more than just the place where an individual
happens to be living at a particular time and has aspects of an ongoing intention to stay in
the same location for the foreseeable future unless and until something might occur to
prompt or compel a change (loss of employment, family needs, illness, job opportunities,
retirement, other significant life events or perhaps a spontaneous desire to relocate born of a
spirit of adventure).
The term habitual residence includes an element of permanence and stability and is com-
parable to domicile.38
The US Bankruptcy Court has also indicated that the factors to rebut the pre-
sumption are different from those with respect to a corporate debtor.39 The court has
also indicated that each person ‘has a unique set of connections to our place of
residence, some personal and others institutional, and there are multiple ways for an
individual to manifest the intent to remain indefinitely in that place of residence’.40
In Re Loy, the US Bankruptcy Court held that as Mr. Loy had only a temporary
residence visa and had to return to England in several months’ time to renew his
visa, his habitual place of residence had not changed to the USA.41
The meaning of habitual place of residence appears to equate to the place of a
person’s residence where they intend to stay in the long term.42 This test is slightly less
strict than the old common law test of domicile with the court being required to look at
all the surrounding factors to determine whether the debtor has demonstrated the intent
to remain there indefinitely and assimilate into the State. This lack of difference in the
35
Ibid 391 [42].
36
607 F.3d 1017, 1022. (5th Cir, 2010).
37
607 F.3d 1017, 1025 (5th Cir, 2010).
38
Re Kemsley 489 BR 346, 353 (Bankr, SD NY, 2013).
39
Re Chiang, 437 BR 397, 404 (Bankr, CD Cal 2010).
40
Re Kemsley, 489 BR 346, 363 (Bankr, SD NY, 2013).
41
Re Loy 380 BR 154, 163 (Bankr, ED Va, 2007).
42
See, eg, Williams v Simpson [2011] 2 NZLR 380, 391 [41, 42]; Re Ran 607 F.3d 1017, 1022 (5th
Cir, 2010).
8.2 Article 16 111
interpretation of this term, it is argued, is due in part to the fact that none of the States
examined has sought to change the wording used in this presumption.
8.3 Article 17
Decision to recognize a foreign proceeding

1. Subject to Article 6, a foreign proceeding shall be recognized if:
(a) The foreign proceeding is a proceeding within the meaning of subpara-
graph (a) of Article 2;
(b) The foreign representative applying for recognition is a person or body within
the meaning of subparagraph (d) of Article 2;
(c) The application meets the requirements of para 2 of Article 15;
(d) The application has been submitted to the court referred to in Article 4.
2. The foreign proceeding shall be recognized:
(a) As a foreign main proceeding if it is taking place in the State where the debtor
has the centre of its main interests; or
(b) As a foreign non-main proceeding if the debtor has an establishment within the
meaning of subparagraph (f) of Article 2 in the foreign State.
3. An application for recognition of a foreign proceeding shall be decided upon at
the earliest possible time.
4. The provisions of Articles 15, 16, 17 and 18 do not prevent modification or
termination of recognition if it is shown that the grounds for granting it were
fully or partially lacking or have ceased to exist.
Article 17 sets out the requirements for recognition as a foreign proceeding

and provides that it will be recognised as a foreign main proceeding if the foreign
representative from the State of the debtor’s COMI. It further provides that it shall
be recognised as a foreign non-main proceeding if it is being made by a foreign
representative from the State in which the debtor has an establishment. Paragraph 3
of this Article requires a court to hear any application for recognition as early as
possible, whilst para 4 allows a court to modify or terminate any order granting
recognition in the future should circumstances change.
The power to modify or terminate a recognition order may be used in circum-

stances where:
(a) a change of circumstances after the decision granting recognition (e.g. the
recognised proceeding has been terminated or changed from a restructuring
proceeding to a liquidation);
(b) new facts have arisen that require or justify a change;
(c) the requirements for recognition were not fully observed in the decision-making
process especially where, on appeal, the merits of the decision can be reviewed.43
Each of the States examined, other than Canada, has made minor insubstantial
procedural amendments which affect the operation of this article, but will not affect
the ultimate outcome of an application for recognition. Canada has no requirement
for the debtor to have an establishment in the State of the foreign representative in
order to recognise it as a foreign non-main proceeding.44 Furthermore, there is no
requirement for the application to be dealt with at the earliest possible time.
UNCITRAL Working Group V confirmed that the ‘Model Law is not intended
to accord recognition to all foreign proceedings’.45 The Model Law anticipates
non-recognition where the foreign proceedings are issued outside a State which is
not the debtor’s COMI or where the debtor does not have an establishment.46 This
includes those foreign proceedings based upon the cessation of payments, aban-
donment of premises or departure from the jurisdiction.47
As Canada, does not require the debtor to have an establishment in order to be
recognised as a foreign non-main proceeding, it may possibly give rise to the
recognition of a foreign proceeding which will not be recognised in other States.
The issues identified under Article 16 with respect to the test applicable for
recognition of the COMI also apply under this Article. Different courts have listed
different factors to be taken into account when determining a debtor’s COMI
although it is clear that these lists are not exhaustive.
This article has been the subject of much judicial commentary, especially in
relation to the various meanings of COMI, which are not consistent and raise
questions as to whether the provisions have been interpreted after taking into
43
(2013) (16 December 2013) [165, 166]; Wessels, Markell and Kilborn, see footnote 14, 215–6.
44
Companies Creditors Arrangement Act, RSC 1985, c C-36 s 47; Bankruptcy and Insolvency Act,
RSC 1985, c B-3 s 270.
45
United National Commission on International Trade Law ‘Interpretation and application of
selected concepts of the UNCITRAL Model Law on Cross-Border Insolvency relating to centre
of main interests (COMI)’ 41 session, UN Doc A/CN.9/WG.V/WP.103 (28 February 2012) 8
[37A].
46
Ibid 9 [37C]-[37D].
47
Bankruptcy Act 1966 (Cth) s 40; Bankruptcy & Insolvency Act, 1985, c B-3 s 2 in the definition
of ‘insolvent person’.
8.3 Article 17 113
account the interpretative provisions of Article 8. This issue is further complicated

where it is clear that the local legislature intended to change the local provision
from that provided for in the Model Law. The judicial decisions of the different
States take different positions in relation to the level of the evidence required to
rebut the presumption contained in Article 16. In Australia and the UK, it must be
shown on readily ascertainable evidence that the COMI is in another State. In the
USA and Canada, the court requires evidence to be put before it as to COMI and if
any of that evidence is inconsistent with the rebuttable presumption, then the court
must make its own determination on the evidence presented. The key judicial
decisions in each of the States examined is set out below:
8.3.1 Australia
In Ackers, Justice Rares of the Federal Court of Australia, noted that COMI is not
defined in the Model Law of the Cross Border Insolvency Act and that this was a
deliberate choice. Further, the Australian Court should have regard to foreign
decisions when deciding whether to grant recognition.48
In the same decision, when referring to Bear Stearns, both before the US
Bankruptcy Court and on appeal before the US District Court, Justice Rares went
on to state:
Both Judges Lifland and Sweet considered that the concept of the centre of main interests
derived from the European Union Convention on Insolvency Proceedings (done at
Brussels, November 23, 1995) that had been in the process of adoption when the Model
Law was being drafted. The regulation adopting the European Convention explained that
the centre of main interests meant “… the place where the debtor conducts the adminis-
tration of his interests on a regular basis and is, therefore, ascertainable by third parties”: see
Bear Stearns 389 BR at 336. His Honor referred to the decision of the European Court of
Justice in Re Eurofood IFSC Limited [2006] Ch 508, particularly at 542 [34, 35] describing
it as “more or less amount[ing] to another non-barking dog”. District Judge Sweet noted
that the European Court of Justice had held that the fact that a company’s economic choices
are or could be controlled by a parent company in another state was not enough to rebut the
COMI presumption.49
The court further determined that the relevant test to determine the centre of
main interest should be the approach adopted in Eurofood and Stanford
International Bank.50
In Buccaneer Energy Ltd the Federal Court accepted that an Australian listed
company had its centre of main interest in the USA. The court indicated that
48
Ackers v Saad Investments Company Ltd (in liq) (2010) 190 FCR 285, 291–292 [30].
49
Ibid 293 [36].
50
Ibid 295–296 [49].
in determining the centre of the main interests of a debtor company, the simple presumption
laid down by the Community legislature in favour of the registered office of that company
can be rebutted only if factors which are both objective and ascertainable by third parties
enable it to be established that an actual situation exists which is different from that which
locating it at that registered office is deemed to reflect.51
8.3.2 Canada
In Canada, the courts have not reached a consistent position in relation to the
meaning and factors to be taken into account in relation to COMI and when
recognition should be granted.
In Straumar-Buraras Investment Bank, the Ontario Superior Court of Justice
recognised a special trustee appointed under special Icelandic legislation following
the collapse of their banking sector. The Bank had no office or creditors in Canada,
but had assets in the form of shares in a Canadian company and money due from
three Canadian borrowers. Clearly, the bank’s centre of main interest was Iceland.
The court commented that the CCAA was intended to give flexibility in peculiar
and unusual circumstances.52
In Re Stanford International Bank Ltd, the Quebec Court of Appeal determined
the court has discretion under the BIA whether or not to recognise a foreign
representative. Further, the court can refuse recognition where it is not in the
interests of Canadian creditors.53 The court affirmed the decision of the court at first
instance which had refused recognition of the liquidators appointed by the Antiguan
court, citing the fact that prior to seeking recognition, they had imaged the data
contained on computers in Canada and then deleted the data on the Canadian
computers without the consent of the USA receivers. The court further referred to
the order appointing the liquidators preventing disclosure of information to third
parties without a further order of the court. The court held that the liquidators’
actions in destroying the data were illegal and not in the interests of Canadian
creditors, and therefore refused recognition.54 It is uncertain but arguable whether
the court, in reaching its conclusions either at first instance or on appeal, was
seeking to apply the public policy exception under Article 6. This decision has
otherwise been criticised as not dealing with the issue of whether the US
receivership of the entity whose purpose was to protect US creditors alone was a
collective proceeding.55
51
52
Re Straumar-Buraras Investment Bank hf (2009) 57 CBR (5th) 256 [24].
53
Re Stanford International Bank Ltd (2009) 65 CBR (5th) 4; [2009] QCCA 2475 (17 December
2009) [18].
54
Re Stanford International Bank Ltd (2009) 65 CBR (5th) 33 (Cour supérieure du Québec).
55
Fraser Hughes ‘The Stanford Bank Decisions in England and Quebec: Are we Moving Further
Away from Common Principles: The Stanford Bank Decisions in England and Quebec’ (2010) 21
International Company and Commercial Law Review 205, 210.
8.3 Article 17 115
In Tucker v Aero Inventory (UK) Ltd, the Court was satisfied that a Canadian
company with a registered office in Canada, but which had business interests
globally and its head office in the UK from where it was managed and administered
and where its holding company was listed, was sufficient to find that its centre of
main interest was in the UK.56
In Re Probe Resources Ltd, the British Columbia Supreme Court equated the
centre of main interest to where the legitimate expectations of third parties dealing
with a company as to which law would govern it.57
In Angiotech Pharmaceuticals Ltd, the Supreme Court of British Columbia set
out a number of relevant factors to consider when determining the centre of main
interest; these are:
(a) the location where corporate decisions are made;
(b) the location of employee administrations, including human resource functions;
(c) the location of the company’s marketing and communication functions;
(d) whether the enterprise is managed on a consolidated basis;
(e) the extent of integration of an enterprise’s international operations;
(f) the centre of an enterprise’s corporate, banking, strategic and management
functions;
(g) the existence of shared management within entities and in an organization;
(h) the location where cash management and accounting functions are overseen;
(i) the location where pricing decisions and new business development initiatives
are created; and
(j) the seat of an enterprise’s treasury management functions, including manage-
ment of accounts receivable and accounts payable.58
In Re Massachusetts Elephant & Castle Group Inc., the court was faced with an
application by the company which had issued Chap. 11 proceedings in the USA in
respect of itself and a number of related entities including three entities incorporated
in Canada with registered offices in Canada to be recognised as the foreign main
proceedings. The Ontario Superior Court stated that Canadian courts had consis-
tently recognised Chap. 11 proceedings as foreign proceedings and that, as the
applicant was the lead debtor, it should be recognised as the foreign representa-
tive.59 In relation to the Canadian companies, the court was required to determine
whether the presumption in relation to the registered office being the company’s
centre of main interest (COMI) had been rebutted. The court found that ‘the factors
listed in Re Angiotech, the intention is not to provide multiple criteria, but rather to
provide guidance on how the single criteria, i.e. the centre of main interest, is to be
interpreted’.60 The court went on to list a number of factors that it considered
56
[2009] ONSC 63138 (12 November 2009).
57
(2011) 79 CBR (5th) 148 [28].
58
(2011) 76 CBR (5th) 317) [7] (BCSC).
59
(2011) 81 CBR (5th) 102 [13] (ONSC).
60
Ibid [27].
significant in relation to COMI being (a) the location of the debtor’s headquarters or
head office functions or nerve centre; (b) the location of the debtor’s management;
and (c) the location which significant creditors recognize as being the centre of the
company’s operations.61
The Nova Scotia Supreme Court has refused to recognise US Chap. 11 pro-
ceedings as main proceedings where the corporation had transferred it place of
incorporation from Nova Scotia to Delaware in the USA two month prior to issuing
the Chap. 11 proceedings and the majority of the secured creditors where in Nova
Scotia. The director has also failed to reveal to the Nova Scotia Supreme Court in
other proceedings that the place of incorporation had changed.62
8.3.3 New Zealand
In New Zealand, the courts have considered in detail the position of an individual
debtor. In Williams v Simpson, the High Court of New Zealand dealt with an
application for recognition by an English trustee of a New Zealand citizen and
resident who had been made bankrupt in England upon a petition of Lloyds for
non-payment of calls made against the debtor who was a ‘name’ in a Lloyds
syndicate. The English Court had accepted jurisdiction to make the sequestration
order as the debtor, Dr. Simpson, was deemed to have been carrying on business in
England by being a Lloyds name. The New Zealand High Court refused recognition
under the Model Law as a foreign main proceeding as Dr. Simpson’s centre of main
interest was clearly in New Zealand where he had a family and home and a child at
school. Relying on Article 16 (3), the court held that the centre of main interest was
presumed to be his place of habitual residence and this presumption had not been
rebutted. The court also refused to recognise the English bankruptcy as a non-main
proceeding as it found Dr. Simpson had no establishment (as defined in Article 2) in
England. The Court did, however, agree to grant assistance to the English trustee
based upon a request from the English High Court in accordance with the principles
of comity.63
61
Ibid [30].
62
Re Wolfridge Farm Ltd [2015] NSSC 168 (6 May 2015).
63
[2011] 2 NZLR 380.
8.3 Article 17 117
In the UK, the courts on several occasions have had to consider the meaning of
COMI and when recognition should be granted.
In the Matter of Stanford International Bank Ltd, the English High Court dealt
with an application by the liquidators of Stanford who had been appointed by the
High Court of Antigua and Barbuda for recognition. Stanford had been incorpo-
rated in Antigua and Barbuda and had a registered office in that country. Stanford
had been the subject of a ponzi scheme and was being investigated by the US
Securities Exchange Commission which had obtained the appointment of a receiver
from the US District Court. The US receiver also applied for recognition in
cross-referenced proceedings. At first instance, Lewison J granted recognition to the
liquidators as the foreign main proceedings, but not the USA receivers because the
USA receivership was not a collective proceeding or made under a law relating to
insolvency as their purpose was to prevent dissipation and waste, not to liquidate or
reorganise.64 The Court of Appeal confirmed the decision at first instance.65 In
considering the issue of centre of main interest, the court affirmed that it should
follow the European Court of Justice decision in Eurofood66 and that the test for
centre of main interest is ‘the place where the debtor conducts the administration of
his interests on a regular basis and is therefore ascertainable by third parties’.67
As indicated under Article 2, the issue that must be questioned when examining
the decision in Stanford International Bank is the extent to which the court
accorded with or relied upon the UK amendment to Article 3 and Regulation 2(d).68
Those provisions required the court to give preference to the interpretation offered
in Eurofood rather than look to independently determine the meaning of ‘centre of
main interest’ for the purposes of the Model Law. It is argued that the decision in
Eurofood has been further clarified by the decision in Re Interedil Srl.69
The English High Court in Rubin was faced with the situation of a trust being
recognised as a debtor and separate legal entity under US Chap. 11 proceedings, but
not being recognised as a separate legal entity under UK general law.70 The court
found that if the structure was recognised as a separate debtor under the foreign law
giving rise to the foreign main proceeding, then the court should do likewise.71 The
court also found that when interpreting these provisions in the Model Law, ‘a
64
[2011] Ch 33.
65
[2011] Ch 33, 58 [29].
66
Re Eurofood IFSC Ltd [2006] Ch 508.
67
[2011] Ch 33, 61, [36], 67 [53] quoting Virgos and Schmidt, see footnote 26; Contra, Stanford
International Bank Ltd (2009) 65 CBR (5th) 4; (2009) QCCS 4109 (11 September 2009) [47].
68
69
Re Interedil Srl [2012] Bus LR 1582.
70
Rubin v Eurofinance SA [2009] EWHC 2129 (Ch) (31 July 2009).
71
Ibid [46].
purposive construction should be given to these provisions. Their object is to facilitate

co-operation between different jurisdictions in relation to bankruptcy proceedings’.72
The court went on to find that the Model Law cannot be used for the purposes of
obtaining recognition and enforcement of judgements relating to the foreign pro-
ceedings unless it complies otherwise with English private international law which
requires ‘that the judgment of a foreign court is not enforceable unless the defen-
dant was present within the jurisdiction, or in some way submitted himself to the
jurisdiction, of the foreign court’.73 This conclusion was affirmed by the UK
Supreme Court.74
In Pillar Securitisation S.a.r.l, the English High Court summarised the Re
Eurofood principles as follows:
(i) There is a presumption that the body’s COMI is in the state where its registered
office is located.
(ii) The presumption can be rebutted only by factors which are both objective and
ascertainable by third parties. Thus the court is to have regard to factors already in
the public domain, or which would be apparent to a typical third party doing
business with the body, excluding such matters as might only be ascertained on
inquiry.
(iii) Accordingly, the place where the body’s head office functions are carried out is only
relevant if so ascertainable by third parties.
(iv) Each body or individual has its own COMI; there is no COMI constituted by an
aggregation of bodies or individuals.75
The court determined that the company’s centre of main interest was where it
was managed and business was conducted on its behalf as this was the address that
clients and creditors dealt with and, as such, the presumption was rebutted.76
Article 17(4) has been the legal foundation used by the English High Court to
refuse and application for orders sought by a foreign representative whose
appointment in restructuring proceedings had been terminated by the appointing
Japanese court who had given the court an undertaking to complete the restruc-
turing agreement.77
8.3.5 USA
In the USA, the court has considered the meaning of COMI in light of the
amendments made to the Model Law provisions by Chap. 15 of the Bankruptcy
72
Ibid [48].
73
Ibid [72].
74
75
Pillar Securitisation S.a.r.l v Spencer [2011] BCC 338, 342[13].
76
Ibid 344 [27].
77
Re Sanko Steamship Co Ltd [2015] EWHC 1031 (Ch) (16 April 2015).
8.3 Article 17 119
Code. This has led to different considerations being taken into account in relation to
recognition.
In Re Sphinx Ltd, the joint liquidators appointed by the Grand Court of the
Cayman Islands of a group of companies operating under the Sphinx Ltd group
applied for recognition as the Foreign Main Proceedings. The liquidator’s evidence
established that, whilst the companies’ registered office was in the Cayman Islands,
each of the companies operated as hedge funds and was incorporated as either a
limited liability company or as a segregated portfolio company. The companies
operated to attract both US and non-US investors; however, they had no employees
or business addresses in the Cayman Island with only their statutory records being
kept in the Cayman Islands. The companies’ business and trading activities were in
fact conducted under a management agreement by a company in New York City
with 90% of its assets being located in the United States of America. The court
determined that the presumption in section 1516(c) can be rebutted and that the
ultimate burden of element of recognition is on the foreign representative although
the court is entitled to shift the burden to the extent indicated in section 1516.78 The
court also found that ‘there is nothing in Chap. 15 provides that there cannot be a
‘non-main’ proceeding unless there is a ‘main’ proceeding’.79 As there was no
opposition to the recognition, the court granted recognition as a main proceeding
based upon its registered office being in the Cayman Islands. This recognition has
been criticised in more recent decisions.80
The Court also stated that ‘in cases where the court is asked under Chap. 15 to
reconcile conflicting claims to primacy between or among proceedings… including
the matter presently before the Court, the interests of the debtor’s estate, creditors
and other parties, absent evidence that they support a ‘primary’ proceeding for an
improper purpose, should generally be a significant and perhaps deciding factor.’81
The Court set out a number of factors which it believed were relevant in
determining the location of the debtor’s headquarters, namely ‘(1) the location of
those who actually manage the debtor (which, conceivably could be the head-
quarters of a holding company); (2) the location of the debtor’s primary assets;
(3) the location of the majority of the debtor’s creditors or of a majority of the
creditors who would be affected by the case; and (4) the jurisdiction whose law
would apply to most disputes’.82
In Bear Stearns High Grade Structured Credit Strategies Master Fund Ltd, the
US District Court on appeal from the US Bankruptcy Court examined a Cayman
Island winding up proceedings of two Cayman Islands open-ended investment
78
Re Sphinx Ltd, 351 BR 103, 117 (Bankr, SD NY, 2006).
79
Ibid 122.
80
See, eg, Re Bear Stearns High Grade Structured Credit Strategies Master Fund Ltd, 374 BR
122, 130 (Bankr, SD NY, 2007); Re Bear Stearns High-Grade Structured Credit 389 B.R 325, 334
(Dist SD NY, 2008); In re Basis Yield Alphs Fund (Master), 381 BR 37,52–53 (Bankr, SD NY,
2008).
81
Re Sphinx Ltd 351 BR 103, 114 (Bankr, SD NY, 2006).
82
Ibid 117 adopted in Re Fairfield Sentry Ltd, 714 F 3d 127 (2nd Cir 2013).
companies that were incorporated in the Cayman Islands as exempt companies.83

The Bankruptcy Court had ruled that the winding up was neither a foreign non-main
proceedings, nor foreign main proceedings. The companies operated hedge funds
that were managed and administered in the USA. The investment registries were in
Ireland and the accounts receivable registries were located in a number of countries
in Europe. The registered office of the company was that of its professional advisers
in the Cayman Islands and the only thing that occurred in the Cayman Islands was
the maintenance of statutory records and auditing. The Bankruptcy Court determined
that it was not a foreign non-main proceeding as the company did not have a business
establishment in the Cayman Islands; nor did it conduct any transactions in the
Cayman Islands. After the issue of the Chap. 15 application, the company had a large
amount of funds remitted from the United States to the Cayman Islands. The US
District Court determined that the time for determining whether a debtor had an
establishment was as at the date of presentation of the petition.84 The US District
Court referred to the House of Representatives Report and stated:
The drafters of the Model Law understood that only a main proceeding or a non main
proceeding meeting the standards of section 1502 (that is, one brought where the debtor has
an establishment) were entitled to recognition under this section. The Model Law has been
slightly modified to make this point clear by referring to the section 1502 definition of main
and non main proceedings, as well as to the general definition of a foreign proceeding in
section 101(23). A petition under section 1515 must show that the proceeding is a main or
a qualifying non main proceeding in order to obtain recognition under this section.85
The Court went on to say:

If the debtor does not have its center of main interests or at least an establishment in the
country of the foreign proceedings, the bankruptcy court should not grant recognition and is
not authorized to use its power to effectuate the purposes of the foreign proceeding.86
The court held that ‘Auditing activities and preparation of incorporation papers
performed by a third party do not in plain language terms constitute ‘operations’ or
‘economic activity’.87
The court referred to the European Court of Justice decision of Eurofood88 and
stated that their reasoning was consistent with this decision and determined that the
presumption had been rebutted and the liquidators had failed and reaffirmed the
Bankruptcy Court’s decision.89
In Re Ran, the US Court of Appeals considered an appeal involving an appli-
cation by an Israeli bankruptcy receiver of the affairs of Mr. Ran. Mr. Ran had been
83
Re Bear Stearns High Grade Structured Credit Strategies Master Fund Ltd, 374 BR 122 (Bankr,
SD NY, 2007).
84
Ibid 339.
85
Ibid 331.
86
Ibid 334.
87
Ibid 339.
88
Ibid 337.
89
Ibid.
8.3 Article 17 121
a high profile business man in Israel whose business interests had become insolvent.
Mr. Ran had moved to Texas in the United States before he was bankrupted in
Israel and had obtained residency. His children were US citizens. The petition for
recognition was issued eight years after Mr. Ran was declared bankrupt. The Court
confirmed that an application for recognition is not a ‘rubber stamp’ and, in the
absence of an objection, the court must undertake its own jurisdictional analysis to
grant or deny recognition. The burden of proof of the requirements for recognition
as either a foreign main proceeding or a foreign non-main proceeding is on the
foreign representative. The court determined that Mr. Ran’s habitual place of res-
idence as at the date of the petition was the USA, and as such, the Israeli pro-
ceedings could not be foreign main proceedings. Furthermore, as Mr. Ran did not
have any businesses in Israel, he could not have an establishment there. Even if he
had a place of operations in Israel, because he carried out no economic activity
there, the test for an establishment was not met.90
The US Bankruptcy Court has refused to terminate a recognition order where a
foreign representative had taken conflicting positions on material issues the
Bankruptcy Court and in the foreign main proceedings. The court indicated that it
was not a ground upon which to terminate recognition, but that the court would
reconsider the position when the foreign representative was seeking recognition of
any ultimate scheme of reorganisation at which time the court would decide
whether to grant comity to the order or judgment.91 The issue of recognition of
COMI is discussed further in Chap. 12.
This article is also subject to the public policy exception contained in Article 6.
As highlighted under Article 6, there has been a recent tendency for some courts in
the USA to use this exception to refuse recognition so as to protect the industrial
and competitive concerns of USA businesses.92
The types of entities that are recognised may also differ between States and it is
not certain that the English position in relation to the recognition and enforcement
of foreign judgements as set out in Rubin will be followed in other States.93
These issues are commented on further in Sects. 11.3.2 and 13.3.
90
Re Ran (2010) 607 F.3d 1017, 1027–28 (5th Cir, 2010).
91
Re Cozumel Caribe SA de CV (2014) WL 1569238 (Bankr, SD NY, 2014).
92
Re Ephedra Products Liability Litigation, 349 BR 333, 336 (Dist, SD NY, 2006); Re Iida, 377
BR 243, 259 (BAP, 9th Cir, 2007).
93
[2009] EWHC 2129 (Ch) (31 July 2009) [48].
8.4 Article 18
Subsequent information
From the time of filing the application for recognition of the foreign proceeding, the
foreign representative shall inform the court promptly of:
(a) Any substantial change in the status of the recognized foreign proceeding or the
status of the foreign representative’s appointment;
(b) Any other foreign proceeding regarding the same debtor that becomes known to
the foreign representative.
Article 18 places an obligation upon a foreign representative, following

recognition, to inform the court promptly about any substantial change to the
foreign proceedings or the foreign representative’s appointment, and of any other
foreign proceedings regarding the same debtor that comes to the foreign repre-
sentative’s knowledge.
In Australia, additional obligations are placed upon the foreign representative to
inform the court of any local proceedings issued in respect of the debtor, including
the appointment of a receiver or controller of the debtor’s assets.94
In Canada, foreign representatives are obliged to:
publish, without delay after the order is made, once a week for two consecutive weeks, or as
otherwise directed by the court, in one or more newspapers in Canada specified by the
court, a notice containing the prescribed information.95
The amendments made to the Model Law provisions in Australia and Canada are
largely procedural and designed to keep the court informed of developments so that
the court can determine whether it is necessary to amend its orders under Article 22
or its inherent powers. No amendments of substance have been made to this article
in New Zealand, UK or the USA.
The effect of this article has been considered in both Australia and the USA due
to foreign rehabilitation proceedings being converted into bankruptcy or liquidation
proceeding. Generally te courts have found that ‘once a foreign proceeding, the
recognition of which is sought in the forum, has come to an end, there can be no
bona fide reason to maintain a stay in the forum under Articles 19, 20 or 21 that is
based on that foreign proceeding’.96
94
95
Companies Creditors Arrangement Act, RSC 1985, c C-36 s 53; Bankruptcy and Insolvency Act,
RSC 1985, c B-3 s 276.
96
Board of Directors of Rizzo-Bottiglieri-De Carlini Armatori SpA v Rizzo-Bottiglieri-De Carlini
Armatori SpA [2017] FCA 331 (3 February 2017) [19].
8.4 Article 18 123
In Yakushiji (No 2) Chief Justice Allsop of the Federal Court of Australia

commented as follows:
1. While Chap. 5 of the Corporations Act does not contain a provision which adopts the
form of the Japanese rehabilitation proceedings, the helpful submissions of the appli-
cants drew attention to the explanatory notes in the UNCITRAL Model Law on
Cross-Border Insolvency with Guide to Enactment and Interpretation (United Nations
2014) at [168], which describes circumstances where it may be relevant to inform the
Court of a “substantial change”:
168. Article 18 obligates the foreign representative to inform the court promptly, after the
time of filing the application for recognition of the foreign proceeding, of “any
substantial change in the status of the recognized foreign proceeding or the status of
the foreign representative’s appointment”. The purpose of the obligation is to allow
the court to modify or terminate the consequences of recognition. As noted above, it
is possible that, after the application for recognition or after recognition, changes
occur in the foreign proceeding that would have affected the decision on recognition
or the relief granted on the basis of recognition, such as termination of the foreign
proceeding or conversion from one type of proceeding to another. Subparagraph
(a) takes into account the fact that technical modifications in the status of the pro-
ceedings or the foreign representative’s appointment are frequent, but that only some
of those modifications would affect the decision granting relief or the decision rec-
ognizing the proceeding; therefore, the provision only calls for information of
“substantial” changes. It is of particular importance that the court be informed of such
modifications when its decision on recognition concerns a foreign “interim pro-
ceeding” or a foreign representative has been “appointed on an interim basis” (see
Article 2, subparagraphs (a) and (d)).
2. The reach of Article 20 should be understood to be for the currency of foreign main
proceedings. If it is a liquidation, it will be unlikely that an end date for the orders will
become relevant. For rehabilitation or reconstruction proceedings, an end date for the
operation of orders will or may (as here) be relevant. Article 20, however, provides not
for orders but the effect of operation of the Article. Plainly, however, Article 20 and
orders under Article 21 are intended to be limited to the currency or life of the reha-
bilitation. I would not read the effect of Article 20 as lasting beyond the end of the
foreign proceeding.
3. This view accords with the view of Judge Lifland in In re Daewoo Logistics
Corporation, 2011 WL 4706197 (October 5, 2011, Bankr. SDNY), [461 BR 175],
in which it was held that certain recognition order stays that had been granted to
Daewoo, a Korean company involved in the shipping and trading businesses, had
terminated after the close of its rehabilitation proceedings (emphasis added).97
The Federal Court has also communicated directly with the court supervising the
foreign proceeding where there has been noncompliance with this article.98
In the USA Judge Lifland has commented:
The Recognition Order Stays here accordingly sought to preclude actions against Daewoo’s
assets in the United States in order to facilitate its orderly rehabilitation in the ROK [scil:
97
Yakushiji v Daiichi Chuo Kisen Kaisha (No 2) [2016] FCA 1277 (17 October 2016), [20–22];
followed in Board of Directors of Rizzo-Bottiglieri-De Carlini Armatori SpA v Rizzo-Bottiglieri-
De Carlini Armatori SpA [2017] FCA 331 (3 February 2017).
98
Suk v Hanjin Shipping Co Ltd [2017] FCA 404 (12 April 2017).
the Korean court] proceeding by preventing parties from taking actions that would
undermine the proceeding. But once the ROK Rehabilitation closed, that purpose could no
longer be served. Daewoo no longer needs time to devise a plan and preventing creditors’
pursuit of alternative remedies would no longer provide the above-mentioned breathing
room.
It follows that continuing the Recognition Order Stays after the expiration of the stay in the
Korean Proceeding is contrary to the ancillary nature of Chap. 15 because it unnecessarily
burdens creditors by preventing their pursuit of United States assets when such action may
not be prohibited in Korea. Furthermore, various provisions in Chap. 15 of the Code, which
recognize that the status of foreign proceedings can change and give domestic courts
flexibility to condition relief or modify previously granted relief in light of such changes,
equally compel this Court’s conclusion. See In re SPhinX, Ltd., 351 B.R. 103, 113 (Bankr.
S.D.N.Y.2006). Section 1517(d), for example, permits the modification or termination of
recognition if the grounds for granting it “have ceased to exist.” And section 1518(1)
requires the foreign representative to promptly file a notice of any substantial change of
status in the foreign proceeding, because “changes occur in the foreign proceeding that
would have affected the … relief granted on the basis of recognition”.99
8.5 Article 19
Relief that may be granted upon application for recognition

of a foreign proceeding
1. From the time of filing an application for recognition until the application is
decided upon, the court may, at the request of the foreign representative, where
relief is urgently needed to protect the assets of the debtor or the interests of the
creditors, grant relief of a provisional nature, including:
(a) Staying execution against the debtor’s assets;
(b) Entrusting the administration or realization of all or part of the debtor’s assets
located in this State to the foreign representative or another person designated
by the court, in order to protect and preserve the value of assets that, by their
nature or because of other circumstances, are perishable, susceptible to deval-
uation or otherwise in jeopardy;
(c) Any relief mentioned in para 1 (c), (d) and (g) of Article 21 below.
2. [Insert provisions (or refer to provisions in force in the enacting State) relating
to notice.]
3. Unless extended under para 1 (f) of Article 21, the relief granted under the
present article terminates when the application for recognition is decided upon.
4. The court may refuse to grant relief under the present article if such relief would
interfere with the administration of a foreign main proceeding.
Article 19 grants the courts power to grant provisional or interim relief once
proceedings seeking recognition have been filed. Such relief can be granted to
99
Re Daewoo Logistics Corporation 461 BR 175, 79 (Bankr, SDNY, 2011).
8.5 Article 19 125
protect the debtor’s assets or interests of creditors including staying the execution of
proceedings, and entrusting the administration and/or realisation of the debtor’s
assets to the foreign representative. The court may refuse to give such interim relief
if it is likely to interfere with the foreign main proceedings.
No amendments of substance have been made to this article in Australia, New
Zealand, or the UK. However, New Zealand imposes an obligation upon the foreign
representative to notify the debtor in a prescribed form as soon as practical after an
interim relief has been granted.100
There is no corresponding provision in the Canadian legislation; however, the
court can apply legal and equitable rules regarding recognition of foreign insol-
vency proceedings.101 In practice, it appears that this has not caused any difficulties
in Canada as courts are willing to make provisional orders.102
The USA also provides that such interim relief cannot be granted if it might
enjoin a police, regulatory or government unit. Further, the grant of relief is subject
to ‘the standards procedures and limitations applicable to injunctions’.103 However,
the US Bankruptcy Court has held that the standards for obtaining a preliminary
injunction under section 1519(e) are not the same as those for obtaining an
injunction in adversary proceedings and that the court has the power to grant stays
under section 362 of the Bankruptcy Code.104
It has been opined that the reason for allowing a foreign representative to obtain
provisional relief is to overcome the potential ‘race of the swiftest’ to take
advantage of local assets and to address the issue of forum shopping.105 The courts
have on several occasions granted interim relief under this article as summarised
below.
8.5.1 Australia
The Federal Court of Australia in Tucker granted interim provisional relief pre-
venting the commencement or continuation of proceedings concerning the debtor’s
assets, rights, obligations or liabilities and staying the execution against the debtor’s
assets. The court further injuncted the debtor’s right to transfer, encumber or dis-
pose of assets.106
100
Article 19(2).
101
Companies Creditors Arrangement Act, RSC 1985, c C-36 s 61; Bankruptcy and Insolvency
Act, RSC 1985, c B-3 s 274.
102
See eg Re Payless Holdings LLC 2017 ONSC 2242 (20 April 2017).
103
11 USC §1519 (e).
104
In re Pro-Fit Holdings Ltd 391 BR 850 (Bankr, CD Cal, 2008); Contra, Re Worldwide
Education Services Inc 494 BR 494, 497–8 (Bankr, C D Cal, 2013).
105
Mason, ‘Cross-border insolvency: Adoption of CLERP 8 as an evolution of Australian insol-
vency law’, see footnote 20, 84.
106
Tucker, re Aero Inventory (UK) Ltd v Aero Inventory (UK) Ltd [No 2] (2009) 181 FCR 374.
In Ackers, the Federal Court of Australia gave interim relief by entrusting the
administration of all of the company’s assets in Australia (excluding the external
Territories) to the foreign representative together with an Australian-based regis-
tered liquidator. The court also issued orders preventing proceedings being con-
ducted against the assets of the debtor.107
In Asafuji, the Federal Court found that there were threats from creditors of the
debtor to arrest or take possession of the debtor’s ships. The court gave interim
relief that prevented any enforcement being undertaken or continued with against
the debtor’s property, and prevented any legal proceedings being issued against the
debtor without leave of the court.108
8.5.2 New Zealand
The High Court of New Zealand granted interim relief to an English trustee in
bankruptcy against a debtor resident in New Zealand by issuing a search warrant
allowing the New Zealand Official Assignee to search the debtor’s premises and
ordering the debtor to attend for examination.109
Whether to grant an order that would not be available to the foreign represen-
tative in their home jurisdiction has also been raised as a reason for refusing to grant
such an order.110
8.5.3 USA
In Bear Sterns, the US Bankruptcy Court granted interim relief restraining persons
from commencing or continuing any litigation or enforcement proceedings
including judicial, quasi-judicial administrative or regulatory action, proceeding or
process against the foreign representative of the debtor or the debtor’s property in
the USA, by way of an interim injunction.111 On the other hand, the US Bankruptcy
Court has refused to grant an injunction to protect subsidiary non-debtor guarantors
because it was against the basic bankruptcy law and such orders could not be
granted in the State of the foreign proceeding.112 The difficulty that emerges from
these cases is that they are seeking to apply domestic bankruptcy principles to the
Model Law which is based upon universal principles. Whilst the outcomes of the
107
In Ackers v Saad Investments Company Ltd (in liq), (2010) 190 FCR 285, 291 [25].
108
Asafuji v The Sanko Steamship Co., Ltd [ 2012] FCA 1154 (15 Oct 2012).
109
Williams v Simpson [2010] NZHC 1631.
110
ANZ National Bank Ltd v Sheahan [2013] 1 NZLR 674 [112].
111
Re Bear Stearns High-Grade Structured Credit Strategies Master Fund Ltd (in prov liq) 389
BR 325,329–30 (Dist, SD NY, 2008).
112
Re Vitro S.A.B de C.V 455 BR 571 (Bankr, ND Tex, 2011).
8.5 Article 19 127
cases referred to above are not criticised, they highlight the underlying difficulty of
attempting to incorporate a model law into pre-existing, domestic legislation.
8.6 Article 20
Effects of recognition of a foreign main proceeding

1. Upon recognition of a foreign proceeding that is a foreign main proceeding:
(a) Commencement or continuation of individual actions or individual proceedings
concerning the debtor’s assets, rights, obligations or liabilities is stayed;
(b) Execution against the debtor’s assets is stayed;
(c) The right to transfer, encumber or otherwise dispose of any assets of the debtor
is suspended.
2. The scope, and the modification or termination, of the stay and suspension
referred to in para 1 of the present article are subject to [refer to any provisions
of law of the enacting State relating to insolvency that apply to exceptions,
limitations, modifications or termination in respect of the stay and suspension
referred to in para 1 of the present article].
3. Paragraph 1 (a) of the present article does not affect the right to commence
individual actions or proceedings to the extent necessary to preserve a claim
against the debtor.
4. Paragraph 1 of the present article does not affect the right to request the com-
mencement of a proceeding under [identify laws of the enacting State relating to
insolvency] or the right to file claims in such a proceeding.
Article 20 provides that upon recognition of a foreign main proceeding, an

automatic stay is granted in respect of any proceedings in relation to the debtor’s
assets, rights, obligations or liabilities. A stay operates against the execution of the
debtor’s assets and a debtor’s right to transfer, encumber or dispose of assets is
suspended.
An exception is provided in para 3 where proceedings are being issued to
preserve a claim against the debtor. Fletcher indicates that this paragraph is
designed to prevent a creditor’s claim from becoming statute barred under the laws
of the enacting State or some other State.113 He points out that the effect of Article
20 is that the automatic stay in the enacting State may be more extensive than those
imposed by the laws of the State of the foreign main proceeding.114
113
footnote 42, 465 [8.33].
114
Ibid [8.34].
The Model Law does not provide any relief or punishment for breach of its
provisions. Any breach of the stay under this article is to be punished in accordance
with the domestic law of the enacting State.115
As noted in Sect. 11.3.5, there is no consistency in the States examined
regarding the extent of the stay. This article as enacted in Australia, the UK and the
USA equate the stay or suspension that can be given under this article to the orders
that can be made by the court in relation to domestic insolvency administrations.
However, the USA courts will not apply the world-wide stay that operates under
their Chap. 11 restructuring proceedings.116 In New Zealand the court can limit the
stay or suspend the stay on any conditions it thinks fit.117
It is argued that the stay intended to be granted under the Model Law is clear
from the terms of the Model Law, and for uniformity and international certainty,
should not be equated to the domestic stay, but rather should apply as drafted, as is
the case in New Zealand. This would overcome the issue of the stay being different
depending upon the type of insolvency or restructuring proceeding that is recog-
nised, as is the case in Australia.
8.6.1 Exceptions to Stay
The factors to be considered by a court under section 1520(1)(c) of the Bankruptcy

Code in relation to giving permission to the transfer or disposal of the debtor’s
assets, has been considered by the US Bankruptcy Court. The court in respect of an
application to approve the sale of assets in the USA by a foreign representative
outside the ordinary course of business, determined that the standards applicable to
granting permission is the same as those under section 363(b) of the US
Bankruptcy Code and stated that:
A debtor may sell assets outside the ordinary course of business when it has demonstrated
that the sale of such assets represents the sound exercise of business judgment. In deter-
mining whether a sale satisfies this standard, the courts in this Circuit require that a sale
satisfy four requirements (1) a sound business purpose exists for the sale; (2) the sale price
is fair; (3) the debtor has provided adequate and reasonable notice; and (4) the purchaser
has acted in good faith.118
This issue has not been considered by the courts of any other States examined. It
is argued that the courts in those other States would allow sales of the debtor’s
assets to proceed after considering all the circumstances, including those identified
above, when determining whether to grant leave to sell such assets in accordance
115
Ibid 466, [8.36].
116
See Re JSC BTA Bank, 434 BR 334 (Bankr, SD NY, 2010).
117
Insolvency (Cross-border) Act 2006, Schedule 1 Article 20(2); see also Downey v Holland
[2014] NZHC 1546 (3 July 2014), [14, 15].
118
Re Elpida Memory Inc, 2012 WL 5828748 (Bankr, D Del 2012).
8.6 Article 20 129
with the principles applicable to the corresponding stay granted under their
domestic law.
Given the lack of consistency in the extent of the domestic stays and the
exceptions applicable to insolvency entities as discussed in Sect. 11.3.5, it is clear
that no uniform approach to this issue has been taken by the States examined. It is
argued that Territorial considerations have in this regard defeated the Universalist
aim of the Model Law which is to achieve some consistency between States in
respect of the recognition of foreign proceedings between States.
8.7 Article 21
Relief that may be granted upon recognition of a

foreign proceeding
1. Upon recognition of a foreign proceeding, whether main or non-main, where
necessary to protect the assets of the debtor or the interests of the creditors, the
court may, at the request of the foreign representative, grant any appropriate
relief, including:
(a) Staying the commencement or continuation of individual actions or individual
proceedings concerning the debtor’s assets, rights, obligations or liabilities, to
the extent they have not been stayed under para 1 (a) of Article 20;
(b) Staying execution against the debtor’s assets to the extent it has not been stayed
under para 1 (b) of Article 20;
(c) Suspending the right to transfer, encumber or otherwise dispose of any assets of
the debtor to the extent this right has not been suspended under para 1 (c) of
Article 20;
(d) Providing for the examination of witnesses, the taking of evidence or the
delivery of information concerning the debtor’s assets, affairs, rights, obliga-
tions or liabilities;
(e) Entrusting the administration or realization of all or part of the debtor’s assets
located in this State to the foreign representative or another person designated
by the court;
(f) Extending relief granted under para 1 of Article 19;
(g) Granting any additional relief that may be available to [insert the title of a
person or body administering a reorganization or liquidation under the law of
the enacting State] under the laws of this State.
2. Upon recognition of a foreign proceeding, whether main or non-main, the court
may, at the request of the foreign representative, entrust the distribution of all or
part of the debtor’s assets located in this State to the foreign representative or
another person designated by the court, provided that the court is satisfied that
the interests of creditors in this State are adequately protected.
3. In granting relief under the present article to a representative of a foreign
non-main proceeding, the court must be satisfied that the relief relates to assets
that, under the law of this State, should be administered in the foreign non-main
proceeding or concerns information required in that proceeding.
Article 21 gives the courts discretion to determine the powers to grant to a

foreign representative including the power to entrust to a foreign representative the
distribution of the debtor’s assets within a court’s jurisdiction. It sets out examples
of the types of relief that a court may grant however this does not limit the type of
orders that can be made.
Paragraph 3 provides that relief granted to a foreign non-main proceeding should
be limited to assets that are to be administered in that non-main proceeding and that,
if the foreign representative seeks information concerning the debtor’s assets or
affairs, the relief must concern information required in that proceeding. The type of
relief that has been granted by courts has varied and is largely dependent upon the
circumstances such as whether there are any secured creditors or creditors holding
liens, whether any enforcement or legal proceedings are threatened, and the
underlying cause of the debtor’s insolvency or need to restructure.
8.7.1 Australia
The Federal Court of Australia has granted foreign representatives the following
powers:
(a) entrusting English Special Administrators appointed by the English High Court
with the administration, realisation and distribution of Australian assets to the
Administrators. The court further extended the automatic stay on legal pro-
ceedings to ‘any individual action or legal proceedings including without
limitation any arbitration, mediation or any quasi-judicial administrative action,
proceeding or process whatsoever’.119
(b) entrusting the realisation and administration of the debtor’s assets to the
debtor’s New Zealand liquidator.120 The court granted the New Zealand liq-
uidators the powers of a liquidator appointed under the Corporations Act.121
(c) granting stays against commencement of proceedings or enforcement of
judgements and appointed a local representative of the foreign representative
who was a local liquidator to administer and finalise a sale of the property and
business.122
(d) giving the distribution of real property to a Japanese foreign representative after
recognition of a foreign main proceeding.123
(e) Appointing an administrator over an individual assets in support of US Trustee
appointed in respect of that individuals bankruptcy in the USA which was
119
Pink v MF Global UK Ltd ( in Special Admin) [2012] FCA 260 (23 March 2012) [20].
120
Lawrence v Northern Crest Investments Limited (in liq) [2011] FCA 925 (8 July 2011).
121
Ibid order 3.5.
122
Appleyard re Crawford Farms Ltd v Crawford Farms Ltd [2012] FCA 1373 (8 November
2012).
123
Murakami, re Murakami [2011] FCA 844 (22 July 2011).
8.7 Article 21 131
recognised as a non main proceeding.124 The administrator was effectively

given the same powers as a domestic trustee in bankruptcy. The court allowed
the Australian assets to be administered by the US trustee. The court issued
stayed equivalent to that which operated under the Bankruptcy Act. The court
protected the position of the Australian Taxation Office by requiring and sum
equivalent to the amount so the dividend they would receive in Australia.125
(f) granting a British Virgin Island liquidator the power to conduct an examination
of an Australia resident in accordance with the provisions of the Corporations
Act.126
(g) Appointing local liquidators as persons designated by the court to act as agents
of English administrators with the same powers as local liquidators.127
(h) Granting a US trustee all the powers of a trustee under the Bankruptcy Act.128
(i) Extending the stays otherwise applicable upon recognition.129
The Federal Court has held that the payment of tax liabilities and employees fell
within Article 21(1)(e) if an order was made in those terms. The court further held
that in order for an order to be made under Article 21(1)(g), the powers given must
be in addition to those set out in paragraphs (a) to (f) in order to constitute ‘ad-
ditional relief’.130
On the other hand the Federal Court of Australia, has refused to grant a foreign
representative from Iceland all the powers of the domestic liquidator under the
Corporations Act, on the basis that such a request was too wide and went beyond
what was envisaged by the Model Law.131 However the court, however, indicated
that it may be willing to grant the representative more limited powers should the
representative prove a requirement of the same.
The above decisions illustrate that the Australian courts are more willing to grant
New Zealand liquidators powers akin to those of Australian liquidators, presumably
as a result of the similarity of their positions and the law under which they operate.
Liquidators and administrators in New Zealand are not required to be licensed and
therefore cannot seek recognition as Australian liquidators under the mutual
recognition which would otherwise entitle them to practice and be registered in
124
Kapila, re Edelstein [2014] FCA 1112 (10 October 2104).
125
Ibid [71].
126
Crumpler v Global Tradewaves (in Liq) [2013] FCA 1127 (28 October 2013).
127
Wild v Coin Co International PLC (Administrators Appointed) [2015] FCA 354 (16 April 2015)
[70–72].
128
Gladstone (Trustee) v Digrigoli (No 2) [2016] FCA 1220 (7 October 2016).
129
See Kim v SW Shipping Co Ltd (2016) 113 ACSR 260; Suk v Hanjin Shipping Co Ltd [2016]
FCA 1404 (23 November 2016).
130
[28]; see also De Akers as a joint foreign representative of Saad Investments Company Limited (in
Official Liquidation) v Deputy Commissioner of Taxation [2014] FCAFC 57 (14 May 2014)
(November 2016).
131
Backman v Landsbanki Islands hf [2012] FCA 260 (7 December 2011) [21].
Australia.132 Similarly the court has also given equivalent power to that of a local
representative to foreign representatives for the UK and the USA in appropriate
circumstances.
8.7.2 Canada
In Canada, it has been argued that the Canadian enactments provide the courts with
flexibility to make orders authorising foreign representatives to act as monitors of
the debtors business and affairs.133 The provisions of the CCAA are a broad outline
and give the Canadian courts wide discretion in terms of what they can approve.
The Alberta Queens Bench has, in commenting upon the CCAA, indicated that:
The legislation is intended to have wide scope and allow a judge to make orders which will
effectively maintain the status quo for a period while the insolvent company attempts to
gain the approval of its creditors for a proposed arrangement which will enable the com-
pany to remain in operation for what is, hopefully, the future benefit of both the company
and its creditors.134
The provisions of the CCAA have been described as being skeletal in nature and
as a ‘sketch, an outline, a supporting framework for the resolution of corporate
insolvencies in the public interest.’135 This is said to provide flexibility and is
particularly useful in complex insolvency cases.136 This has been confirmed by the
Superior Court of Quebec which stated that the function of the court in proceedings
under the CCAA ‘is to facilitate an orderly restructuring process and to promote a
negotiated settlement of any disputes which may arise’.137 It has also been stated
that a court should give the Act ‘a broad and liberal interpretation so as to
encourage and facilitate successful restructurings whenever possible’.138 The
Canadian Courts are able to recognise diverse restructuring arrangements and to
approve such arrangements in relation to a Canadian entity without that entity
having any place of business in Canada or in the jurisdiction from which the foreign
representative is seeking recognition. Canadian courts have recognised foreign
proceedings, where such proceedings were based upon a debt being incurred in
their jurisdiction, a business being conducted, or an asset being located in the
jurisdiction of the foreign proceedings. In practice, this has meant that the Canadian
132
See, eg, Companies Act 1993 ss 239F, 280; Mutual Recognition Act 1992 (Cth) s19.
133
Golick and Wasserman, in Ho (ed), see footnote 75, 93.
134
Meridian Developments Inc v Toronto Dominion Bank (1984) 11 D.L.R (4th) 576, 580 [15].
135
ATB Financial v Metcalfe & Mansfield Alternative Investments II Corp (2008) 45 C.B.R (5th)
163 [44, 61].
136
Re Nortel Networks Corporation (2009) CanLii 39492 (ONSC) (23 July 2009) [28].
137
Re White Birch Paper Holding Company (2011) 209 ACWS (3d) 26; (2011) QCCS 5223(7
October 2011) [21].
138
Re Cinram International Inc (2012) 91 CBR (5th) 46, [58].
8.7 Article 21 133
courts have been able to recognise the majority of US-based foreign proceedings,
with the real issue being the remedies or orders that should be granted as a matter of
discretion if the foreign proceeding is not a foreign main proceeding.139
The Supreme Court of Yukon has held that it canot give a foreign representative
power to allow proceedings to be issued against the debtor as section 48 of the
CCAA requires such exception to be by court order.140
8.7.3 New Zealand
In New Zealand, the High Court has commented that as a matter of discretion the
court should not make an order under this article if the remedy sought is not
available to the foreign representative in the State of their appointment.141
The New Zealand High Court has issued summons for the examination of
officers of an Australian company and ordered that the examinations be held in
chambers and that there be restricted communication to examinees of the questions
and answers of other examinees.142 The New Zealand court has also appointed
Australian liquidators as liquidators of related companies in New Zealand under
their domestic laws.143
In the UK, the court can give the same relief as they give to a British insolvency
officeholder. No stay granted under this article can affect a regulatory authority’s
intention to commence or continue proceedings. The English High Court has stated
that:
Article 21(1) (d) was intended to set a common minimum standard. A foreign represen-
tative is to be able to seek relief under Article 21(1) (d) regardless of whether an office-
holder would be entitled to such relief under the local law. If the local law in fact provides
for “additional” relief, a foreign representative can seek that under Article 21(1) (g).144
The English High Court has also indicated that it must weigh up the competing
factors when determining whether to grant an order under this article and that an
139
Re Probe Resources Ltd (2011) 79 CBR (5th) 148 [31, 32]; Re Cinram International Inc (2012)
91 CBR (5th) 46, [58, 60].
140
Re Ultra Petroleum Corp. [2017] YKSC 9 (7 February 2017).
141
ANZ National Bank Ltd v Sheahan [2013] 1 NZLR 674 [112]; Sheahan v ANZ Bank NZ Ltd
[2013] NZHC 888 (26 April 2013) [4].
142
Omegatrend International Pty Ltd (in Liq) v New Image International Ltd [2010] NZHC 1761
(5 October 2010).
143
See, eg, ANZ National Bank Ltd v Sheahan [2013] 1 NZLR 674.
144
Ackers v Deutsche Bank AG [2012] BCC 786, 791 [11].
order is, in the words of Article 21(1), ‘necessary to protect the assets of the debtor
or the interests of the creditors’.145 Lastra has commented that this article does not
authorise a court to grant any relief that prejudices the protection afforded to
financial collateral arrangements and closes out netting provisions within the
Financial Collateral Arrangements (No 2) Regulations 2003 and certain financial
market transactions.146 Both Fletcher and Sheldon have commented that any relief
is restricted to that which is available under their domestic law.147 This position has
been confirmed by the High Court.148
The English High Court has granted conditional interim relief staying the
enforcement of a lien in England pending the determination of an appeal over the
quantity of the creditor’s provable debt in Korea, the place of the main proceeding,
upon an undertaking being given that the fact that the creditor appeared in the
Korean proceeding would not create an estoppel in England to them enforcing their
lien.149 The court relied upon Articles 21(3) and 22(2) of the Model Law when
imposing these conditions.
The English High Court has used Article 21(1) (d) to issue a subpoena to compel
a Bank resident in England to hand over documents to a foreign representative,
including several internal documents of the bank to allow the foreign representative
to assess its claims against the Bank.150
In Picard v FIM Advisers LLP, the English High Court stated:
It is apparent that Article 21(1) (d) has both a jurisdictional and a discretionary component.
The court must be satisfied that the information sought concerns the debtor’s assets, affairs,
rights, obligations or liabilities. If it is so satisfied then it has discretion to order the delivery
of that information. In exercising that discretion it must have regard to all relevant cir-
cumstances and ensure that the interests of the person against whom the order is sought are
adequately protected.151
In Swissair, the English High Court stated:

While express provision is made for the remittal of assets to a foreign representative, there
are two qualifications relevant to the present application, in addition to the discretionary
nature of the power under Article 21.2. First, under Article 21.2 itself, the court must be
satisfied that the interests of creditors in Great Britain are adequately protected….
Secondly, because Swissair was already in liquidation in England when the Swiss liq-
uidator applied for recognition of the Swiss liquidation, Article 29(a) (i) requires that an
order for remittal must be consistent with the liquidation in England.
In the context of the submissions made in the present case, it is worth noting Article 21.3
which provides that in granting relief under Article 21, including remittal of assets under
Article 21.2, to a representative of a foreign non-main proceeding “the court must be
145
Ibid [17].
146
Lastra (ed), see footnote 43, 221 [9.58].
147
Fletcher, see footnote 42 [8.38]; Sheldon, see footnote 146, 128–32.
148
Fibria Celulose S/A v Pan Ocean Co Ltd [2014] EWHC 2124 (Ch) (30 June 2014) [108].
149
Norden v Samsun Logix Corporation [2009] BPIR 1367.
150
Ackers v Deutsche Bank AG [2012] BCC 786.
151
Picard v FIM Advisers LLP [2011] 1 BCLC 129; [2010] EWHC 1299 (Ch) (27 May 2010) [23].
8.7 Article 21 135
satisfied that the relief relates to assets that, under the law of Great Britain, should be
administered in the foreign non-main proceeding”. There is no equivalent restriction as
regards remittal to a main proceeding. The implication is clear, that remittal to a main
proceeding is contemplated by English law.152
The Court held that recognition of a foreign main proceeding does not prejudice
the rights of set-off that exist under an English winding-up.153
The issue of the nature of the protection that is required for a court to entrust the
distribution of assets to a foreign representative was considered in a different
context by the Privy Council in Cambridge Gas in which case it was equated to
fairness,154 with fairness requiring the bankruptcy proceedings to have universal
application to which all creditors are entitled and required to prove.155 However the
United Kingdom Supreme Court has since indicated that this case was wrongly
decided for other reasons in so far as it relates to the United Kingdom.156 It is still
open for courts in other States to follow the reasoning of Lord Hoffman in
Cambridge Gas and seek to look at issues of fairness.
The House of Lords in McGrath, in deciding to entrust the distribution of assets
to a foreign representative, found that the assets did not have to be distributed
according to English law.157
8.7.5 USA
Paragraph (a) of this article is understood to include ‘intangible property deemed

under applicable non bankruptcy law to be located within that territory’.158 The
court also cannot enjoin an act of a police or regulatory or government agency.
Melnik comments that this article was drafted to protect the primacy of the law of
the State of the foreign main proceedings and that it will allow a US court to grant a
worldwide stay to assist such proceedings.159 It is argued that such stays are against
the spirit of the Model Law that requires recognition in order for an insolvency
proceeding to have effect in a foreign jurisdiction. This issue is commented upon
further in Sect. 11.3.5.
152
Re Swissair Schweizerische Luftverkehr-Aktiengesellschaft (2010) BCC 667, 672 [14, 15].
153
Ibid.
154
Cambridge Gas Transport Corporation Limited v Official Committee of Unsecured Creditors
(of Navigator Holdings PLC & Ors) (Isle of Man) [2007] 1 AC 508, 520 [26]; Cf Rubin v
Eurofinance SA [2013] 1 AC 236, 287 [178].
155
Cambridge Gas Transport Corporation Limited v Official Committee of Unsecured Creditors
(of Navigator Holdings PLC & Ors) (Isle of Man) [ [2007] 1 AC 508, 517 [16].
156
Rubin v Eurofinance SA [2013] 1 AC 236, 276–8 [128–132].
157
McGrath v Riddell [2008] 3 All ER 869, 879 [20] (Lord Hoffman).
158
11 USC § 1502(8).
159
Selinda A Melnik, in Ho, see footnote 75, 493.
A US court, when exercising the power under this provision, must take into
account the provisions of sections 1507 and 1522 which list a number of factors a
court must take into account when determining what assistance to grant. In addition,
it cannot grant relief under sections 522, 547, 548, 500 or 724(a).160 These pro-
visions are not contained in the Model Law suggesting once again that the USA
places its domestic interests ahead of international consistency and the principles of
modified Universalism upon which the Model Law is based.
The granting of relief is subject to the ‘standards procedures and limitations
applicable to an injunction’. The section prevents the court from granting to a
foreign representative the power to bring a number of antecedent transaction pro-
ceedings under the Bankruptcy Code. The Court of Appeals has, however, heard
that the restriction goes no further than the sections listed and does not extend to the
court applying foreign law in respect of antecedent proceedings.161 This case is
discussed further in Sects. 8.7.5, 8.9.5 and 11.3.7.
The US Court of Appeals has indicated that any relief granted does not have to
be identical to that which would have been granted if the proceedings commenced
in the USA but is only ‘comparable’.162 It is argued that this is the correct analysis
and recognises the international character of the Model Law and that any relief
granted should take account of the provisions of Article 8.
There is a dispute among the different circuits of the US Court of Appeals as to
the appropriateness of granting non-debtor discharges of liabilities as a part of
restructuring proceedings.163 As previously discussed, this is a function of the US
judicial system and its lack of structures to resolve differences in reasoning between
the different US Courts of Appeal.
The US Bankruptcy Court in Re International Banking Corporation applied
section 1521(1) (b) in refusing to transfer property in the US to a recognised foreign
proceeding in Bahrain until the foreign representative provided additional evidence
that the US creditors would be protected.164
In Re Atlas Shipping, the court granted a Danish Foreign Main Representative
the power to administer the assets of a Danish shipping company located in the
USA and to vacate attachments by the debtor’s creditors against US bank accounts.
Judge Glenn described the discretion under section 1521 as ‘exceedingly broad’
since the court may grant any appropriate relief that would provide further relief in
accord with the purposes of Chap. 15.165 The court went on to state that:
Section 1521(b) cautions that this relief only be granted if the interests of local creditors are
“sufficiently protected.” Id. One court has described “sufficient protection” as embodying
three basic principles: “the just treatment of all holders of claims against the bankruptcy
160
11 USC § 1521(7).
161
Re Condor Insurance Ltd, 601 F.3d 319 (5th Cir, 2010).
162
163
Ibid.
164
439 BR 627, 637–9 (Bankr, SD NY 2010).
165
404 B.R 726, 739 (Bankr, SD NY, 2009).
8.7 Article 21 137
estate, the protection of U.S. claimants against prejudice and inconvenience in the pro-
cessing of claims in the [foreign] proceeding, and the distribution of proceeds of the
[foreign] estate substantially in accordance with the order prescribed by U.S. law.”…, but
noting that the analysis would be “essentially the same” under § 1521(b).166
The US Court of Appeals has indicated that, in assessing which relief to grant,
courts must use the following framework when analysing such requests:
First, because § 1521 lists specific forms of relief, a court should initially consider whether
the relief requested falls under one of these explicit provisions…
Second, if § 1521(a)(1)–(7) and (b) does not list the requested relief, a court should decide
whether it can be considered “appropriate relief” under § 1521(a)…
Third, only if the requested relief appears to go beyond the relief previously available under §
304 or currently provided for under United States law … should a court consider § 1507.167
The US Court of Appeals in Re Condor Insurance described the powers the

court may not confer upon a foreign representative as follows:
The sections explicitly excepted from [1521] (a)(7) are often referred to as “avoidance
powers”—a trustee’s powers to avoid the transfer of debtor property that would deplete the
debtor’s estate at the expense of creditors. Such powers, generally described, include those
addressing exempt property (§ 522), the “strong arm” power, which permits the trustee to
act as a judicial lien creditor (§ 544), the power to avoid statutory liens (§ 545), the power
to avoid transactions as “preferences” (§ 547), the power to avoid fraudulent transfers (§
548), and the power to avoid liens that secure claims for compensatory fine, penalty, or
forfeiture, or punitive damages (§ 724(a)). Section 550 contains the rules that govern the
mechanics of avoidance actions.168
In Lee, the US Bankruptcy Court determined that when a foreign representative

is seeking a turnover order for the assets of the debtor in the USA to be turned over
to them, the burden of proof is with the applicant representative to prove that their
administration is entitled to the assets upon a preponderance of evidence.169 The
Bankruptcy Court has also used the equivalent of this article to allow a foreign
representative to seek orders under sections 542 and 543 for turnover orders pro-
viding that an application is made on motion and the adverse parties are given an
opportunity to be heard.170 Likewise, orders for discovery can be made provided
that they are sought on notice, with the parties against whom they are sought being
given an opportunity to be heard.171
Finally the US Bankruptcy Court has also used this article to exempt from the
automatic stay under Article 20 a foreign main proceeding where there were
166
Ibid 740.
167
168
Re Condor Insurance Ltd, 601 F.3d 319, 323 (5th Cir, 2010).
169
Re Lee, 472 BR 156,183 (Bankr, D Mass, 2012).
170
Re AJW Offshore Ltd, 488 BR 551 (Bankr, ED NY, 2013).
171
Ibid.
domestic proceedings on foot in relation to the entitlement of the debtor to money

that had been paid into the custody of the court.172
8.7.6 Generally
Mason, has indicated that where a debtor is the subject of foreign proceedings in
multiple jurisdictions, and foreign representatives of more than one jurisdiction seek
recognition or relief, a local court must seek to promote cooperation and coordi-
nation with all of the foreign representatives, with any relief to be granted to be
consistent with the foreign main proceeding.173 Fletcher has suggested that Article
21(3) requires the court to:
decide which of two or more foreign proceedings has the better claim to assets located
within its jurisdiction where each of the foreign laws purports to affect the debtors property
‘wherever situate’. It will normally be the case that the claim on behalf of a main pro-
ceeding will prevail over that of a non-main. Where both foreign proceeding are non-main,
however, the matter is apt to be less clear cut, although it may be possible to establish that
the local assets or some of them, are more closely associated with the operations of a
particular foreign establishment of the debtor.174
Mason and Fletcher do not appear to have taken into account the situation of
what is to occur when there are inconsistent findings of the State in which there is
the foreign main proceeding. This is especially the case where the inconsistency in
part occurs due to amendments made in those jurisdictions to the wording of the
Model Law adopted in those States.
8.8 Article 22
Protection of creditors and other interested persons

1. In granting or denying relief under Article 19 or 21, or in modifying or termi-
nating relief under para 3 of the present article, the court must be satisfied that
the interests of the creditors and other interested persons, including the debtor,
are adequately protected.
2. The court may subject relief granted under Article 19 or 21 to conditions it
considers appropriate.
3. The court may, at the request of the foreign representative or a person affected by
relief granted under Article 19 or 21, or at its own motion, modify or terminate
such relief.
172
Re Comercial V.H., S.A. de CV, 2012 WL 4051882 (Bankr, D Ariz, 2012) 2–3.
173
Mason, see footnote 1, 88.
174
Fletcher, see footnote 42, 470, [8.42].
8.8 Article 22 139
Article 22 confirms that a court has broad discretion regarding the type of
order it can make to assist a foreign representative, including rescinding or varying
a previous order. The court must consider and weigh up the competing interests of
creditors, other interested parties and the debtor. It has been suggested that in ‘order
to allow the court to tailor the relief, the court is authorised to subject the relief to
conditions (para 2) and to modify or terminate the relief granted (para 3)’.175
The effect of this article is to allow the court to tailor the relief granted so as to
take into account any changing circumstances.176 It has been suggested that the
court can use this article to limit the stay granted under Article 20.177
8.8.1 Australia
This article has been used to prevent assets being remitted to the jurisdiction of the
foreign main proceedings until a sum equivalent to the dividend that would be
payable to the Australian Taxation authorities had been paid to them, where that
debt was not otherwise admissible under the local law of the place of the main
proceedings.178 The Federal Court ordered that a sum equivalent to the amount of
the dividend that would otherwise be payable to the Australian Taxation Office had
they been entitled to prove as a creditor in the foreign jurisdiction as a pari passu
creditor remain in Australia and be paid to the Australian Taxation Office. The court
reasoned that:
The foreign representatives’ argument that Saad Investments cannot be wound up here
reinforces why, for the purposes of Article 22(1), the Commissioner’s interests are not
adequately protected. The Commissioner cannot, or may not be able to, avail himself of a
number of statutory remedies if the 2010 orders are not modified. Those orders are the
existing relief operating under Article 21 that currently confer a benefit on all other cred-
itors of Saad Investments. That relief was available to the foreign representatives because
Saad Investments, first, operated in Australia and not only had assets but made capital gains
here that were taxable, before the Grand Court ordered it to be wound up in the Cayman
Islands, and, secondly, it was insolvent both here (given the deficiency in its total assets of
USD 7 million as against its liabilities of over AUD 83 million) and internationally. If the
foreign representatives had not been granted relief under the Model Law, such as that in the
2010 orders, then the Commissioner could have used the remedies available to him under
the taxation laws to obtain the equivalent of what would have been his pari passu
175
Explanatory Memorandum, Cross-Border Insolvency Bill 2008 (Cth) 31 [65].
176
177
178
Ackers v Saad Investment Company Ltd (in liq) (2013) 31 ACLC 493 affirmed but for slightly
different reasons in Ackers v Deputy Commissioner of Taxation [2014] FCAFC 57 (14 May 2014).
It will be interesting to see if this Article is also used to collect foreign taxes given Australia's
recent adoption of the Convention on Mutual Administrative Assistance in Tax Matters [2012]
ATS 38 (entered into force 11 December 2011).
entitlement to a distribution had he been entitled to prove in Saad Investments’ liquidation

here or in its centre of main interests in the Cayman Islands.179
It is argued that similar arguments could be mounted in relation to creditors who

are afforded priorities under their local law but would not be recognised as having a
priority in the foreign jurisdiction to which the assets were being remitted. This is
especially the case where there are good public policy reasons in a State giving
priority in the distribution of assets to certain types of creditors.
8.8.2 Canada
In the Canadian version of this article, there is no provision for the adequate
protection of creditors and interested persons.180 Section 187(5) of the
Canadian BIA allows a court to review, rescind or vary any order made under its
bankruptcy jurisdiction. The Quebec Superior Court has held that this section
permits a judge to deal with continuing matters on an insolvency file and not be
bound by an earlier decision where circumstances have changed or fresh evidence is
brought forward.181
Sarra has suggested that the omission of this Article is due to Canadian insol-
vency law not currently enshrining a notion of adequate protection such as exists in
the USA and other jurisdictions.182
8.8.3 New Zealand
In New Zealand, this article has been altered to oblige the court to terminate any
relief granted should the debtor be a registered bank.183
This article has been enacted as drafted.
179
De Ackers as a joint foreign representative of Saad Investments Company Limited (in Official
Liq) v Deputy Commissioner of Taxation [2014] FCAFC 57 [41].
180
See, eg, Golick and Wasserman in Ho, see footnote 75, 93.
181
Marciano (Sequestre de) [2011] QCCS 7086 (8 December 2011) [41].
182
Sarra, see footnote 75, 48–9.
183
Article 22(4).
8.8 Article 22 141
8.8.5 USA
In the USA this article allows a court to grant relief under Articles 19 or 21 ‘only if
the interests of creditors and other interested parties, including the debtor are suf-
ficiently protected’.184 It can also grant such relief on condition that security is
provided.185 This Article has been the subject of judicial comment in the USA
summarised as follows:
The court stated in Tri-Continental Exchange that:
Standards that inform the analysis of § 1522 protective measures in connection with dis-
cretionary relief emphasize the need to tailor relief and conditions so as to balance the relief
granted to the foreign representative and the interests of those affected by such relief,
without unduly favoring one group of creditors over another.186
In Re Atlas Shipping, the US Bankruptcy court stated that ‘[t]he exercise of

discretion is, however, circumscribed by the Bankruptcy Code. Section 1522(a)
provides that the court may only grant discretionary relief under § 1521 if the
interests of creditors are sufficiently protected’.187
The US District Court on the other hand, has used this article to approve a stay
granted upon the recognition of a foreign proceeding extending to non-debtor
entities in order to maintain the integrity of the administration of the debtor’s
bankruptcy case.188
This amended requirement has also been used by the US Court of Appeals in the
Fourth and Fifth Circuits to limit recognition where US creditor interests were
affected.189
It is argued that, in determining whether to impose terms upon any relief, a court
must examine all the circumstances including the interests of the debtor and
creditors. The court must craft conditions after taking account of the principles of
equity. Any order should not impose any substantial burden upon the debtor, in
addition to that which would be imposed under that State’s domestic law, but does
not have to be identical.
184
11 USC § 1522 (a) (2012).
185
11 USC § 1522 (b) (2012).
186
349 BR 627, 637 (Bankr, ED Cal, 2006).
187
404 BR 726, 739 (Bankr, SD NY, 2009).
188
CT Investment Management Co.LLC v Carbonell, 2012 WL 92359 (Dist, SD NY, 11 January
2012) 5–6.
189
See Jaffe v Samsung Electronics Company Ltd, 737 F 3d 14 (4th Cir, 2013); Re Vitro SAB De
CV, 701 F 3d 1031 (5th Cir, 2012).
8.9 Article 23
Actions to avoid acts detrimental to creditors

1. Upon recognition of a foreign proceeding, the foreign representative has
standing to initiate [refer to the types of actions to avoid or otherwise render
ineffective acts detrimental to creditors that are available in this State to a
person or body administering a reorganization or liquidation].
2. When the foreign proceeding is a foreign non-main proceeding, the court must
be satisfied that the action relates to assets that, under the law of this State,
should be administered in the foreign non-main proceeding.
Article 23 grants a foreign representative standing to bring proceedings to

overturn antecedent transactions under the domestic law of the State in which
recognition is granted. This article does not equate foreign representatives with
individual creditors who have similar rights under different laws.190
8.9.1 Australia
In Australia, the types of actions which a foreign representative can issue as if they
were appointed under the relevant domestic legislation are nominated as being:
(a) Section 120, 121, 121A, 122, 128B or 128C or Division 4A of Part VI of the
Bankruptcy Act 1966; or
(b) Division 2 of Part 5.7B of the Corporations Act 2001.191
8.9.2 Canada
The situation in Canada, is slightly different as their different enactments allow a

foreign representative to bring or continue proceedings as if it were the debtor or a
creditor of the debtor.192 It is arguable that the court can grant the foreign repre-
sentative of a foreign main proceedings leave to bring general avoidance
proceedings.193
190
191
192
Companies Creditors Arrangement Act, RSC 1985, c C-36 ss 36, 51; Bankruptcy and
Insolvency Act, RSC 1985, c B-3 ss 38, 95–101 274.
193
Golick and Wasserman in Ho, see footnote 75, 96.
8.9 Article 23 143
8.9.3 New Zealand
A foreign representative can take any action that ‘an insolvency administrator may
take in respect of a New Zealand insolvency proceeding that relates to a transaction
(including any gifts or improvement of property or otherwise), security, or charge
that is voidable or may be set aside or altered.’ The relevant applicable provisions
are sections 292 to 299 of the Companies Act 1993 and sections 192 to 216 of the
Insolvency Act 2006. The Model Law does not specify how the relevant provisions
are to be adapted to foreign proceedings.194
A foreign representative has power to issue proceedings under ‘sections 238, 239,
242, 243, 244, 245, 339, 340, 342A, 343, and 423 of the UK Insolvency Act and
sections 34, 35, 36, 36A and 61 of the Bankruptcy (Scotland) Act 1985’ whether or
not the debtor who is an individual has been adjudged bankrupt or the debtor
company liquidated or placed into administration in the UK.195 The majority of
these proceedings relate to antecedent transactions.
Leave of the court must be granted to the foreign representative by an appro-
priate court before issuing any proceedings where there is a concurrent British
insolvency proceeding afoot with respect to the same debtor.196 Such leave may be
granted subject to conditions.197 This article has been amended to provide a number
of procedural definitions to enable proceedings to be conducted under those
sections.
Ho suggests that English courts should first apply the principles of private
international law rules to determine whether the applicable law is under the
Insolvency Act 1986. He argues that it is not be appropriate for an English court to
apply avoidance provisions if this impinges on the insolvency policies of the lex
concurus of the foreign main proceeding.198
8.9.5 USA
In the USA, the foreign representative, once recognised, is granted power to bring
proceedings under sections 522, 544, 545, 548, 550, 553 and 724(a) in another
194
See, eg, Sean Gollin, in Ho, see footnote 75, 340.
195
Article 23 (1)–(3).
196
Article 23(6).
197
Article 23(7).
198
Ho, see footnote 75, 238.
proceeding issued under another chapter of the Bankruptcy Code which is

pending.199
The USA version of this article has been the subject of considerable judicial
comment including the following:
(a) In AWAL Banking, the court recognised that in relation to a creditor who had
within 90 days prior to the filing of the recognition petition set-off amounts
owing by it to the debtor, that this section ‘provides that a foreign administrator,
after recognition, does have standing to initiate certain enumerated actions
including those under § 553(b)’200 and that ‘based on the foregoing, relief
pursuant to § 553(b) is not prohibited by § 521(a)(7).’201
(b) In Re Condor Insurance Ltd, the US Court of Appeals described section 1523
as follows:
The Model Law is not clear about whether it would grant standing in a recognized foreign
proceeding if no full case were pending…
This limited grant of standing in section 1523 does not create or establish any legal right of
avoidance nor does it create or imply any legal rules with respect to the choice of applicable
law as to the avoidance of any transfer of obligation. The courts will determine the nature
and extent of any such action and what national law may be applicable to such action.202
The court went on to allow proceedings in respect recovery of antecedent pro-

ceedings to be issued under the laws of the state of the main proceedings.
8.9.6 Generally
The cases above highlight some of the issues that arise as a result of amendments
made to the text of the Model Law by States that have adopted it, particularly in
relation to the USA. If a foreign representative brings proceedings under this article,
it is argued that the private international law issues must already have been
determined, as it is the domestic law of that State that applies, as proceedings must
be issued in that State’s domestic courts which will apply its domestic procedural
rules.203
The Model Law does not deal with the issue of whether a local court should also
apply the law of the foreign main proceedings or recognise judgments of the courts of
the country of the foreign main proceedings against creditors or recipients of those
transactions within its State. The US Court of Appeals has indicated that it is willing to
199
See Glosband, et al., see footnote 93, 135–6.
200
155 BR 73, 87 (Bankr, SD NY, 2011).
201
Ibid 88.
202
Re Condor Insurance Ltd, 601 F.3d 319, 325–6 (5th Cir, 2010).
203
See Chap. 12.
8.9 Article 23 145
allow a foreign representative to apply foreign law in relation to antecedent transac-

tions in appropriate circumstances.204 This issue is discussed further in Sect. 13.2.
The USA does not allowing a foreign representative to issue domestic pro-
ceeding seeking to overturn antecedent transactions under their domestic law
without issuing domestic proceeding under another chapter of the Bankruptcy
Code. This concept is unique to the USA and, is against the spirit of the Model
Law. Further, this provision can be seen as an attempt by the US legislature to
impose US law on foreign administrations. The US courts have circumvented this
provision by allowing foreign representatives to issue proceedings to recover
antecedent transactions under foreign law. Whilst this solution promotes
Universalism, it may lead to arguments in respect of lack of certainty from domestic
creditors as they would not be familiar with foreign insolvency laws. This is an
issue that should be reconsidered by the US Congress.
8.10 Article 24
Intervention by a foreign representative in proceedings

in this State
Upon recognition of a foreign proceeding, the foreign representative may, provided
the requirements of the law of this State are met, intervene in any proceedings in
which the debtor is a party.
This Article is a procedural provision that grants certainty in relation to a

foreign representative’s standing to intervene in proceedings to which the debtor is
a party. This provision has been enacted without variation in Australia, New
Zealand and the UK. In Canada, there is no direct equivalent provision and
therefore leave is required.205
In the USA, this article has been clarified by a confirmation that such inter-
vention can be in relation to proceedings before either a Federal or State court. In Re
Iida, the US Bankruptcy Appellant Panel determined that by reason of section 1509
(f), a foreign representative was permitted to sue in order to collect or recover a
claim that was the property of the debtor without obtaining prior permission or
recognition from a Bankruptcy Court.206 This decision appears to recognise the
constitutional position in the USA whereby the State’s laws allow a foreign rep-
resentative to sue in that State’s courts in respect of causes of action that arose prior
to recognition. However, this exception does not apply to causes of action that arise
204
Re Condor Insurance Ltd, 601 F.3d 319, 329 (5th Cir, 2010).
205
Golick and Wasserman, in Ho, see footnote 75, 94.
206
337 BR 243, 258 (BAP, 9th Cir, 2007).
by reason of the bankruptcy. Once a foreign proceeding has been recognised,

jurisdiction is vested in the Bankruptcy Court.
It is argued that in the case of corporate debtors, where the cause of action vests
in the body corporate, a similar situation exists in the four other States examined
and that recognition is not required prior to issuing such proceedings. The common
law provides other protections to the parties against whom such proceedings are
issued such as the ability to seek security for costs.
8.11 Summary
The Model Law promotes the granting of recognition to foreign proceedings

without formalities and vests in the courts a wide discretion as to the type of order
that can be made upon recognition or on an interim basis. Upon recognition of a
foreign main proceeding, a stay operates; however, the extent of that stay differs
between States.
As indicated above, no uniformity has been achieved in the States in relation to
recognition of foreign proceedings and the relief that can be granted by courts
following recognition. This is in part due to the way the presumption contained in
Article 16 has been enacted, with the US legislature having intentionally changed
the circumstances in which the registered office presumption can be applied. This
lack of uniformity is also due in part to some States, such as Canada, not enacting
the Model Law completely or amending their domestic version of the same as in the
UK and the USA.
Despite the lack of uniformity, the courts in States with close economic ties such
as those between the USA and Canada and between Australia and New Zealand,
have attempted to interpret the Model Law consistently in relation to applications
involving their close neighbours. Unfortunately, this has given rise to different
interpretations between the North American States on one hand and Europe on the
other, with Australia and New Zealand slightly favouring the European position.
In relation to the powers conferred upon a foreign representative following
recognition, only the USA requires domestic proceedings to be issued in order for
antecedent transactions proceedings to be issued under their domestic laws. All
other States allow a foreign representative to issue such proceedings under the
equivalent of their domestic laws. The USA, however, allows a foreign represen-
tative to issue proceedings under their domestic courts in respect of antecedent
transactions applying a foreign law.
Chapter 9
and Interpretation of Chapter IV
Insolvency—Operation with Foreign
Courts and Foreign Representatives
Overview
Chapter 9 examines how the provisions of Chapter IV of the Model Law have been
enacted by the five nominated States. This chapter argues that:
• the Model Law encourages communication between domestic and foreign courts
and local and foreign representatives and for local representatives to commu-
nicate with foreign courts.
• these provisions are based upon the premise that the more communication there
is between jurisdictions, the less likely it will be for assets to be dissipated.1
• the use of protocols between courts and different representatives of insolvent
entities is important.
9.1 Article 25
Cooperation and direct communication between a court of this State and foreign
courts or foreign representatives
1. In matters referred to in Article 1, the court shall cooperate to the maximum
extent possible with foreign courts or foreign representatives, either directly or
through a [insert the title of a person or body administering a reorganization or
liquidation under the law of the enacting State].
2. The court is entitled to communicate directly with, or to request information or
assistance directly from, foreign courts or foreign representatives.
1
(2013) (16 December 2013) [9].

DOI 10.1007/978-981-10-5876-9_9
Article 25 promotes and advances the principles of uniformity and the

observance of good faith set out in Article 8. It encourages cooperation and com-
munication between courts and between courts and foreign representatives through
communication between courts. Paragraph 2 of this article entitles a court to
communicate directly with, or to request information or assistance from, a foreign
court or foreign representative.
Article 25 is designed to address two problems: firstly, there are no rules in
several States’ (especially in civil law countries), that allow their courts to cooperate
and communicate with foreign courts. Secondly, in some jurisdictions, their internal
laws do not clearly indicate the extent of a court’s power to cooperate with foreign
courts and foreign representatives.2 The communication envisaged by this article
usually occurs through either letters (including letters of request) or protocols.
Communication with foreign representatives will generally occur in accordance
with the court’s procedural rules.
In the UK they have substituted in para 1 the word ‘may’ for ‘shall’ thereby
making the obligation to cooperate discretionary.
It has been suggested that this article allows a court in the USA that is overseeing
a Chapter 11 case, in which the debtor is a Debtor in Possession (DIP), to appoint a
person to deal with cross-border issues in countries that are accustomed to the
appointment of a receiver or supervisor for the debtor that may be suspicious of the
authority of the Debtor in Possession.3
The courts in North America have a greater amount of experience in creating
protocols for dealing with issues that may arise during the course of a cross-border
insolvency. Justice Morawetz of the Ontario Superior Court stated that it is
“common” to have court-to-court communication protocols and to have joint
hearings via closed circuit television.4 A joint trial has also been held with the
Canadian and US courts handing down separate judgement after their judges
consulted pursuant to an agreed protocol.5 This experience may be more due to the
provisions of the American Law Institute’s Transnational Insolvency: Cooperation
Among the NAFTA Countries, Principles of Cooperation Among The NAFA
Countries6 being adopted by the North American courts than to the provisions of
2
3
See, e.g., Glosband et al., see footnote 93, 139.
4
Morawetz, see footnote 135, 11.
5
Re Nortel Networks Corporation [2015] ONSC 2987 (12 May 2015) [4–10]; Re Nortel Networks
Inc, 2015 WL 237431 (Bankr, D Del, 2015).
6
The American Law Institute, see footnote 30.
9.1 Article 25 149
the Model Law. This requires further investigation and is beyond the scope of this
book. However, it is noted that several courts within Australia have referred to these
principles as factors which they believe should be considered.7
Notably a revised set of principles has recently been released which aims to
encourage interaction and cooperation between courts and representatives.8 More
recently, the European Communication and Cooperation Guidelines for
Cross-Border Insolvency have been proposed by the International Association of
Restructuring, Insolvency and Bankruptcy Professionals of Europe in an endeavour
to assist European Courts with transnational cases involving more than one main
proceeding.9
9.1.1 Australia
In Australia, some of the courts having jurisdiction under the Model Law have
issued Practice Directions which address the issue of cooperation with foreign
courts and foreign representatives. The New South Wales Supreme Court has also
found that para 1 of this article imposes a mandatory obligation on the court to
cooperate with courts and representatives of foreign jurisdictions.10
In Parbery; in the matter of Lehman Brothers Australian Limited (in liq) the
Federal Court of Australia accepted that inter-court communication was to be
encouraged in cross-border insolvencies.11 The court declined a request by the
liquidators of the Australian company to send a letter of request in the form sub-
mitted to the Judge Peck of the US Bankruptcy Court dealing with the US com-
panies in an attempt to seek to resolve the inconsistencies that existed between court
7
E.g. Federal Court of Australia Cross Border insolvency Practice Note: Cooperation with Foreign
Courts of Foreign Representatives (GPN-XBDR) (25 October 2016) http://www.fedcourt.gov.au/
law-and-practice/practice-documents/practice-notes/gpn-xbdr New South Wales Supreme Court,
Practice Court SC Eq 6, Supreme Court Equity Division—Cross-Border Insolvency: Cooperation
with Foreign Courts or Foreign Representatives (11 March 2009), http://www.lawlink.nsw.gov.au/
practice_notes/nswsc_pc.nsf/a15f50afb1aa22a9ca2570ed000a2b08/db2a09ee87866a04ca2575770
07983ae?OpenDocument; Supreme Court of Victoria, Cross-Border Insolvency Applications and
Cooperation with Foreign Courts or Foreign Representatives and Coordination Agreements (30
January 2017), http://assets.justice.vic.gov.au//supreme/resources/77e1a5a7-3748-4131-a7d4-
ddd5cd72b881/cc6crossborderinsolvency.pdf.
8
Global Principles for Cooperation in International Insolvency Cases and Global Guidelines for
Court to Court Communications in International Insolvency Cases, presented to the 89th Annual
Meeting of the American Law Institute on 23 May 2012 and unanimously approved by the
International Insolvency Institute membership at its 12th Annual Conference, Court de Cassation,
Paris, 22 June 2012, http://iiiglobal.org/component/jdownloads/viewdownload/36/5897.html.
9
Sexton, see footnote 10, 821.
10
Re Chow Cho Poon (Private) Limited [2011] 249 FLR 315, 324-5, [42].
11
Parbery; in the matter of Lehman Brothers Australian Limited (in liq) (2011) 285 ALR 476,
484 [71].
decisions in England and the USA. Justice Jacobsen indicated that he was not
willing to send the proposed letter because:
1. It breached the principles of comity be pre-empting the decision of the US
Bankruptcy Court as comity is based upon ‘common courtesy and mutual
respect’.12
2. It was inappropriate to enter into discussions with another court on matters of
controversy.13
3. The application was made ex parte.14
4. Cooperation between the courts and other courts should occur within a frame-
work or protocol that has been approved by the court with the input of parties
and the relevant court’s practice notes and guidelines.15
5. The communication was to be in respect of proceedings before the court which
was not the case here.16
The court did, however, agree to send a letter attached to the judgement to the
US Bankruptcy Court advising that court of the application and the judge’s refusal
to grant the request, and seeking to establish a protocol for future communication.
Different practice notes have been issued by different courts exercising insol-
vency jurisdiction which sets out the manner in which inter court communication is
to take place with that court. They all refer to the Guidelines for Court-to-Court
Communications in Cross-Border Cases issued by the American Law Institute and
International Insolvency Institute.17
The New South Wales Supreme Court has used this article as a basis upon which it
appointed a person as a foreign representative to seek recognition of proceedings over-
seas of an Australian scheme of arrangement proceeding for an insolvent company.18
9.1.2 Canada
In Canada, the equivalent provision obliges a court to cooperate to the maximum

extent possible with a foreign representative or foreign court.19 It is arguable that in
12
Ibid 482 [53].
13
Ibid 482 [54].
14
Ibid 482 [55].
15
Ibid 483 [59].
16
Ibid 483 [66].
17
See e.g. Federal Court of Australia Cross Border insolvency Practice Note: Cooperation with
Foreign Courts of Foreign Representatives (GPN-XBDR) (25 October 2016) http://www.fedcourt.
gov.au/law-and-practice/practice-documents/practice-notes/gpn-xbdr.
18
Re Boart Longyear Limited [2017] NSWSC 537 (27 April 2017).
19
Companies Creditors Arrangement Act, RSC 1985, c C-36 s 52(1); Bankruptcy and Insolvency
Act, RSC 1985, c B-3 s 275(1).
9.1 Article 25 151
order for this to work, the court must take into account the same matters as required
under Article 8 in order to achieve maximum cooperation and harmonisation of
outcomes.
In Perpetual Trustee Co Ltd v BNY Corporate Trustee Services Ltd the English
High Court was dealing with an application involving a member of the Lehman
Brothers group and it was proposed to communicate with the US Bankruptcy Court
in an attempt to avoid conflicting decisions between the two countries.20 The
English High Court made it clear that although it would accept submissions in
respect of any letter to be sent, the ultimate decision is for the court alone as to
whether to send a letter and the form of the letter that it was proposing to send to the
US Bankruptcy Court.
The English High Court has made declaration confirming the appointment of a
person resolved by the company in scheme of arrangement proceedings as a foreign
representative for the purposes of seeking recognition overseas. The order was not
however made under this article but under the courts inherent power.21
9.1.4 USA
In the USA, the provisions of this article are ‘subject to the rights of a party in
interest to notice and participation’.22
9.1.5 Canada and USA
In Canada, numerous cases have involved protocols associated with the USA courts
following the introduction of the American Law Institute’s Guidelines Applicable to
Court to Court Communications on Cross-Border Cases23 including:
20
Perpetual Trustee Co Ltd v BNY Corporate Trustee Services Ltd [2009] EWHC 2953 (Ch).
21
Re Telewest Communications PLC [2004] EWHC 924; [2005] 1 BCLC 752 at [61].
22
11 USC § 1525(b) (2012).
23
American Law Institute and International Insolvency Institute, ‘Global Principles for
Cooperation in International Insolvency Cases and Global Guidelines for Court to Court
Communications in International Insolvency Cases’ (10 January 2012) http://iiiglobal.org/
component/jdownloads/viewdownload/36/5897.html.
(a) In Re Matlack, the court approved and set out a protocol for communication
between it and the US Bankruptcy Court based upon The American Law
Institute’s Guidelines Applicable to Court to Court Communications on Cross-
Border Cases.24
(b) In Re Graceway Canada Company, after appointing a Canadian Receiver, the
court approved a communication protocol for the purposes of communicating
with the US Bankruptcy Court in anticipation of Chapter 11 proceedings being
issued.25
(c) In Calpine Canada, Madame Justice Romaine commented that a protocol
cannot be drafted in a vacuum and must address the particular circumstances of
the case at hand. Her Honour stressed that a protocol cannot be pulled off the
shelf and should be a matter of discussion and negotiation and cooperation
among interested parties before a form of protocol is presented to the courts for
review and approval.26
(d) In Eddie Bauer of Canada Inc., the court recognised that in a case where
Canadian entities were fully integrated with associated entities in the USA
which were the subject of Chapter 11 proceedings, the adoption of a
Cross-Border Protocol which incorporates the American Law Institute’s
Guidelines Applicable to Court to Court Communication on Cross-Borders
Cases was appropriate.27
The Supreme Courts of provinces of Canada and the US Bankruptcy Court have
created the following protocols:
(a) Joint directions hearings where the judges confer before handing down joint
directions;28
(b) Requiring a common submission to be filed in both Courts with each Court to
then consider the issue of the States’ laws applicable to the dispute;29
(c) Establishing procedures for submitting claims where two
insolvency/reconstruction administrations exist or where there are interrelated
administrations;30
(d) Establishing a joint plan for reorganisation from a company and approving the
same;31
24
[2001] ONSC 28467 (19 July 2001) [12].
25
[2011] ONSC 6292 (4 October 2011).
26
Calpine Canada Energy Limited (Companies Creditors Arrangement Act) (2006) 26 CBR (5th)
77 [39].
27
Re Eddie Bauer of Canada Inc (2009) 55 CBR (5th) 33 [26].
28
Re Pope & Talbot Ltd (2010) 72 CBR (5th) 140; Re Northstar Aerospace Inc (2012) 91 CBR
(5th) 268; [2012] ONSC 4423 (30 July 2012) [4].
29
Ibid.
30
Re Abitibibowater Inc [2010] QCCS 1064 (18 January 2010).
31
Re Masonite International Ltd [2009] ONSC 40563 (28 July 2009).
9.1 Article 25 153
(e) Waiving the requirement to file a separate plan under the CCAA where Chapter
11 proceedings have been filed in the United States;32
(f) Recognising proceedings in the other jurisdictions so as to allow a group of
companies who reside in different jurisdictions to be dealt with under a joint
plan for reorganisation;33
(g) A standing protocol between the Superior Court of Quebec and the US
Bankruptcy Court for dealing with cross-border insolvencies.34
UNCITRAL
The UNCITRAL Practice Guide on Cross-Border Insolvency Cooperation provides
information for insolvency practitioners and judges on the practical aspects of
cooperation and communication in cross-border insolvency cases. The information
is based upon a description of collected experience and practice, focusing on the use
and negotiation of cross-border agreements. It provides an analysis of more than 39
agreements, ranging from written agreements approved by courts to oral arrange-
ments between parties to the proceedings that have been entered into over the last
decade or so.35
The UNCITRAL Practice Guide has also summarised circumstances in which it
is appropriate for cross-border insolvency agreement or protocols to be entered;
these include:
(a) Cross-border insolvency proceedings with a considerable number of interna-
tional elements;
(b) Complex debtor structures;
(c) Different types of insolvency procedures in the States involved;
(d) Sufficient assets to cover the costs of drafting an agreement;
(e) The availability of time to negotiate an agreement;
(f) Similarity of insolvency laws;
(g) Legal uncertainty regarding the resolution of principles of private international
law or choice of forum questions;
(h) The ordering of contradictory stays in the different proceedings;
(i) The existence of a cash management system providing for the deposit of cash
into a centralised account and the sharing of cash among member of interna-
tional group of companies;
(j) The appointment of insolvency representatives from the same firm.36
32
Re Laidlaw (2003) 39 CBR (4th) 239.
33
Re Abitibibowater Inc [2010] QCCS 1064 (18 January 2010).
34
Re Montreal, Maine & Atlantic Canada Co [2013] QCCS 5194 (9 October 2013) [32].
35
United Nations Commission on International Trade Law, UNCITRAL Practice Guide on Cross-
Border Insolvency Cooperation, UN Publication Sales No E.10.V.6, GA Res 61/112 (16
December 2009).
36
Ibid, 25–26, [10].
The Practice Guide sets out the type of clauses that have been used in the past
with such agreements. These agreements have been reached both between courts
and between insolvency representatives and cover issues including:
(a) Recital setting out the purpose of the agreements;
(b) Circumstances supporting use of a cross-border insolvency agreement;
(c) Capacity to enter into a cross-border insolvency agreement;
(d) Conditions precedents to make agreement binding (e.g. court approval);
(e) Whether agreements are intended to be legally binding;
(f) Comity and independence of courts;
(g) Allocation of responsibilities between courts;
(h) Allocation of responsibility for the investigation and commencement of
avoidance proceedings;
(i) Approval of compensation for insolvency representatives;
(j) Resolution of disputes between different administrations of the same debtor
and between the representatives of the debtor and third parties;
(k) Where it is necessary to appear in the courts of a State that has not adopted the
Model Law, ensuring there is a right to make submissions (rather than
appearing and thereby potentially subjecting them to the jurisdiction of that
court);
(l) Whether the insolvency agreement extends to future proceedings issued in
other States with respect to the same debtor;
(m) The law that governs the insolvency agreement/protocol;
(n) General obligations and means of cooperation;
(o) Coordination of reorganisation plans;
(p) Discovery and treatment of assets in different States;
(q) Supervision of representatives in each State;
(r) Allocation of responsibility to commence further insolvency proceedings;
(s) Calling for and treatment of creditor claims;
(t) Payment of distributions including how priority creditors are to be dealt with;
(u) How communication is to occur between the courts of different States;
(v) Information-sharing between representatives;
(w) Sharing information with third parties (e.g. creditors);
(x) Specifying steps that require notice to be given between parties before being
taken;
(y) The manner of notice to be given;
(z) Amendment revision ort termination of insolvency agreement;
(aa) Costs and fees of complying with insolvency agreement;
9.1 Article 25 155
(bb) Safeguards such that complying with agreement does not breach any domestic
law or to breaching the rights or obligations to third parties;
(cc) Limitation of personal liability to representatives and professional s in their
employ form complying with insolvency agreement, subject to any domestic
law;
(dd) Warranties as to power to enter into agreement.37
In Canada, the UK and the USA, such agreements have generally been approved
by the Court as a means of protecting the representatives from any allegation of
breach of duty and to ensure that the agreements are binding on the insolvency
practitioner representatives. It is suggested that this would also be appropriate in
both Australia and New Zealand.
9.2 Article 26
Cooperation and direct communication between the [insert the title of a person or
body administering a reorganization or liquidation under the law of the enacting
State] and foreign courts or foreign representatives
1. In matters referred to in Article 1, a [insert the title of a person or body
administering a reorganization or liquidation under the law of the enacting
State] shall, in the exercise of its functions and subject to the supervision of the
court, cooperate to the maximum extent possible with foreign courts or foreign
representatives.
2. The [insert the title of a person or body administering a reorganization or
liquidation under the law of the enacting State] is entitled, in the exercise of its
functions and subject to the supervision of the court, to communicate directly
with foreign courts or foreign representatives.
This Article encourages communications and cooperation between foreign

representatives and between local representatives and foreign courts and foreign
representatives, subject to the supervision of the court. Communication between
representatives of insolvent entities generally occurs in a non-formal manner.
Communication between representatives and a court will generally occur in
accordance with the court’s procedural rules and customs. Given the expanded
definition of the term ‘court’, this article also places an obligation on foreign
representatives to communicate and cooperate with local administrative authorities.
In Canada, Article 26 (2) has not been adopted. All other States examined have
adopted the Model Law provisions. Despite Canada not adopting this article, the
Canadian court representatives have a history of communication with foreign
representatives and courts, and in particular have a history of cooperation in the
case of corporate restructuring where dual proceedings are issued under both
Chapter 11 in the USA and under the CCAA in Canada.
37
Ibid, 28–95.
Silverman and Seamon have commented that at the Judicial Colloquia in 1995, the
‘general consensus was that courts can and should be permitted to communicate
directly on procedural or administrative matters, but not on substantive matters without
participation of parties in interest in some appropriate forum. Appropriate forums
would include advance consent or actual participation, but not through an ex parte
communication, made without notice imported to all of the parties’.38 It is argued that
in common law States, such as those considered in this book, it is not appropriate for
judicial officers to communicate between themselves in the absence of the parties or
their input. This is because the court is not aware of all of the circumstances of an
individual insolvency administration and any flow-on effects that may occur. The court
of a English common law tradition cannot be aware of all of the circumstances of a
foreign proceeding under the rules of evidence.39 Even if communications are in
writing, and only relate to procedural matters, all parties should have an input. It is
argued that this issue cannot be addressed by an amendment to the Model Law.
9.3 Article 27
Forms of cooperation
Cooperation referred to in articles 25 and 26 may be implemented by any appro-
priate means, including:
(a) Appointment of a person or body to act at the direction of the court;
(b) Communication of information by any means considered appropriate by the
court;
(c) Coordination of the administration and supervision of the debtor’s assets and
affairs;
(d) Approval or implementation by courts of agreements concerning the coordi-
nation of proceedings;
(e) Coordination of concurrent proceedings regarding the same debtor;
(f) [The enacting State may wish to list additional forms or examples of
cooperation].
This provision is designed as a signpost for courts to give them some idea of
the breadth of orders they can make for the purpose of cooperating with foreign
courts and foreign representatives under Articles 25 and 26. The word ‘including’
implies that the forms of cooperation listed in this article are not intended to be
exhaustive. All States examined have adopted this article.
38
Glosband, see footnote 93, 70–1; Report on UNCITRAL—INSOL Colloquium on Cross-Border
Insolvency, 26 Y.B 207, UN Doc A/CN.9.413 (1995).
39
E.g., the legal advice a foreign representative has received; the state of ongoing settlement
discussions or what has been said by different parties at a mediation.
9.3 Article 27 157
UNCITRAL in its Practice Guide has specified further types of cooperation that
could exist between courts including:
(a) Those relating to questions of jurisdiction and allocation of disputes among
cooperating courts for resolution; and
(b) Coordination of the filing, determination and priority of claims.40
It is argued that any further cooperation that is given must be consistent with the
purposes of the Model Law in providing assistance to a foreign representative after
taking into account the interests of the debtor, creditors and other interested parties
in accordance with Article 22.
9.4 Summary
The Model Law encourages communication between courts, between local and
foreign representatives, and between courts and foreign representatives. The courts
are given a wide discretion as to how to cooperate with foreign courts and foreign
representatives. The list specifying the forms that such cooperation can take is not
exhaustive. However these rules should not be used in circumstances where it may
give rise to an appearance of lack of impartiality or not applying the rules of natural
justice. Courts must ensure that all parties to a proceeding are aware of and have
input into any communication between one court and a court in another State or a
40
United Nations Commission on Trade Law, UNCITRAL Practice Guide on Cross-Border
Insolvency Cooperation, UN Publication Sales No E.10.V.6, GA Res 61/112 (16 December 2009),
20–21, [18–21].
Chapter 10
and Interpretation of Chapter V
Insolvency—Concurrent Proceedings
Overview
Chapter 10 examines how the provisions Chapter IV of the Model Law have been
enacted by the five nominated States:
• Articles 28 to 30 describe what is to occur where there are multiple insolvency
proceedings on foot, and the rules applicable to overcome any conflicts.
• Article 31 makes a presumption that a debtor is deemed to be insolvent if they
are a debtor in a recognised foreign main proceeding. This is designed to assist
with the issuing of domestic proceedings in the State in which recognition is
granted, including those relating to antecedent transactions. Antecedent trans-
actions are discussed further in Sect. 11.3.4.2.
• Article 32 ensures that where there are multiple proceedings, creditors to the
greatest extent possible receive a pari passu distribution after considering all the
proceedings as a whole by applying the English principle of hotchpot, which
provides for the equalisation of distributions between creditors of the same class in
different States.
10.1 Article 28
Commencement of a proceeding under

[identify laws of the enacting State relating to insolvency] after recognition of a
foreign main proceeding
After recognition of a foreign main proceeding, a proceeding under [identify laws of
the enacting State relating to insolvency] may be commenced only if the debtor has
assets in this State; the effects of that proceeding shall be restricted to the assets of
the debtor that are located in this State and, to the extent necessary to implement
cooperation and coordination under articles 25, 26 and 27, to other assets of the
debtor that, under the law of this State, should be administered in that proceeding.

DOI 10.1007/978-981-10-5876-9_10
Article 28 is premised upon another State being recognised as the State in

which there is the COMI such that the foreign main proceeding is within that other
State’s jurisdiction. This article restricts the court’s power to appoint a domestic
representative in circumstances where the debtor has assets within that State. It
further restricts the powers of any subsequently appointed domestic representative
to deal with the assets within the jurisdiction and those which the court believes
should be administered in the jurisdiction in light of the obligations of cooperation
and coordination under Articles 25, 26 and 27.1 It has been stated that both
restrictions contained within the article must be taken into account.2
Fletcher postulates that other assets of the debtor (including those outside the
local jurisdiction) may be brought into the local proceedings pursuant to this
Article, providing that the local laws regard them as being properly within the scope
of an administration conducted within its jurisdiction.3 It has been suggested that
the type of foreign assets that may be covered include assets of a local business
being sold as a going concern which are located overseas, or assets that have been
fraudulently transferred overseas.4 There is, however, no restriction placed upon the
types of assets over which a court can assert control. A number of jurisdictions
assert a right over all the assets of the debtor wherever located.5 This issue is
discussed further in Sect. 11.3.6.
The UK version of this article does not restrict representatives to dealing only
with the local assets within Great Britain once a foreign main proceeding is
recognised. Ho suggests that this is based upon the previous English position that
assets being within the jurisdiction were not a prerequisite to English courts initi-
ating foreign proceedings. Ho further suggests that the English courts would also
extend their insolvency jurisdiction to other assets of the debtor that the court
determines should be administered in that proceeding.6
In the USA, this article restricts the subsequently appointed domestic repre-
sentative to dealing only with the assets which are within the territorial jurisdiction
of the USA and not subject to the control of the foreign proceeding.7 In AWAL
Banking, the US Bankruptcy Court recognised that, when a domestic case is opened
1
See, e.g., Re Awal Bank BSC, 455 BR 73, 81 (Bankr, SD NY, 2011).
2
3
footnote 42, 482 [8.66].
4
5
E.g. under the bankruptcy laws in Australia, New Zealand and the United Kingdom and Chapter
11 proceedings in the United States of America.
6
7
11 USC § 1528 (2012).
10.1 Article 28 161
in the USA following the recognition of a foreign main proceeding, ‘to the extent
possible, the administration of a debtor’s affairs should be centralized in the foreign
main proceeding and other cases should be coordinated with the main case’.8 The
court further held that:
Section 1528 further provides that when a domestic plenary case is opened subsequent to
recognition of a foreign main proceeding, the effects of the U.S. case are restricted to the
assets of the debtor that are within the territorial jurisdiction of the United States and, to the
extent necessary to implement cooperation and coordination under Sections 1525, 1526,
and 1527, to other assets of the debtor that are within the jurisdiction of the court under
Section 541(a) of this title, and 1334(e) of title 28, to the extent that such other assets are
not subject to the jurisdiction and control of a foreign proceeding that has been recognized
under this chapter.9
10.2 Article 29
Coordination of a proceeding under [identify laws of the enacting State relating to

insolvency] and a foreign proceeding
Where a foreign proceeding and a proceeding under [identify laws of the enacting
State relating to insolvency] are taking place concurrently regarding the same
debtor, the court shall seek cooperation and coordination under articles 25, 26 and
27, and the following shall apply:
(a) When the proceeding in this State is taking place at the time the application for
recognition of the foreign proceeding is filed,
(i) Any relief granted under Article 19 or 21 must be consistent with the pro-
ceeding in this State;
(ii) If the foreign proceeding is recognized in this State as a foreign main pro-
ceeding, Article 20 does not apply;
(b) When the proceeding in this State commences after recognition, or after the
filing of the application for recognition, of the foreign proceeding,
(i) Any relief in effect under Article 19 or 21 shall be reviewed by the court and
shall be modified or terminated if inconsistent with the proceeding in this
State;
(ii) If the foreign proceeding is a foreign main proceeding, the stay and suspension
referred to in para 1 of Article 20 shall be modified or terminated pursuant to
para 2 of Article 20 if inconsistent with the proceeding in this State;
(c) In granting, extending or modifying relief granted to a representative of a
foreign non-main proceeding, the court must be satisfied that the relief relates to
assets that, under the law of this State, should be administered in the foreign
non-main proceeding or concerns information required in that proceeding.
8
455 BR 73, 82 (Bankr, SD NY 2011).
9
Ibid 81.
If a domestic insolvency proceeding is on foot at the time an application is

made for recognition of a foreign representative in respect of the same debtor, then
any order made and the automatic stay must be consistent with the domestic pro-
ceedings and not bring about a stay of those domestic proceedings. If the domestic
proceedings are issued after the application for recognition of the foreign pro-
ceedings has been filed, then any order for recognition must be reviewed such that it
is not inconsistent with the domestic proceedings. Further, the court should grant
orders only in relation to foreign non-main proceedings in respect of assets that are
to be administered within the foreign non-main proceedings.
In the UK, where domestic proceedings are issued after recognition of a foreign
proceeding, the court must review any leave granted to the foreign representative
under Article 23 to issue proceedings for recovery of antecedent transactions.
The principle embodied in this Article is that the commencement of a local
proceeding does not prevent or terminate the recognition of a foreign proceeding.10
This article must be read in conjunction with Article 20(3) which allows domestic
proceedings to be issued after recognition of a foreign main proceeding. However
this article gives precedence to the domestic proceedings over a foreign main
proceeding by requiring that any orders made following recognition of the foreign
proceedings be consistent with the domestic proceedings. This is understandable if
the assets are perishable, large or immovable or have local legislative registration
requirements or involve local legal proceedings with which a foreign representative
may not be familiar. The effect of this article as a whole is to give an advantage to
domestic creditors in the State with a large number of assets as the domestic
insolvency laws (including those with respect to antecedent transactions) will
determine that the assets available to be paid to them.11 This is a result of the local
proceedings not being subordinated to the foreign proceedings.12
10.3 Article 30
Coordination of more than one foreign proceeding

In matters referred to in article 1, in respect of more than one foreign proceeding
regarding the same debtor, the court shall seek cooperation and coordination under
articles 25, 26 and 27, and the following shall apply:
(a) Any relief granted under Article 19 or 21 to a representative of a foreign

non-main proceeding after recognition of a foreign main proceeding must be
consistent with the foreign main proceeding;
(b) If a foreign main proceeding is recognized after recognition, or after the filing of
an application for recognition, of a foreign non-main proceeding, any relief in
10
11
See comments below in Chapter 11.3.7.
12
10.3 Article 30 163
effect under Article 19 or 21 shall be reviewed by the court and shall be

modified or terminated if inconsistent with the foreign main proceeding;
(c) If, after recognition of a foreign non-main proceeding, another foreign
non-main proceeding is recognized, the court shall grant, modify or terminate
relief for the purpose of facilitating coordination of the proceedings.
This Article is designed to ensure that where there are multiple recognised
foreign proceedings, any orders made are consistent between those other pro-
ceedings. Further, where both a foreign main proceeding and a foreign non-main
proceeding have been recognised, any order made must be consistent with the
foreign main proceeding. This Article is designed to ‘promote cooperation, coor-
dination and consistency of relief granted to different proceedings’.13 This article
also places an obligation upon the court to review its previous orders when
recognising a foreign proceeding after another proceeding has already been
recognised.
All States examined, other than Canada, have enacted this provision. Canada
does not deal with the situation where a foreign main proceeding is filed before a
foreign non-main proceeding in its legislation. Sarra has suggested that Canadian
courts are likely to align their orders with those made by foreign courts given the
courts’ willingness to grant comity.14
In all States examined except Canada, where two foreign non-main proceedings
are recognised, the court is required to modify its relief in the first proceeding to
facilitate coordination between the two proceedings. The Canadian legislation does
not deal with this possibility.15 The court in Canada does, however, have wide
discretion. Golick and Wasserman comment that where a second non-main pro-
ceeding is recognised, the court will review the orders made in the first non-main
proceeding.16
10.4 Article 31
Presumption of insolvency based on recognition of a foreign

main proceeding
13
14
Sarra, see footnote 75, 53-4.
15
Companies Creditors Arrangement Act, RSC 1985, c C-36, ss 54–55; Bankruptcy and
Insolvency Act, RSC 1985, c B-3 ss 277–278.
16
Golick and Wasserman, in Ho, see footnote 75, 97.
In the absence of evidence to the contrary, recognition of a foreign main proceeding

is, for the purpose of commencing a proceeding under [identify laws of the enacting
State relating to insolvency], proof that the debtor is insolvent.
The presumption contained in this Article does not apply if the foreign
proceeding is a non-main proceeding and imposes a presumption, it can be rebutted
by appropriate evidence.
This a procedural provision such that upon recognition of a foreign main pro-
ceeding, the debtor is deemed insolvent.17 Allowing domestic insolvency pro-
ceedings to be issued quickly.18 The drafters have also stated that the purpose of
this article is to avoid the need for repeated proof of financial failure which reduces
the likelihood that a debtor may delay the commencement of proceedings long
enough to conceal or remove assets.19
In Australia, Canada, New Zealand and the UK, insolvency is not the test for
personal bankruptcy; rather, an act of bankruptcy must have been committed or
failure to comply with a statutory notice or other specified acts have been com-
mitted.20 In the USA, a foreign representative can commence a proceeding under
Chapter 3 of the Bankruptcy Code without otherwise fulfilling the domestic
requirements for an involuntary case.21
Insolvency which is defined as the debtor’s inability to pay its debts as and when
they fall due, is a ground for winding up an incorporated debtor in all of the States
17
(2013) (16 December 2013) [236].
18
See Corporations Act 2001 (Cth) ss 459B, 464; Winding-up and Restructuring Act, RSC 1985, c
W-11 s 10; Companies Act 1993s 241(4) (NZ); Insolvency Act 1986 c45 s 122; In the USA the
necessary perquisites for involuntary proceedings are set out in 11 USC § 303 (2012) and relate to
a debtor having at least $10,000 being owed.
19
(2013) (16 December 2013) [45, 228].
20
Bankruptcy Act 1966 (Cth) s 43; Bankruptcy and Insolvency Act, RSC 1985, c B-3 s 42,
Insolvency Act 2006 ss 16–28 (NZ); Insolvency Act 1986 c45 ss 267–268.
21
11 USC § 1511 (2012).
10.4 Article 31 165
examined.22 In all of the States examined, this presumption can be used in the
recovery of antecedent transactions.
Ho indicates that the UK version of the Model Law is not restricted to pro-
ceedings in relation to a debtor that is technically insolvent; otherwise, this article
would be meaningless.23 In the USA, this article can be used to support an
application for domestic proceedings to be issued under another chapter in order to
issue domestic antecedent transaction proceedings under 11 USC § 1523.
10.5 Article 32
Rule of payment in concurrent proceedings

Without prejudice to secured claims or rights in rem, a creditor who has received
part payment in respect of its claim in a proceeding pursuant to a law relating to
insolvency offin a foreign State may not receive a payment for the same claim in a
proceeding under [identify laws of the enacting State relating to insolvency]
regarding the same debtor, so long as the payment to the other creditors of the same
class is proportionately less than the payment the creditor has already received.
This Article simply incorporates the English equitable principle of hotch-

pot.24 This principle equalises a creditor’s distribution between different proceed-
ings in respect of the same debtor, subject to the rights of secured creditors and
other holders of rights in rem. ‘Article 32 does not affect the ranking of claims as
established by the law of the enacting State and is solely intended to establish the
equal treatment of creditors of the same class’.25
Distributions, even though made by recognised foreign representatives, may be
different given the domestic priority laws that exist in each State. The priority
regime that applies to each payment is that of the State from which the payments are
made. The ability to apply hotchpot is contingent upon there being sufficient assets
available for distribution in the State that will allow such equalisation to occur. This
is not always the case.
It is argued that hotch pot appears to be a sensible political compromise to
address the issue of equalisation of distributions in circumstances where it would be
22
Corporations Act 2001 (Cth) s 459A; Winding-up and Restructuring Act, RSC 1985 c W-11 s 10
(c) Companies Act 1993 (NZ) s 241(4); Insolvency Act 1986 c45 s 122(f); 11 USC § 303.
23
24
For an explanation of English principle of hotchpot see generally McGrath v Riddell [2008] 3
All ER 869, 886 [50]; Fletcher, Insolvency in Private International Law, National and
International Approaches see footnote 42, 485 [8.70]; Sheldon, see footnote 146, 483-8 [14.6]–
[14.18].
25
unlikely that, politically, States would allow all assets in their jurisdiction to be
administered by the representative appointed in the State where the debtor has its
COMI. This is especially so where the debtor is subject to a local licensing regime
or there is a statutory compensation regime applicable to the debtors in that State.
This issue is further complicated where a debtor’s COMI may change over time as
discussed in Sect. 11.3.3.4.
10.6 Summary
Courts are granted a wide discretion to review the orders they have made where
there are multiple proceedings issued in respect of the same debtor. They have
power to review its previous orders under Articles 17(4) and 22(3) at any time. It is
argued that such reviews must be conducted carefully to ensure that a court changes
its findings only in relation to a debtor’s centre of interest where it is clear that, on
the evidence subsequently presented, their earlier decision was incorrect.
Courts should not condone debtors organising their affairs so as to change their
COMI or create an establishment within the jurisdiction so as to take advantage of
and benefit from the insolvency regime present within that jurisdiction.
Canada has not adopted all the articles contained in this chapter. It would appear
that the courts of that State have been granted a very wide discretion and in
exercising that discretion, can implement the policy behind the articles which it has
not adopted should they so choose.
It is further argued that the presumptions contained in Article 31 should not
apply to restructuring proceedings as such proceedings need the versatility to dis-
tinguish between creditors, and some of the entities which are the subject of those
proceedings may not be insolvent. The issue of enterprise groups is discussed in
Sect. 15.3.
Chapter 11
Conflict of Laws
Overview
This chapter addresses the question of how the existing principles of conflict of
laws have a bearing upon the interpretation of the Model Law and how they fit
within the existing domestic law of a State. It highlights and suggests that:
• inconsistent rules is one of the factors contributing to the present inconsistences
in the interpretation of the Model Law
• a number of situations where conflicts exist in the domestic rules applicable in
insolvency matters.
11.1 Introduction
The Model Law does not harmonise the conflict of law rules of States adopting it,
the issue is left to the established rules and practices of each State. Whilst insol-
vency proceedings are typically governed by the laws of the State in which they are
issued (lex fori concursus), many States have adopted exceptions to that rule.1
The international character of the Model Law implies that its interpretation
should be determined by reference to its objectives and its internal interpretative
provisions contained in Article 8, with a view to its interpretation being consistent
between States. Where inconsistencies exist in the interpretation of a provision after
applying these principles, then it is argued that the courts should look to the
domestic rules relating to conflict of laws to resolve these inconsistencies.
This chapter does not deal with the conflict of law issues that relate to the
interpretation and recognition of COMI and establishment, which have previously
been dealt with in Chap. 5; nor does it deal with any conflict that arises as a result
of its decisions conflicting with the EC Regulation which may give rise to incon-
sistent decisions which is dealt with in Chap. 14.
1
on Insolvency Law UN Publications Sales No E.05.V.10 (United Nations, 2005), 68 [80].

DOI 10.1007/978-981-10-5876-9_11
168 11 Conflict of Laws
The other principles of private international law issues, namely choice of forum
and choice of law, are dealt with separately in Chap. 13.
11.2 Common Law
The English common law views bankrupt individuals and the liquidation or
bankruptcy of corporations differently due to the effect of the different types of
insolvency. Under bankruptcy law as it affects individual debtors, the divisible
assets of the bankrupt are vested in the debtor’s trustee. In a corporate liquidation,
the assets remain vested in the corporation.2
11.2.1 Australia
Nygh describes the common law position in relation to the resolution of conflict of
laws in individual bankruptcy matters as follows:
1. The assignment affected by the foreign bankruptcy must comply with any
requirement imposed by the lex situs in order to complete the title of the trustee;
2. In the case of conflicting claims, their respective priorities must be determined
according to lex situs;
3. The foreign trustee takes the assignment subject to such rights, encumbrances
and other equities as exist in relation to the property under lex situs and have
priority over the trustee’s claim under that law.3
Australian courts will give effect to a foreign individual’s bankruptcy only so far
as it operates as an assignment of property. Similarly, a release or discharge from a
liability under a foreign law will not be recognised in Australia unless that dis-
charge or release is given under the law of the country which is the law of the
contract.4
The position in relation to the liquidation of corporations is different as the assets
remain with the corporation and its management changes.5 There is no assignment
or vesting of the assets unless the court so orders.6 The common law will recognise,
2
Bankruptcy Act 1966 (Cth), s 58.
3
Davies, Bell and Brereton, see footnote 116, 727-8, [36.7].
4
Ibid, 728 [36.8]; Barcelo v Electrolytic Zinc Company of Australasia Ltd (1932) 48 CLR 391;
Global Distressed Alpha Fund 1 Limited Partnership v PT Bakrie Investindo [2011] 1 WLR 2038,
2042 [13].
5
Cambridge Gas Transport Corporation v The Official Committee of Unsecured Creditors (of
Navigator Holdings PLC & Ors) [2007] 1 AC 508, 517-8 [20].
6
See, e.g., Corporations Act 2001 (Cth) s 474(2); Blacktown Concrete Pty Ltd v Ultra
Refurbishing and Construction Pty Ltd (1988) 43 NSWLR 484, 500-1.
11.2 Common Law 169
upon application, the appointment of the liquidators or foreign representatives,

upon which recognition they are entitled to deal with the company’s assets
including immovable assets, subject to any conditions the court may impose.7
In summary, the position in Australia is that the foreign proceedings will be
governed by the laws of Australia; however, the identity of the assets available in
the insolvency administration will be determined in accordance with the law of the
State in which the property is located (lex situs) or the law that is the applicable law
of the contract giving rise to the asset.
11.2.2 Canada
In Canada, there are no clear rules in relation to conflict of laws. The Supreme
Court of Canada has adopted a test of real and substantial connection in determining
whether Canadian law should apply.8 The Supreme Court of Canada recently
confirmed the lack of a clear rule when it stated:
But in the common law, the nature of the conflict rules that would accord with the con-
stitutional imperative has remained largely undeveloped in this Court’s jurisprudence.
Although the real and substantial connection test has been consistently applied both as a
constitutional test and as a principle of private international law since Hunt, the Court has
generally declined to articulate the content of the private international law rules that would
satisfy the test’s constitutional requirements or to develop a framework for them.9
Castel, however, has previously sought to identify a number of principles

applicable in bankruptcy scenarios and concluded the proper law for determining
provability of debts in a Canadian bankruptcy, the validity of security interests and
any property caught by a Canadian bankruptcy is lex situs.10 He also comments that
a foreign discharge of a debt will be recognised in Canada if it is recognised as a
discharge under the law of the State of the contract.11
11.2.3 New Zealand
New Zealand has a position similar to that in Australia and the United Kingdom
(without the imposition of the EC Regulation).
7
Cambridge Gas Transport Corporation v The Official Committee of Unsecured Creditors (of
Navigator Holdings PLC & Ors) [2007] 1 AC 508, 517-8, [20].
8
See, e.g., Morguard Investments Ltd v De Savoyne [1990] 3 SCR 1077.
9
Club Resorts Ltd v Van Breda [2012] 1 SCR 572, 592 [29].
10
J.-G Castel, Canadian Conflict of Laws (Butterworths, 2nd ed, 1986), 496-7.
11
Ibid, 501.
Dicey, Morris and Collins summarise the common law position in England in
respect of liquidations and bankruptcy in rules 176–178 and rules 216–219. In
relation to corporate insolvency, the UK courts assume jurisdiction in respect of
those entities registered in the UK or whose central management is in the UK. The
courts will wind up such entities according to the law of the UK, including the EC
Regulation. The UK court will also recognise a winding-up order made by the
courts of the State in which a corporate entity is incorporated.
In relation to personal insolvency, the UK courts say that the foreign bankruptcy
of an individual amounts to an assignment of their movable assets in the UK but
does not assign their immovable assets in the UK. It may however assign the right
to receive rents from such immovable assets. A release from liabilities only operates
in the UK so long as the law of the contract is the law of the State of the bankruptcy.
Otherwise it is necessary to determine whether the law of the contract will other-
wise recognise the release.
Goode has explained the UK common law position slightly differently by
indicating that it still applies where the insolvency is not covered by either the EC
Regulation or section 426 of the Insolvency Act 1986, and indicates that there is a
hierarchical order that applies:
(1) The Insolvency Regulation;
(2) The Model Law and related provisions of the Cross-Border Insolvency
Regulations, supplemented by s426 of the Insolvency Act;
(3) Other UK statutes governing the insolvency of companies; and
(4) The common law conflict rules relating to the recognition of foreign judgement
in insolvency proceedings and to the provision of assistance so far as not
displaced by s426.12
It is argued that the corporate rules above may require some refinement given
the 2008 Global Financial Crisis in particular that financial institutions should be
excluded from these rules as they are from the Model Law’s provisions and that
special rules apply in relation to them. Fletcher has also commented that the
English conflict of laws rules in relation to insolvency need further development
and modernisation.13 The issue of financial institutions is discussed further in
Sect. 15.5.
12
Goode, see footnote 276, 792-3 [16–15].
13
Ian F Fletcher The Law of Insolvency (Sweet & Maxwell, 2002) 739 [28-012].
11.2 Common Law 171
11.2.5 USA
In the USA, the rules relating to conflict of laws are governed by the laws of the
individual USA States. The American Law Institute has enunciated some general
principles comprising factors which must be considered when determining the
relevant laws which are applicable if there is a conflict. Those relevant rules are as
follows:
(1) A court, subject to constitutional restrictions, will follow a statutory directive of
its own state on choice of law.
(2) When there is no such directive, the factors relevant to the choice of the
applicable rule of law include
(a) the needs of the interstate and international systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the relative interests of
those states in the determination of the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of law,
(f) certainty, predictability and uniformity of result, and
(g) ease in the determination and application of the law to be applied.14
This approach requires a court to weigh up a number of factors to determine the
appropriate law that is applicable. This can lead to results different from those
obtained by using the laws that are applicable in England and Australia. There are a
number of more specific laws set out in the reinstatement that do not appear to
apply specifically to bankruptcy or its elements, although there is a chapter on
receivership which is no longer applicable in the USA. The principles set out in the
Second Reinstatement have been criticised as being too subjective and allowing
judges in individual States to protect those individual States’ interests.15 It is also
acknowledged that this is an area of law in the USA which has no uniformity across
all its States.16
14
American Law Institute, see footnote 178 § 6.
15
Lea Bilayer, Perspectives on the Law Conflict of Laws—Foundations and Future Directions
(Little Brown & Co, 1991).
16
See, e.g., Simon C. Symonds ‘Choice of Laws in the American Courts in 2010: Twenty-Fourth
Annual Survey’ (2011) 59 American Journal of Comparative Law 303; Simon C. Symonds
‘Choice of Laws in the American Courts in 2011: Twenty-Fifth Annual Survey’ (2012) 60
American Journal of Comparative Law 291. It is not the purpose of this book to examine in detail
the various common law rules that exist in each of the fifty States in the USA in respect of the issue
of conflict of laws.
11.3 Model Law
The Model Law does not attempt to harmonise local insolvency law. The main
issues addressed by the Model Law include the recognition of foreign proceedings,
the rights and duties of foreign representatives, the power of courts, and the duty of
cooperation between jurisdictions.17 The Model Law does not otherwise attempt to
change the domestic law of a State. As a result there are an infinite number of
potential conflicts of law issues that arise by reason of the enactment of the Model
Law in the domestic law of States. In an endeavour to highlight a number of those
potential conflicts the following issues are each separately addressed:
(a) Concurrent Insolvency Administrations;
(b) Entities excluded by various States from the operation of the Model;
(c) The different definitions of exempt property that exist under the various States
insolvency legislation;
(d) The different rules relating to conflict of laws that exist between States;
(e) The nature of the stay granted under Article 20;
(f) The purported worldwide effect of some States insolvency regimes;
(g) Priority of Domestic Laws and Administrations;
(h) The effect of discharge given to creditors under domestic law and whether it
applies internationally;
(i) Inconsistency between provisions of the Model Law and with Other
International Laws and Conventions; and
(j) Protection of local creditors’ interests.
In the world of global commerce where secured creditors, who are also generally
some of the debtors largest creditors, ‘place a premium on certainty’, these creditors
wish to avoid these potential conflicts.18 They also wish to exert maximum control
the process for resolving them commercially.19 To this end, it is argued that the
rules of conflict of laws in insolvency situations should as much as possible be
universally known and largely uniform, thereby ensuring that a consistent approach
is taken between States.
11.3.1 Concurrent Administrations
The jurisdiction of the courts of a State were traditionally not excluded by the fact
that the debtor had been made bankrupt or insolvent by a foreign court from
17
Look Chan Ho, ‘Conflict of Laws in Insolvency Transaction Avoidance’ (2008) 20 Singapore
Academy of Law Journal 343, 351.
18
Steven Harris, ‘Choosing the Law Governing Security Interests in International Bankruptcies’
(2007) 32 Brooklyn Journal of International Law 905, 917.
19
Wade, see footnote 475, 144.
11.3 Model Law 173
exercising jurisdiction in relation to proceedings involving the debtor as any stays

imposed by that foreign jurisdiction were not recognised.20 The Model Law,
however, anticipates that there may be concurrent proceedings by distinguishing
between foreign main proceedings and foreign non-main proceedings and allowing
proceedings to be issued, even following recognition, in a State in which the debtor
has assets. Further, the Model Law allows for the administration or realisation of the
debtor’s assets by a person appointed by the court who does not necessarily need to
be a foreign representative.21 The Model Law recognises that where a foreign main
proceeding is recognised prior to the appointment of a local representative, care
must be taken to ensure that the powers of both are not inconsistent so as to avoid
them acting inconsistently.
If the common law position in relation to movable assets in a bankruptcy still
applies post Model Law, Nygh questions how an Australian court can appoint a
local representative to deal with those assets if they are already vested in the foreign
representative.22 The answer may lie with the power of a court, in recognising
foreign representatives, to limit their powers or deny them jurisdiction to collect
local assets, especially in circumstances where they are not aware of the local
provisions relating to exempt property or the manner in which assets are to be
collected or administered.23 This occurred in Levy v Reddy where the Federal Court
of Australia appointed a local receiver to assist an English Trustee to collect the
debtor’s assets including an immovable asset in the form of land.24
Dicey, Morris and Collins, in respect of bankruptcy proceedings against indi-
viduals, described the rule applicable in England as follows:
Rule 218 - . . ., where a debtor has been made bankrupt in more countries than one, and,
under the bankruptcy law of each such countries, there has been an assignment of the
bankrupt’s property, which might, under any of the foregoing Rules operate as an
assignment of his property in England, effect will be given in England to that assignment
which is earliest in date.25
11.3.2 Excluded Entities
As identified in Sect. 6.2, most States exclude entities in the financial, insurance
and banking sectors from automatic recognition under their domestic version of the
20
Davies, Bell and Brereton see footnote 116, 733, [36.23].
21
See Art 21(1)(e).
22
Davies, Bell and Brereton, see footnote 116, 735, [36.32].
23
Ibid, 736 [36.34].
24
Levy v Reddy [2009] FCA 63 (6 February 2009).
25
Collins, Lord et al. (eds), Dicey, Morris and Collins on The Conflict of Laws (Sweet & Maxwell,
15 ed, 2012) see footnote 158, 1758 [31R-086]. © Thomson Reuters (Professional) UK Limited
2012. Reproduced with permission of The Licensor through PLSclear.
Model Law.26 This is also consistent with the EC Regulation.27 The option to
exclude these entities has been given because States may have special regimes that
exist in relation to these types of entities.28 UNCITRAL has also recently
developed a paper dealing with financial institutions,29 which is discussed further in
Sect. 15.4.
Foreign representatives of these types of companies can be recognised under the
common law principles of comity or other concurrent statutory regimes as dis-
cussed in Chap. 4. Alternatively, it is arguable that given the differences in the
domestic law that relate to these types of companies,30 it is probable that the courts
will require a local representative or authority to be appointed to ensure compliance
with the domestic laws. Such appointments may result in inequitable distributions
between the creditors of different States by giving priority in the distribution of
dividends to local creditors, which Article 32 of the Model Law has attempted to
overcome.
As can be seen from the manner of enactment of Preamble and Article 1 of the
Model Law by the different States, individual States have sought to exclude other
types of entities and individuals from the operation of the Model Law. It is arguable
on public policy grounds that such exclusion is necessary due to either separate
domestic compensation schemes existing at a domestic level or other international
regulations applying in the case of the UK. However, this will still give rise to
conflicts regarding the manner in which the assets of those foreign entities are to be
treated in different States, as arguably, there may be inconsistencies between States
in the recognition of foreign representatives.31 This conflict will also make it dif-
ficult for foreign representatives to determine whether the provisions of the Model
26
See Sects. 6.2 and 6.3.
27
160/1, Art 1(2).
28
(2013) (16 December 2013) [56].
29
See United Nations Commission on International Trade Law, Insolvency of Large and Complex
Financial Institutions 42nd session, UN Doc A/CN.9/WG.V/WP.109 (24 September 2012).
30
See, e.g. Insurance Act 1973 (Cth) s 116(3) which requires Australian assets to be applied first in
the discharge of Australian liabilities and Corporations Act 2001 (Cth) s 562A which allows for
the flow through of reinsurance proceeds to the insured. This difference was commented on by the
House of Lords in McGrath v Riddell [2008] 3 All ER 869, 877, 882, [2, 32]. A Similar priority for
domestic creditors is conferred by the Insurers (Reorganisation and Winding Up) Regulations
2004 (SI 2004/353), giving effect to the European Parliament and Council Directive 2001/17/EC
on the reorganisation and winding up of insurance companies.
31
For example, an Australian railroad and tourism company goes into voluntary administration in
Australia. It has assets in Canada, USA, New Zealand and the United Kingdom where it operates a
small protected railway. It has establishments in all states other than Canada. It is recognised in
Canada as there is no requirement for the company to have an establishment. It is also recognised
in New Zealand as it has an establishment in that state. The company cannot be recognised in the
USA or United Kingdom as railroad companies are excluded.
11.3 Model Law 175
Law apply to their proceedings in different States and whether it is more appropriate
to seek assistance relying upon the principles of common law comity.
As discussed in Sect. 3.5, the USA further restricts the application of the Model
Law to entities that are recognised under Chap. 1 of the Bankruptcy Code. This
effectively means that the Model Law cannot be used to examine directors of an
entity subject to a foreign proceeding where that entity does not have any property
or a place of business within the USA or otherwise fits within the definition of a
debtor set out in section 109 of the Bankruptcy Code.32 However it acknowledged
that there is a low threshold required to satisfy these requirements as it has been
held that both a cause of action or an undrawn retainer in the trust account of the
foreign representatives lawyer who were making the application for recognition
were both property located in the USA and therefore satisfied that perquisite.33
However a number of States prevent a representative of an insolvent debtor from
depositing money with their foreign lawyers without court approval and requires it
to be placed into a bank account within their jurisdiction.
11.3.3 Exempt Property
A potential conflict arises due to the different definitions of ‘exempt property’ and
debtor’s property that is not available for distribution to creditors in the various
countries’ domestic laws, although not all jurisdictions have considered this issue.
11.3.3.1 Australia
In personal insolvency matter section 116 of the Bankruptcy Act 1966 sets out the
type of property that vests in a bankrupt’s trustee. All other property is exempt from
the operation of that Act except in relation to income which is dealt with under a
separate regime under that Act.
11.3.3.2 United Kingdom
In the UK there are different provisions in relevant between England and Wales,
Scotland and Northern Ireland. These laws are also not consistent with other Sates
examined.
In the UK, the House of Lords has considered the issue of different assets that are
available for distribution to creditors in the context of the HIH Insurance liquida-
tion wherein the Australian liquidators sought to have the UK assets remitted to
32
See Re Barnet, 737 F 3d 238 (2nd Cir, 2013).
33
Re Octaviar Administration Pty Ltd, 511 BR 361 (Bankr, SD NY, 2014).
Australia. A liquidator had already been appointed in England and had collected the
English assets which were reinsurance proceeds. The application was opposed
because it was claimed that the English creditors would not be treated equally to the
Australian creditors as a result of the difference in the laws between Australia and
England in respect of the flow through of reinsurance proceeds to the individual
claimant creditors.34 Under Australian Law the proceeds would flow through to the
relevant claimants and not be used to pay creditors generally. There was no
equivalent provision at the time under UK law. The Australian liquidators of HIH
had made application for assistance, not under the Model Law, but rather based
upon a letter of request from the New South Wales Supreme Court under sec-
tion 426(4) of the UK Insolvency Act. Australia was a designated country under
that section which obliged the English courts to give assistance to the courts of
Australia if requested. It is arguable that the Australian liquidators were unable to
use the Model Law to effect the transfer of the assets as insurance companies are
excluded from the provisions of the Australian version of the Model Law.35
Although such exclusions would not technically bind the English courts exercising
jurisdiction, there may have been an issue as to whether it was proper in the
circumstances for the liquidators to make such an application.
There appears to have been no unanimity in the court’s decision, with some
judges basing their decision solely upon the power conferred on the court under
s426 of the UK Insolvency Act, whilst others sought to exercise a wider power in
the court based upon Universalist principles being applicable in international
insolvency. Lord Hoffman, with whom Lord Walker agreed, adopted a Universalist
approach by considering the insolvency proceeding on a worldwide basis, stating
that:
… creditors cannot be deprived of their statutory rights under the English scheme of
liquidation. The whole doctrine of ancillary winding up is based upon the premise that in
such cases the English court may ‘disapply’ parts of the statutory scheme by authorising the
English liquidator to allow actions which he is obliged by statute to perform according to
English law to be performed instead by the foreign liquidator according to the foreign law
(including its rules of the conflict of laws.) These may or may not be the same as English
law. Thus the ancillary liquidator is invariably authorised to leave the collection and
distribution of foreign assets to the principal liquidator, notwithstanding that the statute
requires him to perform these functions.36
Almost all countries have their own lists of preferential creditors. These lists reflect leg-
islative decisions for the protection of local interests, which is why the usual English
practice is, when remittal to a foreign liquidator is ordered, to make provision for the
retention of funds to pay English preferential creditors. But the existence of foreign pref-
erential creditors who would have no preference in an English distribution has never
inhibited the courts from ordering remittal.37
34
McGrath v Riddell [2008] 3 All ER 869.
35
Cross-Border Insolvency Regulations 2008 (Cth) Sch 1.
36
McGrath v Riddell [2008] 3 All ER 869, 879 [19].
37
Ibid [21].
11.3 Model Law 177
Lord Scott and Lord Neuberger adopted a more territorialist approach by con-
sidering how the remittal of assets would affect local creditors. They took the view
that the domestic rules should apply to domestic ancillary liquidations and that,
generally, a domestic court should not give up control of a liquidation in its
jurisdiction. However, they agreed to the transfer of the English assets to Australia
solely because Australia was a designated country under section 426 of the
Insolvency Act which obliged the English Court to assist the New South Wales
Supreme Court pursuant to its letter of request. They indicated that without such a
provision, they would not have approved the turnover of the assets as the English
creditors would have been receiving less than if the English liquidator had dis-
tributed the assets in accordance with English law.
However, more recently, courts in the UK have appeared to favour the releasing
of assets in part based upon the practices that have developed under the EC
Regulations and the Model Law, provided that the interests of the English creditors,
including the right of set-off, are protected.38
11.3.3.3 USA
In the USA, the issue becomes more complicated because of section 522(b) of the
Bankruptcy Code which provides that ‘a debtor can choose to exempt from property of
the bankruptcy estate that property which is exempt under the applicable state or
federal law.’ Section 522(o) also provides a limited exemption.39 Various States in the
USA, by virtue of their constitutions or legislation, exempt an individual person’s
home or value in their home up to a prescribed limit from being subject to judgments
enforced against it (homestead provisions). The homestead provisions vary widely
from being non-existent in two States to being unlimited in seven States.40 The effect
of these provisions is to allow an individual bankrupt to keep the value of the equity in
their home up to the prescribed limit for that State, no matter what the home’s true
value is or how it was purchased. The extent of the exemption and the ability to recover
payment made toward the home depend upon the laws in each State.
To highlight the issues that arise, reference is made to the situation in two US
States. In Florida, where the homestead provision is contained in that State’s
Constitution,41 the US District Court determined that even where the payment into
38
Re Swissair Schweizerische Luftverkehr-Aktiengesellschaft [2010] BCC 667, 672 [14–15].
39
Such that the value of the property exempted ‘shall be reduced to the extent that such value is
attributable to any portion of any property that the debtor disposed of within the 10-year period
ending on the date of the filing of the petition with the intent to hinder, delay, or defraud a creditor
and that the debtor could not exempt’.
40
Summit Agarwal, Chunking Liu and Lawrence Mielnicki ‘Exemption laws and consumer
delinquency and bankruptcy behaviour: an empirical analysis of credit card data’ (2003) 43 The
Quarterly Review of Economics and Finance 273, 277. The article also contains a table of
exemptions.
41
Art X, § 4(a)(1).
the house mortgage was done for the sole purpose of ‘hindering and avoiding their
creditors and defeating their claims’, the exemption applied.42 In Minnesota, where
the homestead provision is a State law, the US Court of Appeals found that the
value of a payment made for the purpose of ‘hindering and avoiding their creditors
and defeating their claims’ was divisible property of the bankrupt estate and
recoverable.43
11.3.3.4 Generally
Article 21 of the Model Law provides that a Court has power to remit assets to
the custody of a foreign representative for distribution, which should take account
of in accordance with the principles of Article 32. Article 32 basically enacts the
English principle of hotchpot.44 This principle is not otherwise generally part of
the domestic law of Australia, Canada, New Zealand or the USA, although it has
been used in Canada in the past.45 As the Model Law is enacted as a domestic
law, the assets and income that can be remitted must be only those which are
divisible under that State’s domestic law. As discussed in Sect. 11.2 this may
include foreign assets, The foreign State (or part thereof) in which the assets are
held will clearly have a bearing upon the assets that are recoverable by the
Article 32 of the Model Law does not deal with the situation highlighted by
McGrath v Riddell namely, that if certain assets under a State’s domestic law are
exempt from distribution or are distributable to a certain class of creditors in pri-
ority, which has the effect of disadvantaging the creditors in a State (as opposed to a
distribution of the assets under their domestic regime) in which the assets are
located, whether a court will exercise its discretion to remit the assets.
Given the legislative effect of Article 32, it has not been determined whether this
article in the Model Law will override the domestic laws in respect of distributions
to creditors, and if it does, whether the principles of Article 32 will apply only to
42
Bank Leumi Trust Co. v Lang, 898 F Supp 883, 885 (SD Fla, 1995).
43
Re Addison, 540 F 3d 805, (8th Cir, 2008).
44
Which principle is explained in McGrath v Riddell [2008] 3 All ER 869, 887 [50].
45
Sarra, see footnote 75, 24-7. Hotchpot has been used in Australian relation to cases involving
trust funds and managed investment schemes were some creditors have already received a return
on their money invested and other haven’t and all creditors are making claims against a common
fund and is based upon equitable principles see, Re French Caledonia Travel Services Pty Ltd (in
liq) (2003) 59 NSWLR 361; Australian Securities and Investments Commission (ASIC) v Idylic
Solutions Ltd (2009) 76 ACSR 129; Australian Securities and Investments Commission v Letten
(No 20) [2012] FCA 1283 (19 November 2012). It is uncertain as to whether this equitable
principle applies to managed investments schemes because its property is held on trust:
Corporations Act 2001 (Cth) s 601AC (2) or whether it applies more generally.
11.3 Model Law 179
those assets remitted from a foreign jurisdiction or to the assets held by a foreign
representative generally.46
It is argued that ordinarily the laws applicable to the exemption of property will
be determined lex fori concursus.
11.3.4 Conflict of Laws Provision in Different States
Professor Fletcher has commented:

In the past, a notorious feature of the subject of conflict of laws was that states sought to
develop their own individual solutions to the problems caused by the material diversity
between the domestic laws of the various sovereign states, thereby giving rise to the
paradoxical situation where there were effectively just as many systems of conflict of laws
as there were national laws.47
Westbrook has argued that we should adopt a Universalist approach to distri-

butions to creditors in insolvency proceedings involving more than one State and
has advocated that the laws of the foreign main proceeding should (subject to three
significant exceptions) solely govern such distributions regardless of the priorities
that exist in the States in which the debtors’ assets are held, providing that creditors
are treated on a pari passu basis. Westbrook lists the three exceptions as being
wages, secured creditors and taxes.48 It should be noted that this is effectively the
situation that exists under the EC Regulation.49
Janger, on the other hand, advocates that if we apply Westbrook’s suggestion,
this will only lead to greater problems as it will encourage forum shopping by
companies that want to have a COMI in a favourable jurisdiction for taxation
purposes or other reasons by artificial means. This may make coordinated gover-
nance more difficult.50
The assets that are available for distribution include the assets that are remitted
into that jurisdiction. The question arises regarding the extent to which they should
be remitted to the jurisdiction of the foreign main proceeding. In McGrath v
Riddell, Lord Hoffman stated:
The power to remit assets to the principal liquidation is exercised when the English court
decides that there is a foreign jurisdiction more appropriate than England for the purpose of
dealing with all outstanding questions in the winding up. It is not a decision on the choice
46
It was accepted in McGrath v Riddell that the priority awarded to domestic creditors under s116
(3) of the Insurance Act 1973 only applied to assets that existed as at the date of liquidation: New
Cap Reinsurance Corp v Faraday Underwriting (2003) 117 FLR 52; HIH Casualty and General
Insurance Ltd (2005) 215 ALR 562.
47
Fletcher, see footnote 3, 494.
48
Westbrook, ‘‘Breaking Away: Local Priorities and Global Asset’’ see footnote 2.
49
Arts 3 and 4.
50
Edward J. Janger, ‘‘Reciprocal Comity’’ (2010) 46 Texas International Law Journal 441.
of the law to be applied to those questions. That will be a matter for the court of the
principal jurisdiction to decide. Ordinarily one would expect it to apply its own insolvency
laws but in some cases its rules of the conflict of laws may point in a different direction.51
This issue of remittal of assets may be affected by whether any local creditor
holds security over them and whether a court is confident that a foreign repre-
sentative can deal with them properly. This will in part depend upon the nature of
the assets and whether they are perishable or created solely pursuant to some local
law (e.g. forestry rights over land).
Fletcher has noted that the American Legal Institute has prepared ‘Global
Principles for Cooperation in International Insolvency Cases’52 pursuant to which
the courts of the State in which there is an establishment can deal only with the
assets within that State; otherwise, the courts in the State of the COMI have control
of the overall insolvency proceedings.53 Unfortunately, the Model Law gives no
guidance on the law applicable to any insolvency proceedings. Article 28 allows
separate proceedings to be issued in different States which would allow assets to be
distributed pursuant to their domestic laws. Conversely, Article 21 of the Model
Law allows a court to authorise the administration, realisation and distribution of
assets to a foreign administrator provided that the interests of the local creditors are
protected. This will allow the movable assets to be distributed in accordance with
the laws of the State to which the assets are entrusted (lex situs). The extent to
which the domestic creditors of a State must be protected is based upon political
and public policy considerations, which may differ between States. Article 21 can
also be used to allow the sale of immovable assets to be controlled by a foreign
representative and the proceeds remitted to the jurisdiction of that foreign
representative.
The practical difficulties and theoretical issues that result from the principles of
private international law that may apply is highlighted by issues relating to the
availability of set-off, the recovery of antecedent transactions, and priority creditor
claims. The law that is applicable to each of these issues in any given administration
may differ depending upon the relevant principles of private international law that
are applicable under their respective conflict of law provisions. This issue is dealt
with further in Chap. 13.
51
McGrath v Riddell, [2008] 3 All ER 869, 881 [28].
52
American Law Institute and International Insolvency Institute, n 32.
53
See, e.g. Ian Fletcher, a, 508-12; Global Principles for Cooperation in International Insolvency
Cases and Global Guidelines for Court to Court Communications in International Insolvency
Cases, presented to the 89th Annual Meeting of the American Law Institute on 23 May 2012 and
unanimously approved by the International Insolvency Institute membership at its 12th Annual
Conference, Court de Cassation, Paris, 22 June 2012, http://iiiglobal.org/component/jdownloads/
viewdownload/36/5897.html, principle 13.
11.3 Model Law 181
11.3.4.1 Set-Off
Each State has a set-off law based upon the English common law which allows
creditors to set off amounts which they owe the debtors against amounts that the
debtor owes them which arise out of mutuality of dealing.
In both England and the US set-off is a right that must be allowed by the foreign
jurisdiction in order for the domestic creditor’s interests to be adequately protected.54
In particular, the US Bankruptcy Court in Tri-Continental explained that the substi-
tution of ‘sufficiently protected’ in lieu of the Models Law’s ‘adequately protected’
was made in order to avoid confusion with the Bankruptcy Code’s defined term of
‘adequate protection’.55 The court held that a secured creditor objecting to a Chapter
15 order would have no greater rights than a secured creditor under the Bankruptcy
Code.56 The USA does not allow set-off in respect of transactions occurring within
90 days prior to the commencement of the insolvency proceedings whether or not the
other party to the transaction knew the debtor was insolvent.57 In Australia, New
Zealand and the UK, set-off is not allowed where the creditor received notice of the
insolvency of the debtor.58 In the UK, multilateral contractual set-off must have been
taken place before the commencement of the liquidation.59
These different rules of set-off can give rise to substantially different amounts
being recoverable by the representative of the insolvency entity where a set-off is
allowed in similar circumstances between the jurisdictions examined.60 It is argued
that the right of set-off should also be determined under either lex situs or lex
contractus where it arises from a transaction involving property as this recognises
the commercial reality of the transaction and potential commercial impetus in
entering into the transaction.61
54
See McGrath v Riddell [2008] 3 All ER 869, 878 [16–17]; Re Tri-Continental Exchange Ltd 349
BR 627 (Bankr, ED Cal, 2006).
55
56
Ibid, 636.
57
11 USC § 553 (a) (2012).
58
See Corporations Act 2001 (Cth) s 533C(2); Bankruptcy Act 1966 (Cth) s 86(2); Insolvency Act
2006 s 254(2); Insolvency Act 1986 c45 s 323(3).
59
60
See especially, Bankruptcy Act 1966 (Cth) s86; Corporations Act 2001 (Cth) s 553C;
Bankruptcy and Insolvency Act 1985 (Can) s97(3), Companies Creditors Arrangement Act 1985
RSC 1985, c C-36 s21; Insolvency Act 2006 ss 255–263; Companies Act 1993 ss 239AEG–
239AEP, 310–310O; Insolvency Act 1986, c45, s 323; 11 USC § 553 (2012); see, generally, Look
Chan Ho ‘‘Enforcing English set-off right in the US bankruptcy court: In re Lehman Brothers
Holdings Inc’’, (2009) 2 Corporate Rescue and Insolvency 124.
61
See United Nations Commission on International Trade Law, General Assembly, Legislative
Guide on Insolvency Law UN Publication Sales No E.05.V.10 (United Nations, 2005), 70 [85].
11.3.4.2 Antecedent Transactions
Article 23 authorises a foreign representative of a recognised foreign main pro-

ceeding to issue proceedings seeking recovery of antecedent transactions. It also
authorises a foreign representative of a foreign non-main proceeding with leave of
the court to issue such proceedings. In the UK, the foreign representative is required
to seek the leave of the court prior to issuing such proceedings. In the USA, such
proceedings can be issued only in domestic proceedings under another chapter of
the US Bankruptcy Code. Chapter 15 does not allow such proceedings to be issued
under the relevant provisions of the Bankruptcy Code without associated domestic
proceedings.62
Each State examined has different provisions in relation to the recovery of
antecedent transactions, which provisions provide for a different time before their
appointment in which a representative can look to overturn a transaction and
recover the debtor’s property.63 This book does not explore these differences, but
rather notes that they will give rise to different States treating creditors differently,
and the amount available for distribution to creditors depends upon which State’s
laws apply to such recoveries. Recognising these differences Ho has advocated that
priority should be given to the laws of the jurisdiction where the main proceedings
are opened in respect of antecedent transactions.64
The United Kingdom Supreme Court in Rubin held that the ordinary rules for
enforcing foreign judgements in personam or in rem apply to bankruptcy pro-
ceedings such that it was necessary for the defendant to have conceded to the
jurisdiction of the foreign court in order for its judgment in respect of recovery of an
antecedent transaction to be recognised.65 The court also refused an application by
Rubin who had the benefit of judgments from the US Bankruptcy Court in respect
of claims to overturn antecedent transactions where the defendants had refused to
participate in the proceedings. The Supreme Court found that such judgments could
not be enforced in the UK under the common law and found that as Articles 21 and
25 of the Model Law say nothing about enforcement of foreign judgements and that
it could not be implied that the Model Law was as a basis for a court to allow
enforcement of a foreign judgement.66
62
The court has power under 11 USC §§ 1521 (2012) to grant a foreign representative power to
bring proceedings except under ss 522, 544, 545, 547, 548, 550 and 724(a).
63
See especially, Bankruptcy Act 1966 (Cth) ss 120–122; Corporations Act 2001 (Cth) ss 588FA–
588FF, 461; Bankruptcy and Insolvency Act, RSC 1985, c B-31985 (Can) ss 38, 95–101;
Companies Act 1993 ss 292–301; Insolvency Act 2006 ss 204–212; Insolvency Act 1986, c45, ss
339–346; 11 USC §§ 547 (2012).
64
65
Rubin v Eurofinance SA [2013] 1 AC 236, 274 [115–117], 278 [132]: distinguishing and
disapproving of Cambridge Gas Transport Corporation Limited v Official Committee of
Unsecured Creditors (of Navigator Holdings PLC & Ors) (Isle of Man) [2007] 1 AC 508.
66
Ibid, 279–280.
11.3 Model Law 183
This decision has been criticised for not taking into account the ability to
recognise a foreign judgement pursuant to the principles in comity.67 It has also
been suggested that the decision may in part be due to the alteration made in the UK
to Para 1 of Article 25 so as to make the obligation to cooperate discretionary rather
than mandatory and the court reluctance to use discretionary powers to expand the
types of orders it can make.68 It is questionable the extent to which Lord Collins
was simply adopting the position he set out as editor in Dicey, Morris and Collins69
On the other hand, in order to circumvent the statutory provisions the US Court
of Appeals and the US Bankruptcy Court have allowed recovery of antecedent
transactions in the USA according to the law of the State of the main proceedings,
basing this decision upon the principles of comity and Article 21 of the Model
Law.70 The US Bankruptcy Court has also applied the law of the State in which the
provable debt arose in order to determine the validity of that provable debt.71
Given the difference in the above court decisions, it is difficult to extract any
common rules for determining the principles of private international law applicable
to antecedent transactions. It is clear that there is a difference between the UK and
the USA in relation to the courts’ ability to recognise a foreign judgment regarding
antecedent transactions where the creditor who received the benefit has not con-
ceded to the jurisdiction of the foreign court. These differences have been recog-
nised by UNCITRAL which has been unable to properly reconcile the same.72
If a rule can be extracted from the different court decisions highlighted above, it
is argued that it should be that subject to a court order to the contrary, the applicable
laws for antecedent recoveries should be lex fori concursus.
11.3.4.3 Priorities
Judge Gropper of the US Bankruptcy Court has accepted that the treatment of
priority claims to creditors will be largely dependent upon the State’s laws that
are applicable to the payment of such claims.73 His Honour points out that insol-
vency regimes differ not only in the identity of creditors granted priority status, but
also in the size and scope of priorities particularly in the area of employee
67
Jodie Kirshner above 692, 30.
68
Tristan G Axelrod, ‘UK Supreme Court Highlights Parochial Roadblocks to Cooperative
Cross-Border Insolvency in Rubin v Eurofinance SA’ (2014) 31 Wisconsin International Law
Journal 818.
69
Lord Collins et al. see footnote 158.
70
Re Fairfield Sentry Ltd, 452 B.R 64, 78–80 (Bankr, SD NY, 2011); Re Condor Insurance Ltd,
601 F.3d 319, 329 (5th Cir, 2010).
71
Re Nortel Networks Inc, 469 BR 478, 498-9 (Bankr, D Del, 2012).
72
on Insolvency Law UN Publications Sales No E.05.V.10 (United Nations, 2005), 71 [90].
73
Judge Allan L Gropper, ‘‘The Payment of Priority claims in Cross-Border Insolvency Cases’’
(2011) 56 Texas International Law Journal 559, 560-2.
priorities.74 Pottow, on the other hand, has speculated that a priority conflict among
creditors in multinational jurisdictions will result in secondary proceedings being
opened in order to protect local creditors’ priority interests.75 Judge Clark of the US
Bankruptcy Court, after considering the position of secured creditors, concluded
that it is possible via an insolvency regime to restrict, partially or fully, a secured
creditor’s rights to their collateral and enforcement of the same as part of a
restructuring without their consent, providing their underlying legal or equitable
interest in the property does not change.76
The position of priority creditors is even more pronounced in the USA than in
other States examined by reason of the insertion of section 1521(b) which requires
a US court to ensure that the position of US resident creditors is protected prior to
allowing the transfer of assets to a foreign representative.77 Given the broad dis-
cretion that courts are given under the Model Law, it is difficult to see how a
Universalist approach will be achieved unless all States agree to a convention that
contains common wording.
Given the public policy and political considerations behind priorities, it is not
realistic to expect the courts of one State to release their assets into the care of a
foreign representative when their domestic creditors may lose a priority or other-
wise be adversely affected.78 It is further argued that the decision of the House of
Lords in McGrath v Riddell does not provide any certainty that, in the absence of
section 426 applying, the UK courts will allow assets in the UK to be remitted to a
foreign representative for distribution where the UK creditors’ interests may be
adversely affected.
Further given the differences that exist with the manner of introduction of the
Model Law in the States examined, it is unlikely that this or any consistency in the
principles of private international law rules or the rules relating to conflict of laws
could be achieved via another Model Law or an amendment to the present Model
Law. It is argued that the priority laws regarding creditors who have security over
assets should be lex situs.79 In relation to other creditors, there are competing
arguments as to whether the applicable laws should be determined lex situs or lex
fori concursus. The issues involving the different rules of private international law
are dealt with further in Chap. 13.
74
Ibid, 562.
75
John A.E. Pottow, ‘‘A New Role for Secondary Proceedings in International Bankruptcies’’
(2011) 46 Texas International Law Journal, 579, 584.
76
Clark & Goldstein, see footnote 8, 556.
77
Gropper, see footnote 780, 568.
78
See, e.g. Re Collins & Aikman Europe SA [2006] EWHC (Ch) (9 June 2006).
79
See United Nations Commission on International Trade Law, General Assembly, Legislative
Guide on Insolvency Law, UN Publications Sales No E.05.V.10 (United Nations, 2005), 68, [82]
where it describes the applicable law as lex rei sitae which has the same meaning as lex situs.
11.3 Model Law 185
11.3.5 Nature of Stay Under Article 20
As highlighted in Chap. 8, the nature of the automatic stay granted under Article 20
differs between each of the States examined because some of the States equate it to
one or more of the stays granted under their domestic insolvency legislation.
The UNCITRAL Guide indicates that it is meant to extend to “actions before an
arbitral tribunal”.80 It further states that it is meant to extend to “enforcement
measures initiated by creditors outside the court system”.81
11.3.5.1 Australia
In Australia, the stay granted under the Model Law is equated to the stays provided
for under the Bankruptcy Act 1966 (Cth) and Chapter 5 of the Corporations Act.82
The court has to determine the type of Australian insolvency proceeding that is the
closest to the foreign proceeding in order to determine the nature of the stay that is
applicable.83 The choice is limited to proceedings under the Bankruptcy Act in
relation to individual debtors and in the case of corporate debtors between a scheme
of arrangement, voluntary administration, court ordered winding up (liquidation)
and voluntary liquidation.
If the applicable stay is that applicable in the case of liquidation then it does not
affect the rights of secured creditors to otherwise realise or deal with their security
over the assets that are the subject of their security.84 By way of example the
Federal Court of Australia has held that an action in rem to enforce a maritime lien
is not affected by the stay, where the applicable stay was equivalent that under a
liquidation as the maritime lien was a type of security.85
Where a debtor’s proceeding is equated to a court-ordered winding up, the
automatic stay operates only in relation to ‘proceedings in a court’ or ‘enforcement
against the property of the company’ without leave of the court.86 Any attachment
80
(2013) (16 December 2013) [188].
81
Ibid, [146].
82
83
Suk v Hanjin Shipping Co Ltd [2016] FCA 1404 (23 November 2016) [21].
84
In the case of restructuring proceedings, if concurrent voluntary administration proceedings are
commenced in Australia, a secured creditor with security over the whole or substantially the whole
of the assets of the company can only seek to enforce its security during the decision period see
Corporations Act 2001 (Cth) s 441A; in respect of liquidations see s 471C.
85
Yu v STX Pan Ocean Co Ltd (South Korea) (2013) 23 FCR 189, 202-3 [41].
86
Corporations Act 2001 (Cth) s 471B.
or execution against the property of a company after the commencement of pro-

ceedings seeking winding up by the court is void.87
Where a debtors proceeding is equated to a voluntary liquidation, the stay
operates in respect of ‘any action or other civil proceedings’.88 This phrase is
purported to capture arbitral proceedings.89 It also prevents any attachment,
sequestration, distress or execution against the property of the company. As secured
creditors have proprietary right over the assets the subject of their security they have
been found to fall outside the liquidation.90
In respect of a debtor whose proceedings are equated to Voluntary
Administration proceedings, the stay applies only to ‘proceedings in a court’.91
Because of the definition of ‘court’ contained in section 58AA, it does not apply to
arbitration proceedings.92 A secured creditor with security over the whole or sub-
stantially the whole of the assets of the company can only seek to enforce its
security during the decision period, being the thirteen business days after notice is
given to them of the appointment of the Voluntary administration.93
Where a debtors proceedings is equated to a scheme of arrangement there is no
automatic stay applicable and any application for a stay would have to be made
under Article 21.
In appropriate circumstances a court will extend the stay as occurred in the
Hanjin Shipping proceedings so as to prevent proceedings or enforcement action
taken against the debtor or its assets.94
The Victorian Supreme Court has questioned whether Chapter 11 reorganisation
proceedings are more akin to a scheme of arrangement.95 The New South Wales
Supreme Court has previously held that corporate reorganisation proceedings under
the Corporate Reorganisation Act (Korea) (the predecessor to the current Korean
Debtor Rehabilitation and Bankruptcy Act) were “not winding up proceedings, but
are akin to a scheme of arrangement.”96 Under Part 5.1 of the Corporations Act
which deals with schemes of arrangement there is no automatic stay of proceedings
as it is a court controlled proceeding. The court is given a wide discretion to order
stays as part of the proceedings.
87
Ibid, s 468(4).
88
Ibid, s 500(2).
89
Re Vassal Pty Ltd [1983] 2 Qd R 769.
90
Re Asiatic Electric Co Pty Ltd [1970] 2 NSWR 612; Australian Gypsum Industries Pty Ltd v
Dalesun Holdings Pty Ltd (2015) 106 ACSR 79.
91
Corporations Act 2001 (Cth) s 440D.
92
Auburn Council v Austin Australia Pty Ltd (Admin Apptd) (2004) 22 ACLC 766; Brian
Rochford Ltd (Administrator Appointed) v Textile Clothing and Footwear Union of NSW (1999)
17 ACLC 152.
93
Corporations Act 2001 (Cth) s 441A.
94
See Suk v Hanjin Shipping Co Ltd [2016] FCA 1404 (23 November 2016).
95
Indian Farmers Fertiliser Cooperative Ltd v Legend International Holdings Inc [2016] VSC 308
(2 June 2016) [133].
96
ML Ubase Holdings Co Ltd v Trigem Computer Inc (2007) 69 NSWLR 577, 595 [53] (Brereton J).
11.3 Model Law 187
11.3.5.2 Canada
In Canada, the BIA imposes an automatic stay upon a bankruptcy or liquidation,

subject to a court order to the contrary. There is no automatic stay under the CCAA,
however, the court is granted power to order similar stays. The stay imposed relates
to all proceedings taken or that might be taken against the debtor for such time as
the court thinks appropriate.97 The stays can prevent secured creditors from seeking
to enforce against their security, especially in the case of restructuring proceedings.
Any stay granted in Canada is subject to three conditions First, the order must be
consistent with any order that may be made under the legislation. Second, the stay
provisions do not apply if any other proceedings under the CCAA, BIA have been
issued. Third, nothing prevents a debtor from commencing other proceedings under
either of those Acts or the Winding-Up and Restructuring Act. The latter enactment
is restricted in its application to both domestic and foreign banks, trust companies,
insurance companies, loan companies with borrowing powers, building societies
and trading companies doing business in Canada, whether domestic or foreign, and
corporations incorporated under federal or provincial laws.
In Re Massachusetts Elephant & Castle Group Inc., the Ontario Superior Court
acknowledged that, having recognised a foreign main proceeding, the relief set out
in section 48(1) of the CCAA was mandatory.98
11.3.5.3 New Zealand
In New Zealand, there is no reference in the legislation to equating the stay granted
under Article 20 to any stay granted under their domestic legislation. The stay that
operates is in the form contained in the Model Law, namely ‘the commencement or
continuation of individual actions or individual proceedings concerning the debtor’s
assets rights obligations or liabilities’. The court is given the power to limit or
remove the stay.99
There is also an additional provision that allows the court on the application of a
creditor or interested party to exclude a stay against a particular action or pro-
ceeding, execution, or disposal of assets.100
97
Bankruptcy and Insolvency Act, RSC 1985, c B-3 s271; Companies Creditors Arrangement Act,
RSC 1985, c C-36 s 48.
98
(2011) 81 CBR (5th) 102 [33].
99
Art 20(2).
100
Art 20(2).
11.3.5.4 United Kingdom
In the UK, the stay under this article is equated to the stay granted under the UK
Insolvency Act in relation to a court-ordered winding up and subject to the same
powers of the court and the same prohibitions, limitations, exceptions and condi-
tions as would apply under the law of Great Britain.
In a court-ordered winding up, ‘no action or proceedings shall be proceeded with
or commenced against the company’ without leave of the court.101 The stay does
not affect a party’s right to claim set-off.102 If concurrent administration proceed-
ings are commenced in the UK, secured creditors are generally unable to appoint an
administrative receiver to enforce against their secured assets; however, the holder
of a floating charge can appoint an administrator.103 The stay granted is subject to
the court’s power to grant leave to issue proceedings. The stay granted also does not
affect the rights of secured creditors to enforce their security, or an owner’s right to
repossess the debtor’s goods under a hire purchase agreement.104 Creditors’ rights
of set-off are also reserved.105 The stay does not affect a creditor’s right to issue
proceedings to the extent necessary to preserve a claim. The stay also does not
affect a regulatory authority’s right to commence or continue proceedings against
the debtor. Further the stay does not affect claims that are not subject to the
collective proceeding from being able to pursue their claims against the debtor.106
In Amanda Shipping, the English High Court stated:
Paragraph 2 of article 20, which is expressed to prevail over paragraphs 1 and 3, clearly
identifies the British insolvency code as the primary source of an understanding as to the
effect of recognition of a foreign main proceeding both in terms of its immediate effect, and
in terms of the court’s powers in relation to the automatic stay prescribed by paragraph 1.
… Thus, the domestic regime for the imposition and management of a stay incorporated by
paragraph 2 of article 20 is that prescribed by section 130(2) of the Insolvency Act 1986. …
101
Insolvency Act 1986 c45 s 130 (2); Enasarco v Lehman Brothers Finance SA [2014] EWHC 34
(Ch) (16 January 2014); Ackers v Samba Financial Group (2014)16 ITELR 808; [2014] EWHC
540 (Ch) (28 February 2014); Nordic Trustee ASA & Anor v Ogx Petróleo E Gás SA (Em
Recuperação Judicial) & Anor [2016] EWHC 25 (Ch) (12 January 2016).
102
Larsen and Ziegler v Navios International Inc [2012] 1 BCLC 151 [16]; Langley Construction v
Wells [1969] 2 All ER 46.
103
Insolvency Act 1986 c45 ss, 72A- 72H, Sch B1 s 41.
104
Such rights must be read as being subject to the provisions contained in Insolvency Act 1986
c45 ss 72A–72H.
105
Cross-Border Insolvency Regulations 2006 SR 2006/1030 sch 1 Art 20(3).
106
Nordic Trustee ASA & Anor v Ogx Petróleo E Gás SA (Em Recuperação Judicial) & Anor
[2016] EWHC 25 (Ch) (12 January 2016) [53].
11.3 Model Law 189
The only provision of the Model Law framed in a way which might be thought to override
article 20.2 is article 22.1, requiring the court to be satisfied that the interests of creditors,
including secured creditors, and other interested persons, including if appropriate the
debtor, are adequately protected.107
The court decided that arbitration proceedings could be pursued against a

company whose foreign proceedings had been recognised as the main proceeding in
England as the court determined that the stay granted by Article 20 was akin to the
stay granted under England’s domestic law upon the commencement of winding-up
proceedings under section 130 of the Insolvency Act. Therefore, the Court had the
power to remove the stay (in whole or part) and grant leave to issue proceeding
despite the stay. The court, however, granted a stay in the enforcement of any award
until after the award became final and the company which was the subject of the
foreign proceedings had a chance to restore the matter to the Court.108
11.3.5.5 USA
In the USA, a stay is applied which operates in other bankruptcy proceedings under
sections 361 and 362 upon recognition of a main proceeding. The USA enactment
confers upon a recognised foreign representative the power to:
(a) use, sell or lease the property of the estate in accordance with the provisions of
section 363;
(b) avoid a transfer of property after the date of commencement of a petition for
recognition pursuant to section 549; and
(c) avoid security interests created prior to their appointment pursuant to
section 552.
The grant of such power is not contingent upon a court order granting them, the
same but may be removed by court order. The stay granted in the USA extends only
to the assets within the territorial jurisdiction of the USA.109 This issue is to be
determined in accordance with the applicable USA States’ laws using individual
State’s conflict of law rules. These sections also prevent the commencement or
continuation of judicial, administrative or other actions and the enforcement of any
award or judgement. Pursuant to these sections, the courts can also prevent secured
creditors from seeking to enforce against the assets the subject of their security with
or without terms. In Atlas Shipping, the court described the stay under Chapter 15
as follows:
107
Cosco Bulk Carrier Co Ltd v Amanda Shipping SA [2011] 2 All E.R (Comm) 481, 492 [45–46],
cited in United Drug (UK) Holdings Ltd v Bilcare Singapore Pte Ltd [2013] EWHC 4335 (Ch) (19
December 2013).
108
Ibid, 496 [64].
109
Re JSC BTA Bank, 434 BR 334, 342 (Bankr, SD NY, 2010).
The statute refers to “property of the debtor” to distinguish it from the “property of the
estate” that is created under § 541(a). In a chapter 15 case, there is no “estate”; nevertheless,
§ 1520(a) imposes an automatic stay on any action with respect to the debtor’s property
located in the United States.110
In Soundview Elite the court found that the stay under Article 20 ‘does not bar a
creditor from pursuing individual or personal claims for particularized injury
belonging to the creditor, even where the debtor may also have claims against the
same third party’.111
11.3.5.6 Stay Generally
In those jurisdictions in which the granting of recognition does not prevent a

secured creditor from seeking to enforce its security without a corresponding
domestic appointment or at all, a foreign representative can seek to prevent such
enforcement by seeking additional relief under Article 21. This is of benefit in
States, such as Australia, where the stay under Article 20 is restricted to proceedings
before a court and does not apply to proceedings before tribunals or arbitral
proceedings.112
Although there may be good reasons for States to equate the stay to the stay
under their domestic insolvency legislation, these differences in large multijuris-
dictional proceedings will give rise to administrative difficulties for the foreign
representative and may lead to forum shopping by creditors seeking to litigate their
disputes. To avoid these issues, it is argued that a common form of stay should be
granted under this article.
11.3.6 Worldwide Effect of Some States’

Insolvency Regimes
In the UK, the common law position assumes that its wind-up orders have
worldwide effect.113 Similarly in Australia, New Zealand and the UK, the common
110
Re Atlas Shipping A/S, 404 B.R 729, 739 (Bankr, SD NY, 2009); Re Spansion Inc, 418 BR 84,
90 (Bankr D Del, 2009); Contra Re Worldwide Education Services Inc 494 BR 494, 497-9 (Bankr,
C D Cal, 2013).
111
Re Soundview Elite Ltd, 2017 WL 1155694 (Bankr SD NY, 2017).
112
Corporations Act 2001 (Cth) s 58AA re definition ‘Court’; Auburn Council v Austin Australia
Pty Ltd (Administrator Appointed) (2004) 22 ACLC 766; Brian Rochford Ltd (Administrator
Appointed) v Textile Clothing and Footwear Union of NSW (1999) 17 ACLC 152; Neil Hannan
‘International Commercial Arbitration and Cross-Border Insolvency’ (2014) XVII International
Trade and Business Law Review 447.
113
Re International Tin Council [1987] Ch 419, 446; Bilta (UK) Ltd (In Liquidation) v Nazir
[2013] 1 All ER 375, 391-2 [42]–[43].
11.3 Model Law 191
law assumes that when a debtor is made bankrupt in their place of domicile, their
movable assets are assigned to their insolvency trustee or representative wherever
located within the world.114 The effect of these assumptions was not always
recognised in the States in which the debtors held assets, which is one of the reasons
that led to the creation of the Model Law which allows such recognition to be
obtained.
The Model Law does not deal with the way in which courts in other States have
recognised the purported worldwide stay of proceedings following the filing of
Chapter 11 proceedings in the USA and other jurisdictions.115 The stay is automatic
and applies worldwide irrespective of whether or not it is consistent with a foreign
State’s domestic law. This stay also applies to secured creditors. This jurisdiction
over all of the debtor’s assets asserted by US courts is said to arise from their in rem
jurisdiction over those assets resulting from the bankruptcy. None of Chapter 11
proceedings in the US Bankruptcy Court, there is a low threshold regarding the
entity in respect of which such proceedings are issued in the USA.116 All that is
required is that the entity has an asset, place of business or domicile in the USA.117
Entities can arrange to have property transferred to the US in order to secure the
court’s jurisdiction. This may result in entities attempting to manipulate their cir-
cumstances so as to obtain the benefit of an insolvency regime to which they are
otherwise not entitled, and deny creditors in other jurisdictions what should be their
legitimate enforcement rights. These competing public policy issues do not appear
to have been dealt with by the US courts in the context of whether such proceedings
would be recognised in other States under the Model Law and the enforceability of
any stay under those provisions.118
As indicated above, although the United States courts have asserted that the stay
under Chapter 11 operates automatically and they have jurisdiction over assets
located in other States, courts in other States have been reluctant to accept this. This
is highlighted by the decision in Re Gold & Honey Ltd119 wherein the US
Bankruptcy Court dealt an application of a secured creditor continuing with an
Israeli receivership proceeding relating to Gold & Honey Ltd, a company incor-
porated under the laws of Israel and a partner in Gold & Honey LP a limited
partnership under New York law. After Gold & Honey Ltd and Gold & Honey LP
filed a Chapter 11 application under the US Bankruptcy Code, the First
International Bank of Israel (FIBI) filed a receivership proceeding out of a District
114
See Hall v Woof (1908) 7 CLR 207, 211.
115
11 USC §§ 362(a), 1110(2) (2012).
116
Andrew DeNatale and Jonathon D Canfield ‘Minimum Jurisdictional Threshold for U.S.
Bankruptcy Courts in Cross-border Insolvency Cases’ (2013) 2 Insol World 30.
117
11 USC § 109(a).
118
Effectively creditors which fall within the Bankruptcy Court’s jurisdiction because they have an
office or assets within the USA could be found to be in contempt if they seek to act inconsistently
with the stay.
119
Re Gold & Honey Ltd, 410 BR 357 (Bankr, ED NY, 2009). See also Re Soundview Elite Ltd,
503 BR 571 (Bankr, SDNY, 2014).
Court in Israel in purported breach of the world-wide stay granted by the issue of
Chapter 11 proceedings. FIBI then sought recognition of the receivership pro-
ceeding under Chapter 15. The Israeli court had been advised of the US Bankruptcy
Court’s orders in relation to the stays but refused to recognise the same, in part for
procedural reasons and the presumed illegitimacy of Chapter 11 insofar as it
affected Gold & Honey Ltd partly because the stay had not been filed with the
Israeli Court and partly on principles of comity. The Israeli Court also noted that:
in spite of the broad, worldwide grant of jurisdiction given to United States federal courts
over a debtor’s assets wherever located, a United States court cannot control the actions of a
foreign court, nor can it exercise control over assets in a foreign country without the
assistance of the foreign court.120
When FIBI appeared before the US Bankruptcy Court, that court warned them
that they may be in contempt by continuing with the receivership proceedings. The
situation may have been different if FIBI had not appeared in the US proceedings
since, by doing so, they had conceded the jurisdiction of the US Courts. The
situation may have also been different if FIBI had sought recognition of the Israeli
proceedings only; then they could have relied upon Article 10 to allege that they
had not accepted the US court jurisdiction.
The position taken by the Israeli court is not uncommon and has resulted in
separate proceedings being issued in each State in which the entity or business,121
the subject of Chapter 11, trades.122 Until the US courts provide that the stay under
Chapter 11 does not operate in foreign jurisdictions, and until the Chapter 11
proceedings are recognised as foreign proceedings and orders are made in those
jurisdictions, this issue will not be addressed. The decision by the foreign court,
where Article 20 of the Model Law does not apply, to grant or recognise the stay
under Chapter 11, is discretionary and may be affected by domestic considerations
and principles of territoriality in not wanting to been seen as necessarily auto-
matically enforcing the law of the USA in that State.
Given the principles of judicial sovereignty, any reorganisation plan that deals
with or uses assets in another State should also generally be approved by the Courts
of that State, often following a protocol agreed to by the US court and the foreign
court.123
Pottow has speculated that if Chapter 11 proceedings are issued at a time when
there are other foreign main proceedings afoot, then section 1528 will limit the
120
Re Gold & Honey Ltd, 410 BR 357, 369 (Bankr, ED NY, 2009).
121
Chapter 11 allows business trusts to file for protection under Chapter 11: Rubin v Eurofinance
SA [2010] 1 All ER (Comm) 81, 85 [10].
122
See, e.g., Re Massachusetts Elephant & Castle Group Inc (2011) 81 CBR (5th) 102; Re
Graceway Canada Company (2011) 209 ACWS (3d) 555; [2011] ONSC 6292(4 October 2011);
Re Hartford Computer Hardware Inc (2012) 94 CBR (5th) 20; Re T&N Ltd [2004] EWHC 2361
(Ch) (21 October 2004).
123
See, e.g., Re T&N Ltd [2005] 2 BCLC 488; [2004] EWHC 2361 (Ch) (21 October 2004).
11.3 Model Law 193
automatic stay of proceedings under section 541 to assets in the United States.124
This comment has been confirmed by the US Bankruptcy Court.125
Another issue that arises is the ability to bring into Chapter 11 proceedings any
related entity of the debtor with a connection to the USA on whose behalf the
proceedings are issued, even though those other entities have no connection to the
USA.126 The US Court of Appeals has held that a reorganisation can include third
party releases where they directly impact on the debtor’s reorganisation or they
provide for payment of the creditors’ claims in full.127 Releases can otherwise be
given only to third parties in unique or unusual circumstances when it is an integral
part of the plan.128 Whilst the US Court of Appeals has confirmed the power to
grant such stays, it has questioned the appropriateness of granting such orders and
the disagreement between different circuits of that court as to its power to grant such
orders in domestic proceedings.129 A similar issue may exist in relation to stay and
releases included in plans approved in Canada under the CCAA. It has been held
that such releases and stays against non-debtor third parties can have worldwide
effect provided that they were properly approved and are integral to bringing the
plan into effect.130 However, the US courts have held that they are required to make
an independent determination about the propriety of individual acts of a foreign
court.131 This issue is especially relevant in corporate group and as discussed in
Sect. 15.3 is being considered by UNCITRAL’s Working Group V.
The effect of stays and other orders which are to have effect in foreign juris-
dictions is further illustrated by a recent decision of the US Bankruptcy Court which
has identified a limited circumstance in which it may seek to exercise extra terri-
torial jurisdiction when recognition has been granted under Chapter 15:
124
See, e.g. John A.E Pottow, ‘‘The Myth (and Realities) of Forum Shopping in Transnational
Insolvency’’ (2006) 32 Brooklyn Journal of International Law 785, 808.
125
Re Awal Bank BSC 455 BR 73, 81 (Bankr, SD NY, 2011).
126
Nick Segal, The Effect of Reorganisation Proceedings on Security Interests: The Position under
English and U.S. Law (2007) 32 Brooklyn Journal of International Law 927.
127
Re Speciality Equipment Companies Inc, 3 F.3d 1043 (7th Cir, 1993); Re Metromedia Fiber
Network Inc, 416 F. 3d 136 (2nd Cir, 2005); Contra Re Vitro SAB de CV, 701 F.3d 1031 (5th Cir,
2012).
128
Re Continental Airlines, 203 F. 3d 203 (3rd Cir, 2000); Re Metromedia Fiber Network Inc 416
F. 3d 136 (2nd Cir, 2005).
129
130
Re Metcalfe & Mansfield Alternative Investments II Corp (2008) 45 CBR (5th) 163 and
accepted by the US Bankruptcy Court Re Metcalfe & Mansfield Alternative Investments, 421 BR
685, 692–693 (Bankr, SD NY, 2010).
131
Re Metcalfe & Mansfield Alternative Investments, 421 BR 685, 697–700 (Bankr, SD NY,
2010).
where the Court has recognized a foreign main proceeding, the foreign representative has
filed a plenary bankruptcy case for the debtor here, and the foreign representative does not
have the benefit of another foreign proceeding for the debtor recognized by this Court
having jurisdiction over the asset, then this Court may exercise its extra-territorial in rem
jurisdiction under Sect. 1334(e).132
Whilst the exercise of such jurisdiction is based upon the court’s jurisdiction
over the ancillary domestic proceedings which may be issued under Article 28, it
will face the same difficulties with the enforceability of those orders as all other
extra-territorial orders face when made without recognition of the US ancillary
proceeding as a non-main proceeding in the foreign jurisdiction. Such orders would
generally be enforceable only where the parties concerned are otherwise subject to
the jurisdiction of US courts. It is further argued that in such circumstances, it is not
in accordance with the principles of Universalism for a US court to assert a
jurisdiction over the foreign assets when the representative of the foreign main
proceeding has not sought recognition or comity in that foreign jurisdiction in
which the assets are located.
The worldwide effect of an insolvency regime is further complicated by the issue
of non-suit injunctions seeking to enforce stays granted under the law of the State of
the main proceeding being recognised in foreign jurisdictions. The New Zealand
High Court has refused to grant an anti-suit injunction in respect of proceedings in
Nevada against a company in liquidation in New Zealand. The court held, after
considering the effect of the Model Law and the fact that the USA had incorporated
Chapter 15 into its domestic law, that:
the statutory prohibition to commence or continue proceedings against a company in liq-
uidation is not applicable to foreign proceedings, and there is therefore no jurisdiction to
make the order sought. I conclude that in terms of New Zealand law, no consent of this
Court is required for the Nevada proceedings to continue.133
The Model Law appears to assume that any stay granted under the domestic law
of the State of the foreign proceedings does not necessarily apply in foreign
jurisdictions; otherwise, it would be unnecessary for such a stay to come into effect
upon recognition of such proceeding as a main proceeding pursuant to Article 20 or
orders being granted under Articles 19 or 21. If this is the case, it is arguable that
anti-suit injunctions may have a place under the Model Law until such time as
recognition is granted. However, such injunctions may cause conflict if they extend
beyond the time of recognition in the case of non-main proceedings where a court
has refused to grant a stay following recognition of the foreign non-main
proceeding.134
132
Re British American Insurance Co Ltd, 488 BR 205 (Bankr, SD Fla, 2013).
133
Commissioner of Inland Revenue v Compudigm International Limited (in liq) [2010] NZCCLR
6 [44].
134
See, e.g. Re Kemsley, 489 BR 346 (Bankr, SD NY, 2013); Kemsley v Barclays Bank PLC
[2013] BPIR 839; [2013] EWHC 1274 (Ch) (15 May 2013).
11.3 Model Law 195
11.3.7 Priority of Domestic Laws in Administrations
Article 29 of the Model Law provides that if local insolvency proceedings have
already been commenced at the time proceedings are issued for recognition under
the Model Law, no mandatory assistance is available on recognition as provided by
Article 20; any discretionary relief must be consistent with the existence of the local
proceedings. Where both foreign main and non-main proceedings are recognised,
priority is accorded to the foreign main proceedings and any assistance granted to a
foreign non-main proceeding must be consistent with that provided to the foreign
main proceeding. Therefore, where courts cannot agree on the identity of the State
of the foreign main proceedings, inconsistencies may arise. This may result in
assets shifting after an entity has insolvency proceedings issued in one State. The
purpose would be to attempt to shop for the forum where the laws provide the most
convenient outcome for the directors or management and which may prejudice the
interests of creditors.
Similar issues arise where there is a difference between the laws of a State in
which a debtor carries on business or under whose laws contracts are entered into
and the laws of the State of the foreign main proceeding. This situation was
exemplified in the Lehman Brothers administrations where the English Courts had
interpreted a complicated series of financial instruments which contained a flip
clause. The clause deprived the Lehman’s’ entity of an indemnity and gave that
indemnity to the investor note-holders should any of the Lehman entities commit
any default including an insolvency event.135 Whilst the proceedings were settled
prior to the final appeals being heard, the English Courts had interpreted the con-
tract under English law, being the law that governed the contract which found the
flip clause to be valid.136 The UK Supreme Court had however considered the
anti-deprivation rule and the pari passu rule and found that whilst it was not
possible to contract out pari passu rule, it was possible for a debtor to contact so as
to deprive the debtor of property upon their bankruptcy so long as it was done in
good faith and on commercial terms and for reasons other than bankruptcy.137
The US Bankruptcy Court, on the other hand, held that the flip clause was invalid
under sections 365(e) (1) and 541(c) (1) (B) and void against the Lehman enti-
ties.138 In relation to this inconsistency, Judge Peck stated:
The English Courts authoritatively have interpreted the Transaction Documents in accor-
dance with applicable English law. The Court, while respecting that determination as valid
and binding between the parties, is not obliged to recognize a judgment rendered by a
foreign court, but instead may choose to give res judicata effect on the basis of comity. …
In deciding whether to recognize the decision of the English Courts in relation to the
135
Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd [2012] 1 AC 383,
404, [35].
136
Perpetual Trustee Company Limited v BNY Corporate Trustee Services Limited [2010] Ch 347.
137
Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd [2012] 1 AC 383.
138
Re Lehman Brothers Holdings Inc, 422 BR 407 (Bankr, SD NY, 2010).
determination that Perpetual is entitled to a distribution based on Noteholder Priority, this

Court will evaluate whether the English Courts, in rendering their respective decisions,
sufficiently considered the applicability and impact of section 365 of the Bankruptcy Code.
It appears that the English Courts did not take into account principles of United States
bankruptcy law and understood, as did the parties themselves, that the outcome of the
dispute might well be different in this Court …
As a general matter, ‘courts will not extend comity to foreign proceedings when doing so
would be contrary to the policies or prejudicial to the interests of the United States.’139
The US Court of Appeals has also found that whilst some avoidance laws under
the Bankruptcy Code are expressly excluded from being able to be granted to
foreign representatives, ‘it does not necessarily follow that Congress intended to
deny the foreign representative powers of avoidance supplied by applicable foreign
law.’140 On the other hand, the US Court of Appeals has also determined that even
though English administrators can bring recovery proceedings in the USA in
respect of transactions in England, the English preference laws apply to the
recovery, and not the USA laws.141
It is difficult to determine when the courts will apply domestic or foreign laws in
insolvency proceedings as it is a matter of discretion. This creates uncertainty in the
minds of foreign representatives and creditors regarding their potential liabilities,
and is an issue that needs to be further investigated. This issue will persist until
States can agree to a convention that will legislate consistently the rules applicable
to choice of law rules and principles of private international law issues in insol-
vency administrations.
An easier issue to deal with relates to the position of domestic secured creditors
who have not registered their security in the jurisdiction of the foreign main pro-
ceeding. This has been dealt with in the past by orders requiring all claims of the
secured creditor to be satisfied in full from the assets before transmission of the
balance to the foreign main proceeding.142 It is argued that given the provisions of
Article 22 under the Model Law, this situation will continue as the validity of the
title to the assets and the security should be determined by the lex situs.
It is argued that the priority laws in relation to creditors which have security over
particular assets should be lex situs. In relation to other creditors, there are com-
peting arguments as to whether the applicable laws should be determined lex situs
or lex fori concursus, depending upon the circumstances. As the Model Law allows
separate insolvency proceedings to be issued in a State in which the debtors held an
asset after recognition of a foreign main proceeding, equity and harmonisation
between administrations would demand that lex situs apply but with hotchpot as is
envisaged by Article 32. This is different from the old common law position in
relation to trustees that required the administration of the assets to be carried out lex
139
Ibid, 416-7.
140
Re Condor Insurance Ltd (in liq), 601 F.3d 319, 324 (5th Cir, 2010).
141
Maxwell Communications Corporation v Societe Generale, 93 F.3d 1036 (2nd Cir,1996).
142
Re Northland Services Pty Ltd (1978) 18 ALR 684.
11.3 Model Law 197
fori concursus of the country in which representation has been granted.143 This
change, it is argued, has been brought about by the Model Law.
11.3.8 Effect of Discharge Under Domestic Law
The Model Law, unlike the EC Regulation, applies the domestic rules to the dis-
charge of debts in jurisdictions where foreign proceedings are recognised.
Recognition itself does not automatically give a discharge.144
In Australia, section 153(1) of the Bankruptcy Act 1966 (Cth) operates to release
the bankrupt individual from all debts provable in the bankruptcy. Since all cred-
itors, both foreign and domestic can prove their debts, whether governed by
Australian or foreign laws, then according to that section, all debts both foreign or
domestic that fit within the definition of a provable debt, are discharged. Similar
provisions are contained in the legislation of the other States examined.145
In the case of releases given in an Australian deed of company arrangement
executed under the provisions of Part 5.3A of the Corporations Act, the company’s
debts are released to the extent provided for in the Deed of Company
Arrangement.146 A Deed of Company arrangement can bind all unsecured creditors,
both domestic and foreign, if so expressed.147 Similar provisions are contained in
the reorganisation legislation in the other States examined.148 The question of
whether these discharges and releases will be recognised in foreign jurisdictions
will depend upon their domestic laws and whether recognition will be required of
the Australian proceeding as a foreign proceeding.
For some time, Canadian Courts have been willing to recognise United States
bankruptcy proceedings including the stay of proceedings and discharge of
debts.149 However, there does not appear to be any other definitive rule about the
discharges that will be recognised. The New Zealand position would appear to be
similar to that in Australia given their adoption of similar legislation. The traditional
position in England was stated by the Privy Council over a hundred years ago
where it found that a discharge of a debt of an English company by a scheme of
arrangement under English law did not prevent a debt from being pursued in
Australia under Victorian law where Victorian law was the law of the contract, as
143
Permanent Trustee Company (Canberra) Ltd v Finlayson (1968) 122 CLR 338, 342-43.
144
Kumkang Valve Manufacturing Co Ltd v Enterprise Products Operating LLC
145
Bankruptcy and Insolvency Act, RSC 1985, c B-3 ss 168.1, 172; Insolvency Act 2006 s 304;
Insolvency Act 1986 c45 ss 260, 281; 11 USC § 524 (2012).
146
Corporations Act 2001 (Cth) s 444H.
147
Corporations Act 2001 (Cth) s 444D.
148
Companies Creditors Arrangement Act 1985, RSC 1985, c C-36 s 36; Companies Act 1993 ss
239ACS, 239ACT; Insolvency Act 1986 c45 ss 37, 260; 11 USC § 1141.
149
See, e.g. Roberts v Picture Butte Municipal Hospital [1999] 4 WWR 443; 449-50, 451 [23, 31];
Re Matlack Inc (2001) CanLII 28467 (ON SC) (19 July 2001).
the enactment under which the scheme of arrangement was effected did not extend
to Victoria.150 It has been stated that a foreign discharge in accordance with the
proper law of the obligation will be effective in England.151 It is arguable that this
position has been altered by the Model Law in that, should the above fact scenario
occur again and recognition of the English scheme of arrangement be sought in
Australia, it would have the effect of bringing the Australian debts into the English
restructuring.
The entering of an appearance by a creditor in a foreign insolvency process will
not itself prevent a creditor from subsequently bringing an action in England to
enforce their debt. However, the situation is different where the debt has been
discharged under the foreign proceeding and the creditor has sought to prove in the
administration of that foreign proceeding with a view to receiving a dividend.152
Westbrook has suggested by analogy that the US courts:
might well assert that the person’s conduct is subject to stay anywhere in the world once we
have jurisdiction over that person, even if the jurisdiction arises form a “generally doing
business” contact unrelated to the bankruptcy as such. On that basis, it is reasonably
probable that the United States courts will impose sanctions on creditors who attempt to
collect outside the United States debts discharged in a main proceeding in our country.153
Despite the above, it is argued that the effect of a discharge can be confined only
to the jurisdictions in which the insolvency proceeding commenced or has been
recognised or where the lex contractus is one of those jurisdictions.
11.3.9 Inconsistency with Other International Laws Treaties

and Conventions
Whilst the US Constitution gives treaties and federal statutes equal status,154 the
same is not the case in Australia, Canada, New Zealand or the UK where treaties are
required to be enacted domestically.155
Further, despite the indication given in para 92 of the UNCITRAL Guide,
Australia and New Zealand have made the decision to leave Article 3 in their
domestic version of the Model Law. This means that a decision under the Model
Law must be interpreted in light of existing treaties, agreements and conventions to
which those States are parties. This would include future treaties, agreements and
conventions to which those States may become a party. In the USA, this may give
150
New Zealand Loan and Mercantile Agency v Morrison (1898) AC 349, 357-8.
151
152
Ibid, 476 [13.22].
153
Jay Lawrence Westbrook, ‘Chapter 15 and Discharge’, (2005) 13 American Bankruptcy
Institute Law Review 503, 513.
154
United States of America Constitution, art VI § 2.
155
See, Dietrich v R (1992) 177 CLR 292, 305.
11.3 Model Law 199
rise to potential difficulties with the interpretation of the Model Law as a result of
the provision of a domestic version of Article 3,156 as it may be difficult to
determine at any point in time the treaties that may apply to any given fact scenario
and where they do apply, this may produce a different result from that anticipated
under the Model Law. The United States and Canada are both parties to the North
America Free Trade Agreement and have endorsed The American Law Institute
guidelines for cooperation157 which include guidelines for communications
between courts.158 As different States are subject to different treaties, this clause
may result in different States interpreting terms contained in the Model Law dif-
ferently despite the provisions of Article 8 where such treaty requires the Model
Law or insolvency legislation generally to be interpreted in a certain way.
Different conventions and model laws agreed to by different States have different
meanings for similar phrases. This may give rise to potential clashes and incon-
sistencies where courts rely upon decisions that have interpreted a similar phrase in
another convention to determine the meaning of that phrase in the Model Law,
especially where that phrase is not clarified. It is argued that rather than using the
meaning of a phrase from another convention or model law, Article 8 requires the
courts to look at the UNCITRAL Guide and other documentation as well as foreign
decisions under the Model Law. For example, the debtor’s COMI has a different
meaning in the Cape Town convention that provides that it is ‘the place of the
debtors statutory seat, or if there is none, the place where the debtor is incorporated
or formed unless proved otherwise’.159 In another UNDROIT convention, a similar
meaning is given to the phrase ‘primary Insolvency jurisdiction’.160 Further, the use
of the concept of COMI is different in the EC Regulation, as once insolvency
proceedings are issued in the State where the debtor has its COMI, further insol-
vency proceedings cannot be issued against the debtor in a member State if the
debtor has no establishment in that State.161
Justice Rares of the Federal Court of Australia has pointed out a number of
potential inconsistencies between the Model Law and the international admiralty
law. This is highlighted by the fact that courts are granted in rem jurisdiction simply
based upon a ship being present in their jurisdiction without their owner or operator
having any other association with that jurisdiction. Courts can arrest a ship even
though its owner or operator/charterer may be the subject of foreign insolvency
156
11 USC § 1503 (2012).
157
The American Law Institute see footnote 30.
158
Ibid, Annexure B.
159
International Institute for the Unification of Private Law, ‘Protocol to the Convention on
International Interests in Mobile Equipment on Matter Specific to Aircraft Equipment’ Cape Town
(16 November 2001), Art 1 (2)(n).
160
‘Luxembourg Protocol to the Convention on International Interests in Mobile Equipment on
Matters Specific to Railway Rolling Stock’, (opened for signature 23 February 2007 International
Institute for the Unification of Private Law Art 1(2)(d).
161
160/1, Art 3(2).
proceedings. His Honour applauds the decision in Atlas Shipping wherein the US
Bankruptcy Court set aside a garnishee notice issued by the US District Court
exercising its admiralty jurisdiction based upon the fact that foreign insolvency
proceedings had been issued at the time of issue of the garnishee proceedings, even
though there was no application afoot for recognition of those proceedings in the
USA at the time.162 His Honour stated that admiralty proceedings fall outside the
Model Law’s provisions for the orderly distribution of a debtor’s assets.163 His
Honour further stated that admiralty proceedings are in rem proceedings and, as
such, a plaintiff is treated as a secured creditor entitled to enforce by arresting the
ship but not against the insolvent debtor’s property generally.164 The judge further
argued:
What happens if a ship is sold by a liquidator or under an order of a court exercising
insolvency jurisdiction such as under the Model Law? Such a sale does not operate in the
same way as a sale by order of the Admiralty Court. The two jurisdictions deal with
changes in status. But, because of the reach and operation of Admiralty law principles, or
the general law of the sea, most jurisdictions recognise the authority of a sale by an
Admiralty Court as passing a clear title. Such a title will be free from maritime liens
attached to the ship or other res..165
His Honour expressed the opinion that the Model Law could not override the
existing principles of admiralty law.166 The above statements highlight a number of
potential inconsistencies and difficulties that may arise when a court exercising
insolvency jurisdiction ventures into the admiralty jurisdiction, especially if that
court otherwise does not have the power to exercise admiralty jurisdiction. Whilst
the courts in Australia, Canada, New Zealand and the UK which are granted
jurisdiction under their domestic version of the Model Law can also exercise
admiralty jurisdiction, this is not necessarily the case in other States. In the USA
that jurisdiction is vested in the District Court. It may therefore be necessary to
ensure that any orders made under the Model Law, where the debtor has admiralty
issues, are made by a court which has both jurisdictions in order to ensure that they
are issued with the recognition of the court’s order by other admiralty courts.
The Federal Court of Australia has also held that an admiralty action in rem to
enforce a maritime lien is not affected by the stay under Article 20 as their position
is akin to that of a secured creditor.167 This decision is in part due to the definition
of secured creditor which includes a person who holds a pledge or lien.168
162
Justice Steven Rares, ‘Admiralty Law- The Flying Dutchman of Cross-Border Insolvency’
[2009] Federal Judicial Scholarship 22.
163
Ibid, [31].
164
Ibid, [49], citing Re Aro Ltd [1980] Ch 196, 204, 229.
165
Ibid, [53].
166
Ibid, [63]; Kim v Deabo International Shipping Co Ltd [2015] FCA 684 (8 May 2015) [14].
167
Yu v STX Pan Ocean Co Ltd (South Korea) (2013) 23 FCR 189, 202-3 [41].
168
Bankruptcy Act 1966 (Cth) s5; Corporations Act 2001 (Cth) ss 51A, 51F.
11.3 Model Law 201
Chief Justice Alsop of the Federal Court of Australia has also accepted the
position of admiralty liens that are recognised in Australia as having some priority
and has refused to grant a stay with respect of the same although he has required
any claims made under the same to be heard by a Judge upon notice the foreign
representative. His Honour also raised the issue as to whether there should be
advertising of any recognition application in Lloyd’s List.169
The Federal Court has also granted an extension to the automatic stay upon
recognition of a foreign main proceeding under Article 21 has been granted which
prevents an admiralty lien being enforced without leave of the Court to assist with
restructuring proceedings.170
The Full Bench of the Federal Court has also decided that only those liens
referred to in the Admiralty Act are those recognised by Australian law and that
arrest warrants for vessels could not be issued based upon liens recognised in
overseas jurisdictions.171
Justice Rares of the Federal Court of Australia has also questioned whether it
should be the term of any stay granted under Article 21 of the Model Law that
notice should be given to the company prior to the arrest of any ship it owns or
charters to enforce and admiralty lien. His Honour reasoned that:
The practical effect of giving notice to a foreign representative of an intention to apply for
the issue of an arrest warrant may result in the plaintiff creditor’s entitlement to enforce its
alleged maritime lien becoming lost, as would occur if the foreign representative decided to
divert the ship out of the jurisdiction before she could be arrested. That would frustrate the
purpose of enabling the creditor, if it established a sufficient prima facie case on an ex parte
application, to assert a claim for a maritime lien that a judge considered to be sufficiently
substantial and arguable to justify the arrest.172
This position is not uniformly accepted by that court which has previously
ordered four hours notice be given.173
The unique position of admiralty claims has been confirmed in England in The
Matter of Amanda Shipping SA wherein the court granted leave for arbitration
proceedings to continue against a company whose foreign proceedings had been
recognised as a main proceeding in England as the court determined that the stay
granted by Article 20 was akin to the stay granted under England’s domestic law
upon the commencement of winding-up proceedings under section 130 of the
Insolvency Act, and as such, the Court had the power to remove the stay.174
169
Yakushiji v Daiichi Chuo Kisen Kaisha [2015] FCA 1170 (2 November 2015).
170
Suk v Hanjin Shipping Co Ltd [2016] FCA 1404 (23 November 2016).
171
The Ship “Sam Hawk” v Reiter Petroleum Inc [2016] FCAFC 26 (28 September 2016).
172
Armatori SpA [2017] FCA 331 (3 February 2017) [31].
173
See Kim v SW Shipping Co Ltd (2016) 113 ACSR 260; Suk v Hanjin Shipping Co Ltd [2016]
FCA 1404 (23 November 2016).
174
Re Amanda Shipping SA [2011] 2 All ER (Comm) 481.
The European Union and the USA are both signatories to the Hague Conference
Convention on Choice of Courts Agreements.175 This agreement requires a con-
tractual provision containing choice-of-court provisions to be honoured and
enforced in signature States.176 This may cause issues in respect of the enforcement
of standard form agreements and terms of trade with those States. The convention
does not apply to insolvency, composition and analogous matters and where the
enforcement of the choice-of-court clause amounts to a breach of public policy.177
The extent of the insolvency and public policy exemptions is uncertain as it will
depend upon the domestic laws of the relevant State. Subject to the exemptions, the
Convention may still have to be taken into account by representatives in relation to
enforcement of agreements entered into prior to a debtor’s insolvency.178 However,
it should not affect the principles of private international law applicable to the
insolvency proceeding.
Another issue arose in a matter involving the estate of Australian personality
Rene Rivkin. The English High Court in a case in which Mr. Rivkin’s Trustee in
Bankruptcy was attempting to trace where Mr. Rivkin’s assets had gone, found that
an application by the trustee of Mr. Rivkin’s estate to inspect documents relating to
third parties brought into issue the third parties’ rights to privacy under Article 8 of
the European Convention of Human Rights insofar as they related to the third party
individuals and their business affairs. The court refused to allow the trustee to
inspect those documents.179
It is argued that the interaction of the Model Law with other model laws and
conventions must be determined according to the provisions of the Model Law
itself, in particular Article 3 that provides that to the extent that there are any
inconsistencies, the terms of the other treaties prevail over the Model Law. The law
to be used to determine whether there are any inconsistencies should be the
applicable law for interpreting that treaty or convention.
11.3.10 Protection of Creditors Interests
Articles 21(2) and 22(1) oblige the court to be satisfied that the interests of creditors
are protected before making orders under those articles and Article 19. These
175
Hague Conference on Private International Law, Convention on Choice of Courts Agreement,
opened for signature 30 June 2005, [2005] UKTS 14169 (entered into force 1 October 2005).
176
The signature States are the European Union, Mexico and the United States of America, http://
www.hcch.net/index_en.php?act=conventions.status&cid=98.
177
Art 2(2)(e); Art 6(c).
178
See Keri Bruce, ‘The Hague on Choice of Court Agreements: Is the Public Policy Exception
Helping Click-Away the Security of Non-Negotiated Agreements?’ (2007) 32 Brooklyn Journal of
International Law, 1103.
179
Re Rivkin [2009] BusLR 500; [2008] EWHC 2609 (29 October 2008) [18].
11.3 Model Law 203
Articles must be read subject to Article 13 which excludes certain creditors from the
operation of the Model Law.
The English High Court in Samsun Logix, in attempting to address the interests
of local creditors, granted conditional relief staying the enforcement of a lien in
England pending the determination of an appeal over the quantity of the creditors’
provable debt in Korea, being the place of the main proceeding, upon an under-
taking being given that the fact the creditors appeared in the Korean proceeding
would not create an estoppel in England to them enforcing their lien.180 The English
courts have also raised the issue of distribution to creditors being on a pari passu
basis as a necessity for recognition and for assets to be handed over to a foreign
representative for distribution.181
In both England and the USA, the courts maintain that the right of set-off is a
fundamental right that must be adequately protected and recognised by the foreign
jurisdiction before the court is willing to make orders under those articles.182 In the
USA, section 1507 in addition requires the court, before granting assistance under
Chap. 15, to be reasonably assured that there is a just treatment of all claims against
the debtor and protection of claims holders in the USA against prejudice and
inconvenience of processing claims in a foreign jurisdiction. This provision has
been interpreted differently by the US Courts in different circuits. The US District
Court has described its obligations as follows:
Thus, according to the Model Law, a bankruptcy court must be satisfied that local creditors’
interests are “sufficiently protected” before allowing a foreign representative to distribute
property in a foreign proceeding, and though not an express requirement, is not precluded
from satisfying itself that foreign creditors’ interests are “sufficiently protected” before
allowing a foreign representative to distribute property in a foreign proceeding.183
In Tri-Continental Exchange, the US Bankruptcy Court stated that section 1522

required a court ‘to tailor relief and conditions so as to balance the relief granted to
the foreign representative and the interests of those affected by such relief, without
unduly favoring one group of creditors over another’.184
In re Board of Directors of Telecom Argentina, the US Court of Appeals held
that the principles of comity require a just treatment of creditors and that the foreign
law ‘provides for a comprehensive procedure for the orderly and equitable distri-
bution of [the debtor]’s assets among all of its creditors.’185 This does not require
them to give creditors the same protections as under US Bankruptcy Law.186
180
Norden v Samsun Logix Corporation [2009] BPIR 1367; [2009] EWHC 2304 (Ch) (12 March
2009).
181
McGrath v Riddell [2008] 3 All ER 869, 896-7, [79–81].
182
Re Swissair Schweizerische Luftverkehr-Aktiengesellschaft [2010] BCC 667, 672 [14]-[15];
SNP Boat Service S.A. V Hotel Le St James 483 BR 776 (Dist, SD Fla, 2012).
183
SNP Boat Service S.A. V Hotel Le St James, 483 BR 776 (Dist, SD Fla, 2012).
184
349 BR 627, 637 (Bankr, ED Cal, 2006).
185
Re Board of Directors of Telecom Argentina, 528 F. 3d 162, 170 (2nd Cir, 2008).
186
Ibid, 173.
In Re International Banking Corporation, the US Bankruptcy Court refused to

transfer property in the US to the foreign representative of recognised proceedings
in Bahrain until the foreign representative provided additional evidence that the US
creditors would be protected.187 The court further held that Article 22 is not limited
to local creditors and that it must protect the interests of both secured and unsecured
creditors.188
Westbrook has argued that in the interest of creditors, they should be treated on a
pari passu basis with the exception of wages, secured creditors and taxes.189
However, this ignores any local priorities as observed above in Sect. 11.3.4.3.
The additional requirement imposed by section 1507 in the USA may create
inconsistency in the requirements between States to protect the interests of credi-
tors. This may lead to resentment by creditors in other jurisdictions whose interests
may not be as well protected as those in the USA. This protection may also lead to
preference being given to USA creditors over other foreign creditors.
As each State examined has a different priority regime for creditors and different
laws in relation to when set-off is applicable, if foreign courts believe that their
regime should apply to assets in their State, conflicts will arise regarding the way in
which creditors’ interests are to be protected. This is not the case in the States
examined in this book, but may be an issue with other States. It is argued that the
stance taken by the House of Lords in McGrath v Riddell is the more appropriate
stance, namely that a difference in a priority regime, subject to basic, generally
accepted priorities for employees and secured creditors being protected, should not
influence a court issuing turnover or other orders under these articles.190 The
validity of any secured interests must be assessed lex situs as that is the law that will
govern the transfer of such property including the formalities required to affect such
transfer.
As stated above, it is further argued that the right of set-off should also be
determined under either lex situs or lex contractus where it arises from a transaction
involving property as this recognises the commercial reality of the transaction and
potential commercial impetus in entering into the transaction.
11.4 Summary
The Model Law does not harmonise the conflict of law rules for each State adopting
it. This leaves this issue to the established conflict of law practices of each State.
Whilst a number of obvious areas where conflicts will arise have been examined in
187
Re International Banking Corporation B.S.C 439 BR 614, 627-9 (Bankr, SD NY 2010).
188
Ibid, 627.
189
Westbrook, ‘Breaking Away: Local Priorities and Global Assets’ see footnote 2, 603-15.
190
See McGrath v Riddell [2008] 3 All ER 869.
11.4 Summary 205
this chapter, there are an infinite number of possibilities in terms of where conflicts
are likely to arise in cross-border insolvency matters.
The interpretation of the Model Law, it is argued, should be determined in
accordance with the provision of Articles 3 and 8. Article 3 provides that, to the
extent that the Model Law is inconsistent with any other treaty, the provisions of the
treaty prevail. Article 8 requires the court to take into account the Model Law’s
international origins and to promote uniformity. It is argued that this requires courts
to consider foreign judgments when interpreting the provisions of the Model Law.
As was evidenced in McGrath v Riddell, the courts are grappling with the notion
of addressing cross-border insolvency matters by taking a Universalist approach
being advanced by Lord Hoffmann, whilst other judges are adopting a more con-
servative traditionalist approach advocating the protection of local creditors’
interests. Westbrook advocates that the Universalist approach would apply the law
of the State of the main proceeding to the administration and its recovery
proceedings.
In appropriate cases, the courts appear willing to allow foreign law to be used in
domestic insolvencies to recover antecedent transactions which would normally be
governed by domestic legislation. However, no steadfast rules have been developed
to determine when this will occur. It is argued that in order to achieve a commercial
and equitable result, the courts must take into account the relevant laws which the
parties believed would apply to their transactions and any potential insolvency.
In the USA, it is argued, Chap. 15 relates recognition to comity, and therefore by
implication bringing in their earlier judicial interpretations of that principle.191 In
the other States examined, no such linkage is given, with the Model Law creating a
separate right to recognition.192 Whilst all of the States examined have similar
conflict of law rules due to their English common law heritage, the same cannot be
said for all States that have adopted the Model Law. This may ultimately give rise
to further conflicts which will continue to exist until a common set of conflict rules
applies in relation to cross-border insolvencies.
See 11 USC §§ 1507, 1509 (2012).

191
192
See comments above in Chap. 8 in respect of linkages between comity and the Model Law.
Chapter 12
Present Issues with Concepts of Centre
of Main Interest and Establishment
Overview
In Chap. 5 the reader was introduced to the concepts of COMI and establishment.
In this chapter is discussed:
• Further practical difficulties in the interpretation of the concepts of centre of
main interest and establishment has not been uniform between States that have
enacted the Model Law.
• Recent efforts by UNCITRAL to amend to the Uncitral Guide to overcome these
difficulties may not be successful due to the principles of legislative sovereignty.
12.1 Courts Obligation to Review Decisions in Relation

to COMI and Establishment
Article 17(3) of the Model Law requires an application for recognition of a foreign
proceeding to be decided at the earliest possible time. The UNCITRAL Guide
explains that this is in order to protect the debtor’s assets from dissipation or
concealment.1
Article 17(4) provides that nothing in Articles 15–18 prevents the modification
or termination of recognition if it is shown that the grounds for granting such
recognition were fully or partially lacking or have ceased to exist.
In Ackers, the Federal Court of Australia appears to advocate that once an initial
finding of the State in which the debtor’s COMI exists is made, that pursuant to
Article 17(4) of the Model Law, this finding can be reviewed should new evidence
1
(2013) (16 December 2013) [163].

DOI 10.1007/978-981-10-5876-9_12
208 12 Present Issues with Concepts of Centre …
come to light.2 This view is supported by the US Bankruptcy Court in British

American Insurance although in a different context.3 The Federal Court has also
stated that the ‘Court should be slow to accept that an established COMI has been
changed by activities that may turn out to be temporary or transitory. There is no
principle of immutability.’4 This comment is supported by Dicey, Morris and
Collins.5 It is unknown whether the courts of other States will follow the positions
set out above and if so, on what basis.
It is argued that Article 17(4) of the Model Law may be used by the courts to
overcome inconsistencies in the recognition of the State in which the debtor has its
COMI or an establishment.
A possible solution to the problem of a change in the finding of the State of the COMI
is that proposed in principle 13 of the Global Principles for Cooperation in International
Insolvency Cases which prevents a previous finding being displaced unless either:
(i) ‘at the time of the alleged relocation of the centre of main interests, the debtor
was able to pay all debts and liabilities incurred prior to that time; or
(ii) the debtor has fully paid or concluded a composition or compromise in
respect of its obligations incurred before the relocation of its centre of a main
interests’… or alternatively
(iii) ‘there is no undue prejudice to creditors whose claim arose from dealings
with the debtor during the time when the debtor’s centre of main interest was
in the Prior State’.6
Article 17 provides the court with the power to review its previous orders
including recognition should circumstances change. Arguably this provision should
not be used frequently to review a recognition order based upon a subsequent
change in circumstances.
12.2 Inappropriate Recognition of Centre

of Main Interest (COMI)
UNCITRAL’s Working Group V has expressed concern that examples are

emerging of a practice of originating courts making decisions on COMI in situa-
tions where they were not required to do so under their national laws, but where
2
Ackers v Saad Investment Company Ltd. (in liq) (2010) 190 FCR 285, 296 [53].
3
Re British American Insurance Co Ltd., 425 BR 884, 910 (Bankr, SD Fla, 2010).
4
Moore v Australian Equity Investors (2012) 30 ACLC 629, 634 [20].
5
Collins et al., see footnote 158, 1766 [31–108].
6
‘Global Principles for Cooperation in International Insolvency Cases and Global Guidelines for
Court to Court Communications in International Insolvency Cases’, presented to the 89th Annual
Meeting of the American Law Institute on 23 May 2012 and unanimously approved by the
International Insolvency Institute membership at its 12th Annual Conference, Court de Cassation,
Paris, 22 June 2012, http://iiiglobal.org/component/jdownloads/viewdownload/36/5897.html, 104.
12.2 Inappropriate Recognition of Centre of Main Interest (COMI) 209
there was an intention to influence or an attempt to influence the receiving court’s

decision on the issue of COMI. Amendments to the UNCITRAL Guide, make it
clear that a court receiving an application for recognition is required to indepen-
dently satisfy itself that the requirements for recognition are met.7
If this situation is correct and courts, especially those of larger nations and
economies, are trying to intimidate other courts of smaller States to follow their
decision in light of Article 30 of the Model Law, it may affect States’ future
adoption of the Model Law. This would defeat the purpose for which the Model
Law was created and discourage the principles of Universalism and encourage
States to maintain or revert to principles of Territorialism. This, in turn, would not
be good for international commerce.
12.3 Inconsistency of Court Decisions
There is a possibility that given the different interpretation of COMI and the extent
of the evidence required to rebut the registered office presumption, different courts
in the USA and Canada on the one hand, and Australia, New Zealand and the UK
on the other, may have different findings regarding the State in which the debtors
have their COMI. This situation may also arise where the debtor’s COMI changes
over time, especially in the case of individual debtors who move between States.8
Fletcher and Wessels have commented that the finding of a debtor’s COMI may
differ between the EC Regulation and the Model Law due to the manner in which
that term must be interpreted. The EC Regulation must be interpreted in an
autonomous way with a purposive interpretation (related to the goals of the EC
Regulation, including the proper functioning to the European market, the avoidance
of forum shopping, the protection of creditors and the aim of improving the effi-
ciency and effectiveness of cross-border insolvency proceedings). The Model Law
is to be interpreted with regard to the obligations under Article 8 concerning its
international origin and the need to promote uniformity and the observance of good
faith.9 As the Model Law is enacted as a domestic law of each State, there is no
provision for an appeal or adjudication to occur before an international court to
resolve this issue. The issue will have to be resolved by the domestic courts
themselves, in part relying upon the provisions of Article 8.
The courts have not been required to consider the issue of the effect of incon-
sistent decisions made under the Model Law, although it is likely that they will have
7
(2013) (16 December 2013) [139].
8
See Gainsford v Tannenbaum (2012) 293 ALR 699; Williams v Simpson [2011] 2 NZLR 380; Re
Loy 380 BR 154, 168 (Bankr, ED Va, 2007).
9
American Law Institute and International Insolvency Institute, see footnote 32, 122.
210 12 Present Issues with Concepts of Centre …
to do so in an endeavour to overcome a number of practical difficulties that may

arise in large insolvency administrations, especially those using tax havens as
places of incorporation. The courts have unsucessfully attempted to grapple with
this problem in the Lehman Brothers administrations where there are inconsistent
decisions between the US and English courts.10 This issue also has arisen in relation
to Stanford International Bank wherein the English Court of Appeal recognised the
liquidation taking place in Antigua as the foreign main proceeding whilst the
Quebec Court of Appeal recognised the US receivership as the foreign main pro-
ceeding.11 These problems will be further highlighted as other European countries
recognise the same foreign main proceeding as the UK due to its interpreting the
provisions of the Model Law consistently with their interpretation of the EC
Regulation.
It is probable that whilst any appeal courts attempt to sort out the inconsistencies
after taking into account the provision of Article 8 which requires the need to
promote uniformity and observance of good faith, an insolvency agreement/
protocol will be entered into between the foreign representatives with a view to
protecting the assets and interests of creditors whilst the issue is determined if no
practical solution presents itself (e.g. the majority of assets are in one State and it
adopts the dominant role).
In Ackers, the Federal Court of Australia and in British American Insurance, the
US Bankruptcy Court advocate that once an initial finding of the State in which the
debtor’s COMI exists is made pursuant to Article 17(4), this finding must be
reviewed should new evidence come to light.12 If this interpretation is correct, it
may give rise to multiple applications to review the findings and create uncertainty
in the administration of the debtor’s assets as a result of the debtor, its officers or
creditors seeking to change the debtor’s COMI by moving assets or its head office
functions or habitual residence so as to create a new COMI. Given that there is no
consensus regarding the time at which COMI is to be determined, such manipu-
lation could lead to a court changing its finding on this issue.13 It could also lead to
creditors and other interested parties seeking to manipulate evidence and circum-
stances of the debtors so that a court changes its finding from a State in which the
debtor had its COMI to one which is more favourable to their respective position.
This will only further complicate the issue concerning the State in which the debtor
had or has its COMI. This is especially the case as the court is able to review its
10
See Re Lehman Brothers Holdings Inc 422 BR 404 (Bankr, SD NY, 2010); Perpetual Trustee
Company Limited v BNY Corporate Trustee Services Limited [2010] 2 BCLC 237; Perpetual
Trustee Company Limited v BNY Corporate Trustee Services Limited [2010] Ch 347, Belmont
Park Investments Pty Ltd. v BNY Corporate Trustee Services Ltd. [2012] 1 AC 383.
11
See Re Stanford International Bank Ltd. [2011] Ch 33; Re Stanford International Bank Ltd.
(2009) 65 CBR (5th) 4; [2009] QCCA 2475 (17 December 2009).
12
Ackers v Saad Investment Company Ltd. (in liq) (2010) 190 FCR 285, 296 [53]; Re British
American Insurance Co Ltd., 425 BR 884, 910 (Bankr, SD Fla, 2010).
13
See above under subheading Time of Recognition of COMI and Establishment.
12.3 Inconsistency of Court Decisions 211
determination pursuant to Article 17(4) if the grounds for granting recognition have
‘ceased to exist’.
Article 17(4) may also be used by the courts in an attempt to overcome
inconsistencies in the recognition of the State in which the debtor has its COMI or
an establishment. Different evidence may be presented to different courts as a result
of each court being provided with the most up-to-date evidence as at the time the
application for recognition in that State. Such evidence would include which State
has been recognised by other courts as being the State in which the debtor has its
COMI. It is arguable that, given the provisions of Article 8, a court should act
consistently with courts in foreign jurisdictions which decide this issue. As the real
dispute in the interpretation of the rebuttable presumption in the recognition of
COMI, such evidence, may be sufficient to allow a court to review all the evidence
and determine whether the proper conclusion is adverse to the presumption.14
12.4 Summary
As a result of the manner in which the Model Law was enacted in the different
States examined, no uniformity of approach has been adopted when interpreting the
terms COMI and ‘establishment’, nor the time at which the assessment of whether
the debtor had either of these in the foreign representative’s jurisdiction is to occur
been finally established. Further, it has been suggested that as facts change, a State’s
recognition of a foreign proceeding could also change as it is reviewable under
Article 17(3).
It is argued that attempts by UNCITRAL to resolve some of these issues by
amending the UNCITRAL Guide will be unsuccessful in resolving these differ-
ences, and only highlights the different stances taken by States and their courts until
such time as the factors to be considered when determining COMI and the standard
of proof required to rebut the registered office presumption, are made uniform. Any
change may require legislative change in some States which, politically, may not be
feasible.
Some States appear to be trying to influence the courts’ findings in other States
by making unnecessary rulings. This has led to UNCITRAL confirming that each
State should make its own determinations.
These issues will lead to further differences and inconsistencies existing between
States in court decisions given under the Model Law, which has the potential to
create further international difficulties.
14
See e.g., Ackers v Saad Investment Company Ltd. (in liq) (2010) 190 FCR 285, 296 [52].
Chapter 13
Applicability of Rules of Private
International Law
Overview
This chapter explores how the rules of private international law in respect of choice
of law and choice of forum affect the recognition of foreign insolvency proceedings
and the interpretation of the Model Law. The following point is made:
• An individual State’s own choices of law and choice of forum rules have the
potential to affect the interpretation of the Model Law as the Model Law itself
does not deal with this issue.
13.1 Private International Law
Private International Law adopts a comprehensive theoretical approach to

multi-jurisdictional issues. Professor Mason states that the fundamental issues that
must be determined are:
(a) choice of forum;
(b) the recognition and effect accorded foreign insolvency proceedings; and
(c) choice of law.1
13.1.1 Choice of Forum
Professor Fletcher has commented that, despite the world’s legal systems being able
to be categorised into a small number of ‘legal families’, they nevertheless differ
1
Rosalind Mason, ‘Cross-Border Insolvency Law; Where Private International Law and
Insolvency Law Meet’, in Paul J Omar (ed), International Insolvency Law: Themes and
Perspectives (Ashgate Publishing Ltd., 2008), 27, 40.

DOI 10.1007/978-981-10-5876-9_13
214 13 Applicability of Rules of Private International Law
from one another in numerous details, with the consequence that the actual venue to
a proceeding cannot infrequently assume a critical significance in relation to the
interests of the various parties concerned.2 The issue of choice of forum pertains not
only to substantive and procedural issues, but also to choice of the insolvency law
that will be implied which affects such issues as who the priority creditors are, and
the laws that are applicable in respect of recovery of antecedent transactions, as well
as the extent to which stays on proceedings may be imposed. In the past, this has
led to forum shopping by debtors.
The Model Law does not address the issue of debtors who change the State of
their COMI shortly prior to the commencement of the insolvency or restructuring
proceedings. As indicated in Sect. 12.2, the courts are grappling with this issue at
present.3
13.1.2 Recognition and Choice of Law
In a domestic setting, insolvency laws have been described as being neither in rem
nor in personam proceedings. The purpose of insolvency laws ‘is not to determine
or establish the existence of rights but to provide a mechanism of collective exe-
cution against the property of the debtor by creditors whose rights are admitted or
established’.4 The United Kingdom Supreme Court however, has determined that
proceedings in respect of the recovery of antecedent transactions issued pursuant to
such insolvency laws are proceedings in personam and subject to the ordinary
principles of private international law with respect to recognition of judgments.5 By
way of contrast in the USA, bankruptcy proceedings are considered to be in rem
proceedings.6
Nygh has commented that the first objective of the rules of private international
law should be to meet the parties’ reasonable expectations. Thus, parties will expect
their contractual relations to be governed by the law they have chosen or by the law
of the State with the closest connection to the transaction, if they have not chosen
one.7 This is the rule that is most frequently used although its application can vary
between States. It is arguable that similar expectations arise in relation to the law
applicable to insolvency such that the laws of the State with the closest connection
with the insolvent debtor or the transaction sought to be overturned should apply.
2
Ian F Fletcher The Law of Insolvency (Sweet & Maxwell, 2002) 737 [28-008].
3
See e.g., Re Interedil Srl [2012] Bus LR 1582, 1592-3 [55]; Re Staubitz-Schreiber [2006] BCC
639; Enasarco v Lehman Brothers Finance SA [2014] EWHC 34 (Ch) (16 January 2014); Ackers v
Samba Financial Group (2014)16 ITELR 808; [2014] EWHC 540 (Ch) (28 February 2014).
4
Cambridge Gas Transport Corporation Limited v Official Committee of Unsecured Creditors of
Navigator Holdings PLC [2007] 1 AC 508, 516 [13, 14].
5
6
Ho, see footnote 724, 577-8.
7
Davies, Bell and Brereton, see footnote 116, 263 [12.19].
13.1 Private International Law 215
This has not always been the case, especially where foreign laws in relation to
antecedent transactions are sought to be applied to overturn a transaction after it has
been completed.
Fletcher has commented that:
In the past, a notorious feature of the subject of conflict of laws was that states sought to
develop their own individual solutions to the problems caused by the material diversity
between the domestic laws of the various sovereign states, thereby giving rise to the
paradoxical situation where there were effectively just as many systems of conflict of laws
as there were national laws.8
It has been suggested that the different rules of private international law that have
been developed in different States have paradoxically led to further diversity in the
national systems of private international law.9 In the past, this diversity has led to
informal measures being adopted to resolve international disputes which have
included insolvency agreement/protocols between courts and between representa-
tives.10 The diversity of the laws and procedures, and their predictability in outcome
as applicable to insolvency administrations, has also led to forum shopping in
transnational corporations.11 In particular, this has occurred as a result of the lack of
universal acceptance of the provisions of the Model Law, and its numerous vari-
ations as is evidenced by the way it has been adopted in the States examined. It is
still the case that the majority of States in the world have not adopted the Model
Law. It is not the purpose of this book to provide a detailed examination of the rules
applicable in each State; however, the issues addressed below relate to the inter-
action between private international law and the Model Law
In common law jurisdictions such as those considered in this book, these issues
generally emerge only if one of the parties raises them. Although a court has the power
to raise issues should a judge be concerned, this does not occur on a regular basis.
13.2 Model Law
The Model Law does not seek to deal with issues governed by private international
law including which State’s law should govern insolvency proceedings and any
individual court applications within it.12 These issues are left to the individual
8
Fletcher, see footnote 3, 494.
9
Angus Francis, ‘Cross-border Insolvency in East Asia: Formal and Informal Mechanisms and
UNCITRAL’s Model Law’ in Roman Tomasic (ed), Insolvency Law in East Asia (Ashgate
Publishing, 2006), 535, 538.
10
United Nations Commission on Trade Law, UNCITRAL Practice Guide on Cross-Border
Insolvency Cooperation, GA Res 61/112 (16 December 2009).
11
John A.E. Pottow, ‘The Myth (and Realities) of Forum Shopping in Transnational Insolvency’
(2006) 32 Brooklyn Journal of International Law 785.
12
Rubin v Eurofinance SA [2011] Ch 133,146 [31].
State’s rules of private international law. In addition the laws of the individual
States in which the debtor’s assets are located are relevant in order to ensure that
any court decision is recognised and is enforceable.13
Although the drafters of the Model Law were unable to agree on any model law
provisions regarding the rules of private international Law, the Legislative Guide
contains four recommendations14 addressing applicable law in insolvency pro-
ceedings generally including provisions in respect of which State laws should
govern the insolvency administration.15 These recommendations apply lex concu-
rus in granting an automatic stay once a foreign main proceeding has been
recognised. As indicated above in Sects. 8.6 and 11.3.5, this stay has been equated
in some jurisdictions to the stay granted once local proceedings have been
recognised.
Fletcher suggests that the Model Law deliberately refrains from including choice
of law rules and leaves it to the States adopting the Model Law to deal with this
issue in accordance with their existing rules.16
The UK version of the Model Law specifically refers to the law that applies to
the Model Law as including Great Britain’s ‘rules of private international law’.17
The English Supreme Court has held that the Model Law was not ‘intended to
replace the rules of private international law in any enacting State’.18 Dicey, Morris
and Collins indicate that the EC Regulation and the UK Insolvency Act have altered
the choice of law rules as applicable to insolvency proceedings. They have gen-
erally summarised the English choice of law position in relation to corporate
insolvencies involving the EC Regulation (subject to a number of specific excep-
tions) as follows:
Rule 183- (1) Subject to Rules 184–194, the law applicable to insolvency pro-
ceedings and their effects is that of the Regulation State within the
territory of which such proceedings are opened, herein after referred to
as the ‘State of the opening of proceedings’.
(2) The law of the State of the opening of proceedings determines the
conditions for the opening of those proceedings, their conduct and their
closure…
13
See cases referred in Chapter 5 under Art 20.
14
on Insolvency Law, UN Publications Sales No E.05.V.10 (United Nations, 2005) 67–71.
15
Block-Lieb and Halliday, see footnote 49, 896.
16
footnote 42, 455 [8.19].
17
Art 2(q).
18
Rubin v Eurofinance SA [2011] Ch 133, 146 [31]. This issue was not commented on in the
appeal see Rubin v Eurofinance SA [2013] 1 AC 236.
13.2 Model Law 217
(3) …the law applicable to secondary proceedings shall be that of the

Regulation State within the territory of which the secondary proceedings
are opened.19
It is argued that similar rules would apply under the Model Law. Ho argues that
it is still undecided whether English courts can apply foreign law with respect to
antecedent transactions as the courts in the USA have done in Re Condor Insurance
Ltd.20 The English High Court has questioned whether they have the power to
apply foreign law when such relief would not be available under their domestic law
and has refused to follow that US decision.21 The court contrasted the position
under the EC Regulation which does allow the application of foreign law. His
Honour relied upon the reasoning in Rubin v Eurofinance22 to support his con-
clusion that neither the UK Cross Border Insolvency Regulation nor Article 21
allowed foreign law to be applied.23 His Honour also referred to the report of
UNCITRAL’s Working Group V from the time of drafting the model law. It is
suggested that English courts would be unlikely to follow the US decision which
would appear to have been designed to circumvent a problem created by the US
enactment of the Model Law requiring foreign representatives to go to the incon-
venience and expense of issuing Chaps. 7 or 11 proceedings in order to be able to
issue avoidance of antecedent transaction proceedings under the provisions of the
US Bankruptcy Code.24 Issuing US bankruptcy proceedings under Chap. 7 or 11
may also give rise to different periods in which antecedent transactions are
reviewable than would be the case under the law of the jurisdiction of the foreign
proceeding.. This position of the US courts enables them to comply with the spirit
of the Model Law and apply a wide reading to Article 21.
Lastra and Ho on the other hand opine that UK courts can apply foreign
insolvency law.25 They have further argued that the three main areas where foreign
law will have the most application are bankruptcy discharge, executor contracts and
avoidance of antecedent transactions.26 Previously, the Privy Council had stated
19
Collins, Lord et al. (eds), Dicey, Morris and Collins on The Conflict of Laws (Sweet & Maxwell,
15 ed, 2012) see footnote 158, 1645 [30R-203]. © Thomson Reuters (Professional) UK Limited
2012. Reproduced with permission of The Licensor through PLSclear.
20
Look Chan Ho ‘Applying Foreign Law—Realising the Model Law’s Potential’ (2010) 24
Journal of International Banking Law and Regulation 522, 557 citing Re Condor Insurance Ltd.,
601 F.3d 319, 324-9 (5th Cir, 2010).
21
Fibria Celulose S/A v Pan Ocean Co Ltd. [2014] EWHC 2124 (Ch) (30 June 2014) [106–108].
22
23
Fibria Celulose S/A v Pan Ocean Co Ltd. [2014] EWHC 2124 (Ch) (30 June 2014) [89, 90].
24
Sheldon, see footnote 146, 128-31.
25
Lastra, see footnote 43, 227 [9.81]; Ho, see footnote 75, 668.
26
Lastra, see footnote 43, 227 [9.82]; Ho, see footnote 75, 552.
that ‘it is doubtful whether assistance could take the form of applying provisions of
the foreign insolvency law which form no part of the domestic system’.27
The English Court of Appeal has indicated that, after considering Article 8 of the
Model Law and the equivalent provisions in the UK and USA domestic versions of
the Model Law which it found to be similar, it justified a ‘harmonised interpreta-
tion’ of those provisions.28 However, on appeal, the United Kingdom Supreme
Court held that it did not extend the operation of the Model Law such that a court
could recognise a foreign judgment in respect of antecedent transactions where the
person who received the benefit did not concede to the foreign court jurisdiction in
respect of that foreign proceeding.29
In the UK, it is questionable whether the court will follow the US Court of
Appeals in applying foreign law as the Privy Council has stated:
At common law, their Lordships think it is doubtful whether assistance could take the form
of applying provisions of the foreign insolvency law which form no part of the domestic
system.. ..The purpose of recognition is to enable the foreign office holder or the creditors to
avoid having to start parallel insolvency proceedings and to give them the remedies to
which they would have been entitled if the equivalent proceedings had taken place in the
domestic forum.30
However, in the same decision, the Privy Council issued orders which had the
effect of recognising and enforcing a stay of proceedings granted under Chap. 11 of
the US Bankruptcy Code. The efficacy of some of those orders has been questioned
recently by the United Kingdom Supreme Court.31
The House Report that accompanied the introduction of Chap. 15 in the USA,
implies that the US Congress was happy to leave the issue of choice of law to the
courts to decide. The report states:
The Model Law is not clear about whether it would grant standing in a recognised foreign
proceeding if no full case were pending. This limitation reflects concerns raised by the
United States delegation during the UNCITRAL debates that a simple grant of standing to
bring avoidance actions neglects to address very difficult choice of law and forum issues.
This limited grant of standing in section 1523 does not create or establish any legal right of
avoidance nor does it create or imply any legal rules with respect to the choice of applicable
law as to the avoidance of any transfer of obligation. The courts will determine the nature
and extent of any action and what national law may be applicable to such action.32
The US Court of Appeals has stated in respect of the Model Law that:
27
Navigator Holdings PLC [2007] 1 AC 508, 518 [22].
28
Rubin v Eurofinance SA [2011] Ch 133, 159 [60].
29
Rubin v Eurofinance SA [2013] 1 AC 236, 274 [115–117], 278 [132].
30
Ibid.
31
32
Abuse Prevention and Consumer Protection Act (8 April 2005), HR Report Pub L No 109-31, 116.
13.2 Model Law 219
The statutory intent to conform American law with international law is explicit in the text of
Section 1501(a), and also is expressed in Section 1508, which states that ‘[i]n interpreting
this chapter, the court shall consider its international origin, and the need to promote an
application of this chapter that is consistent with the application of similar statutes.33
Wessels has advocated that the Model Law has made a clear choice to adopt as
its choice of law lex (forum) concursus.34 It is argued that this is not strictly correct
as the Model Law contains no choice of law provision.
13.3 Private International Law in Interpretation of Model

Law
Professor Westbrook has commented that the choice of principal forum will have
important implications for the choice of the bankruptcy rules (and procedures) to be
applied in an insolvency administration and therefore will substantially affect the
outcome for stakeholders.35
The Model Law contains in Article 8 its own provision in relation to the Model
Law’s interpretation which requires it to be interpreted by ‘having regard to its
international origin and the need to promote uniformity in its application and the
observance of good faith’. This article would appear to require courts to consider
the decisions of courts of other States interpreting the same provisions and promote
uniformity in their interpretation of similar provisions.
Difficulties arise with the implementation of Article 8. As has been identified
above in Sect. 6.9, the words used in each of the domestic versions of the Model
Law differ such that the provisions are not identical in each of the States examined.
As the Model Law is still a domestic law of each State, the courts have not been
able to promote uniformity where it is clear that their respective domestic legislature
has not intended it, by adopting alternate wording to that contained in the Model
Law. In such circumstances, it is arguable that Article 8 cannot be relied upon to
overcome the domestic legislature’s intention to change the provisions of the Model
Law.
As aforementioned, this issue has been identified by both the US District Court
in Bear Stearns36 and the English High Court in Stanford International Bank37 as
being an issue regarding the interpretation of the rebuttable presumption in respect
of the interpretation of the COMI contained in Article 16. Other clear instances also
33
Re Ran, 607 F.3d 1017, 1020 (5th Cir, 2010).
34
Bob Wessels ‘Will Uncitral Bring Changes to Insolvency Proceedings Outside the USA and
Great Britain? It Certainly Will!’ (2006) 3 International Corporate Rescue 200, 205 citing rec-
ommendation 31 in the UNCITRAL Guide.
35
Westbrook, ‘Locating the Eye of the Financial Storm’ see footnote 474, 1020.
36
Re Bear Stearns High-Grade Structured Credit, 389 B.R 325, 335-6 (Dist SD NY, 2008).
37
Re Stanford International Bank Ltd. [2009] BPIR 1157; [2009] EWHC 1441 (Ch) (3 May 2009).
exist where this intent is clear, such as Canada not requiring a foreign proceeding to
have an establishment in order to recognise it as a foreign non-main proceeding.
This issue cannot be overcome using the present Model Law regime.
Ho has criticised the English Court of Appeal for the way it interpreted the
Model Law in Stanford International Bank,38 and for not using Article 8 to examine
and follow previous international interpretations of its provisions, but rather to find
that it should be interpreted consistently with the EC Regulation.39
The UNCITRAL Guide refers to the concept of the COMI as corresponding to the
formulation in Article 3 of the EC Regulation, thereby building on the emerging
harmonisation of the notion of a main proceeding.40 However, Article 8 obliges a
court to look at the Model Law’s international origins and consider the need to
promote uniformity. Article 3 of the UK’s enactment of the Model Law provides
that if there is any inconsistency between the provisions of the Model Law and the
EC Regulation, the provisions of the EC Regulation prevail. In light of these
circumstances, it is arguable that the English Court of Appeal decision cannot be
criticised as suggested by Ho, as otherwise they would have created a tension
between the provisions of Articles 3 and 8. The provisions contained in Article 3
impose an obligation upon the English Courts to more readily accept the inter-
pretations of similar phrases consistent with those in the EC Regulation. No other
State examined has this obligation.
Zeller has argued that the statutory interpretation of model laws should not be
governed by domestic methods if they contain an interpretative article. He argues
that if, as is provided in Article 8, the Model Law is to be interpreted having regard
to its international origin and the need to promote uniformity, then this necessarily
means that recourse to foreign and domestic judgements are mandatory. He argues
that the use of extrinsic material which considers the same or similar provisions is
permissible under the mandate of ‘international origin’.41 This is similar to a
position taken by the High Court of Australia in relation to the interpretation of the
Model Law on International Commercial Arbitration.42
13.3.1 Extrinsic Material
In Australia, the Federal Court has indicated that it is entitled to take extrinsic
materials into account in construing the Model Law, relying upon s 15AB of the
38
Re Stanford International Bank Ltd. [2011] Ch 33.
39
Ho, see footnote 75, 194–200.
40
Guide to Enactment of The UNCITRAL Model Law on Cross-Border Insolvency UN Doc
A/CN.9/442 [31].
41
Bruno Zeller, ‘Statutory Interpretation—the three stage approach’ [2014] 1 Curtain Law and
Taxation Review 31.
42
See TCL Air Conditioning (Zhongshan) Co Ltd. v Judges of the Federal Court of Australia
(2013) 295 ALR 596.
13.3 Private International Law in Interpretation of Model Law 221
Acts Interpretation Act 1901 (Cth).43 It is argued that both sections 15AA and
15AB of the Acts Interpretation Act 1901 (Cth) would allow reference to the Model
Law and UNCITRAL Guide as drafted as at the date of the passing of Cross-Border
Insolvency Act 2008 (Cth) as well as the Corporate Law Economic Reform
Program’s Proposals for Reform: Paper No 8,44 which preceded the introduction
of the Australian legislation adopting the Model Law in order to interpret the
Australian legislation so as to best achieve its purpose.45 The word ‘including’ in
section 15AB(2) suggests that the list of matters set out in the section that a court
may take into account is not intended to be exclusive. The court could look widely
to see what matters it can refer to providing these assist to determine the matters
referred to in subsection (1). There are no equivalent provisions to sections 15AA
and 15AB in the other States examined.46
In Australia, it is argued that the purpose of the Cross-Border Insolvency Act
2008 (Cth) is for the Model Law to have effect in Australia, subject to the modi-
fications made.47 Further, the explanatory memorandum that accompanies the bill
refers to Australian courts making use of international precedents in the interpre-
tation of the Model Law provisions.48 In relation to the interpretation of the
UNCITRAL Model Law on International Commercial Arbitration, the High Court
of Australia has stated that ‘[t]hose considerations of international origin and
international application make imperative that the Model Law be construed without
any assumptions that it embodies common law concepts’.49 It is argued that this
statement should also apply to the Model Law.
It is argued that although Article 8 allows reference to international material
including the UNCITRAL Guide in the interpretation of the Model Law, it may not
extend to domestic documentation created for the domestic enactment of its pro-
visions. These later documents would be able to be referenced pursuant to the
domestic rules of statutory interpretation such as sections 15AA and 15AB of the
Acts Interpretation Act 1901 (Cth). It may therefore be necessary to rely upon both
provisions, to see if the legislature intended to amend the relevant provisions of the
Model Law and the interpretation of Article 8 itself. Otherwise, Article 8, being the
Model Law’s own interpretative provision, would be used to reference foreign
material to determine the meaning of the provisions of the Model Law.
43
Tucker, re Aero Inventory (UK) Ltd. v Aero Inventory (UK) Ltd. [No 2] (2009) 181 FCR 374,
378 [22]; Raithatha v Ariel Industries PLC [2012] FCA 1526 (30 November 2012) [39].
44
Australian Department of Treasury, Corporate Law Economic Reform Program’s Proposals for
Reform: Cross-Border Insolvency—Promoting International Cooperation and Coordination
Paper No. 8 (2002).
45
Ibid 377-8 [21, 22].
46
See Interpretation Act, RSC 1985, c I-21; Interpretation Act 1999; Interpretation Act 1978 c30;
1 USC.
47
48
Explanatory Memorandum, Cross-Border Insolvency Bill 2008 (Cth), 21 [23, 24].
49
TCL Air Conditioner (Zhongshan) Co Ltd. v Judges of the Federal Court of Australia (2013) 295
ALR 596, 599 [8].
In all other States examined, as highlighted above, their courts have referred to
the UNCITRAL Guide when interpreting the provisions of the Model Law.
13.3.2 Vienna Convention
The Federal Court of Australia has, in interpreting the Model Law and acknowl-
edging Article 8, chosen to ignore this provision and instead sought to rely upon the
Vienna Convention to interpret the Model Law.50 The court has indicated that the
Model Law must be interpreted in accordance with Australian principles of statu-
tory interpretation which principles, using the Vienna Convention, allow it to have
regard to the preparatory material prepared by UNCITRAL in respect of the Model
Law. The court did not determine whether it could rely upon the provisions of
Article 8 to look at extraneous material when interpreting the Model Law.
The Vienna Convention is designed to assist with the interpretation of treaties.51
Treaties are defined in the Vienna Convention as ‘an international agreement
concluded between States in written form and governed by international law,
whether embodied in a single instrument or in two or more related instruments and
whatever its particular designation’.52 It is argued that the Model Law does not
constitute an agreement within the meaning of the Vienna Convention as it is
adopted by States incorporating it into their domestic Law. Further, as highlighted
in Chaps. 6–10, the Model Law has not been adopted by the States examined using
a common wording, and therefore cannot constitute an agreement comprised of two
or more agreements as envisaged by the above definition.
As the Model Law is a domestic law in each of the States examined, it is argued
that it is inappropriate to refer to the Vienna Convention for its interpretation. If
reliance can be placed on the Vienna Convention, it is submitted that it cannot be
used to interpret more than the provisions of Article 8 of the Model Law.53
It is arguable that both Article 8 of the Model Law and Articles 31 and 32 of the
Vienna Convention would require a court to look at the Model Law in its inter-
national context and to take account of other court decisions in other States when
interpreting its provisions. Further, it is arguable that pursuant to the requirement in
the Model Law ‘to promote uniformity in its application and the observance of
good faith’, a court must consider the preparatory work and subsequent material in
the UNCITRAL Guide and other UNCITRAL publications that existed at the time
50
See Ackers v Saad Investment Company Ltd. (in liq) (2010) 190 FCR 285, 295; Gainsford v
Tannenbaum (2012) 293 ALR 699, 707 [37]; Ackers v Deputy Commissioner of Taxation [2014]
FCAFC 57 (14 May 2014) [43].
51
Vienna Convention on the Law of Treaties 1969, opened for signature 26 May 1969 1155 UNTS
331 (entered into force 27 January 1980); [1974] ATS 2, art 5.
52
Ibid art 1(a).
53
See Bruno Zeller, ‘Statutory Interpretation—the three stage approach’ [2014] 1 Curtain Law and
Taxation Review 31.
13.3 Private International Law in Interpretation of Model Law 223
of its enactment in the interpretation of the Model Law.54 Such documents could
also be relied upon pursuant to Articles 31 and 32 of the Vienna Convention.
The High Court of Australia has indicated that a model law should be construed
‘without any assumptions that it embodies common law concepts or that it will
apply only to arbitral awards or arbitration agreements that are governed by com-
mon law principles’.55
Given the above, it is arguable that it was unnecessary for the Federal Court to
refer to the Vienna Convention and that the same result can be achieved by simply
relying upon the interpretation provisions contained in Article 8 of the Model Law
and the provisions of the Acts Interpretation Act 1901 (Cth).
13.3.3 Model Law Provisions
As highlighted above, there is still an interaction between the Model Law provi-
sions and each State’s respective principles of private international law, especially
those provisions which may not achieve the same outcome depending upon the
States involved and the nature of the relevant dealings and transactions. Given the
manner in which the Model Law was introduced and the differences that exist with
its incorporation into the domestic laws of the States considered, it is unlikely that
this or any consistency in the principles of private international law rules could be
achieved via an amendment to the Model Law or a separate model law that will deal
with its interpretation including agreement to a convention applying to its
interpretation.
Given the broad discretion that courts are given under the Model Law, it is
difficult to see how a Universalist approach will be achieved without a convention
being agreed upon by the States. Such a convention would provide a common
wording and overcome the present difficulties which have been created by States
not adopting the Model Law’s wording. It would also have to be given appropriate
domestic legislative effect.
Wade has gone a step further and argued that, given the increased lack of ability
to associate assets and liabilities with only one State and the increase in electronic
commerce, one set of laws should apply to such international insolvencies.56 She
has suggested that it is time to create international rules of law in relation to
international insolvency that are not dependent upon any individual State’s laws for
54
Ackers v Saad Investment Company Ltd. (in liq) (2010) 190 FCR 285, 291-2 [30].
55
TCL Air Conditioning (Zhongshan) Co Ltd. v Judges of the Federal Court of Australia (2013)
295 ALR 596, 599 [8] (French CJ and Gageler J). Referring to the UNCITRAL Model Law on
International Commercial Arbitration.
56
Judith May Wade, The Interrelationship of Private International Law Principles and
International Corporate Insolvency (Ph.D. Book, University of Melbourne 2002) 261-74.
its interpretation.57 It is argued that the international convention proposed by this

book could be the basis for such a law.
13.4 Uniform Choice of Law Rules
Given the issues identified above, the writer submits that a universal specialist set of
choice of law rules should be established in relation to insolvency and restructuring
proceedings.
It is argued that the proposed rules should provide a fair balance between
sovereignty issues and the rights of other parties to transactions so as to provide a
degree of commercial certainty to parties to a transaction.
13.5 ALI and IIL Guidelines
As there is no uniformity in the rules of private international laws between States,

the American Law Institute and the International Insolvency Institute in their
recently published guidelines have sought to promote Global Rules of Laws in
International Insolvency Cases.58 These rules provide a useful benchmark for courts
to consider when dealing with difficult principles of private international law issues.
To date, these rules have not been generally accepted by any State.
13.6 Summary
The Model Law does not specify the rules of private international law that apply. In
the majority of cases, the domestic rules will apply. Although the States considered
have similar choice of law rules due to their English common law heritage, the
same cannot be said for all States that have adopted the Model Law; this may
ultimately give rise to further conflicts which will persist until a common set of
conflict rules applies in relation to cross-border insolvencies.
57
Ibid 185, 192-3.
58
See Fletcher and Wessels, see footnote 23, Appendix II; The Global Principles for Cooperation
in International Insolvency Cases and Global Guidelines for Court to Court Communications in
International Insolvency Cases, presented to the 89th Annual Meeting of the American Law
Institute on 23 May 2012 and unanimously approved by the International Insolvency Institute
membership at its 12th Annual Conference, Court de Cassation, Paris, 22 June 2012, http://
iiiglobal.org/component/jdownloads/viewdownload/36/5897.html.
13.6 Summary 225
The Model Law contains interpretative provisions in Article 8 which, it is

argued, must be respected. There is still a necessary interaction between the Model
Law provisions and each State’s respective principles of private international law,
especially those provisions which may not achieve the same outcome depending
upon the States involved and the nature of the dealings and transactions involved.
It is argued that Article 8 cannot be relied upon to overcome the domestic
legislature’s intention to change to provisions of the Model Law as has occurred in
a number of the States examined. In such circumstances, the domestic rules of
interpretation apply, including those of choice of law.
Chapter 14
Interrelationship Between the Model Law
and the EC Regulation
Overview
The EC Regulation relates only to the recognition of insolvency proceedings

between States within the European Union (except Denmark which opted out
pursuant to the provisions of the Treaty of Amsterdam).1 However, the UNCITRAL
Guide refers to a number of essential concepts as having taken into account or
having similar meanings to those contained in the EC Regulation. This chapter:
• examines the interrelationship between the Model Law and the EC Regulation
and the extent to which decisions under the EC Regulation should be relied
upon in the interpretation of the Model Law;
• discusses amendments to the UNCITRAL Guide and its relationship with the
Amended EC Regulation are discussed which may widen the present differences
in the interpretation of essential common concepts such as COMI.
14.1 Interrelationship
In European States, when recognition is sought by a foreign representative from

outside Europe or when recognition is sought in States outside Europe, the issue
arises to what extent decisions under the EC Regulation or the Amended EC
Regulation in relation to equivalent issues, such as a finding of COMI, should be
followed in order to achieve harmonisation between findings under the EC
Regulation and those under the Model Law. Article 8 of the Model Law does not
strictly apply as the decisions are not made in relation to the Model Law. This issue
is further complicated where the wording of an individual article varies even
slightly between individual States’ enactment of the Model Law and the EC
Regulation.
1
Treaty of Amsterdam amending the Treaty on European Union, the Treaties establishing the
European Communities and certain related acts [1997] OJ C 340/01.

DOI 10.1007/978-981-10-5876-9_14
228 14 Interrelationship Between the Model Law …
The UNCITRAL Guide states that the Model Law took into account the pro-
visions of the EC Regulation at the time it was drafted.2 Further, it provides that the
Model Law offers a complementary regime to the EC Regulation.3
The UNCITRAL Guide also notes that the definition of COMI corresponds with
that under the EC Regulation,4 and that the definition of ‘foreign court’ has a
similar meaning.5 It states that the term ‘establishment’ was ‘inspired’ by the EC
Regulation.6 This interrelationship between the Model Law and the EC Regulation
is further supported by the Legislative Guide which provides that the appropriate
test to be applied for determining COMI is that referred to in Recital B of the EC
Regulation.7 The Legislative Guide notes that the EC Regulation provides a similar
definition with respect to ‘establishment’, although the definition in the EC
Regulation does not include services.8
Given the above, it is arguable that it was intended that the Model Law should be
interpreted consistently with the EC Regulation. The English Court of Appeal in
Stanford International Bank referred to the above provisions in the UNCITRAL
Guide and found that they saw nothing in the respective contexts of the Model Law
and the EC Regulation ‘to require different meanings to be given to the phrase
COMI’.9 The court found that the EC Regulation and the Model Law should be
interpreted consistently. The court further stated that it ‘should apply the Eurofood
test’.10 It is argued that the Court, in reaching this decision, must have been aware
of the provisions of the UK Article 3 of Model Law which provided that should
there be conflicts between the Model Law and an obligation under the EC
Regulation, then the EC Regulation would prevail. This finding of the Court of
Appeal makes practical sense in European States as it avoids the possibility of
inconsistent decisions being reached in respect of the place of the main proceedings
where a debtor does business both within and outside Europe. The same cannot
necessarily be said about States outside Europe to whom the EC Regulation does
not apply. The substituted wording in Article 3 in the UK enactment of the Model
Law which gives precedence to the EC Regulation is clearly of no relevance to the
other four States.
2
Guide to Enactment of The UNCITRAL Model Law on Cross-Border Insolvency UN Doc
A/CN.9/442 [18].
3
Ibid [19].
4
Ibid [31].
5
Ibid [74].
6
Ibid [75].
7
on Insolvency Law, UN Publications Sales No E.05.V.10 (United Nations, 2005),13 [13],41 [13].
8
Ibid 42 [15].
9
Re Stanford International Bank Ltd [2011] Ch 33, 67 [53–54].
10
Ibid 67 [54].
14.1 Interrelationship 229
14.1.1 COMI
In the USA the US Bankruptcy Court has stated:

The interrelationship between the EC Regulation and the Model Law in relation to the
interpretation of ‘centre of main interest’ has been accepted by the US Bankruptcy Court
which referred to the UNCITRAL Guide as referring to the concept of COMI being
modelled on that concept under the EC Regulation. The court further stated that:
In the regulation adopting the EU Convention, the COMI concept is elaborated upon as
“the place where the debtor conducts the administration of his interests on a regular basis
and is therefore ascertainable by third parties.”…This generally equates with the concept of
a “principal place of business” in United States law…
As noted by the European Court of Justice, the COMI presumption may be overcome
“particular[ly] in the case of a ‘letterbox’ company not carrying out any business in the
territory of the Member State in which its registered office is situated.”11
Similar comments have been made in respect of the interpretation of the term
‘establishment’.12
The European Court of Justice has indicated in respect of the definition of COMI
that a greater importance must be placed on the company’s central administration,
as may be established by objective factors which are ascertainable by third parties.
The court went on to state:
– where a company’s central administration is not in the same place as its registered
office, the presence of company assets and the existence of contracts for the financial
exploitation of those assets in a Member State other than that in which the registered
office is situated cannot be regarded as sufficient factors to rebut the presumption unless
a comprehensive assessment of all the relevant factors makes it possible to establish, in
a manner that is ascertainable by third parties, that the company’s actual centre of
management and supervision and of the management of its interests is located in that
other Member State;
– where a debtor company’s registered office is transferred before a request to open
insolvency proceedings is lodged, the company’s centre of main activities is presumed
to be the place of its new registered office.13
In relation to rebutting the presumption, the court stated that it requires an

enquiry to be made where the place in which a company’s central administration is
located is not the same as that of its registered office.14 This test appears to be more
consistent with the approach adopted by the US and Canada with respect to the
ability to rebut the presumption than that adopted in Australia, New Zealand and the
11
Re Bear Stearns High Grade Structured Credit Strategies Master Fund Ltd, 374 BR 122, 129
12
Re Ran, 607 F.3d 1017, 1020 (5th Cir, 2010); Re Millennium Global Emerging Credit Master
Fund Limited, 458 BR 63, n 49 (Bankr, SD NY, 2011).
13
Re Interedil Srl [2012] Bus LR 1582, 1593 [59].
14
Ibid 1592 [51–52].
UK. As observed in Sect. 8.2.1, this decision may also lead to the position in
relation to the rebuttal of the presumption set out by the English Court of Appeal in
Shierson, being re-examined.15 If the approach adopted by the European Court of
Justice is followed in Australia, New Zealand and the UK, and that court continues
down the path of this line of reasoning, it is arguable that it may lead to a con-
vergence of the positions in respect of the presumption in Article 16.
The question arises whether the European proposals for reform should be
amended so as to align themselves with the amendments proposed to the
UNCITRAL Guide with a view to creating uniformity. This, however, may require
legislative change in Australia, UK and the USA, in order to overcome any
uncertainty created by the principles of legislative sovereignty, which politically
might not be achievable.
14.1.2 Establishment
In relation to the definition of ‘establishment’, the European Court of Justice stated:

The fact that that definition links the pursuit of an economic activity to the presence of
human resources shows that a minimum level of organisation and a degree of stability are
required. It follows that, conversely, the presence alone of goods in isolation or bank
accounts does not, in principle, satisfy the requirements for classification as an
‘establishment’.16
The above statement appears at odds with the definition of ‘establishment’ in

both the UK and the US which has been altered from that contained in the Model
Law. This may give rise to a further divergence between the EC Regulation and the
interpretation of the Model Law in those States.
The above concepts enunciated by the European Court of Justice in Interedil
have been incorporated into the Amended EC Regulation.17 The 2014 amendments
to the UNCITRAL Guide are more proscriptive in relation to the factors to be
considered it may therefore be necessary for UNCITRAL to consider whether the
interrelationship should continue as there will, in effect, be a statutory definition of
the concept rather than relying upon the courts to interpret the same.
15
Shierson v Vlieland-Boddy [2005] 1 WLR 3966, 3985–6 [55].
16
Re Interedil Srl [2012] Bus LR 1582, 1594 [62].
17984
141/19 Recital 30.
14.1.3 Date of Recognition of COMI
As indicated in Sect. 1.1, the European Court of Justice has determined that the
appropriate time is the date when the request to open insolvency proceedings is
lodged.18 This differs from the dates which have been determined by courts in
Australia, New Zealand and the USA, although may correspond to the recent
amendments to the UNCITRAL Guide. This may give rise to inconsistent decisions
between the EC Regulation and the Model Law. This is especially the case where
recognition is sought both within and outside the European Union.
It must be borne in mind that the concept of COMI in the Model Law and EC
Regulation is used for different purposes as was pointed out by the New Zealand
High Court which stated:
In considering the authorities it is necessary to bear in mind that the Model Law and the EC
Regulation use the term “centre of main interests” for different purposes. The EC
Regulation uses the term to provide jurisdiction for the opening of a main insolvency
proceeding in a Member State. Such proceedings have universal scope and encompass all
the debtor’s assets within the European Union. On the other hand, the expression is used in
the Model Law purely for recognition purposes.19
14.1.4 EC Regulation
The EC Regulation emanates from a political community, the European Union,

whose member states have agreed to pool sovereignty and work towards a closer
union. The EC Regulation contained mandatory uniform rules on jurisdiction and
choice of law, whereas the Model Law does not purport to say which law should
govern insolvency proceedings which are opened in a particular State.20
Under the EC Regulation, a proceeding issued in one State is entitled to auto-
matic recognition in another EU member State. The Model Law, on the other hand,
requires an application to be made to the courts of each State in which recognition is
sought, which recognition is not automatic.21
The European Court of Justice has determined that the EC Regulation allowed a
court of the State of the centre of main interest which is within the European Union,
to set aside a prior transaction between the debtor and a defendant domiciled in a
third country as it conformed with the objective of the Regulation to promote the
proper functioning of the internal market. Such application would be made under
18
Re Interedil Srl [2012] Bus LR 1582, 1592–3 [55].
19
Williams v Simpson [No 5] [2010] NZHC 1786 (12 October 2010) [32].
20
See Gerard McCormack, ‘Universalism in Insolvency Proceedings and the Common Law’
(2012) 32 Oxford Journal of Legal Studies 325, 341.
21
See Goode, see footnote 276, 807–11 [16–32]–[16–36].
the laws of the State in which the debtor had its centre of main interest.22 This is
similar to the situation that exists under the Model Law, but highlights the need for
consistency between the EC Regulation and the Model Law so that inconsistent
decisions are not possible.
The European Court of Justice has found that it is for the national law of the
Member State in which insolvency proceedings have been opened to determine at
which moment the closure of those proceedings occurs.23 The EC Regulation
permits the opening of secondary insolvency proceedings in the Member State in
which the debtor has an establishment, where the main proceedings have a pro-
tective purpose.24 The court before which an application to have secondary insol-
vency proceedings opened has been made, cannot examine the insolvency of a
debtor against which main proceedings have been opened in another Member State,
even where the latter proceedings have a protective purpose.25
The same situation may not exist under the Model Law as there is no choice of
law provision in the Model Law like that contained in Article 4 of the EC
Regulation. It is possible under the Model Law for proceedings in different States to
be recognised as the foreign main proceedings as discussed in Chapters 5 and 8.
In non-European States, Article 8 of the Model Law is the only interpretive
provision that binds their courts. It is argued that they are therefore free to look at all
decisions made under the Model Law and to use lex fori concurus to determine
which competing line of authority to follow or to reach their own independent
conclusions.
14.1.5 Predilection of Insolvency Laws
The divergence of opinion in relation to the interpretation of the Model Law has
been said by one commentator to highlight the differences in their insolvency
regimes. ‘Whereas European systems are generally considered more solicitous
(which implies the bent toward corporate liquidation instead of rehabilitation), US
bankruptcy laws are more debtor-centric’.26 This predilection, if it exists, obviously
affects the way in which the courts interpret concepts common to both the EC
Regulation and the Model Law, and may not be something that can be overcome by
legislation as it is attitudinal. Given these different predispositions, it is arguable
that a different test for the two regimes may be appropriate. Alternatively, if it is
22
Schmid v Hertal [2013] EUECJ C-328/12.
23
Bank Handlowy w Warszawie SA v Christianapol sp zoo [2012] WLR (D) 340 [46].
24
Ibid [55].
25
Ibid [63].
26
Pedro Jose F Bernardo, ‘Cross-Border Insolvency and the Challenges of the Global Corporation:
Evaluating Globalization and Stakeholder Predictability through the UNCITRAL Model Law on
Cross-Border Insolvency and the European Union Insolvency Regulation’ (2012) 56 Ateneo Law
Journal 798, 827.
desirable to have uniformity as was suggested in Stanford International Bank, more

detailed and consistent interpretative provisions are needed to achieve this.
14.1.6 Changes to EC Regulation Since Model Law
On 20 May 2015 the European Council and Parliament passed a replacement EC

Regulation which was approved by the European Commission and commences on
26 June 2017.27 This new regulation is designed to determine which member States
should open insolvency proceedings, with territorial jurisdiction being determined
in accordance with the law of the member State.28
The amendments affect the interrelationship between the Model Law and the EC
Regulation by imposing a number of factors that must be looked at when deter-
mining COMI.29 These amendments will require a court to look at a smaller number
of factors than those required under the recent amendments to the UNCITRAL
Guide as referred to in Sect. 5.2.
The amendments include stating that whilst it is assumed that a corporate entity’s
COMI is its registered office, this presumption can be rebutted if its central
administration is located in another member State
and a comprehensive assessment of all the relevant factors establishes, in a manner that is
ascertainable by third parties, that the company’s actual centre of management and
supervision and of the management of its interests is located in that other Member State.30
In March 2014, the European Commission issued a number of common prin-

ciples which it has recommended that its member States adopt as national insol-
vency principles that encourage a shift toward restructuring. In particular it notes
that a number of member States including UK have laws that require amendment.
The European Commission recommends that these principles be adopted within
12 months.31 Only time will tell if the recommendations are adopted by its member
States and whether it changes this predilection. These recommendations, if adopted,
will necessarily result in changes to the EC Regulation as well as changes to the
way that the European Courts view insolvency law generally and their predilection
to it. This may also lead to a change in their interpretation of the Model Law.
27
Regulation EC No 848/2015of the European Council on Insolvency Proceedings [2015] OJ L
141/19.
28
141/19 recital 26.
29
141/19 Art 7(2).
30
141/19 recital 30.
31
European Commission ‘Insolvency: Commission recommends new approach to rescue busi-
nesses and give honest entrepreneurs a second chance’ (Press Release, IP/14/254, 12 March 2014).
14.1.7 Other Comments
Professor Westbrook has argued that we should not necessarily apply the same
COMI standard under the Model Law and the EC Regulation.32 It is argued that this
would appear to be inconsistent with the provisions of the UNCITRAL Guide and
would give rise to further inconsistencies in respect of the treatment of foreign
proceedings between Europe and the rest of the world.
Ho has suggested that where a debtor’s business was a fraud, the approaches
adopted under the EC Regulation and the Model Law may produce different results.
Under the EC Regulation, a public perception that its business is run from its
registered office will be almost determinative of the COMI location, even if it is all
smoke and mirrors. However, he argues that, if applying the US approach to COMI
under the Model Law,33 a court should not feel bound by the smoke and mirrors
and should be free to determine the true location of the debtor’s COMI.34 On the
other hand, it is arguable that should an intention to defraud be proven, a court
would look for the real ‘seat of power’ in order to give justice to the parties. Public
policy may also come into play to prevent the registered office being recognised.
A further difference may exist in respect of the rules of private international law.
The EC Regulation contains its own choice of law rule by providing that the
uniform law applicable to proceedings is that of the Member State in which such
proceedings are commenced (lex concurus).35 This has led to the European Court of
Justice determining that the EC Regulation must be interpreted as meaning that the
courts of the Member State within the territory of which insolvency proceedings
have been opened have jurisdiction to hear and determine an action to set a
transaction aside by virtue of insolvency that is brought against a person whose
place of residence is not within the territory of a Member State.36 As highlighted in
Sect. 13.3, this may not be the case under the Model Law as the domestic rules of
private international law apply in each State.
The list of current inconsistencies may lengthen if, as Veder speculates, courts
within the European Union apply the provisions of the EC Regulation wherever
they are inconsistent with the provisions of the Model Law.37 These inconsistencies
may arise because of the issues discussed above.
It is argued that these differences will continue, even after the Amended EC
Regulation commences, and UNCITRAL amendments to the UNCITRAL Guide
32
Lawrence, ‘Locating the Eye of the Financial Storm’ see footnote 474, 1021.
33
Applying the reasons in cases such as Re Ernst & Young Inc as Receiver of Klytie’s
Developments Inc, 383 BR 773 (Bankr, D Col, 2008).
34
Look Chan Ho, ‘Cross-border fraud and cross-border insolvency: Proving COMI and seeking
Recognition under the UK Model Law’ (2009) 29 Journal of International Banking and Financial
Law, 537, 549.
35
Art 4.
36
Schmid v Hertel [2014] 1 WLR 633.
37
Michael Veder, Cross-Border Insolvency Proceedings and Security Rights (Kluwer, 2004), 106.
are accepted in countries that have adopted the Model Law, as the legislative
definition differ and required different factors to be taken into account.
14.2 Reconciliation—ALI and LLI Guidelines
The American Law Institute and the International Insolvency Institute in their
recently published guidelines have sought to promote uniformity in the recognition
of both the EC Regulation and the Model Law and to encourage cooperation
between representatives of insolvent debtors.38 The aim of the principles enunciated
in the report was to provide ‘a standard statement of principles suitable for appli-
cation on a global basis in international insolvency cases. As in the ALI NAFTA
Principles, a ‘principle’ is a statement of value serving as guidance for behaviour in
cross-border insolvency cases’.39
Whilst these principles have no legislative effect, they do provide a benchmark
for comparing good conduct and useful suggestions for overcoming the difficulties
in the different interpretations of the EC Regulation and the Model Law. The
principles seek to harmonise the practical interpretation rules by restating the
provisions that appear in both the Model Law and EC Regulation in a way that has
a different emphasis, but without changing the substance of those provisions.40 The
principles also seek to clarify issues such as when COMI and establishment are to
be determined.41
14.3 Summary
It is argued that, although some of the concepts used in the Model Law including
centre of main interest and establishment are similar to or derived from the EC
Regulation, the purpose for which they are used is different. This different purpose
may be the justification for similar terms being given different meanings.
Whilst it may be desirable for commercial reasons to achieve uniformity in
outcomes under the Model Law and the EC Regulation, this might not be
achievable until phrases such as ‘centre of main interest’ and ‘establishment’ have a
uniform unequivocal meaning. It is argued that even with further explanation, this
will not overcome deliberate drafting changes made by some States to their
domestic version of the Model Law which may result in courts having to ignore
38
See Fletcher and Wessels see footnote 23.
39
Ibid 8–9.
40
See, e.g., principle 13 in relation to recognition of foreign proceedings and definition of centre of
main interest and establishment.
41
Principle 13.4.
such further definitions and explanations if they are not consistent with their
domestic version. As the Model Law is a domestic law, it will be virtually
impossible for each State that has adopted the Model Law to amend its local version
in order to clarify definitions. Although the proposed American Law Institute and
International Insolvency Institute global principles seek to advance this matter, they
have no legislative effect and therefore it will be difficult for courts to rely upon
them when interpreting the domestic version of the Model Law.
Chapter 15
Current Proposals Which May Affect
the Model Law
Overview
This chapter examines current proposals by UNCITRAL and other bodies that may
affect the future interpretation or implementation of the Model Law. The following
points are discussed:
• UNCITRAL is investigating the creation of a consistent set of director’s duties
that are to apply when a corporate entity is nearing insolvency. This is an issue
that relates possible causes of action that may exist against such director even
though they are not resident in the place of the foreign main proceeding.
• UNCITRAL is currently also exploring either separate model laws or conven-
tions or special provisions that should relate to both enterprise group and
financial institutions.
• At present, the Model Law applies only to individual entities and not enterprise
groups. The COMI of each member of that group must be determined sepa-
rately. Where this examination gives rise to different results it may affect the
ability of enterprise groups to properly restructure.
• All of the States examined exclude financial institutions from the provisions of
the Model Law, in part because they have separate domestic regimes in place in
respect of such institutions in order to protect both their voter-consumers and
domestic economies.
• UNCITRAL is presently examining the possibility of a new model awl in
relation to the recognition of foreign insolvency judgments.

DOI 10.1007/978-981-10-5876-9_15
238 15 Current Proposals Which May Affect the Model Law
15.1 Model Law Concepts
UNCITRAL is currently working on three issues which may affect the Model Law,
namely ‘Interpretation and Application of selected concepts of the Model Law on
Cross-Border Insolvency relating to centre of main interest’1 and Directors’ obli-
gations in the period approaching insolvency2; Insolvency of Large and Complex
Financial Institutions3 and mechanisms suitable for the insolvency of micro, small
and medium sized enterprises.4
As observed in Sect. 1.1, the UNCITRAL Guide has been amended to suggest
that where on an application for recognition there appears to be a separation
between the debtor’s registered office and its COMI, the party alleging that the
registered office is not the COMI will need to satisfy the court of the debtor’s
COMI. The court hearing the application for recognition will need to consider
independently the debtor’s COMI.5 As discussed in Sect. 5.2 this new test does not
appear to be consistent with that set out in the Amended EC Regulation which is to
provide a statutory definition of COMI.6 This inconsistency may lead to a further
division between the European States and those in North America in relation to the
interpretation of this phrase.
It is argued that whilst Practice Guides and interpretative statements and
amendments to the UNCITRAL Guide are issued by UNCITRAL, and others may
1
(Insolvency Law) on the work of its 43rd session (Vienna, 15–19 April 2013) UN Doc
A/CN.9/766 (26 April 2013); United Nations Commission on International Trade Law,
Border Insolvency relating to centre of main interests (COMI) 43rd session, UN Doc A/CN.9/WG.
V/WP.112 (11 February 2013).
2
United National Commission on International Trade Law, ‘Directors obligation in the period
approaching insolvency’ UN Doc A/CN.9/WG.V/WP.1113 (12 February 2013).
3
See United Nations Commission on International Trade Law, Report of Working Group V
(Insolvency Law) on the work of its 43rd session (Vienna, 15–19 April 2013) UN Doc A/CN.9/766
(26 April 2013) 9–15.
4
See United Nations Commission on International Trade Law, Mechanisms suitable for the
insolvency of micro, small and medium-sized enterprises: the UNCITRAL Legislative Guide for
Insolvency Working Group V (Insolvency Law) on the work of its 45th session (Vienna, 21–25
April 2014) UN Doc A/CN.9/WG.V.WP.121 (14 February 2014); United Nations Commission on
International Trade Law, Report of Working Group V (Insolvency Law) on the work of its 45th
session (New York, 21–25 April 2014) UN Doc A/CN.9/803 (6 May 2014) 4.
5
(Insolvency Law) on the work of its 43rd session (Vienna, 15–19 April 2013) UN Doc A/CN.9/766
(26 April 2013), 7 [36]; United Nations Commission on International Trade Law, Interpretation
and application of selected concepts of the UNCITRAL Model Law on Cross- Border Insolvency
(11 February 2013) 21.
6
European Commission, ‘Proposal for a Regulation of the European Parliament and of the Council
amending Council Regulation (EC) No 1346/2000 on insolvency proceedings’ 2012/0360 (COD),
recital 13a.
15.1 Model Law Concepts 239
represent a statement of what was intended or should be intended by the provisions

of the Model Law ipso facto, such documents may not be admissible before a court.
This is because such extrinsic materials did not exist at the time the domestic
legislation was enacted and therefore could not have been considered by their
legislature. Courts therefore cannot assume, except to the extent that it is otherwise
authorised by statute, that the legislature intended for such documents has been
referred to. Such an assumption would breach the principles of legislative sover-
eignty.7 Given the extent of the variations made to the text of the Model Law by
different States, the UNCITRAL Guide may not be relevant to the interpretation of
the domestic versions of the same in a number of States. It is arguable that Article 8
may allow reference to foreign or international extrinsic material that did not exist
at the time of enactment but only in so far as it relates to the domestic wording
adopted.
It would appear that UNCITRAL’s Working Group V have appreciated the
above difficulties at their meeting in December 2013 and have expressed support for
the goal of drafting a convention, although it expressed reservations as to its
feasibility.8
15.2 Directors’ Obligations
UNCITRAL’s Working Group V has produced a series of draft recommendations in

relation to a director’s obligations in the period approaching insolvency including
directors in enterprise groups.9 These duties include a duty to look after the interests
of creditors. The working group has agreed to adopt part of those recommendations
and the draft commentary which included reference to the cross-border insolvency
implications of their research.10
7
See, Jeffrey Goldsworthy, ‘Abdicating and Limiting Parliament’s Sovereignty’ (2007) 17 Kings
College Law Journal 255.
8
United Nations Commission on International Trade Law, Insolvency Law Background informa-
tion on topics comprising the current mandate of Working Group V and topics for possible future
work, Note by Secretariat, 44th session, UN Doc A/CN.9/WG.V/WP.117 (8 October 2013) 6–8;
United Nations Commission on International Trade Law, Report of Working Group V (Insolvency
Law) on the work of its 43rd session (Vienna, 16–20 December 2013) UN Doc A/CN.9/798 (8
January 2014) 6.
9
United Nations Commission on International Trade Law, Directors Obligations in the Period
Approaching Insolvency UN Doc A/CN.9/WG.V/WP.113 (12 February 2013).
10
(Insolvency Law) on the work of its forty-third session UN Doc A/CN.9/766 (26 April 2013), 9–15
[56–100].
15.3 Enterprise Groups
In 2010, UNCITRAL issued the legislative guide in relation to the next stage of
cross-border insolvency development, namely the treatment of enterprise groups in
insolvency.11 It has been observed that, to date, substantive consolidation in relation
to multi-jurisdictional insolvent enterprise groups has been difficult to achieve but
that procedural consolidation of the insolvency proceedings has been achieved,
depending upon the jurisdictions involved.12
The concept of an enterprise group COMI has previously been rejected by
UNCITRAL’s Working Group V. It was identified that a key issue in this decision
was the extent to which such a definition would be accepted by different States and
adopted and enforced by the courts of those States.13 The working group has, began
the process of drafting an addendum to the Model Law which deals with this issue.
To date no agreement has been reached as to its final terms. It is proposed that a
single insolvency practitioner would be able appointed to get appointed over an
enterprise group especially for the purposes of restructuring the group.14 Lastra has
commented that the issues involving corporate groups are more intractable as the
Model Law problems are largely solved at a national level, so the only difficulties
that had to be addressed were those that re-emerged at a multinational level. The
issues regarding multinational corporate groups are largely unresolved at a national
level and therefore it is more difficult to resolve them internationally.15 This has
clearly been evidenced by what has occurred with the Lehman Brothers
administrations.16
Given the diverse nature of enterprise groups and the degree of control that is
centralised, it is argued that it not possible to create a uniform set of rules for
dealing with them. The extent of the variance within groups ranges from those
wherein all substantial decisions are taken by the board of directors of the con-
trolling entity and where there is a centralised treasury vehicle which sweeps money
each day from group members’ bank accounts and pays it back so that bills can be
paid,17 to those that are more like a conglomerate in which each business line
11
United Nations Commission on International Trade Law, Legislative Guide on Insolvency Law,
Part three: Treatment of enterprise groups in insolvency UN Publication Sales No E.12.V.16., GA
Res 65/24 (6 December 2010).
12
Jacob Ziegel, ‘Corporate Groups and Cross-border Insolvencies: A Canada-United States
Perspective’ (2002) 7 Fordham Journal of Corporate & Financial Law 367, 376.
13
Eva M.F de Vette ‘Multinational enterprise groups in insolvency: how should the European
Union act?’ (2011) 7 Utrecht Law Review 216, 221.
14
(Insolvency Law) on the work of its 50th session (Vienna, 10–16 December 2016) UN Doc
A/CN.9/898 (21 December 2016).
15
Lastra, see footnote 43, 192 [8.20].
16
See Ho, ‘Conflict of Laws in Insolvency Transaction Avoidance’ see footnote 724.
17
See, e.g., Re iMarketing Solutions Group (2013) 227 ACWS (3d) 314; [2013] ONSC 2223 (15
April 2013).
15.3 Enterprise Groups 241
operates as a separate business and pays dividends once or twice yearly to its
controlling entity. It is recognised that even where there is no centralisation of
power within the head office, it may still be desirable to coordinate insolvency
proceedings of all such entities within a group for the purposes of restructuring.
Further, given the diverse nature of enterprise groups, it is difficult to see how a
‘one size fits all’ approach can be taken in this area. The extent of control exerted by
the centralised management may have a bearing upon the willingness of States to
concede jurisdiction to another State in any insolvency proceeding or restructuring.
It is difficult to see why in the case of say, conglomerates with totally different
business lines which may exist in different States, any State would be willing to
concede jurisdiction to another State which has no relationship with that business.
Enterprise groups also present a unique problem in that, while it may be
desirable to include them in insolvency proceedings for the purposes of a
restructuring of an enterprise group, including them may relieve officers of sub-
sidiaries being properly reviewed and held accountable for their actions. Each
subsidiary would have its own directors who would have responsibilities under the
domestic law of the States in which the corporate entity is incorporated and
operates. It is argued that States, for public policy reasons, may be unwilling to
relieve officers within their jurisdiction of their personal liabilities through such
restructuring activities.
The public policy of the State in which the subsidiaries are incorporated or
regulated may wish to ensure that those officers are held responsible for their
actions including any liability which they may have for insolvent trading or breach
of duties. Further, there is an issue as to whether domestic creditors should be
bound by a foreign insolvency or restructuring regime, where such entity traded
only within one State and creditors had a reasonable expectation that the laws of the
State would be applicable to them in their trading with that entity. In addition, it is
questionable whether solvent members of an enterprise group should be included
within restructuring proceedings and if so, whether the provisions of any conven-
tion should apply to those entities. There are clearly reasons both for and against the
inclusion of such entities. However, to date, no consensus has been reached in
relation to this issue.
It is arguable that where there is a centralised management function within an
enterprise group, one test that could be easily implemented to identify those
insolvency proceedings to be covered by any special provisions relating to enter-
prise groups would be to look at the entities’ centre of main interest and the
presumptions contained in Article 16(2) to determine if its vests in the head office. It
is recognised that this test would not deal with the situation identified above in
respect of the desirability of having all entities within the group coordinated for the
purpose of restructuring.
It is hoped that an acceptable framework will emerge for the recognition of
international enterprise groups which could form part of, or be an add-on to, any
proposed convention. In this context, enterprise groups may comprise more than
corporate entities and could also include trusts, partnerships and other former
business structures as authorised by different States’ domestic legislation.
Any law seeking to deal with enterprise groups should be supported by common
rules of accounting which would assist in the identification of assets and liabilities
between States, as well as standardised laws in respect of some procedural matters
such as priority payments in an attempt to overcome an individual State’s political
priorities.
15.4 Micro, Small and Medium Enterprises
Working Group V has just commenced its deliberations on this issue which
involves trying to achieve cost effective mechanisms for smaller business to either
restructure or be wound up without the business owners being in debt the rest of
their lives. The results will be incorporated into its Legislative Guide.
15.5 Financial Institutions
Following the commencement of the global financial crisis, there has been a
renewed effort, to examine for the purposes of reaching some agreements between
States, the framework applicable for the supervisory, legal and financial issues that
arise by virtue of the insolvency of a financial institution. These issues are exem-
plified by with the case of the Lehman Brothers Group.18 A number of bodies
including the Financial Stability Forum,19 Basel Committee on Banking
Supervision of the Bank for International Settlement20 and the International
Monetary Fund,21 have published recommendations in respect of this issue; how-
ever, to date no consensus has been reached other than a special form of coordi-
nated regulation being required.
UNCITRAL has recently developed a paper dealing with financial institutions.22
In this paper, they have suggested that until a coordinated approach can be agreed to
between States, the Model Law may provide the best mechanism at present by
18
See Re Lehman Brothers Holdings Inc 422 BR 404 (Bankr, SD NY, 2010); Perpetual Trustee
Company Limited v BNY Corporate Trustee Services Limited [2010] 2 BCLC 237; Perpetual
Trustee Company Limited v BNY Corporate Trustee Services Limited [2010] Ch 347, Belmont
Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd [2012] 1 AC 383.
19
Financial Stability Forum FSF Principles for Cross-border Cooperation on Crisis Management
(2 April 2009) www.financialstabilityboard.org/publications/r_0904c.pdf.
20
Bank for International Settlements, A framework for dealing with domestic systemically
important banks (October 2012) http://www.bis.org/publ/bcbs233.pdf.
21
International Monetary Fund Resolution of Cross-border Banks—a proposed framework for
enhanced coordination, (11 June 2010) www.imf.org/external/np/pp/eng/2010/061110.pdf.
22
See United Nations Commission on International Trade Law, Insolvency of Large and Complex
Financial Institutions 42nd session, UN Doc A/CN.9/WG.V/WP.109 (24 September 2012).
15.5 Financial Institutions 243
which such coordination can be achieved.23 However it is argued that this sug-
gestion, ignores that a number of States have excluded such financial institutions
from the operation of their domestic version of the Model Law where the same
debtor’s financial institution also operates in their State.24 Further, the EC
Regulation and the UK Insolvency Act exclude several financial institutions which
are governed by separate European Union Directives.25
In the US, Chapter 15 of the Bankruptcy Code does not apply to enforcement of:
(a) security contracts;
(b) commodity contracts;
(c) forward contracts;
(d) repurchase agreements;
(e) swap agreements; and
(f) master netting agreements.26
These exceptions are wider than those provided for in other States and effec-
tively means that not only the financial sector but also those entities that trade in
securities are also excluded for its operation.
One reason for these the Model Law not applying to these sectors is that different
consumer compensation schemes may also operate in each State. It would therefore
be politically difficult for States to act uniformly without some pre-existing con-
vention or treaty, which it is suggested would be difficult to achieve as governments
will be wanting to be seen as protecting their own citizens and people who bank
with their domestic banks, ahead of foreign citizens financial institutions. If a major
financial institution becomes insolvent the flow on effect this can have in an
economy are very large as was seen during the global financial crisis. A single State
may not be financially able to uniformly compensate those persons effected whilst
still seek to stabilize their economies.
UNCITRAL’s Working Group V has agreed to continue to monitor and assist
the Financial Stability Board who has established a legal panel to review this
issue.27
23
Ibid [62].
24
See, e.g., comments under preamble and Article 1 above.
25
Directive 2001/17/EC of the European Parliament and of the Council of 19 March 2001 on the
reorganisation and winding-up of insurance undertakings [2001] OJ L 110/28; Directive
2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation
and winding-up of credit Institutions [2001] OJ L 125/15; Cross-Border Insolvency Regulations
2006 SR 2006/1030 reg 36.
26
11USC §1501.
27
(Insolvency Law) on the work of its 43rd session (Vienna, 16–20 December 2013) UN Doc
A/CN.9/798 (8 January 2014) 7; United Nations Commission on International Trade Law,
Facilitating the cross-border insolvency of multinational enterprise groups: draft legislative
provisions UN Doc A/CN.9/WG.V/ WP.142 (3 October 2016).
15.6 Recognition of Foreign Insolvency Judgments
In an endeavour to get around the decision of the United Kingdom Supreme Court
in Rubin v Eurofinance,28 UNCITRAL’s Working Group V is drafting a proposed
model law allowing for the recognition of foreign insolvency judgments, especially
if the judgment comes from the jurisdiction of the debtors COMI.29 To date there is
no agreement in relation to the type of judgments to which the proposed model law
should extend and how it will interrelate with the Model Law on Cross Border
Insolvency. There is however an attempt to keep the definitions in the proposed
model law consistent with those in the Model Law on Cross Border Insolvency.30
15.7 Conclusion
Until such time as there is some international agreement in relation to how the issue
of enterprise groups is to be dealt with, in particular whether the state of the head
office function should govern the state with overall control of the debtor group’s
proceedings, it is argued that this issue should be left in abeyance and not be
included in any convention on cross-border insolvency. This issue can be addressed
by either a separate convention or an amendment to any future convention, once a
degree of unanimity has been arrived at.
The issue of directors’ duties may affect a States willingness to reach agreements
in relation to enterprise groups and financial institutions if one effect of a restruc-
turing is to alleviate or limit the directors’ liability which may lead to forum
shopping. The different predispositions States have to their insolvency laws will
also affect the way they view the issue of directors duties are viewed and the level
of obligation imposed upon directors.
Similarly, financial institutions should be dealt with separately as is evidenced in
the States examined they are generally subject to domestic compensation regimes
and special regulation which would make a uniformity of approach practically
impossible without some uniformity in those domestic schemes and regulation.
The issue identified in relation to insolvency judgements highlights the need to
uniform laws of interpretation and principles of private international law.
28
29
United Nations Commission on International Trade Law, Recognition and enforcement of
insolvency-related judgements :draft model law UN Doc A/CN.9/WG.V/ WP.143 (4 October
2016).
30
(Insolvency Law) on the work of its 50th session (Vienna, 10–16 December 2016) UN Doc
A/CN.9/898 (21 December 2016).
Chapter 16
Conclusions
Overview
In this chapter, the present issues that exist with the Model Law are summarised and
conclusions drawn in relation to the central issues examined by this book, namely:
(a) Do words matter?
(b) Has the Model Law achieved its aim of modified universalism?
(c) Does the Model Law achieve its purposes as set out in its preamble?
(d) How would an insolvent debtor with assets in each of Australia, Canada, New
Zealand, the UK and the USA and its foreign representative be treated in each
of those jurisdictions?
A summary of the findings of this book regarding the causes of the current
inconsistencies in the interpretation of the Model Law is presented and discussed.
16.1 Present Status of Model Law
The Model Law has been a large step forward in the recognition of international
insolvency administrations between States. As the manner in which the Model Law
should be enacted is not dictated, it can be inferred that it was envisaged that there
would be variations in its domestic enactment. This is evidenced by what has
occurred in both Canada and the USA where its provisions have been incorporated
into the existing legislation. In the USA, restrictions have also been placed on its
operation by restricting the operation of Chap. 15 to debtors that fit within Chap. 1
of the Bankruptcy Code.1 It would however appear that there is a low threshold to
satisfy the requirements to have property in the USA as it includes having a cause
of action in that jurisdiction or money in a trust account.2
1
11 USC §§103(a),109(a) Re Barnet, 737 F 3d 238 (2nd Cir, 2013).
2
Re Octaviar Administration Pty Ltd., 511 BR 361 (Bankr, SD NY, 2014).

DOI 10.1007/978-981-10-5876-9_16
246 16 Conclusions
In all States examined, the Model Law complements the existing statutory and
common law systems including comity in order to assist foreign courts when
dealing with cross-border issues. These systems continue to apply in relation to
those debtors who are excluded domestically from the operation of the Model
Law’s provisions.
This book shows that in all of the States examined (except Canada) their
domestic enactment of the Model Law has retained its core principles and those of
modified universalism. Canada has, on the other hand, worked within those core
principles even though they are not part of their domestic legislation. In practice,
this has resulted in a workable cross-border insolvency system although there has
been a lack of consistency in the interpretation of some of the key concepts,
especially the registered office presumption in relation to COMI.3
Further differences are also evident in relation to the interpretation of the public
policy exception identified in Sect. 6.9, particularly as that exception is being
interpreted in the USA and includes commercial considerations.
This book shows that some of the differences in the enactment and interpretation
of the Model Law arise from a difference in attitude or predisposition in relation to
the operation of insolvency and restructuring laws. These differences arise from a
conceptual difference among the jurisdictions concerning the balance of rights of
the parties in insolvency. These differences have been summarised as ‘[w]hereas
European systems are generally considered more solicitous which implies the bent
toward corporate liquidation instead of rehabilitation; US bankruptcy laws are more
debtor-centric’.4 This issue is further complicated by the US courts being required
by their enactment to protect the interests of their domestic creditors.5 The writer
argues that this predilection may not be something that can be overcome by
amending the domestic legislation enacting the Model Law as there may not be the
political will to do so due to cultural differences which may present obstacles.
Further, whilst the Model Law is incorporated into existing legislation, the
predilection of that legislation will continue to influence the interpretation of the
Model Law.
Despite the provisions of Article 8, the domestic courts of individual States
cannot ignore the words used in their domestic legislation or the intention expressed
by their legislature when enacting their domestic version of the Model Law.
Further, it is argued that principles of legislative sovereignty may prevent courts
looking to any amendments to the UNCITRAL Guide made after the date of the
enactment of their domestic law when interpreting the provisions of the Model Law.
An inherent difficulty with a model law is that, in order for there to be consis-
tency in its interpretation, the Model Law should be enacted by adopting States with
3
See Nora Wouters and Alla Raykin ‘Corporate Group Cross-Border Insolvencies Between the
United States and European Union: Legal & Economic Developments’ (2013) 29 Emory
Bankruptcy Developments Journal 387.
4
Bernardo, see footnote 993, 827.
5
11 USC §1507(b).
16.1 Present Status of Model Law 247
as little variation as possible. This book shows that in the States reviewed, this has
not occurred and Article 8 cannot be used to achieve consistency. Each State has
sought to incorporate the Model Law into its domestic law by different means
which has resulted in different predispositions to interpretation of its provisions. In
addition, this book shows that in the UK, a preference has been expressed for the
interpretation to be consistent with the EC Regulation. In Canada, they have chosen
to delete a number of the provisions. Whilst in the United States their Congress has
intentionally amended the wording, particularly in respect of the rebuttable pre-
sumption contained in Article 16. In addition, in order for the Model Law to apply
in the USA, the debtor must be a debtor within the meaning of Chap. 1 of their
Bankruptcy Code. The lack of consistency and predictability of decisions may be a
reason why only 20 countries and one territory have adopted the Model Law.6
For the reasons set out in Chap. 14, it is desirable that there be consistency in the
interpretation of the Model Law and the EC Regulation in relation to common key
concepts including ‘centre of main interest’ and the rebuttable presumption asso-
ciated with it and the term ‘establishment’.
This book further shows that the courts should seek to develop a uniform set of
choice of law and conflict of laws rules and choice of forum in relation to insol-
vency matters.
16.2 Does the Model Law Achieve Its Objectives?
The above chapters highlight a number of instances where there have been
inconsistent enactments or interpretations of the Model Law, and other issues that
have arisen from the inconsistent enactment of the provisions of the Model Law. As
the Model Law has been enacted as domestic law and the local legislature has
chosen to amend its text, the provisions of Article 8 cannot be used to overcome
these inconsistencies.
As highlighted in Chaps. 5 and 14, the differences in interpretation may also be
in part due to cultural differences and predispositions in the insolvency laws
between the North American States and Europe. Whilst it was intended to allow
States to modify the provisions of the Model Law, the lack of consistency in the
enactment and interpretation has led to a lack of consistency in courts’ decisions
between States which is creating commercial uncertainty for business, for whose
benefit the Model Law was drafted.
On the other hand, despite a large degree of consistency having been achieved in
the interpretation of some provisions of the Model Law, and what has been
described by Lord Hoffman as the ‘golden thread’ of cross-border insolvency,7 it is
6
http://www.uncitral.org/uncitral/en/uncitral_texts/insolvency/1997Model_status.html.
7
McGrath v Riddell [2008] 3 All ER 869, 881[30], cited in Ackers v Saad Investment Company Ltd
(in liq) (2010) 190 FCR 285, 295 [47].
248 16 Conclusions
argued that the Model Law has generally achieved its stated aim of modified
Universalism. This book shows that a large degree of consistency has been
achieved in the interpretation of a majority of the provisions of the Model Law. The
courts in the USA have interpreted the provisions of Chap. 15 so as to get around
some of the issues created by their legislature, such as allowing foreign law to be
used in respect of antecedent transactions. However, there remain areas in the
interpretation where inconsistent court decisions have affected the interpretation of
an essential concept such as COMI. In addition, there are inconsistent decisions in
relation to choice of law, such as applying foreign laws to set aside antecedent
transactions as highlighted in Sect. 11.3.4.2. Further, in the USA, they have limited
the application of the Model Law to debtors who reside or are domiciled in the USA
or have property or a place of business in the USA.8 This has limited the class of
debtors to which it applies. It is acknowledged however that a fairly low threshold
has been established in order to satisfy these requirements.9
On the other hand, this book shows that the Model Law has not achieved all of
its stated objectives as set out in its Preamble. Summarised below is each of those
objectives and a number of reasons why those objectives are not being achieved in
the jurisdictions examined:
(a) Cooperation between the courts and other competent authorities of the State in
which it is enacted and foreign States involved in cases of cross border
insolvency
Cooperation under the Model Law is contingent upon recognition of a foreign
proceeding and especially a foreign main proceeding. As highlighted in
Chapters 5,7 and 8 the differences in the interpretation of the concepts of COMI
and establishment, especially between Europe and the Americas has meant that
this objective is not being meet.
(b) Greater legal certainty for trade and investment
In Canada, a large number of the articles contained in the Model Law have not
been included in their domestic enactment of the Model Law including Article
8. It can be argued that in such a circumstance, the legislation should be
interpreted by relying solely upon the domestic rules of interpretation as the
legislature has intentionally not included the interpretative provision within the
Model Law that obliges it to be interpreted with regard to its international
origins and to promote uniformity. The effect of this is that Canadian decisions
cannot be relied upon when interpreting the provisions of the Model Law.
In the UK, the word ‘assets’ has been substituted for the word ‘goods’ in the
definition of ‘establishment’.10 This amendment has clearly been intentional,
but is not explained as it is inconsistent with the definition contained in the EC
Regulation although it may be consistent with the intended meaning as dis-
cussed above in Sect. 5.3. The effect of this is that some UK decisions cannot
8
11 USC §§103(a), 109(a); Re Barnet, 737 F 3d 238 (2nd Cir, 2013).
9
See Re Octaviar Administration Pty Ltd, 511 BR 361 (Bankr, SD NY, 2014).
10
Collins et al, see footnote 158, 1634 [30–186].
16.2 Does the Model Law Achieve Its Objectives? 249
be relied upon when interpreting the provisions of the Model Law, further it
may create inconsistent results when compared to applications for recognition
made in other States.
The position of the USA regarding the application of the foreign law to ante-
cedent transactions has made the legal position less certain for creditors within
that country which may discourage them from foreign trade for fear of being
bound by foreign laws that they do not know or understand.
Further, there is the present inconsistent interpretation of the concept of ‘centre
of main interest’ between the States examined as highlighted in Chap. 12, and
the different interpretation of this concept between the EC Regulation and the
Model Law as highlighted in Chap. 14. This uncertainty is further evidenced by
the different choice of law and conflict of law rules in each of the jurisdictions
examined. These rules are further complicated by the relevant States’ treaty
requirements, with Canada and the USA bound by the protocols and rules
established pursuant to the North American Free Trade Agreement, whilst the
UK is a member of the EU and bound by its legislation and procedures.
(c) Fair and efficient administration of cross-border insolvencies that protects the
interests of all creditors and other interested persons including the debtor
The provisions in the USA version of Article 6 of the Model law including that
which requires their courts to take account of the protection of claim holders in
the United States against prejudice and inconvenience in the processing of
claims in foreign proceeding, means that the US courts are to give priority to
their domestic creditors.11
On the other hand the ability to apply foreign law in respect of antecedent
transactions in the USA means that their domestic creditors may be bound by
laws which they are not aware of.
(d) Protection and maximisation of the value of the debtor’s assets
The requirement in the USA that Chapter 1 of the Bankruptcy Code applies to
the Model Law provisions under Chapter 15 of the Bankruptcy Code, has
resulted in the US Court of Appeals finding that Chapter 15 only applies to
debtors to which section 109 of the Bankruptcy Code applies. A debtor must
reside, be domicile, have a place of business, or property in the United States.12
This provision unduly limits the ability of foreign representatives to seek
recognition pursuant to the Model Law. Despite the low thresholds imposed by
the US courts, these provisions may restrict proper investigation being con-
ducted of officers of a foreign debtor resident in the USA by foreign repre-
sentatives which may result in this objective not being achieved, especially in
relation to debtor administrations with limited funds.
(e) Facilitation of the rescue of finally troubled businesses, thereby protecting
investment and preserving employment
11 USC §1507(b) (2012).

11
11 USC §§103(a),109(a); Re Barnet, 737 F 3d 238 (2nd Cir, 2013).

12
250 16 Conclusions
The predisposition for liquidation in the Australia and New Zealand and the
fact that their administration regimes cannot bind secured creditors and stop
them enforcing their securities means that they cannot achieve this objective. In
the UK a floating charge holder cannot appoint a receiver.13 Chapter 11 pro-
ceedings in the USA and the provisions of the Canadian CCAA provide the
maximum protection for investments and preserving employment by having
procedures that prevent secured creditors enforcing their securities. Until all
States offer restructuring proceedings which bind all creditors and grant a wide
uniform stay of proceedings upon recognition, this objective cannot be
achieved.
The writer argues that the amendments to the UNCITRAL Guide and the
Amended EC Regulation will not achieve the desired uniformity as they continue to
apply different tests to the key concept of centre of main interest. Further, as
highlighted in Chap. 12, there is the question of whether the principles of legislative
sovereignty will prevent such amendments being used by the courts in a number of
the States examined.
Until consistency of wording and manner of interpretation is achieved, it is
argued that the inconsistencies will continue to exist regarding the interpretation
and implementation of the Model Law in respect of the States examined.
In addressing how an insolvent debtor with assets in each of Australia, Canada,
New Zealand, the UK and the USA and its foreign representative would be treated
in each of those jurisdictions, account must be taken of the different wording used
by each of the States examined in their domestic version of the Model Law. The
outcome of any application for recognition may be different in the courts of each
State. Hence, in more difficult cases where there is a difference between the place of
the debtor’s centre of main interest and its registered office or place of habitual
residence, the individual State’s rules in relation to private international law should
be examined. However, it is anticipated that this would apply to only a small
number of cases. In the majority of cases, consistent decisions will be arrived at
under the Model Law’s provisions, thereby achieving its stated aim of promoting
modified Universalism. However, where such differences do arise, especially where
recognition is sought under both the Model Law and EC Regulation, this will lead
to commercial uncertainty and the possibility of inconsistent decisions as is high-
lighted by both the Stanford Bank and Lehman Brothers insolvency proceedings.
16.3 Factors Giving Rise to Inconsistencies
As identified in earlier chapters a number of factors have given rise to the present
inconsistencies in the interpretation and operation of the Model Law in the States
examined. These factors include:
13
Insolvency Act 1986 (UK) c 45 s72A.
16.3 Factors Giving Rise to Inconsistencies 251
(a) the manner of the introduction of the Model Law into the domestic legislation
of each State;
(b) amendments and deletions made to the Model Law in the domestic legislation
enacting it;
(c) the incorporation of different domestic insolvency principles into the interpre-
tation of the Model Law by its enacting legislation;
(d) the different predispositions the States have in relation to insolvency law;
(e) different prerequisite for States invoking jurisdiction over an insolvent debtor or
a debtor requiring restructuring;
(f) some States seeking to state that they can impose their jurisdiction worldwide
once they are ceased of jurisdiction under their domestic law;
(g) different rules relating to conflicts of law;
(h) different rules relating to choice of law; and
(i) other treaties or agreements to which the States are bound, which affect their
predisposition in relation to the interpretation of the Model Law.
These factors show that the Model Law is not fulfilling all its stated objectives as
set out in its preamble. Further amendments made to the UNCITRAL Guide may be
of no effect in all the States discussed except New Zealand given the principles of
legislative sovereignty.
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Re Northstar Aerospace Inc (2012) 91 CBR (5th) 268; [2012] ONSC 4423 (30 July 2012)
Re Oas SA, 2014 WL 4197076 (Bankr, SD NY, 2015)
Re Octaviar Administration Pty Ltd, 511 BR 361 (Bankr, SD NY, 2014)
Re Office Metro Limited [2012] BCC 829
Re Osborn; Ex Parte Trustee [1931-1932] B & CR 189
Re Oversight and Control Commission of Avanzit, 385 BR 525 (Bankr, SD NY, 2008)
Re Pacific Northstar Property Group LLC [2009] NZHC 965 (29 September 2009)
Re Payless Holdings LLC 2017 ONSC 2242 (20 April 2017)
Re Pope & Talbot Ltd (2010) 72 CBR (5th) 140
Re Probe Resources Ltd, (2011) 79 CBR (5th) 148
Re Pro-Fit Holdings Ltd, 391 BR 850 (Bankr, CD Cal, 2008)
Re Qimonda AG, 433 BR 547 (Dist, ED Va, 2010)
Re Qimonda AG, 462 BR 165 (Bankr, ED Va, 2010)
Re Ran, 607 F 3d 1017 (5th Cir, 2010)
Re Real Estate Development Co [1991] BCLC 210
Re Rede Engeria SA, 2014 WL 4248121 (Bankr, SD NY, 2014)
Re Rivkin [2009] Bus LR 500
Re Samsun Logix Corporation [2009] BPIR 1502
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Bibliography 265
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Re Spansion Inc, 418 BR 84 (Bankr, D Del, 2009)
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Re Stanford International Bank Ltd [2011] Ch 33
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Re Swissair Schweizerische Luftverkehr-Aktiengesellschaft [2010] BCC 667
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Re Thow, 392 B.R 860 (Dist, D Wash, 2007)
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Re Tradex Swiss AG, 384 BR 34 (Bankr, D Mass, 2008)
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The Trustees of the Olympic Airlines S.A. Pension and Life Assurance Scheme v Olympic Airways
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Trustees of the Olympic Airlines SA Pension & Life Insurance Scheme v Olympic Airlines SA
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Tucker, re Aero Inventory (UK) Ltd v Aero Inventory (UK) Ltd [No 2] (2009) 181 FCR 374
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Yu v STX Pan Ocean Co Ltd (South Korea) (2013) 23 FCR 189
Zayed v Cook & Ors (2009) 62 CBR (5th) 114
C. Legislation
1 USC
11 USC
28 USC
An Act to Amend the Bankruptcy and Insolvency Act, the Companies' Creditors Arrangement Act,
the Wage Earner Protection Program Act and Chapter 47 of the Statutes of Canada, 2005 S.C,
2005, c.C-47
Banking Act 2009 c 1 (UK)
Bankruptcy Abuse Prevention and Consumer Protection Act 2005 Pub L 109-8 119 Stat 23 (2005)
(USA)
Bankruptcy Act 1869 (32 & 33 Vict c 71) (Eng)
Bankruptcy Act 1966 (Cth)
Bankruptcy and Insolvency Act, RSC 1985, c B-3
Commercial Arbitration Act 2011 (Vic)
Companies Act 1993 (NZ)
Companies Act 2006 c 46 (UK)
Companies Creditors Arrangement Act, RSC 1985, c C-36
Corporations Act 2001 (Cth)
Cross-Border Insolvency Act 2000 (South Africa)
Cross-Border Insolvency Act 2008 (Cth)
Cross-Border Insolvency Regulations 2006 (NZ)
Cross-Border Insolvency Regulations 2006 SR 2006/1030 (UK)
Cross-Border Insolvency Regulations 2008 (Cth)
Enterprise Act 2002 c 40 (UK)
Federal Court (Corporations) Rules 2000 (Cth)
Financial Collateral Arrangements (No 2) Regulations 2003 (UK) (SI 2003/3226)
Insolvency (Cross-border) Act 2006 (NZ)
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Insolvency Act 1986 c 45 (UK)

Insolvency Act 2000 c39 (UK)
Insurance Act 1973 (Cth)
Insurers (Reorganisation and Winding Up) Regulations 2004 (UK) (SI 2004/353)
Interpretation Act 1978 c30 (UK)
Interpretation Act 1999 (NZ)
Interpretation Act, RSC 1985, c I-21
Mutual Recognition Act 1992 (Cth)
Receiverships Act 1993 (NZ)
Regulation EC No 1346 /2000 of the European Council on Insolvency Proceedings [2000] OJ L
160/1
Regulation EC No 848 /2015 of the European Parliament and Council on Insolvency Proceedings
[2000] OJ L 141/19
The Enterprise Act 2002 (Insolvency) Order 2003 (UK) SI 2003/2096
United States Constitution
Winding-up and Restructuring Act, RSC 1985, c.W-11
D. Treaties
Convention on Choice of Courts Agreement, opened for signature 30 June 2005 [2005] UKTS
14169 (entered into force 1 October 2005)
Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft
Equipment, opened for signature 16 November 2001 [2001] ATNIF 35 (entered into force 16
November 2001)
Convention on Mutual Administrative Assistance in Tax Matters, open for signature 25 January
1988 [2012] ATS 38 (entered into force 11 December 2011)
Montevideo Treaty on Commercial International Law (entered into force 1889)
Protocol to the Convention on International Interests in Mobile Equipment on Matter Specific to
Aircraft Equipment, opened for signature 16 November 2001 [2001] ATNIF 36 (entered into
force 16 November 2001)
The Convention on Abolishing the Requirements of Legalisation for Foreign Public Documents,
Hague Conference on Private International Law, [1995] ATS 11 (entered into force 24 January
1965)
Treaty of Amsterdam amending the Treaty on European Union, the Treaties establishing the
European Communities and certain related acts [1997] OJ C 340/01
Treaty on Functioning of the European Union [2010] OJ C 83/49
United National Convention on Contracts for the International Sale of Goods, opened for
signature 11 April 1980, [1988] ATS 32 (entered into force 1 January 1988)
Vienna Convention on the Law of Treaties 1969, opened for signature 30 November 1969,[1974]
ATS 2 (entered into force in Australia 27 January 1980)
E. Other
Agreement on the European Economic Area [1994] OJ L 1 /3 http://www.efta.int/*/media/

Documents/legal-texts/eea/the-eea-agreement/Main%20Text%20of%20the%20Agreement/
EEAagreement.pdf
Australian Department of Treasury, Corporate Law Economic Reform Program’s Proposals for
Reform: Cross-Border Insolvency - Promoting International Cooperation and Coordination
Paper No 8 (2002)
Australian Law Reform Commission, General Insolvency Inquiry, Report No 45 (1988).
268 Bibliography
Bank for International Settlements, A framework for dealing with domestic systemically important
banks (October 2012) http://www.bis.org/publ/bcbs233.pdf
Canadian Library of Parliament Legislative Summary, “Bill C-12:An Act to Amend the Bankruptcy
and Insolvency Act, The Companies Creditors Arrangement Act, The Wage earner Protection
Program Act and Chapter 47 of the Statutes of Canada 2005”, LS -584E (14 December 2007)
Canadian Parliamentary Debates, House of Commons, 9 October 2007, 1509, (The Honourable
Peter Milliken)
Canadian Parliamentary Debates, House of Commons, 9 October 2007, 1515, (The Honourable
Peter Milliken)
Canadian Parliamentary Information and Research Service ‘Bill, C-12: An Act to Amend the
Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act, the Wage Earner
Protection Program Act and Chapter 47 of the Statutes of Canada 2005’ Legislative Summary
584E (2007)
Directive 2001/17/EC of the European Parliament and of the Council of 19 March 2001 on the
reorganisation and winding-up of insurance undertakings [2001] OJ L 110/28
Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the
reorganisation and winding-up of credit Institutions [2001] OJ L 125/15
European Commission ‘Insolvency: Commission recommends new approach to rescue businesses
and give honest entrepreneurs a second chance’ (Press Release, IP/14/254, 12 March 2014)
European Commission ‘Insolvency: European Parliament backs Commission proposal to give
viable businesses a “second chance”’ Memo /145/88 (5 February 2014)
European Commission, ‘Proposal for a Regulation of the European Parliament and of the Council
amending Council Regulation (EC) No 1346/2000 on insolvency proceedings’ 2012/0360
(COD)
European Commission ‘Proposal for a Directive of the Europena Parliament and of the Council on
preventive restructuring frameworks, second chance and measures to increase efficiency of
restructuring, insolvency and discharge procedures and amending Directive 2012/30/EU’
2016/0359 (COD)
Explanatory Memorandum, Cross-Border Insolvency Bill 2008 (Cth)
Federal Court of Australia Cross Border insolvency Practice Note : Cooperation with Foreign
Courts of Foreign Representatives (GPN-XBDR) (25 October 2016) http://www.fedcourt.gov.
au/law-and-practice/practice-documents/practice-notes/gpn-xbdr
Financial Stability Forum FSF Principles for Cross-border Cooperation on Crisis Management
http://www.financialstabilityboard.org/publications/r_0904c.pdf
International Monetary Fund Resolution of Cross-border Banks – a proposed framework for
enhanced coordination, http://www.imf.org/external/np/pp/eng/2010/061110.pdf
New South Wales Supreme Court, Practice Court SC Eq 6, Supreme Court Equity Division –
Cross-Border Insolvency: Cooperation with Foreign Courts or Foreign Representatives (11 March
2009), http://www.lawlink.nsw.gov.au/practice_notes/nswsc_pc.nsf/a15f50afb1aa22a9ca2570ed
000a2b08/db2a09ee87866a04ca257577007983ae?OpenDocument
New Zealand Law Reform Commission, Cross-border Insolvency: Should New Zealand Adopt the
UNCITRAL Model Law on Cross-border Insolvency? Report No 52 (1999)
Supreme Court of Victoria, Cross-Border Insolvency Applications and Cooperation with Foreign
Courts or Foreign Representatives and Coordination Agreements (30 January 2017), http://
assets.justice.vic.gov.au//supreme/resources/77e1a5a7-3748-4131-a7d4-ddd5cd72b881/
cc6crossborderinsolvency.pdf
The Standing Senate Committee on Banking Trade and Commerce in its Seventeenth Report of the
38th Parliament (24 November 2005).
United National Commission on International Trade Law, “9th Multinational Judicial Colloquim,
UNCITRAL- INSOL- World Bank” Singapore, (12-13 March 2011).
United Nations Commission on International Trade Law, Annotated Provisional Agenda for the
Thirty-First Session of the Working Group V, UN Doc A/CN.9/WG.V/WP.73 (22 September
2006)
Bibliography 269
United Nations Commission on International Trade Law, Developments in insolvency law:

adoption of the UNCITRAL Model Law on Cross-Border Insolvency; use of cross-border
protocols and court-to-court communication guidelines and case law on interpretation of
“centre of main interest” and “establishment” in the European Union UN Doc A/CN.9/580
(14 April 2005)
Approaching Insolvency – Note by Secretariat, 42nd session, UN Doc A/CN.9/WG.V/WP.108
(17 September 2012)
United National Commission on International Trade Law, Directors Obligation in the Period
Approaching Insolvency UN Doc A/CN.9/WG.V/WP.104 (17 December 2012)
Approaching Insolvency UN Doc A/CN.9/WG.V/WP.113 (12 February 2013)
United Nations Commission on International Trade Law, General Assembly, Draft Legislative
guide on insolvency law UN Doc A/CN.9/WG.V/WP.70
United Nations Commission on International Trade Law, General Assembly, Legislative Guide on
Insolvency Law UN Publication Sales No E.05.V.10 (United Nations, 2005)
Model Law on Cross-Border Insolvency, UN Doc A/CN.9/442 (19 December 1997) as
approved by GA Res A/RES/52/158 (1997) (30 January 1998) and amended by GA Res
A/RES/68/107 (2013) (16 December 2013)
United Nations Commission on International Trade Law, Insolvency Law Background information
on topics comprising the current mandate of Working Group V and topics for possible future
work, Note by Secretariat, 44th session, UN Doc A/CN.9/WG.V/WP.117 (8 October 2013)
United Nations Commission on International Trade Law, Insolvency of Large and Complex
Financial Institutions 42nd session, UN Doc A/CN.9/WG.V/WP.109 (24 September 2012)
United Nations Commission on International Trade Law, Insol International, World Bank, ‘9th
Multinational Judicial Colloquium’ (Singapore, 12-13 March 2011)
United Nations Commission on International Trade Law, Interpretation and application of
of main interests (COMI) 41st session, UN Doc A/CN.9/WG.V/WP.103 (28 February 2012)
of main interests (COMI) 42nd session, UN Doc A/CN.9/WG.V/WP.107 (13 September 2012)
of main interests (COMI) 43rd session, UN Doc A/CN.9/WG.V/WP.112 (11 February 2013)
United Nations Commission on International Trade Law, Legislative Guide on Insolvency Law,
Part three: Treatment of enterprise groups in insolvency, UN Publication Sales No E.12.V.16.,
GA Res 65/24 (6 December 2010)
United Nations Commission on International Trade Law, Model Law on Cross-Border Insolvency,
GA Res 52/158, UN GAOR, 6th Comm, 52nd sess, Agenda Item 148, UN Doc A/RES/52/158
(30 January 1998)
United Nations Commission on International Trade Law, Possible Future Work, Note by
Secretariat addendum, Cross Border Insolvency UN DocA/CN.9/378 (23 June 1993).
Law) on the work of its 43rd session (Vienna, 15-19 April 2013) UN Doc A/CN.9/766
(26 April 2013)
Law) on the work of its 45th session (New York, 21-25 April 2014) UN Doc A/CN.9/803
(6 May 2014)
Law) on the work of its 50th session (Vienna, 10-16 December 2016) UN Doc A/CN.9/898
(21 December 2016)
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(19 May 2014)
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(19 May 2014)
United Nations Commission on International Trade Law, The UNCITRAL Model Law on
Cross-Border Insolvency: the judicial perspective UN Doc A/CN.9/732 (21 December 2011)
International Commercial Arbitration UN Doc A/57/172 GA Res 57/562 (19 November 2002)
Cross-Border Insolvency: the judicial perspective, 46th session, UN Doc A/CN.9/778 (3 May
2013)
United Nations Commission on International Trade Law, ‘UNCITRAL establishes informal
open-ended group to study feasibility of developing an international insolvency convention’
http://www.uncitral.org/uncitral/en/data/whats_new/2014_06_informal-open-ended-study-
group.html
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Cross-Border Insolvency Cooperation, UN Publication Sales No E.10.V.6, GA Res 61/112
(16 December 2009)
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V.3 (United Nations, 2003)
United Nations, Revision of the Guide to Enactment of the Model Law on Cross-Border Insolvency
GS Res 68/107 UN GOAR 68th sess, UN Doc A/Res/68/107A (16 December 2013)
US House of Representatives Committee on the Judiciary, Bankruptcy Abuse Prevention and
Consumer Protection Act (8 April 2005), HR Report Pub L No 109-31

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What is the theoretical basis for international cross-border insolvency laws discussed in the text?

What is the theoretical basis for international cross-border insolvency laws discussed in the text?

How was the UNCITRAL Model Law developed?

How was the UNCITRAL Model Law developed?

Neil Hannan

ISBN 978-981-10-5875-2 ISBN 978-981-10-5876-9 (eBook)

© Springer Nature Singapore Pte Ltd. 2017

Printed on acid-free paper

This Springer imprint is published by Springer Nature

5.3 Factors Considered When Determining Establishment . . . . . . . . 48

8.10 Article 24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

11.3.10 Protection of Creditors Interests. . . . . . . . . . . . . . . . . . 202

15.6 Recognition of Foreign Insolvency Judgments . . . . . . . . . . . . . . 244

Amended Regulation EC No. 848/2015 of the European Council on

UK Insolvency Act Insolvency Act 1986 c 45 (UK).

1.1 Theoretical Basis for International Cross-Border

© Springer Nature Singapore Pte Ltd. 2017 1

© Springer Nature Singapore Pte Ltd. 2017 5

In 1994 UNCITRAL and INSOL held a colloquium at which it was recognised

In 2003 in North America, the American Law Institute published Transnational

2.2 Model Law

(c) The discretion is accompanied by a statutory mandate to cooperate subject to

In December 2011, the UN General Assembly adopted the UNCITRAL publi-

© Springer Nature Singapore Pte Ltd. 2017 15

3.3 New Zealand

3.4 United Kingdom

© Springer Nature Singapore Pte Ltd. 2017 23

4.1.1 Statutory Provisions

4.1.2 Common Law

forum when the exercising of jurisdiction is ‘clearly inappropriate’.19 Such a sit-

It is uncertain whether an Australian Court in the absence of a treaty would

residence, presence in the foreign jurisdiction and attornment will serve to

4.3 New Zealand

Section 8 of the Insolvency (Cross-border) Act 2006 provides that if a court of

insolvency administrators appointed in one jurisdiction to gain recognition in other

Gollin has summarised the New Zealand position as follows:

4.4 United Kingdom

international law.60 Nothing in these provisions restricts the UK courts’ power to

The extreme version of the “principle of universality”, as propounded by Lord Hoffmann in

In a number of cases in relation to companies that have operated in both Canada

would generally require proceedings in their jurisdiction to be commenced and in

This position is not universally supported by the US Bankruptcy Court which

5.2 Factors Determining COMI

As no deﬁnition of COMI is contained in the Model Law, UNCITRAL in its

© Springer Nature Singapore Pte Ltd. 2017 43

The deﬁnition of COMI is contained in Article 3 of both the EC Regulation and

management of the debtor’s interests that is ascertainable by third parties.20 No list

5.3 Factors Considered When Determining Establishment

Article 2 of the Model Law deﬁnes an establishment as “any place of operations

5.3.3 New Zealand

5.3.4 United Kingdom

5.3.6 Establishment Generally

5.4 Time of Recognition of COMI and Establishment

This issue was also addressed by the US Bankruptcy Court in relation to

5.4.1 Difﬁculties with Present Proposed Dates

occurred since the appointment of the foreign representatives as occurred in Bear

5.4.2 Suggested Reform

It is argued that the time at which the debtors COMI or establishment is to be

Chapters 6–10 identify where there is a signiﬁcant variation in the domestic