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Justice Kannan Ramesh: Speech delivered at the First Meeting of ASEAN Insolvency Judges
FIRST MEETING OF ASEAN INSOLVENCY JUDGES
Overview of cross-border insolvency and a sampling of international legal instruments for court-to-court communication and coordination in cross-border insolvency, including the Model Law on Cross-Border Insolvency
19 November 2024
The Honourable Justice Kannan Ramesh, Judge of the Appellate Division
Supreme Court of Singapore
I. Introduction(1)
1 Good morning to all once again. Earlier, before the tea break, Justice Xu presented on the importance of effective management of an insolvency and some solutions that could be explored in this regard. Effective management of a cross-border insolvency does not happen by chance. It requires courts to embrace a philosophy which is at the heart of efficient and effective cross-border proceedings. I am referring to the “3Cs” - communication, coordination and cooperation. My presentation will address some of the international responses to the 3Cs and provide an overview of cross-border insolvency in general.
2 I will unpack the subject in the following manner. First, I will explain why the 3Cs are so important in cross-border insolvency. Second, I will discuss how the primary international response, the United Nations Commission on International Trade Law’s (“UNCITRAL”) 1997 Model Law on Cross-Border Insolvency (the “Model Law”), ingrains the 3Cs in its architecture. Third, I will consider soft law instruments which have emerged as viable options to fill the vacuum caused by the non-adoption of the Model Law. Fourth, I will explore the issue of recognition and relief, and how the 3Cs can be achieved even without adoption of the Model Law. I pause here. The four areas I identified are procedural and not matters of substantive law. Finally, I will briefly touch on group insolvencies, which Justice Xu had alluded to in his presentation, before I conclude.
II. Cross-border insolvency and the importance of the 3Cs
3 Let me begin by explaining why the 3Cs are so important in cross-border insolvency.
4 Historically, insolvency laws were developed with a territorial focus. This reflected the economic and political reality at that time that businesses operated largely domestically, and state sovereignty was accorded primacy. This was territorialism in its purest form. Its advent was unsurprising as the prevailing philosophies that undergirded insolvency and therefore defined the architecture of insolvency laws then were not influenced, at least to a significant extent, by globalisation, seamless cross-border trade and multilateralism. The byproduct of territorialism was multiple insolvency proceedings in different jurisdictions, with priority given to local creditors, amongst other things, in the distribution of assets. Insolvency laws and procedures were formulated and applied within jurisdictional silos, with limited or no international cooperation and asset transfers. The very idea of the 3Cs was anathema to courts, being seen as impermissible judicial overreach. But the tide has turned because the world has changed. With that, so has the attitude of judges. Courts are on an irreversible path towards embracing this change, and I submit this is not only desirable, but also necessary. Why, you may ask? The answer resides in one word – globalisation. While decoupling and derisking have resulted in some pullback from globalisation, multilateralism, or should I say modified multilateralism, is here to stay. Judges cannot ignore the new paradigm. Indeed, we must respond.
5 Businesses now increasingly operate on a global scale, and an insolvency can therefore span multiple jurisdictions, involving assets, creditors, and operations spread across many countries. An indicium of this is the monumental increase in the number of international investment agreements. The number has spiked from under 500 in 1990 to over 3000 in 2020(2). In 2023, it was estimated that 65% of the global stock of foreign direct investments was covered by international investment agreements presently in force(3). International trade and investment has rapidly grown as a result of globalisation and advances in technology, which have reduced barriers to entry(4). The rise and widening embrace of Fintech globally is illustrative of this. As of July 2023, publicly traded Fintech companies represented a market capitalisation of US$550 billion, a two-fold increase from 2019, and revenues in the fintech industry are expected to grow at almost three times faster than those in the traditional banking sector between 2023 and 2028(5). Across Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam (ie, the ASEAN-6 economies), fintech funding grew more than 10-fold in the past decade, to US$1.4 billion in the first three quarters of this year(6). These figures tell a story.
6 Multilateralism is the cornerstone of ASEAN and its future. Amongst ASEAN member states, there has been a targeted drive towards greater economic unity and financial integration to make it easier for businesses in one ASEAN member state to conduct operations in another. In fact, this is in line with the ASEAN Economic Community’s goal of economic integration, with the vision of ASEAN being a highly competitive region fully integrated into the global economy. Needless to say, greater economic unity and financial integration will conduce to healthy FDI inflow(7).
7 To foster this goal, significant steps have been taken. I cite three. First, ASEAN signed the Regional Comprehensive Economic Partnership (“RCEP”) agreement along with Australia, China, Japan, New Zealand, and South Korea in 2020, about a decade after it was first proposed at the 2011 ASEAN Summit. The RCEP is the largest FTA in history covering about 30% of the global GDP and world population(8). Second, in 2020, ASEAN also signed the world’s first bloc-to-bloc Air Transport Agreement with the EU to provide greater opportunities for airlines of ASEAN and the EU to operate passenger and cargo services between and beyond both regions(9). Third, within ASEAN, a big step towards greater economic unity and financial integration was achieved through the launch of the Regional Payment Connectivity system in 2022. The system promotes faster, cheaper, more transparent, and inclusive cross-border payments across ASEAN, with eight central banks now part of the network(10).
8 What do these developments in global and regional commerce mean for all of us, the judges? I suggest that it is a call to respond clearly and concretely. I further suggest that maintaining a territorialist approach to cross-border insolvency will lead to inefficient and conflicting proceedings, a failure to preserve enterprise value and a destructive competition for assets. Moreover, it will severely weaken the ability of courts and insolvency professionals to (a) first, effectively manage the debtor’s assets, (b) second, coordinate the insolvency process for the creditors’ benefit, and (c) third devise optimal solutions to address the debtor’s financial difficulties. Such an outcome fundamentally undermines the very purpose of insolvency proceedings, namely, to protect and maximise value for the benefit of all interested parties and to ensure a fair and equitable system for the distribution of assets among creditors(11). Failure to respond in the right way is a deflating message to all stakeholders that we are not in tune with reality.
9 In our present complex landscape, resolving insolvency cases requires the affected parties to navigate a patchwork of national laws with divergent approaches to creditor and shareholder rights, priorities, asset treatment, and recognition of foreign proceedings. The situation is further complicated by complex questions of private international law on the choice of law and forum. Sophistication and skill of practitioners and other stakeholders alone is not enough to get us over the line. The 3Cs are critical to achieve the core objectives of insolvency proceedings, as earlier mentioned. The UNCITRAL Legislative Guide on Insolvency Law, which accompanies the Model Law, succinctly summarises the point perfectly: “[t]o the extent that there is a lack of communication and coordination among courts and administrators from concerned jurisdictions, it is more likely that assets would be dissipated, fraudulently concealed, or possibly liquidated without reference to other more advantageous solutions”(12). Solutions are therefore needed to facilitate communication, cooperation and coordination amongst courts of different jurisdictions.
10 To be clear, this is not an argument for a pure universalist approach or to harmonise the insolvency laws of different jurisdictions comprehensively. That is neither practical nor desirable. Insolvency laws are invariably rooted in distinct national philosophies and policies, and socio-economic circumstances(13). This inevitably results in a degree of justifiable variance, and this has to be recognised and respected. It would be inappropriate to disregard this and push for convergence. However, working towards a middle ground is not inappropriate. A degree of convergence is attainable and fair, and is indeed a good thing. After all, the aim of all insolvency processes is broadly the same. With these observations in mind, I will turn to the 3Cs and the Model Law.
III. The Model Law
11 Recognising the importance of a modern system of cross-border insolvency founded on modified universalism that is fair, respectful of national judicial systems, and acceptable to states with different legal, social and economic systems, UNCITRAL promulgated the Model Law in 1997. The Model Law has since been adopted by 60 States, including many of the G20 economies(14). The Model Law is a model instrument for States to enact, with or without modification, as part of their domestic laws, and its purpose is to equip states with a harmonised and fair framework to effectively address cross-border insolvency cases and facilitate cooperation between courts, between courts and insolvency representatives and between insolvency representatives in different jurisdictions. The Model Law does not seek to unify the substantive insolvency laws of different jurisdictions. It is, instead, procedural in nature, with its primary aim to provide national courts with the necessary tools to put in place a global collective insolvency regime for the coordination of two or more insolvency proceedings concerning the same debtor(15).
12 Four elements underpin the Model Law. They are:
(a) First, the “access” principle which requires that a foreign representative be given rights of access to the court in the foreign state to seek recognition and relief in support of the insolvency proceeding opened in the home state.
(b) Second, the “recognition” principle which requires the court in the foreign state to recognise foreign proceedings which qualify for recognition, either as a “main” or “non-main” proceeding.
(c) Third, the “relief” principle which provides for interim relief pending recognition and upon recognition, automatic and/or discretionary relief to protect the assets of a debtor within the recognising court’s jurisdiction, and consequential relief to provide assistance.
(d) Finally, the “cooperation” and “coordination” principles which require courts and insolvency administrators in various States to communicate and cooperate to ensure that the estate is administered fairly and efficiently, with a view to maximising benefits for the creditors. This is the 3Cs.
13 In managing a cross-border insolvency, it is crucial to first determine the place of the principal insolvency proceeding. There has to be a “home court” so to speak. The Model Law adopts the Centre of Main Interest or “COMI” as the place where the principal insolvency proceeding is opened and defines those proceedings as the main proceeding. COMI considers various factors to determine a company's operational nerve centre and, consequently, the appropriate venue for opening the primary insolvency proceedings. Its origins are from the 1995 European Union Convention on Insolvency Proceedings. Insolvency proceedings that are not opened at the COMI, but where the debtor nonetheless carries out non-transitory economic activity with human means and goods or services(16) are also defined as non-main proceedings. The Model Law terms such locations as “establishments”. Decisions made by the court of the main proceeding are to be recognised by receiving courts that have enacted the Model Law, subject to certain restrictions, public policy being one. Primacy is given to the main proceeding. How then are the 3Cs worked into the Model Law?
A. The 3Cs in the Model Law
Chapter IV of the Model Law
14 The 3Cs are expressed in Chapter IV of the Model Law. The chapter is aptly titled “Cooperation with foreign courts and foreign representatives”. Articles 25 to 27 specifically provide for cooperation between: (a) the courts involved in the proceedings; (b) the courts and the insolvency representatives appointed in the different proceedings; and (c) the insolvency representatives.
15 First Article 25. Article 25 provides for cooperation and direct communication between courts and between courts and foreign insolvency representatives. Article 25(1) states that courts shall cooperate to the maximum extent possible with each other and with foreign insolvency representatives in matters falling within the scope of the Model Law. Article 25(2) provides that the court is entitled to communicate directly with a foreign court, including requesting information or assistance directly from foreign courts or foreign representatives. This is intended to avoid the use of time-consuming procedures traditionally employed in domestic proceedings, such as letters rogatory.(17) Time is so important in insolvency proceedings, as the value of assets can diminish quickly with the passage of time. The Model Law seeks to resolve this expeditiously.
16 Article 26 provides for communication between the insolvency officeholder in the local jurisdiction and foreign courts or foreign insolvency representatives. It provides that for matters governed by the Model Law, a local insolvency holder shall, in the exercise of his functions and subject to the supervision of the court, cooperate and communicate to the maximum extent possible with foreign courts or foreign insolvency representatives.
17 Article 27 provides an indicative list of the forms of cooperation authorised by Articles 25 and 26. These include: (a) first, appointment of a person or body to act at the direction of the court; (b) second, communication of information by any means considered appropriate by the court; (c) third, coordination of the administration and supervision of the debtor’s property and affairs; (d) fourth, approval or implementation by courts of agreements concerning coordination of proceedings (these are protocols which I will come to later); and (e) fifth, coordination of concurrent proceedings concerning the same debtor. This is a non-exhaustive list, and the enacting state may list additional forms or examples of cooperation under Article 27 when enacting the Model Law.
Chapter V of the Model Law
18 Apart from Chapter IV, Chapter V of the Model Law also governs the management of concurrent or parallel cross-border insolvency or restructuring proceedings involving the same debtor. In particular, this chapter deals with coordination and cooperation. For that to happen, it is obvious that there must first be communication pursuant to the provisions in the Model Law.
19 Article 28 provides that after recognition of a foreign main proceeding, domestic proceedings may only be commenced if the debtor has assets in that State. The effects of the domestic proceeding shall be restricted to the assets of the debtor located in that state and to the extent necessary to implement cooperation and coordination under Articles 25 to 27 (which deal with communication).
20 Articles 29 and 30 address the situation where the debtor is subject to concurrent foreign and domestic proceedings. Both Articles seek to foster coordinated decisions that would best achieve the objectives of concurrent proceedings. Article 29 provides for how the concurrent domestic and foreign proceedings should be managed and coordinated, while Article 30 provides for how concurrent multiple foreign proceedings should be managed and coordinated.
21 While not stated in either Article 29 or 30, one mode of facilitating the coordination of concurrent proceedings may be by way of a joint hearing or by coordinating the preparation of a universal reorganisation plan which would be the subject of all the proceedings concerning the debtor. I highlight one example of a joint hearing, which involved the Singapore International Commercial Court’s (SICC) and the US Bankruptcy Court for the Southern District of New York in concurrent recognition applications concerning the airline, Garuda Indonesia. PKPU proceedings, as our Indonesian brother judges are fully familiar with, are proceedings to suspend payments while the debtor prepares a composition plan to restructure debts. The PKPU proceedings were commenced against Garuda Indonesia in the Commercial Court of the Central Jakarta District Court. Garuda Indonesia's proposed composition plan received approval from the requisite majority of creditors and was subsequently homologated by the Jakarta Commercial Court. Garuda Indonesia then sought recognition of the PKPU proceedings in both Singapore(18) and the United States. There were also pending applications in Sydney and Paris. To facilitate efficient coordination and administration of the recognition hearings in Singapore and the United States, a protocol for court-to-court communication was established by the SICC and the US Bankruptcy Court for the Southern District of New York. The protocol aimed to ensure that the same body of information and issues were presented to both courts, and the same lawyers in the respective jurisdictions addressed both courts when the case was argued. The objective was to have a joint hearing before both courts to avoid conflicting outcomes. In line with the protocol, the SICC and the US Bankruptcy Court for the Southern District of New York conducted several joint case management conferences.
22 That is our journey through the Model Law. I turn now to several pertinent questions. What if the Model Law has not been adopted? Are we then left without solutions? What could the solutions be?
IV. Alternatives to enacting the Model Law on the 3Cs
23 The Model Law provides a robust framework for courts in different jurisdictions to approach cross-border insolvency. As I have stated earlier, the Model Law has to be adopted as part of domestic laws which requires legislative intervention. Amongst the ASEAN jurisdictions, the Philippines,(19) Singapore,(20) and Myanmar(21) have enacted the Model Law into their domestic laws. However, I suggest that even if the Model Law has not been adopted, there is nothing to preclude courts from adopting and employing concepts from the Model Law, subject to any restrictions under domestic law. I say this because the Model Law is procedural law, and courts are masters of their procedure.
24 This approach is not unprecedented. A prime illustration of this approach is the adoption by courts of COMI as the touchstone for determining the seat of primary insolvency proceedings. Historically, under the common law, the place of incorporation was regarded as the seat of the main insolvency proceedings.(22) However, this has not stopped common law jurisdictions from departing from this position. In the Singapore Court decision of Re Opti-Medix,(23) the court adopted the COMI test under common law, reasoning that it might better reflect a company's actual business location, while retaining the place of incorporation as a default rule in the absence of contrary evidence. This was similar to the approach in Article 16(3) of the Model Law. Subsequently, in the Hong Kong case of Provisional Liquidator of Global Brands Group Holding Ltd v Computershare Hong Kong Trustees Ltd,(24) the court exclusively endorsed COMI citing Re Opti-Medix. The view expressed in Global Brands was that COMI was better aligned with Hong Kong's commercial realities, where offshore companies typically incorporated in the BVI or Cayman Islands often conduct business in Hong Kong and mainland China. Civil law jurisdictions other than European Union jurisdictions have also embraced COMI without adopting the Model Law. A pertinent example is the Supreme People’s Court of the PRC, which, pursuant to an arrangement with the Government of Hong Kong on mutual recognition and assistance in insolvency proceedings, adopted COMI as the test in implementing this arrangement.(25) These examples demonstrate how courts can not only incorporate concepts and principles from the Model Law into jurisprudence even without formal adoption by the legislature.
25 If this enlightened approach is embraced, courts may adopt the concepts in the Model Law on communication and cooperation to the extent permitted by domestic law, thereby opening the door to cross-border communication, cooperation and coordination even where the Model Law has not been adopted. In fact, even before the promulgation of the Model Law in 1997, jurisdictions have explored cross-border communication, cooperation and coordination. I share two examples.
26 First is the case of Everfresh Beverages Inc. Everfresh underwent insolvency proceedings in 1995, two years before the promulgation of the Model Law. Everfresh was a company that was incorporated in Delaware, headquartered in Chicago, and had creditors in both the United States and Canada. After encountering financial difficulties, Everfresh filed for reorganisation proceedings in New York under Chapter 11 of the US Bankruptcy Code and in Toronto(26) and under the Canadian Bankruptcy and Insolvency Act.(27) Everfresh, its major operating lender and the US Creditors’ Committee developed a cross-border protocol aimed at protecting the interests of all creditors wherever they were located. The protocol mandated cooperation on major aspects of the parallel proceedings. The protocol was approved by the US and Canadian courts on the same day, and both courts engaged in close cooperation and coordination pursuant to the protocol. A joint hearing by way of a telephone conference was also conducted to coordinate the pace of the proceedings in the Canadian and US courts. The US Creditors’ Committee was also permitted to appear and make representations to the Canadian court on the sale of assets in Canada, without being treated as having submitted to the jurisdiction of the Canadian court. In accordance with the protocol, the sale of assets in Canada and the United States was approved by the Canadian court and the US court respectively. The adoption of the protocol significantly accelerated the reorganisation process by reducing potential complications and avoiding the need for parallel administrations. As a result, the parties and the courts were able to concentrate their resources on the commercial aspects of the reorganisation, rather than become entangled in costly and time-consuming litigation over conflict of law issues.
27 The second is a Singapore example. In Singapore, prior to the adoption of the Model Law, the application of the 3Cs was considered in Re Pacific Andes.(28) Pacific Andes Resources Development Ltd (PARD) and three of its subsidiaries, part of the Pacific Andes Group, which operated in, amongst others, the fishmeal production industry in Peru. The group-initiated bankruptcy proceedings in multiple jurisdictions, including Peru, the United States, and Singapore, as part of a restructuring effort. PARD and its subsidiaries sought an extension of a moratorium against creditor proceedings in Singapore and elsewhere. The Singapore Court granted the extension only for PARD, rejecting the applications of the three subsidiaries. The court reasoned that it lacked jurisdiction over the subsidiaries as they were not incorporated in Singapore, had no assets there, and lacked any significant connection to Singapore.
28 The court emphasised the need for communication and cooperation between courts and insolvency administrators across different jurisdictions. The court noted that such collaboration would facilitate plan development, improve understanding and the resolution of issues between proceedings, and strengthen comity. The court had previously encouraged the applicants to work with the insolvency representatives to establish protocols for communication and cooperation, subject to court approval. However, the applicants did not pursue this suggestion, citing ongoing conflicts with creditors as a reason. The court found this explanation unsatisfactory and reiterated the call for implementing such a protocol, particularly with the US proceedings.
29 These examples are instances of laudable efforts by courts. They demonstrate the adaptability and creativity of judges. However, it should also be recognised that these were ad-hoc efforts to coordinate and cooperate driven by the needs of the specific case before the court. An institutional effort is desirable and should be made so that debtors, creditors, shareholders and investors know how courts will respond in the event of a cross-border insolvency. I suggest that the answer to an institutional effort lies in the adoption of soft law instruments by courts through Memoranda of Understanding, Practice Directions, Practice Notes, and other similar instruments.
A. Bilateral arrangements
30 Bilateral arrangements such as Memoranda of Understanding are one way of cementing lasting arrangements. An example is the arrangement between the Supreme Court of Singapore and the Federal Court of Malaysia under which a protocol was implemented in 2021 for court-to-court cooperation in a cross-border insolvency. The protocol allows direct communication between the courts when requested by either side in a cross-border insolvency. Its purpose is to enhance efficiency in various insolvency processes, including winding up, judicial management, receivership, and schemes of arrangement, whether they are conducted in Singapore or Malaysia.(29)
31 Bilateral arrangements are an important and promising starting point for cooperation and coordination. However, we must accept the reality that businesses may span more than the two jurisdictions that are party to the arrangement. This may limit the effectiveness of bilateral arrangement, as there is no multilateral platform for cooperation and coordination with the jurisdictions that are not party to the arrangement. What more can we do?
B. Multilateral arrangements
32 The Judicial Insolvency Network (“JIN”) Guidelines, or JIN Guidelines, is a helpful model for a wider multilateral framework to foster coordination and cooperation amongst courts. The aims of the Guidelines are clearly spelt out in the introduction. These include the efficient coordination and administration of parallel proceedings, respecting stakeholders’ interests, preserving and maximising the debtor's assets, managing the estate proportionately, sharing information to reduce costs, and minimising litigation and inconvenience. These are unarguable objectives of every insolvency process and are indeed of universal application. There is therefore every reason for courts everywhere to embrace these concepts and the Guidelines.
33 The Guidelines preserve enterprise value and reduce costs by focusing on the 3Cs. The attention is on outlining principles for inter-court communication at the earliest practicable opportunity, sharing information, coordination of parallel proceedings and to the extent permissible, joint hearings. To facilitate these outcomes, the Guidelines encourage courts to promote agreement among administrators in parallel proceedings on specific protocols, which have to be approved by the courts. These protocols should address: (a) coordination of requests for court approval of related decisions and actions; (b) direct communication between courts to resolve procedural, administrative, and preliminary matters, and to facilitate coordination in the submission of documents and issuing decisions; (c) communication with creditors and other involved parties; and (d) where possible, efficient procedures to avoid unnecessary and costly court hearings and proceedings. The Guidelines also provide for the possibility of joint hearings. But that is an optional item.
34 By encouraging the adoption of protocols aligned with its terms, the Guidelines enhance the efficiency and transparency of cross-border insolvency proceedings and minimise, importantly, transaction costs. Ultimately, the Guidelines serve as a framework to improve the management and outcome of multinational insolvency cases. Since its inception in 2016, the Guidelines have been adopted by courts in 18 jurisdictions in the Americas, the Caribbean, the Middle East, Asia, Australia and Europe.(30)
35 The Guidelines have played an important role in various cross-border insolvencies. Earlier this year, in the insolvency of the Mercon Coffee Group, which had operations in various countries, including the United States and the Netherlands, a protocol based on the Guidelines (with certain special provisions added to it) was drawn up to ensure a controlled liquidation of Mercon’s global assets. The protocol was approved by the US Bankruptcy Court for the Southern District of New York. While the District Court of Amsterdam did not accept the protocol, it held that there was, in principle, no objection to declaring the Guidelines consistent with its laws providing for tailor-made provisions in restructuring proceedings.(31) The Guidelines also formed the basis of the court-to-court communication protocols between the Singapore courts and the US Bankruptcy Court for the Southern District of New York in various proceedings. The protocol adopted in proceedings involving Garuda Indonesia was one, which I touched on earlier. There were two others. First, Ezra Holdings Ltd, an oil and gas sector-related company, and second, Three Arrows Capital Ltd, an investment fund trading in cryptocurrency and other digital assets.(32)
36 Following the Guidelines, the JIN released the JIN Modalities, which was focused on the mechanics for initiating, receiving and engaging in court-to-court communication. Such mechanics include details concerning the time, method and language of communication, consent and confidentiality protections and the appointment of a facilitator to act as the primary individual to initiate or receive communications on behalf of the courts in question.
37 I suggest that a framework of cooperation and coordination built on the foundations of the Guidelines has the potential to progress cooperation amongst ASEAN courts. Adoption of guidelines by each national court based on the JIN Guidelines will be a powerful signal to investors and businesses that ASEAN courts will communicate, cooperate and coordinate in cross-border matters to avoid inefficiencies and enhance the effectiveness of cross-border proceedings. Recognising this, at its annual conference in June this year, the JIN discussed the JIN Core Protocol, a simplified iteration of the Guidelines. It was heartening that many of our ASEAN counterparts from Brunei Darussalam, Indonesia, Malaysia, Thailand, and the Philippines attended the JIN conference in June this year, and observed and contributed to the JIN’s deliberations. Judges from the PRC, India and Korea were also active participants. Their participation signalled a strong commitment to the 3Cs, providing a solid foundation for future judicial collaboration in cross-border insolvency.(33) I believe that the JIN Core Protocol is something ASEAN courts could consider for adoption, or at least to evaluate it for adoption, as a first step towards an ASEAN framework for the 3Cs. This is one of issues we can discuss later at the roundtable sessions to follow.
38 At a broader level, having a platform such as the JIN to engage with courts of other jurisdictions is a crucial way to build a robust insolvency ecosystem. As the eminent academic Professor Westbrook noted, “A special virtue of the JIN initiative comes from the fact that the establishment of personal relationships among commercial judges from different countries is the key to success in multinational cases. In that regard, not the least important benefit of the Guidelines is the likelihood that they will tend to produce early direct communication by judges (with due notice to all) and will incentivize professionals to act quickly as well.”(34) I therefore look forward to continued participation of our ASEAN counterparts in the work of the JIN. In fact, I would go a step further. ASEAN insolvency judges should consider the formation of a similar network, an ASEAN Insolvency Network, almost like an ASEAN JIN, which we can discuss later.
V. Recognition and relief
39 We have spent a lot of time talking about the 3Cs. There is another equally important aspect that warrants attention: the 2Rs – recognition and relief. The 2Rs are about assistance and relief to foreign insolvency proceedings. This is in fact ingrained in the 3Cs as there cannot be cooperation and coordination if there is no assistance. And for there to be assistance, one must communicate. These concepts are indeed complementary. Recognition and relief are integral features of the Model Law.
40 First, recognition. The Model Law simplifies the recognition of qualifying foreign proceedings ie foreign main and non-main proceedings. The Model Law does this by establishing simplified procedures for recognition and providing certainty on recognition of foreign proceedings. The principle is given effect to in Articles 15 to 18 of the Model Law. Article 15 spells out the core procedural requirements for an application for recognition. Article 16 stipulates presumptions that permit and encourage expedition where speed may be essential. Article 17 states that, if recognition is not contrary to the public policy of the enacting state and if the application meets the requirements set out in the article, recognition will be granted as a matter of course. So, it is quite a fast process. Article 18 obliges the foreign representative to inform the court promptly, after the filing the application for recognition, of “any substantial change in the status of the recognized foreign proceeding or the status of the foreign representative’s appointment”. This is to allow the court to modify or revoke the recognition.
41 Second, relief. Once recognition is granted, the appropriate reliefs follow. The Model Law is based on the idea that necessary relief should be made available to support the fair and orderly management of a cross-border insolvency. Significantly, the Model Law specifies available relief without importing foreign law into the receiving state’s insolvency system or applying the receiving state's relief to foreign proceedings. It is purely procedural. A key difference is made between the relief that is available to a foreign main and a foreign non-main proceeding. Briefly stated, under Article 20 of the Model Law, upon recognition of a foreign main proceeding (a proceeding commenced in the COMI), an automatic stay of proceedings of any domestic proceedings applies. However, if the recognition is granted to a foreign non-main proceeding, the stay of proceedings is discretionary under Article 21 and the court may decide if protection is not warranted for certain reasons. Furthermore, relief that is granted to a representative of a foreign non-main proceeding should only relate to assets which should be administered in those proceedings or concerns information required there. Thus, there are limitations to the reliefs available to foreign non-main proceedings. Article 21 also outlines the discretionary relief that is available upon recognition of both foreign main and non-main proceedings. This includes staying individual actions against the debtor, suspending asset transfers, facilitating evidence gathering, entrusting asset administration to a foreign representative and extending previously granted interim relief. The court may also allow for any additional relief permissible under local law. Further, the court may authorise the foreign representative to distribute the debtor's local assets, provided local creditors’ interests are adequately protected.
42 The 2Rs under the Model Law ensure that an orderly and fair administration of parallel insolvency proceedings is possible notwithstanding the global patchwork of different insolvency laws, by giving primacy to the principal insolvency proceeding, while at the same time supporting other parallel insolvency proceedings. However, the Model Law has not been adopted in all ASEAN jurisdictions. That should be a catalyst for ASEAN jurisdictions to understand how the vacuum left by the non-adoption of the Model Law may be filled to achieve the 2Rs, as recognition and relief are perennial live issues in cross-border insolvencies. A good example of foresight and flexibility was the recognition and assistance that was granted in July 2021 by the Central Jakarta District Court of a moratorium by the Singapore High Court in relation to the restructuring of PT Pan Brothers Tbk, even though Indonesia was not a signatory to the Model Law. I think this is an excellent example of judges thinking out of the box. If we are to formulate a cohesive and comprehensive solution to fill the vacuum, it seems to me that the starting point must be a better understanding of the approach to recognition and relief in our respective jurisdictions.
43 I therefore propose working towards a better understanding among ASEAN courts on the approach in our respective jurisdictions to recognition and consequential relief. This is something that we may wish to discuss in the roundtable sessions later in the afternoon. I highlight some key questions for reflection and discussion: First, can foreign representatives appear in the insolvency, or any other proceedings related thereto, or initiate local proceedings? Can the company’s affairs be investigated in another jurisdiction and, if so, in what circumstances and to what extent? Can a court consolidate a company’s assets for distribution in primary insolvency proceedings, subject to local circumstances? Lastly, does the court have the authority to grant a moratorium and if so, to what extent? Is there room for calibration? These are questions we need to consider on a collective basis.
44 Similarly, we may also wish to consider some equally pertinent questions on the 3Cs: What, if any, provisions exist in our respective laws that allow for direct communication between courts? Is that even permissible? Are there any legal barriers to sharing information with foreign courts? Do our respective laws allow for the recognition of foreign insolvency practitioners and, if so, under what conditions? What legal provisions or hurdles exist for implementing joint protocols or guidelines for cross-border cases? Can we even contemplate the possibility of a joint hearing?
45 One of the topics of growing conversation in cross-border insolvency in the international setting is the use of the 3Cs to encourage the resolution of cross-border issues between estates using ADR such as arbitration and mediation. A well-known example was the cross-border mediation in the Oro Negro case where the US Bankruptcy Court for the Southern District of New York and the bankruptcy court in Mexico opened lines of communication to appoint mediators to resolve issues between the US and Mexican estates. This is something that ASEAN courts could consider in an appropriate case. In this regard, a new development is on the horizon, which I am told I can share with this audience in a close door setting. The Singapore International Arbitration Centre, or SIAC, is in the process of finalising an Insolvency Protocol that will address the resolution of issues arising from insolvencies. In other words, insolvency issues may be resolved in mediation or arbitration administered by the SIAC. This is a first and will open up possibilities, assuming of course courts are prepared to communicate in the first place. Again, this is something we can discuss at the roundtable sessions to follow.
46 Exploring these issues will enable us to gain a clear picture on recognition, potential relief, and the avenues of communication, coordination and cooperation that are available in our respective jurisdictions in the event of parallel proceedings. Such understanding will pave the way for us to collectively construct appropriate solutions.
VI. Managing group insolvencies
47 Before I conclude my presentation today, I want to briefly touch on group insolvencies. While a pivotal tool for harmonising recognition approaches on the 3Cs and 2Rs, the 1997 Model Law has a notable limitation. Its framework assumes the failure of a single debtor, anchored in one jurisdiction – the COMI – with economic activities in other territories. This framework, however, may not be fully compatible with the needs of the contemporary business landscape today. In today’s globalised economy, corporate structures often comprise complex networks of separate corporate entities operating in multiple jurisdictions as a single business unit. When financial distress strikes, it rarely affects just one company in that group. Instead, it often affects other entities in the group, like a contagion effect. Consequently, any meaningful restructuring effort must necessarily encompass the economic interests, creditor claims, and capital structures of multiple group entities. This complexity poses a significant challenge to the 1997 Model Law’s effectiveness, because the Model Law’s focus is on individual debtors and it fails to adequately address the nuanced dynamics of group insolvencies, where the financial fates of multiple entities are inextricably linked.
48 It is worth noting that pre-2019, there has generally been an absence of transnational legal instruments specifically designed to tackle group insolvencies. The sole exception was the recast 2017 European Union Insolvency Regulation (No. 2015/848), which was a key step in addressing this gap, at least in the European Union. But for the EU, this is easier because they are single economic unit. So, this left a considerable void in the global framework for managing cross-border group insolvencies outside the European Union. In 2019, UNCITRAL promulgated the Model Law on Enterprise Group Insolvency (“MLG”) specifically to deal with group insolvencies, but its adoption has not yet happened. I understand that some jurisdictions are evaluating the possibility of adopting the MLG. As businesses continue to evolve and expand globally, legal frameworks must adapt to effectively manage the complexities of financial distress in multinational corporate groups. In the same vein as the rest of my presentation, national courts can, as far as their domestic laws allow, choose to adopt and adapt various concepts in the MLG without legislative enactment of the MLG.(35) Although discussion on the MLG and group insolvencies is best left for another day, I highlight that this is also a critically important issue that calls for our consideration and ultimately our response.
VII. Conclusion
49 In conclusion, I urge to you remember the 3Cs and the 2Rs. The critical importance of communication, cooperation and coordination, in cross-border insolvency cases cannot be overstated. We must also pay the same attention to recognition and relief. As global economic integration has deepened, insolvencies have increasingly transcended national borders. It is crucial to recognise that the effective implementation of the 3Cs and the 2Rs in cross-border insolvencies plays a significant role in attracting foreign investments. Investors are more likely to commit capital to jurisdictions where they can expect predictable and efficient resolution of insolvency issues. Developed markets, such as the European Union, have already implemented robust frameworks for cross-border insolvency cooperation and coordination, which has contributed to their attractiveness as investment destinations. This is particularly relevant for ASEAN for reasons I have already explained.
50 The Model Law provides a crucial and robust framework for facilitating collaboration across jurisdictions. However, not all ASEAN states have adopted the Model Law. We have to consider alternative approaches to foster judicial cooperation.
51 To this end, bilateral arrangements are a powerful starting point. However, one must not ignore the ready and viable option of soft law instruments such as the JIN Guidelines, or its distilled iteration, the JIN Core Protocol, which have emerged as valuable tools for courts to embrace the 3Cs and the 2Rs. In my presentation, I have suggested that ASEAN courts can and should strive to work together and make good use of these instruments to ensure fair and efficient resolution of cross-border insolvency cases. This approach serves the interests of debtors and creditors and contributes significantly to the stability and predictability of the global financial system, ultimately fostering a more resilient international and regional economic environment.
52 Finally, we cannot ignore the challenge posed by group failures. This is not an issue in the distant future; it is here and now, right in front of us. Courts will have to formulate an effective response.
53 I look forward to the discussions that are to follow. Thank you.
(1) I am grateful to my law clerks, Don Ho and Joel Fun, for their assistance in the research for and preparation of this speech.
(2) Peter Egger, Alain Pirotte and Catharine Titi, “International investment agreements and foreign direct investment: A survey” (2023) 46(6) The World Economy 1524, data obtained from UNCTAD. See also, UNCTAD’s International Investment Agreements Navigator available at < https://investmentpolicy.unctad.org/international-investment-agreements>.
(3) UNCTAD, “International Investment Agreements Trends” (2024) < https://unctad.org/system/files/official-document/diaepcbinf2024d4_en.pdf>.
(4) Bob Wessels, Bruce Markell and Jason Kilborn, International Cooperation in Bankruptcy and Insolvency Matters (OUP, 2009) at p 201.
(5) McKinsey & Company, “Fintechs: A New Paradigm of Growth” (2023) available at <https://www.mckinsey.com/industries/financial-services/our-insights/fintechs-a-new-paradigm-of-growth>.
(6) PricewaterhouseCoopers, “Fintech in ASEAN 2024: A Decade of Innovation” (2024) available at <https://www.pwc.com/sg/en/publications/fintech-in-asean-2024.html>.
(7) See “Economic Community”, available at <https://asean.org/our-communities/economic-community/>; “ASEAN Economic Community Blueprint 2025”, available at < https://asean.org/asean-economic-community-blueprint-2025/> at p 6.
(8) See <https://asean.org/rcep-agreement-enters-into-force/>.
(9) See <https://asean.org/joint-press-release-on-the-signing-of-the-asean-eu-comprehensive-air-transport-agreement/>.
(10) The latest ASEAN banks to join the Regional Payment Connectivity initiative are the Brunei Darussalam Central Bank and Bank of the Lao PDR, which brings it to a total of eight ASEAN central banks which are part of the system. See “Media Release: Brunei Darussalam Central Bank (BDCB) and Bank of the Lao PDR (BOL) Formally Join the Regional Payment Connectivity Initiative (RPC)”, available at <https://www.mas.gov.sg/news/media-releases/2024/brunei-darussalam-central-bank-and-bank-of-the-lao-pdr-formally-join-the-rpc-initiative>.
(11) Goode on Principles of Corporate Insolvency Law (Sweet & Maxwell, 5th Ed) at para 2-01.
(12) UNCITRAL, UNCITRAL Legislative Guide on Insolvency Law, Parts One and Two (2004) at p 310.
(13) See Ian Fletcher, Insolvency in Private International Law (OUP, 2005) at pp 4–5.
(14) See <https://uncitral.un.org/en/texts/insolvency/modellaw/cross-border_insolvency/status>.
(15) United Securities Sdn Bhd (in receivership and liquidation) and another v United Overseas Bank Ltd [2021] 2 SLR 950 (“United Securities”) at [5]; UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment and Interpretation (2014) at paras 69–70.
(16) Article 2(f) of the Model Law.
(17) UNCITRAL, UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment and Interpretation (2014) at para 218.
(18) See Re PT Garuda Indonesia (Persero) Tbk and another matter [2024] 3 SLR 254 (“PT Garuda”).
(19) The Philippines enacted the Model Law in 2010.
(20) Singapore enacted the Model Law in 2017.
(21) Myanmar enacted the Model Law in 2020.
(22) Rubin v Eurofinance SA [2013] 1 AC 236.
(23) Re Opti-Medix Ltd (in liquidation) and another matter [2016] 4 SLR 312 (“Re Opti-Medix”)
(24) Provisional Liquidator of Global Brands Group Holding Ltd v Computershare Hong Kong Trustees Ltd [2022] HKCU 2967. See <https://www.doj.gov.hk/en/mainland_and_macao/pdf/RRECCJ_opinion_en_tc.pdf>.
(25) See <https://www.doj.gov.hk/en/mainland_and_macao/pdf/RRECCJ_opinion_en_tc.pdf>.
(26) Barr v. Charterhouse Group Int'l, Inc. (In re Everfresh Bevs., Inc.), 238 B.R. 558.
(27) Everfresh Beverages Inc. (Re), [1996] O.J. No. 105.
(28) Re Pacific Andes Resources Development Ltd and other matters [2018] 5 SLR 125 (“Re Pacific Andes”).
(29) “Media Release: Malaysia and Singapore implement protocols on court-to-court communication and cooperation in admiralty, shipping and cross-border corporate insolvency matters” (5 October 2021), available at <https://www.judiciary.gov.sg/news-and-resources/news/news-details/media-release-malaysia-and-singapore-implement-protocols-on-court-to-court-communication-and-cooperation-in-admiralty-shipping-and-cross-border-corporate-insolvency-matters>.
(30) See <https://www.jin-global.org/jin-guidelines.html>.
(31) See Kyriaki Karadelis, “Europe Column: the US-approved Mercon Protocol and the Dutch Courts” <https://globalrestructuringreview.com/article/europe-column-the-us-approved-mercon-protocol-and-the-dutch-courts>; Ben Clarke, “Mercon Request to Adopt US-approved Protocol Rejected by Dutch Court” <https://globalrestructuringreview.com/article/mercon-request-adopt-us-approved-protocol-rejected-dutch-court>.
(32) Chief Justice Sundaresh Menon, “The Transformation of Litigation and the Litigator of the Future”, delivered at the Litigation Conference 2024 in Singapore on 3 April 2024 at para 20 < https://www.judiciary.gov.sg/news-and-resources/news/news-details/chief-justice-sundaresh-menon--keynote-address-at-litigation-conference-2024>.
(33) See “Media Release: Judicial Insolvency Network held its 5th Conference in Singapore on 12 and 13 June 2024” (1 August 2024) <https://www.judiciary.gov.sg/news-and-resources/news/news-details/media-release--judicial-insolvency-network-held-its-5th-conference-in-singapore-on-12-and-13-june-2024>.
(34) Jay Lawrence Westbrook, “Global Insolvency Proceedings for a Global Market: The Universalist System and the Choice of a Central Court” (2018) 96 Texas Law Review 1473.
(35) See Kannan Ramesh JAD, “Party Autonomy and the Search for Nodal Jurisdictions in Cross-Border Insolvency” (Speech delivered on 6 February 2021).
2024/12/12
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