Towards greater excellence In cross-border insolvency

28 September 2018 — As Singapore continues to intensify its efforts to develop further as a corporate insolvency and restructuring hub for the region and beyond, the Supreme Court of Singapore took part in various international engagements over the past week that seek to enhance Singapore’s standing as a prime forum for cross-border insolvency and restructuring cases.

Changes to Singapore’s legislative framework for insolvency and debt restructuring

Amendments to the Companies Act introduced in 2017 implemented many of the recommendations of the Committee to Strengthen Singapore as an International Centre for Debt Restructuring, including automatic moratoria and cram down provisions similar to those under the United States Bankruptcy Code.

These have been followed up this year by the introduction of the omnibus Insolvency, Dissolution and Restructuring Bill. The bill consolidates the 2017 amendments to the Companies Act with the reforms recommended in 2013 by the Insolvency Law Review Committee as well as further reforms to introduce restrictions on ipso facto clauses and to enhance provisions for third party funding. Together with the migration of the legislative framework under the Bankruptcy Act for personal insolvency matters, the new bill houses Singapore’s legislative framework for insolvency and debt restructuring – both personal and corporate, domestic and cross-border – under one roof.

All these legislative reforms have and will continue to ensure that Singapore’s insolvency and restructuring regime remains modern, relevant and effective.

Chief Justice’s keynote address at the 18th Annual Conference of the International Insolvency Institute

A number of important insolvency cases has been heard in the Singapore courts such as those involving the China Fishery group and the Ezra group. Many of these cases involve complex cross-border corporate structures, requiring coordination between courts of different jurisdictions. The cross-border nature of these cases means that leading international law firms are often involved, acting either for the companies, their lenders or other interested parties.

To increase Singapore’s attractiveness as a forum to hear these disputes, the Honourable Chief Justice Sundaresh Menon has announced a number of initiatives in his keynote address at the 18th Annual Conference of the International Insolvency Institute (“III”),a leading non-profit, limited membership organisation dedicated to improving coordination among nations in multinational business reorganisations and restructurings. The annual conference – held on 24 and 25 September this year at the New York University School of Law – is a congregation of the world’s renown insolvency practitioners, academics and judges in the international insolvency field.

First, Chief Justice Menon announced that enhancements are being considered to clarify how local and foreign counsel can work together in transnational restructuring cases to present arguments to the Singapore International Commercial Court (“SICC”)in the most effective way. Today, foreign lawyers are already permitted to address the SICC on matters involving foreign law in offshore cases as defined under relevant subsidiary legislation. However, given that transnational restructuring cases often involve a complex web of issues of local and foreign law as well as issues of law and fact, the intention is to explore a way for international insolvency specialists to appear before the SICC, which has been established specifically to deal with transnational commercial matters and boasts a distinguished panel of some of the most experienced commercial judges in the world.

Second, the Chief Justice also shared that the Permanent Court of Arbitration is taking the lead in developing an arbitral framework to manage the restructuring of public sector debt in Asia, which is a project that the Supreme Court of Singapore fully supports and in which the III will play an advisory role. With the rapid infrastructural and economic development of the region and beyond, it can be expected that some of the capital investment flowing through this part of the world will be funded through debts and guarantees issued by public sector enterprises. All these come with the concomitant risk of default and the region needs a platform for the negotiation of a cohesive restructuring solution for public sector debt. This project seeks to leverage on the best features of arbitration, such as party autonomy on the choice of seat and procedural flexibility, to provide an effective mechanism for the management of the overall restructuring process.

Memoranda of understanding with 2 US Bankruptcy Courts

Earlier on 24 September 2018, Chief Justice Menon also witnessed the signing of a memorandum of understanding with the United States Bankruptcy Court for the Southern District of New York and another memorandum of understanding with the United States Bankruptcy Court for the District of Delaware. The memoranda aim to improve the efficiency and effectiveness of transnational insolvency proceedings by encouraging cooperation between the Supreme Court of Singapore and the 2 US bankruptcy courts. Together with the first memorandum of understanding signed with the Seoul Bankruptcy Court in May 2018, these memoranda demonstrate the Supreme Court’s commitment to efficient and effective judicial cooperation in cross-border insolvency matters.

The 2nd Judicial Insolvency Conference

The Judicial Insolvency Network (“JIN”) held its second conference on 22 and 23 September 2018 in New York City, almost two years after the inaugural conference held on 10 and 11 October 2016 in Singapore where the Guidelines for Communication and Cooperation between Courts in Cross-Border Insolvency Matters (also known as the JIN Guidelines) were promulgated.

At the 2nd JIN conference, the Singapore judiciary joined judges from the following courts at the conference:

• the United States Bankruptcy Court for the Southern District of New York;
• the United States Bankruptcy Court for the District of Delaware;
• the United States Bankruptcy Court for the Southern District of Florida;
• the United States Bankruptcy Court for the Southern District of Texas (a judge from this court attended as an observer);
• the National Commercial Court of Argentina;
• the Grand Court of the Cayman Islands;
• the Supreme Court of Bermuda;
• the Eastern Caribbean Supreme Court;
• the Court of Appeal of England and Wales;
• the Federal Court of Australia;
• the Court of Appeal of New South Wales;
• the High Court of Hong Kong (a judge from this court attended as an observer);
• the Seoul Bankruptcy Court (a judge from this court attended as an observer);
• the Tokyo District Court (a judge from this court attended as an observer); and
• the Supreme Court of Japan (a judge from this court attended as an observer).

The conference was highly productive as the judges discussed how common principles and guidelines on cross-border insolvency matters prepared and agreed upon by judges from various key commercial jurisdictions can be valuable to the international market.

To date, while over 40 jurisdictions have adopted the Model Law on Cross-Border Insolvency (the “Model Law”), an overwhelming majority of jurisdictions have not and different jurisdictions (even including those which have adopted the Model Law) have varying approaches to the recognition of foreign insolvency proceedings. The judges therefore agreed at the conference to produce a set of core principles on the recognition of foreign insolvency proceedings. A sub-committee of judges agreed to steer the direction of this JIN project.

Recognising the difficulties of communication between courts posed in no small part by language and cultural differences, the judges considered that it would also be useful to devise a set of modalities for court-to-court communication to guide international stakeholders on how courts from diverse backgrounds (such as from civil and common law systems) can communicate effectively. A separate sub-committee of judges was formed to lead this JIN project.

Insolvency laws, neither creating nor extinguishing rights, seeks to manage the rights of competing stakeholders in insolvency in an organised and collective manner amidst the interplay of a web of various private and international laws. Admiralty law is notably one of them where the interaction – or even conflict – between the two bodies of law for the satisfaction of claims has posed difficult problems. The judges therefore decided to also look into this intractable area with focus on the arrest of vessels in the context of the Article 20 relief under the Model Law. Some of the judges with experience in admiralty law will take charge of this project.

The JIN also seeks to examine how arbitration can be tapped for the resolution of certain insolvency matters for the more efficient resolution of disputes.

The 2^nd conference concluded with a joint judicial colloquium with the III where there was robust discussion on the experiences of the United States Bankruptcy Court for the Southern District of New York and the Supreme Court of Singapore on the joint management of the insolvency of the Singapore-incorporated Ezra Holdings Ltd. That was the first cross-border insolvency matter between two JIN courts where a protocol modelled on the JIN Guidelines was invoked.

For more information on the JIN, please log on to www.jin-global.org.