European and American Perspectives on the Choice of Law Regarding Cross-Border Insolvencies of Multinational Corporations – Suggestions for South Africa

Jeanette Weideman, Leonie Stander

Abstract


An increase in economic globalisation and international trade has amounted to an increase in the number of multinational enterprises that have debt, own assets and conduct business in various jurisdictions around the world.  This, coupled with the recent worldwide economic recession, has inevitably caused the increased occurrence of multinational financial default, also known as cross-border insolvency (CBI).

 

The legal response to this trend has, inter alia, produced two important international instruments that were designed to address key issues associated with CBI. Firstly, the United Nations Commission on International Trade Law (UNCITRAL) adopted the UNCITRAL Model Law on Cross-Border Insolvency (the Model Law) in 1997, which has been adopted by nineteen countries including the United States of America and South Africa. Secondly, the European Union (EU) adopted the European Council Regulation on Insolvency Proceedings (EC Regulation) in 2000.  Both the EC Regulation and Chapter 15 adopt a “modified universalist” approach towards CBI matters.

 

Europe and the United States of America are currently the world leaders in the area of CBI and the CBI legislation adopted and applied in these jurisdictions seems to be effective. As South Africa’s Cross-Border Insolvency Act is not yet effective, there is no local policy guidance available to insolvency practitioners with regard to the application of the Model Law. At the basis of this article is the view that an analysis of the European and American approaches to CBI matters will provide South African practitioners with valuable insight, knowledge and lessons that could be used to understand and apply the principles adopted and applied in terms of the EC Regulation and Chapter 15, specifically the COMI concept, the “establishment” concept in the case of integrated multinational enterprises and related aspects.  

  


Keywords


Cross-border insolvency; CBI; UNCITRAL Model Law on Cross-Border Insolvency; European Council Regulation on Insolvency Proceedings; insolvency of integrated multinational enterprises

Full Text:

PDF XML

References


Bibliography

Adams and Fincke 2008-2009 Colum J Eur L

Adams ES and Fincke JK "Coordinating Cross-Border Bankruptcy: How Territorialism Saves Universalism" 2008-2009 Colum J Eur L 43-87

Beckering 2008 Law & Bus Rev Am

Beckering KJ "United States Cross-Border Corporate Insolvency: The Impact of Chapter 15 on Comity and the New Legal Environment" 2008 Law & Bus Rev Am 281-311

Botha and Stander 2011 Journal for Juridical Science

Botha SJ and Stander AL "Die bepaling van die 'sentrum van hoofbelange' by oorgrens insolvensies: Is die Parmalat-benadering voldoende om die behoeftes van moderne handel te bevredig?" 2011 Journal for Juridical Science 19-31

Bufford 2005 Am Bankr L J

Bufford SL "Global Venue Controls are Coming: A Reply to Professor LoPucki" 2005 Am Bankr L J 105-142

Chan Ho 2007JIBLR

Chan Ho L "Proving COMI-Seeking Recognition under Chapter 15 of the US Bankruptcy Code" 2007 JIBLR 636-641

De Boer and Wessels "Dominance of Main Proceedings"

De Boer MB and Wessels B "The Dominance of Main Proceedings under the European Insolvency Regulation" in PJ Omar (ed) International Insolvency Law: Themes and Perspectives (Ashgate Aldershot 2008)

Fletcher Insolvency in Private International Law

Fletcher IF Insolvency in Private International Law: National and International Approaches 2nd ed (Oxford University Press Oxford 2005)

Forsyth Private International Law

Forsyth CF Private International Law 4th ed (Juta Cape Town 2003)

Glosband 2007 American Bankruptcy Institute Journal

Glosband DM "SPhinX Chapter 15 Opinion Misses the Mark" 2007 American Bankruptcy Institute Journal 44-47

Goode et al Transnational Commercial Law

Goode R et al Transnational Commercial Law: Text, Cases and Materials (Oxford University Press Oxford 2007)

Hammer and McClintock 2008 Law & Bus Rev Am

Hammer AL and McClintock ME "Understanding Chapter 15 of the United States Bankruptcy Code: Everything You Need To Know About Cross-Border Insolvency Legislation in the United States" 2008 Law & Bus Rev Am 257-280

Howell 2008 Int'l Law

Howell LJ "International Insolvency Law" 2008 Int'l Law 113-151

LoPucki 1999-2000 Mich L Rev

LoPucki LM "The Case for Cooperative Territoriality in International Bankruptcy" 1999-2000 Mich L Rev 2216-2251

LoPucki 2005 Am Bankr L J

LoPucki LM "Global and Out of Control?" 2005 Am Bankr L J 79-103

Luna 2007 Fla J Int'l L

Luna J "Thinking Globally, Filing Locally: The Effects of the New Chapter 15 on Business Entity Cross-Border Insolvency Cases" 2007 Fla J Int'l L 671-696

Marshall (ed) European Cross Border Insolvency

Marshall M (ed) European Cross Border Insolvency Release 15 (Sweet & Maxwell London 2010)

Mason "United States"

Mason RG "United States" in Chan Ho L (ed) Cross-Border Insolvency: A Commentary on the 'UNCITRAL' Model Law 2nd ed (Globe Law and Business London 2009)

Meskin, Kunst and King Insolvency Law

Meskin PM, Kunst JA and King JC Insolvency Law and its Operations in Winding-up (Butterworths Durban 1990-)

Mevorach 2008 ICLQ

Mevorach I "The "home country" of a multinational enterprise group facing insolvency" 2008 ICLQ 427-448

Mevorach 2011 JBL

Mevorach I "European insolvency law in a global context" 2011 JBL 666-681

Mevorach I Insolvency within Multinational Enterprise Groups

Mevorach I Insolvency within Multinational Enterprise Groups (Oxford University Press Oxford 2009)

Morton 2005-2006 Fordham Int'l L J

Morton JD "Recognition of Foreign Cross-Border Insolvency Proceedings: An Evaluation of Solvent Schemes of Arrangement and Part VII Transfers Under U.S. Chapter 15" 2005-2006 Fordham Int'l L J 1312-1363

Moss, Fletcher and Isaacs EC Regulation on Insolvency Proceedings

Moss G, Fletcher IF and Isaacs S The EC Regulation on Insolvency Proceedings: A Commentary and Annotated Guide 2nd ed (Oxford University Press Oxford 2009)

Olivier and Boraine 2005 CILSA

Olivier M and Boraine A "Some aspects of international law in South African cross-border insolvency law" 2005 CILSA 373-395

Ronen-Mevorach 2006 JBL

Ronen-Mevorach I "Centralising insolvencies of pan-European corporate groups: a creditor's dream or nightmare?" 2006 JBL 468-486

Sarra 2008 INSOL Int Insolv Rev

Sarra J "Maidum's Challenge, Legal and Governance Issues in Dealing With Cross-Border Business Enterprise Group Insolvencies" 2008 INSOL Int Insolv Rev 73-122

Sarra 2008-2009 Tex Int'l L J

Sarra J "Oversight and Financing of Cross-Border Business Enterprise Group Insolvency Proceedings" 2008-2009 Tex Int'l L J 547-576

Silkenat and Schmerler Law of International Insolvencies

Silkenat JR and Schmerler CD The Law of International Insolvencies and Debt Restructuring (Oceana Dobbs Ferry, NY 2006)

Smits and O'Hearn "Multinational Insolvency Forum Shopping"

Smits AJ and O'Hearn IM "Multinational Insolvency Forum Shopping" in Silkenat JR and Schmerler CD (eds) The Law of International Insolvencies and Debt Restructurings (Oceana Oxford 2006)

Stander 2002 Journal for Juridical Science

Stander AL "Cross-border insolvencies as a global economic problem" 2002 Journal for Juridical Science 72-87

Stroebel Protocols as Possible Solutions

Stroebel LDM Protocols as Possible Solutions to Jurisdiction Problems in Cross-border Insolvencies (LLM-dissertation NWU 2006)

Torremans "Coming to Term with the COMI Concept"

Torremans P "Coming to Term with the COMI Concept in the European Insolvency Regulation" in PJ Omar (ed) International Insolvency Law: Themes and Perspectives (Ashgate Aldershot 2008)

Virgós and Garcimartín European Insolvency Regulation

Virgós M and Garcimartín F The European Insolvency Regulation: Law and

Practice (Kluwer The Hague 2004)

Virgós and Schmit Report

Virgós M and Schmit E Report on the Convention on Insolvency Proceedings (European Council Brussels 1996)

Wessels 2011 Insolvency Intelligence

Wessels B "COMI: past, present and future" 2011 Insolvency Intelligence 17-23

Wessels Current Topics

Wessels B Current Topics of International Insolvency Law (Kluwer Deventer

Wessels International Insolvency Law

Wessels B International Insolvency Law (Kluwer Deventer 2006)

Westbrook 1999-2000 Mich L Rev

Westbrook JL "A Global Solution to Multinational Default" 1999-2000 Mich L Rev 2276-2328

Westbrook 2001-2002 Conn J Int'l L

Westbrook JL "The Transnational Insolvency Project of the American Law Institute" 2001-2002 Conn J Int'l L 99-106

Westbrook 2002 Am Bankr L J

Westbrook JL "Multinational Enterprises in General Default: Chapter 15, The ALI Principles, and The EU Insolvency Regulation" 2002 Am Bankr L J 1-41

Westbrook 2005 Am Bankr L J

Westbrook JL "Chapter 15 at Last" 2005 Am Bankr L J 713-728

Westbrook 2005 Penn St Int'l L Rev

Westbrook JL "Universalism and Choice of Law" 2005 Penn St Int'l L Rev 625-637

Westbrook 2006 Tex Int'l L J

Westbrook JL "Multinational Financial Distress: The Last Hurrah of Territorialism" 2006 Tex Int'l L J 321-337

Westbrook 2006-2007 Brook J Int'l L

Westbrook JL "Locating the Eye of the Financial Storm" 2006-2007 Brook J Int'l L 1019-1040

Wofford 2008-2009 Tex Int'l L J

Wofford T "The Other Establishment Clause: The Misunderstood Minimum Threshold for Recognition" 2008-2009 Tex Int'l L J 665-689

Register of cases

European Union

T Telecom Ltd [2005] EWHC 275 (Ch)

AvCraft International Ltd ZIP 2005, 1611; EWiR 2005, 791 District Court Weillheim, 22 Jun 2005

BenQ Mobile Holdings BV 1503 IE 4371/06, Local Court of Munich, 5 Feb 2007

Case nr AR A/03/1126, Commercial Court Tongeren, 31 May 2003

Ci4Net.Com Inc and DBP Holdings Ltd High Court of Justice Chancery Division Leeds, ZIP 2004, 1796, EWiR 2004, 20 May 2004

Cirio del Monte NV Civil Court of Rome, Bankruptcy Section, 13 Aug 2003

Dentist Changing House AG Celle, 18 Apr 2005 (29 IN 11/05)

Enron Directo Sociedad Limitada High Court of London, 4 Jun 2002 (unreported)

Eurofood IFCS Ltd - Bondi v Bank of America NA (Case C-341/04, OJ [2006] C 143/11)

Genevan Trading Co Ltd v Kjell Tore Skjevesland High Court, 11 Nov 2002 [2003] BCC 391

In re Amerindo Internet Growth Fund Ltd No 07-10327 (Bankr SDNY Feb 9, 2007)

In the Matter of Daisytek-ISA Limited English High Court (Leeds Registry), 16 May 2003 BCC 562

Interedil Srl (In Liquidation) v Fallimento Interedil Srl (C-396/09) [2012] Bus LR 1583

Müller Gerüstbau GmbH District Court of Dordrecht, LJN; AQ6547; NIPR 2004/372, 11 Aug 2004

Norse Irish Ferries and Cenargo Navigation Limited High Court of Justice, 20 Feb 2003 (unreported)

Parkside Flexibles SA High Court Leeds Registry, 9 Feb 2005

Rastelli Davide e C Snc v Hidoux (C-191/10) [2012] All ER (EC0 239 (ECJ (1st Chamber)

Re BRAC Rent-A-Car International Inc [2003] 2 All ER 201

Re Finnish LLC Court of Appeal Svea, No Ö4105-03, 30 May 2003 (unreported)

Re Stanford International Bank Ltd (In Receivership) [2009] BPIR 1157

Salvage Association High Court of Justice, 9 May 2003, [2003] EWHC 1028 (Ch)

SAS ISA Daisytek Court of Appeals Versailles, 4 Sep 2003, JOR 2003/288

SAS Rover France Commercial Court Nanterre, 19 May 2005

Shierson v Vleiland-Boddy Court of Appeal (Civil Division), 27 Jul 2005 [2005] EWCA Civ 974

Susanne Staubitz-Schreiber ECJ, 17 Jan 2006, C-1/04, JOR 2006/59

Telia AB v Hillcourt Docklands Ltd [2002] EWCH 2377 (Ch)

Trillium (Nelson) Properties Ltd v Office Metro Ltd [2012] ILPr 30

United States

Canada S Ry Co v Gebhard 109 US 527 (1883)

Genesis Health Ventures, Inc v Stapleton (In re Genesis Health Ventures Inc) 402 F3d 416 (3rd Cir 2005)

In re Basis Yield Alpha Fund (Master) 381 BR 37 (Bankr SDNY 2008)

In re Bear Stearns High-Grade Structured Credit Strategies Master Fund Ltd 374 BR 122 (Bankr SDNY 2007)

In re Betcorp Ltd 400 BR 266

In re British American Isle of Venice (BVI) Ltd 441 BR 713 (Bankr SD Fla 2010)

In re Commercial Envelope Mfg Co 3 Bankr Ct Dec 647 1977 WL 182366 (Bankr SDNY 1977)

In re Lernout & Hauspie Speech Products NV 301 BR 651 (Bankr D Del 2003)

In re Lernout & Hauspie Speech Products NV 308 BR 672 (D Del 2004)

In re Maxwell Communications Corp 170 BR 800 (Bankr SDNY 1994)

In re Millennium Global Emerging Credit Master Fund Ltd 458 BR 63 (Bankr SDNY 2011)

In re Muscletech Research and Development Order of Judge Rakoff 04 MD 1598, 06 Civ 538 (SDNY)

In re Owens Corning 419 F3d 195 (3rd Cir 2005)

In re SPhinX 351 BR 103 2006 371 BR 10 (SDNY)

In re Tri-Continental Exchange Ltd 349 BR 627, 47 Bankr Ct Dec 31

Lavie v Ran (In re Ran) 607 F3d 1017 (5th Cir 2010)

Lernout & Hauspie Speech Products NV v Stonington Partners Inc 268 BR 395 (D Del 2001)

Lernout & Hauspie Speech Products NV v Stonington Partners Inc 310 F3d 118 (3d Cir 2002)

Soviero v National Bank of Long Island 328 F2d 446 (2d Cir 1964)

Register of legislation and government publications

European Union

Council Regulation (EC) 1346/2000 of 29 May 2000 on Insolvency Proceedings

South Africa

Cross-Border Insolvency Act 42 of 2000

United Kingdom

Companies Act of 2006

United States

American Law Institute's Principles of Cooperation Among NAFTA Countries (2003) (the ALI principles)

Chapter 15 of the United States Bankruptcy Code

US House Report (HR Rep No 109-31 (2005))

Register of international instruments

Convention on the International Sale of Goods (1980)

EU Convention on Insolvency Proceedings (1995)

Guide to Enactment of the UNCITRAL Model Law on Cross-Border Insolvency, UN Gen Ass UNCITRAL 30th sess, UN Doc A/CN.9/442 (1997)

UNCITRAL Model Law on Cross-Border Insolvency (1997)

UNCITRAL Model Law on International Commercial Arbitration (1985)

UNCITRAL Legislative Guide on Insolvency Law, Part One (2005)

UNCITRAL Legislative Guide on Insolvency Law, Part Three: Treatment of Enterprise Groups in Insolvency (2010)

Register of internet sources

UNCITRAL 1997 www.uncitral.org

UNCITRAL 1997 UNCITRAL Model Law on Cross-Border Insolvency www.uncitral.org/uncitral/en/uncitral_texts/insolvency/1997/Model_status.html [date of use 1 Nov 2010]




DOI: http://dx.doi.org/10.17159/1727-3781/2012/v15i5a2522

Refbacks

  • There are currently no refbacks.


Copyright (c) 2017 Jeanette Weideman, Leonie Stander

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.