Improving cross-border insolvency resolution

Research at UCL Laws has led to a more coordinated process for resolving cross-border insolvencies, benefiting debtors, creditors, judges, practitioners and the stability of global business.

Insolvency law is a relatively new field of study despite its importance in international commercial life. In his influential article The Quest for Global Insolvency Law (2002), Professor Ian Fletcher laid out the key challenges for any global law on insolvency.  

He demonstrated that a country’s insolvency laws correspond closely to its economic and cultural attitudes to debt, and these vary widely between countries. Wide variation also exists in how countries deal with cases that have a transnational element and the laws they would apply.  These differences have made ‘universalist’ or ‘internationalist’ resolution of insolvency proceedings difficult.

In 2006, Professor Fletcher’s expertise on cross-border insolvency law saw him appointed as an EU expert and as co-reporter (with Professor Bob Wessels, University of Leiden), on the Transnational Insolvency Project instigated by the American Law Institute (ALI) and the International Insolvency Institute. The purpose was to determine whether the model designed to facilitate cooperation in insolvency across the North American Free Trade Area (NAFTA) states of US, Canada and Mexico might be extended as an embodiment of global best practice in international insolvency.

Through five years of extensive research and consultation, Professors Fletcher and Wessels established that, with key modifications, the basic NAFTA principles could be accepted across the world.

Drawing on the NAFTA model, they created set of 37 Global Principles for Cooperation in International Insolvency Cases and 18 Global Guidelines for Court-to-Court Communications. These documents offer ways to navigate the potentially intractable issues of international insolvency.

Both are being applied in various jurisdictions, in both civil and common law. For example, The Global Principles have been seen by judges as an important point of reference in cross-border insolvency cases, encouraging a judicial embrace of a ‘universalist’ approach to cross-border insolvencies. The Global Principles and in particular, the Global Guidelines have also spurred the development of other ‘soft law’ instruments aimed at greater global cooperation in relation to insolvency. The Global Guidelines provided the foundation for the EU Cross-Border Insolvency Court-to-Court Cooperation Principles (also known as the JudgeCo texts), published in 2015 and tailored for use under the EU Insolvency Regulation. The Global Principles and Guidelines also catalysed work by the international Judicial Insolvency Network (JIN), formed in 2016 and now approved by 11 courts around the world, with the objective of avoiding inconsistent judicial findings and improving coordination in jurisdictional approaches.

In the UK, a 2017 amendment to the Chancery Guide (the official guide to conduct of litigation in the Chancery Division of the High Court of Justice) requires practitioners to consider whether a court should be invited to adopt one of three sets of guidelines at the outset of proceedings: the Global Guidelines, the JudgeCo texts, and the JIN Guidelines.  

These developments encourage more coordinated and expeditious resolution of cross-border insolvencies, benefiting debtors, creditors, judges, practitioners and the stability of global commerce and investment.

Professor Ian Fletcher passed away in 2018.

Links

• Tribute to Professor Ian Fletcher
• UCL Faculty of Laws
• Faculty of Laws REF 2021

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• Image credit: iStock / bCracker