New UNCITRAL Model Law on the Recognition and Enforcement of Insolvency-Related Judgments
On September 18, 2018, the United Nations Commission on International Trade Law ("UNCITRAL") published its final version of the new Model Law on the Recognition and Enforcement of Insolvency-Related Judgments (the "IRJ Model Law"). The IRJ Model Law creates a framework for the recognition and enforcement of judgments in foreign bankruptcy and insolvency proceedings. It is intended to supplement and complement the 1997 UNCITRAL Model Law on Cross-Border Insolvency (the "CBI Model Law"). The CBI Model Law has been adopted by 44 nations or territories, including the U.S., in chapter 15 of the Bankruptcy Code (enacted in 2005), and the U.K., in the Cross-Border Insolvency Regulations (in force since 2007) (the "CBIR"). The CBI Model Law establishes a framework for cooperation and coordination among courts presiding over cross-border bankruptcy and insolvency proceedings.
The stated purpose of the IRJ Model Law is:
- To create greater certainty in regard to rights and remedies for recognition and enforcement of insolvency-related judgments;
- To avoid the duplication of insolvency proceedings;
- To ensure timely and cost-effective recognition and enforcement of insolvency-related judgments;
- To promote comity and cooperation between jurisdictions regarding insolvency-related judgments;
- To protect and maximize the value of insolvency estates; and
- Where legislation based on the [CBI Model Law] has been enacted, to complement that legislation.
Like the CBI Model Law, the IRJ Model Law promotes a universalist, rather than a territorial, approach to cross-border bankruptcy proceedings. In this context, "universalism" means that bankruptcy or insolvency proceedings should be recognized worldwide, obviating the need for disjointed proceedings in multiple foreign jurisdictions applying local law for the benefit of local creditors in an exercise of territorialism.
The U.S. has embraced this approach in enacting chapter 15 of the Bankruptcy Code. The U.K. has only partially done so in adopting the CBIR. Vestiges of territorialism still exist in the U.K. based on court rulings in Antony Gibbs & Sons v. La Société Industrielle et Commerciale des Métaux, [1890] LR 25 QBD 399 (establishing the "Gibbs Rule," whereby an English court will not enforce a foreign insolvency judgment discharging or modifying the terms of English-law-governed debt); Rubin v. Eurofinance, [2012] UKSC 46 (refusing to recognize a transfer avoidance judgment issued in a U.S. bankruptcy case on the ground that, in the U.K., a judgment entered in personam cannot be enforced against a person who has not submitted to the jurisdiction of the court entering the judgment); and, most recently, OJSC International Bank of Azerbaijan, [2018] EWCA Civ 2802, 2018 WL 06605589 (Dec. 18, 2018) (ruling that the CBI Model Law is merely procedural and cannot impair substantive English-law contract rights protected by the Gibbs Rule).
Like the CBI Model Law, the IRJ Model Law does not have any legal effect unless it is formally implemented in any given nation. UNCITRAL is expected to publish a Guide to Enactment for the IRJ Model Law in the near future.
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