Recognition and Enforcement in Cross-Border Insolvency Law: A Proposal for Judicial Gap-Filling
Sandeep Gopalan is a Dean and Professor of Law at Deakin University. Michael Guihot is a Senior Lecturer in Law at Queensland University of Technology. Their article addresses the need to fill the gaps of cross-border insolvency law to increase efficiency, fairness, and predictability in insolvency proceedings.
The globalization of business activity means that businesses these days have contacts with a diverse array of national laws and legal systems. In this globalized context, insolvencies can often have transnational consequences. In such situations, there is a clash of competing national laws on questions ranging from the recognition of security interests, to processes related to the disbursal of assets, and there are different policy preferences underlying the protection of different kinds of creditors.
These clashes in the law pose difficulties because each country has framed its insolvency laws in response to particular political exigencies and the policy preferences of its citizens, and the various laws reflect different bargains between creditor and debtor protection. In their article, Gopalan and Guihot argue that despite its enormous financial importance and academic complexity, cross-border insolvency law remains in a state of confusion.
The authors analyze the recognition and enforcement of cross-border insolvency judgments from the United States, United Kingdom, and Australia to determine whether the UNCITRAL Model Law’s goal of modified universalism is currently being practiced. The authors then subject the Model Law to analysis through the lens of international relations theories to elaborate a path forward. The authors suggest that courts could use the express language of the Model Law text to confer recognition and enforcement of foreign insolvency judgments. The adoption of this proposal has the potential to reduce costs, maximize recovery for creditors, and ensure predictability for all parties.