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UNLAWS Report – Working Group V

By Calum Paul

Going into the VIC I had the expectations of encountering a daunting, frightening process but excited by the thought of participating in global model laws. Upon arrival, the daunting and frightening expectations diminished.  The other delegations, who I perceived as ten-fold more experienced and attaining an intellectual right to be participating within the working group, were humble and generous people. These individuals were more than willing to help me, share their knowledge about the working group and the current issues with cross-border insolvency.

It was truly interesting observing the process from which global model laws are made. An aspect that I found most interesting, was the subtle politics of the working group. Prior to attending the working group, I had the naïve opinion that politics would not be played out, due to the consensual nature of the United Nations, however I was wrong. Throughout the working group, there was the conflicting models of universalism and state discretion. In particular, the countries with developed precedent, such as the United States and Canada, wanted the model law to enable discretion to each jurisdiction. In contrast, nations with under-developed precedent, typically Asian states, wanted the model law to provide strict steps informing the jurisdictions of what they can and cannot do.  In addition to the conflict of discretion, it was fascinating to observe the European Union. Although the EU is only an observer, it has the ability to compel its European nations into agreeing with its stance on particular issues. This was obvious when European delegations explicitly informed me that the European Union was forcing them to vote in favour of its polices.

I am thrilled and honoured that I had the opportunity to attend the working group regarding international Insolvency law. It was great to meet experts within the profession and to observe and participate in the process of creating an international model law. Attending the working group has broadened my understanding of international politics and hence has widened my perspective of potential career prospects.

Overview of 142: ‘Facilitating the cross-border insolvency of multinational enterprise groups: draft legislative provisions’.

Working paper 142 had few contentious issues. Most of the proposals by the delegations where merely clarifications of terms and the limitation of certain provisions. The working group was dominated by the delegations of the United States, Canada, United Kingdom, European Union and Korea. In this working paper the delegations that attained an observation status, such as INSOL International, FDC and ABA, had more input, than WP143.

Contentious Issues:

Article 11: ‘Participation by enterprise group members in a proceeding under [identify laws of the enacting State relating to insolvency]’

Article 11 addressed the term of ‘participation’. The working group identified that the term ‘participation’ was not defined within WP.142, thus the definition of ‘non-participation’ was also undefined. The observing delegations, such as the III, ABA and FDC, all proposed suggestions to the working group in order to clarify the meaning of ‘participate’ and the potential consequences of using the term ‘participate’. The chair concluded that the terms should be redrafted for the next working group to discuss.

Article 13: ‘Relief available to a planning proceeding’

Again the term ‘participation’ was under discussion. The FDC asked the working group for a definition and posed the question “can someone who participates opt out?”. The delegations of Canada and the United Kingdom proposed that participation should be defined and proposed a definition of what participation is.  The working group also questioned the need for sub-paragraph (g). The delegations of Canada and United States proposed that sub-paragraph (g) created limitations to finance, due to its significance in relief. The chair determined that no consensus was found and the issue should be re-drafted for the next working group.

Article 22: ‘Commitment to and approval of the treatment of foreign claims in accordance with applicable law: main proceeding’

This article needed clarification for the whole working group. The delegation of Canada questioned the structure of the text and its position as a supplemental provision. Canada proposed the removal of supplemental provisions, as developing nations adopt the whole text on the assumption that model laws are standardized. In contrast, the delegation of Germany disagreed, and supported the use of supplemental provisions.

Overview of 143: ‘Cross-border recognition and enforcement of insolvency-related judgements”.

Document 143, “Recognition and enforcement of insolvency-related judgements: draft model law”, was a very interesting and riveting way to gain an introduction to international insolvency law. This text was more contentious in comparison to WP142. As such, the discussions of the provisions were heated. The delegations of United Kingdom, United States of America, Canada and Singapore were aligned in most of their proposals. After discussions with the Canadian delegacy, I was informed they were purposely playing a ‘devils advocate’ in order to evoke reactions from other delegations.

On the other hand, the delegations of the European Union and it fellow nations also aligned in thought and was usually in opposition with America and its ‘allies’. The delegation of Korea, was highly critical of the model law and used the working group to clarify many elements of the text. The delegations of Thailand, Japan, China did not participate in regular discussion with the working group.

Contentious Issues

Article 2: Definition ‘Foreign proceedings’

The European Union, supported by the European delegates believed the terms ‘on the merit’ should be introduced into the provision. The United States, Canada, United Kingdom, Mexico, Singapore and Korea believed ‘on the merit’ would limit the scope of the model law. The delegations believed that limiting the scope is contradictory to the ideology of a model law. In the end the Chair suggested the text introduced by the European Union be placed in brackets and discussed at the next working group.

DefinitionInsolvency-related judgements’

The definition of “insolvency-related judgements” conveyed polarised opinions. The European Union introduced a document, to significantly adjust the provision. The introduction of the document was seen as a tactical move. Hence, the working group asked for a break in order to consult the document. Outside the conference the European Union and the United Kingdom and United States had a private meeting to discuss the document. Afterwards, the European Union introduced changes to the prepared document in order to reach a compromise. In the end Canada, United States and the United Kingdom saw the adjustments as a positive improvement. The chair asked the working group to continue discussing the provision, in order to provide guidance to the Secretariat, however the working group left the discussion to continue at the 51st conference in New York.

Article 3 and 3bis: ‘International obligations of this State’

Again the European Union introduced a complex proposal. The delegations of the United States of America, Canada, Singapore, Morocco and Argentina did not support the proposal of the European Union, as it limited the jurisdiction of nation states. The Canadian delegate was highly critical of the delegate from the European Union, as they did not provide ample time to consider the proposal, nor provide the document in all the languages of the United Nations. The consensus of the working group was the preference of 3bis and the European Unions proposal to be considered in the next working group.

Article 9: ‘Affect and enforceability of an insolvency-related judgement in the originating State’

Paragraph 2 brought intervention from numerous delegations.  The delegation of Singapore, suggested the use of variant 2 in paragraph 2. This was supported by the delegation of the United Kingdom, United States and Thailand, due to its clarity. In contrast the delegations of Mexico, Spain, Russian Federation, Argentina, Chile and Greece supported the retainment of variant 1. The delegations of Canada and the Republic of Korea sought no preference. As a result the Chair concluded the retainment of variant 1.

Article 12: ‘Grounds to refuse recognition and enforcement of an insolvency-related judgement’

The working group discussed the wording of paragraphs a, b, c and d. Deciding whether to omit or replace bracketed words. In general the delegations of United Kingdom, United States and Singapore were aligned in their view of editing the model law. Where as the European Union and the delegations from Europe were displaying opinions against this. In regards to subparagraph (g)(iv),(v) the working group did not come to a consensus and left the provisions for consideration at the next working group. The delegations of the United Nations and United Kingdom dominated the discussion of this subparagraph. The delegation of Canada sought to remove the whole of sub-paragraph (g), contrasted to the delegation of the European Union who stressed the importance of retaining the whole text.

Calum Paul is a law student at UTS.

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