1. Introduction
In May 1997 the United Nations Commission on International Trade (UNCITRAL) adopted a model law on cross-border insolvency.

Section 14 Insolvency Act 2000 provides powers to the Secretary of State for Trade and Industry to give effect to the UNCITRAL model on cross-border insolvency within the UK. The powers afforded by this section of the legislation include a power to amend s426 Insolvency Act 1986 (co-operation between Courts) so as to specifically implement the UNCITRAL model. As at December 2002, no regulation had been made (pursuant to s14 Insolvency Act 2000) to bring the model into effect within the jurisdiction.

The fact that the UK has yet to implement the UNCITRAL model does not mean that it is of no import. In principle the benefits of the model are to be made available by Enacting States without regard to questions of reciprocity. In other words, office-holders within the jurisdiction can avail themselves of the UNCITRAL model in any state where the same has been enacted.

There is a significant element of overlap between the UNCITRAL model, and the EC Insolvency Regulations. Therefore, to an extent, through the coming into effect of the European Insolvency Regulation within the jurisdiction, the UK has in part effectively adopted the UNCITRAL model.

For an office-holder to take advantage of the UNCITRAL model, he must be an office-holder in respect of Foreign Insolvency Proceedings where there is an element of Court intervention/supervision. It is therefore likely that administrative receivers cannot avail themselves of the benefits afforded by the UNCITRAL model. Administrators, liquidators, and trustees in bankruptcy are likely to be able to avail themselves of the UNCITRAL benefits. Such office-holders are likely in the near future to be able to enjoy significant scope for action across fourteen of the fifteen EU Member States (since Denmark did not adopt the EC Insolvency Regulations), in addition to being able to claim recognition and access to the Courts of all other countries throughout the world where the model law has been incorporated/enacted.

The process of enactment of the model law is likely to be somewhat haphazard, since it is at the discretion of each individual state. A number of states are known to be giving consideration to enactment of the UNCITRAL model, including some of the world’s major powers and emerging economies. To date the following countries have (as at November 2002) adopted/enacted the UNCITRAL model:

1. the United States of America;
2. Canada;
3. Australia;
4. New Zealand; and
5. South Africa.

The UNCITRAL model was primarily intended to prevent local realisation of assets in a situation where there are insolvency proceedings within a specific country (for example, England & Wales), and the company forming the subject matter of those proceeds has assets throughout the world. Local creditors, outside of England & Wales, in the past have attempted to obtain payment in full by taking litigation (within their jurisdiction) against assets located in the jurisdiction of the foreign creditors in question.

2. Structure
The main objective of the UNCITRAL model is to lay down/establish rights of access to Courts, in Enacting States, for foreign office-holders.

The UNCITRAL model consists of thirty-two separate articles, each of which has been drafted as a "model provision" (intended to be suitable for direct enactment into existing insolvency laws of any state minded to adopt the UNCITRAL model).

Enacting States (i.e. states who decide to adopt the UNCITRAL model) are not obliged to adopt the whole of the UNCITRAL model. They can choose which part of the model (i.e. how many of the thirty-two articles) to adopt. Great care must therefore be taken when advising an insolvency practitioner as to the benefits that can be obtained under the UNCITRAL model. Each case must be considered on a country by country basis.

If enacted, the provisions of the model become enforceable exclusively within the Enacting State in question. There is no direct jurisdiction between states. The question of the rule of law, and the choice of prevailing law, does not arise.

The UNCITRAL model concerns itself primarily with two fundamental issues. It is intended to put in place provisions for Enacting States to govern:

• The nature of recognition to be afforded to foreign insolvency proceedings, within an Enacting State; and
• The quality of assistance, and relief, that a foreign office-holder may request (or be granted) within an Enacting State.

3. Scope of Application
For an office-holder to be able to avail himself of the UNCITRAL model, he must be an office-holder in respect of "foreign insolvency proceedings". The model only applies to foreign insolvency proceedings, as defined by Article 2(a). Foreign proceedings are defined by the model as:

"A collective judicial or administrative proceeding in a foreign state, including an interim proceeding, pursuant to a law relating to insolvency in which proceedings the assets and affairs of the debtor are subject to control/supervision by a foreign Court, for the purpose of re-organisation or liquidation."

As stated above, in view of the requirement for Court control/ supervision, the UNCITRAL model cannot apply to administrative receiverships, or floating charge receiverships.
It is however likely that the UNCITRAL model can be used by office-holders in respect of:
1. Liquidations (compulsory and voluntary);
2. Bankruptcy;
3. Administrations;
4. CVAs;
5. IVAs;
6. PVAs; and
7. Provisional liquidations.

An enacting state can, if it so desires, exclude the applicability of the model from certain categories of insolvency proceedings that are subject to special insolvency regimes under the local laws of the Enacting State (for example, banks, insurance companies, and financial institutions may be excluded).

4. Access and Recognition Under UNCITRAL Model
The UNCITRAL model allows foreign office-holders a right to apply, in an Enacting state, for the recognition of the foreign insolvency proceedings (in respect of which they are office-holder).

The model further allows the said office-holder direct access to the Courts of an Enacting State, and a right to apply for relief and assistance in a timely fashion.

The right for relief and assistance can include a right for interim relief, pending formal recognition of foreign insolvency proceedings.

A "foreign representative" (i.e. a foreign office-holder) can apply directly to the Court of an Enacting State for relief and assistance.

Therefore there is no need for the formal recognition of foreign insolvency proceedings, before a foreign office-holder can apply to the local Courts of an Enacting State for relief. However ultimately the right of a foreign office-holder to relief is dependent on recognition of the foreign insolvency proceedings within the Enacting State. Obtaining interim relief in respect of foreign insolvency proceedings that do not qualify could give rise to a claim for damages by the debtor company/ individual.

Although a foreign office-holder can ask for the assistance of the insolvency Courts of an Enacting State, he is likely to be subject to control by the local Courts, and the general requirements of the local law of the Enacting State .

In addition to applications for relief/assistance, a foreign office-holder can also apply to commence proceedings under the local insolvency law of the Enacting State, subject to the conditions for commencing such proceedings being otherwise met.

4.1 Recognition
The benefits available under the model are dependent on the "foreign insolvency proceedings" meeting the criteria for international recognition contained in Articles 15-17.

There are two categories of recognition available, namely:
1. Foreign Main Proceedings; or
2. Foreign Non-Main Proceedings.

The categorisation of proceedings depends on the circumstances under which the foreign proceedings are opened, under the laws of the foreign state. The categorisation as the aforementioned is as follows:
1. Foreign Main Proceedings are where foreign insolvency proceedings have been opened in a state where the debtor has its Centre of Main Interest [COMI];
2. Foreign Non-Main Proceedings are foreign insolvency proceedings, other than foreign main proceedings, which have been opened and are taking place in a state where the debtor has an "establishment" &.

Centre of Main Interest (COMI) is not defined in the UNCITRAL model, although a definition is provided in the EC Insolvency Regulation. Article 16(3) UNCITRAL contains a presumption that the debtor’s registered office (if a company), or a habitual residence (if an individual), is presumed to be its COMI (in the absence of evidence to the contrary).

Article 2(f) UNCITRAL defines Establishment as "any place of operations where the debtor carries out a non-transitory economic activity with human means and goods or services" . For an establishment to exist a "place of business" is required, as opposed to simply assets within the jurisdiction.

The Foreign Office-Holder can apply to the Court of any Enacting State for recognition (as main or non-main proceedings) of the Foreign Insolvency Proceedings in respect of which he has been appointed. Article 15 sets out the documentation required in support of an application. Article 17(1) sets out the grounds for recognition.

Upon an application for recognition, by a Foreign Office-Holder, the Courts of the Enacting State have a discretionary power to grant interim relief to the Foreign Office-Holder (pending the outcome of the application for recognition) .

5. Consequences of Recognition: Relief & Assistance
If Foreign Insolvency Proceedings are recognised (in an Enacting State) as Main Proceedings, Article 20 UNCITRAL automatically affords the following benefits/relief:

1. A stay over commencement/continuation of individual actions/ proceedings concerning debtor’s assets/rights/obligations/ liabilities in the Enacting State in which the Foreign Insolvency Proceedings have been recognised;
2. A stay over any type of execution against the debtor’s assets in the Enacting State in which the Foreign Insolvency Proceedings have been recognised; and
3. A suspension of the debtor’s rights to transfer/encumber or otherwise dispose of any assets.

The Enacting State in question can impose exceptions to the above automatic relief afforded by Article 20, subject to the same being based on any such exceptions already existing in domestic insolvency law.

Recognition of Foreign Insolvency Proceedings, as main proceedings, also gives rise to a rebuttable presumption of the debtor’s insolvency (for the purposes of commencing insolvency proceedings under the law of the Enacting State).

Whether foreign proceedings are recognised as main or non-main proceedings, Article 21 UNCITRAL confers a general discretionary power upon the Courts of the Enacting State to grant the office-holder "any appropriate relief".

Recognition of Foreign Insolvency Proceedings, as main or non-main proceedings, enables the Foreign Office-Holder to initiate the types of action which are available under the laws of the Enacting State (in which the Foreign Insolvency Proceedings are recognised), with a view to enabling the office-holder to avoid any act detrimental to the interests of the creditors generally. If the matter relates to non-main Foreign Proceedings, prior to allowing the office-holder to initiate any such action, the Courts of the Enacting State must be satisfied that such action relates to assets that (under the laws of the Enabling State) should be administered in foreign non-main insolvency proceedings.

Upon recognition of Foreign Insolvency Proceedings, whether as main or non-main proceedings, the Foreign Office-Holder acquires standing to intervene in any proceedings in the Enacting State in which the debtor is a party . Furthermore the office-holder is allowed to participate in any proceedings regarding the debtor’s affairs that have been opened under the insolvency law of the Enacting State . The right to participate is limited in nature, and enables the Foreign Office-Holder to make petitions/requests/submissions.

6. Cross-Border Co-operation Between Courts & Office-Holders -

6.1 Co-ordination of Concurrent Proceedings
Articles 25-27 are intended to provide a regime for co-operation between foreign insolvency Courts, and foreign office-holders. The regime for co-operation is to be put, in practice, through allowing direct communication between respective states’ Insolvency Courts, and between the Insolvency Courts of an Enacting State and a Foreign Office-Holder.

Articles 28-32 compliments the provisions for co-operation, through specific directives concerning procedures to be followed in cases where there are "concurrent proceedings" under the laws of different states. These articles are intended to secure optimum co-ordination between the insolvency regimes of the states in question. For example, Article 32 contains "hotch-pot" provisions .

6.2 Creditors’ Rights of Access & Participation
The UNCITRAL model is intended primarily to deal with international recognition of insolvency proceedings, and rights to relief and access by office-holders. However Articles 9-14 contain certain limited provisions conferring rights of access upon foreign creditors.

Foreign creditors are to have the same rights as local creditors regarding commencement of, and participation in, an insolvency proceeding. Such right of access is not to affect the ranking of creditors’ claims in an insolvency proceeding under the local law.

Foreign creditors have a right to individually (as opposed to by way of general advertisement) receive adequate notification of successive stages in insolvency proceedings within an Enacting State. They are afforded the same rights to notification held by local creditors.

Foreign creditors are to be afforded a "reasonable" period of time in which to file/submit their claims as local creditors. The UNCITRAL model however contains no specific time limits, and no guidance as to what precisely is meant by a "reasonable" period of time.

Note: These keynotes ought to be read in conjunction with SGH keynotes on the EC Insolvency Regulation.

Revised 6 January 2003

Daniel Sejas 020 7544 5555 daniels@sghlaw.com