Enhancing Efficiency and Rescue Outcomes in Cross-Border Insolvency Matters: The Role of Multilateral Cooperation Protocols and Judicial Diplomacy
By Scott Atkins (Norton Rose Fulbright & INSOL International)
Last year, we celebrated the 25th anniversary of the adoption of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency (‘Model Law’). The Model Law has made an immense contribution in ensuring greater consistency and more predictable outcomes for creditors and investors in cross-border insolvency matters. It has also contributed to enhanced creditor returns and more successful restructuring outcomes by centralising proceedings and avoiding duplicate processes where assets and creditors are spread across numerous locations – a typical occurrence in today’s modern commercial world.
The recognition provisions in the Model Law – allowing for foreign insolvency processes to be recognised as main or non-main proceedings, and providing for a range of automatic and discretionary ancillary relief such as enforcement stays, examination orders and entrusting local assets to a foreign insolvency representative – have been central in achieving these outcomes. However, equally significant are the provisions in the Model Law for court-to-court cooperation. These provisions not only build confidence and certainty between courts in granting recognition orders, but also provide a framework for cooperation even where a foreign insolvency process does not qualify as a main or non-main proceeding because it is not taking place where the debtor has its centre of main interests or an establishment.
Proactive cooperation and communication between courts – especially at an early stage of the insolvency process – may avoid the need for parallel proceedings altogether. Even if parallel proceedings have been instituted, court-to-court cooperation can enhance efficiency and reduce costs, including through the negotiation of communication protocols and the conduct of joint hearings. Cooperation can also lead to more consistent outcomes for creditors, aligned with the modified universalism which is aspired to as a core principle of cross-border insolvency law.
The purpose of this article is to explore the benefit of court-to-court cooperation protocols in cross-border insolvency matters, and to identify developments in multilateral and bilateral cooperation and communication agreements in the Asia-Pacific region both within and outside the Model Law framework.
It is suggested that the multilateral cooperation approach reflected in the principles established by the Judicial Insolvency Network (JIN) – which are complementary to the Model Law – along with broader judicial diplomacy initiatives such as those advanced by INSOL International, the World Bank and UNCITRAL – provide the greatest potential to facilitate proactive cooperation among courts in cross-border insolvency matters throughout the Asia-Pacific. These measures also provide a foundation to enhance the scope of substantive recognition and harmonisation outcomes in the best interests of creditors.
The value of court-to-court cooperation Protocols
In advocating for greater court-to-court cooperation in insolvency and indeed broader commercial matters, former Chief Justice of the Supreme Court of New South Wales The Honourable James Spigelman has noted extra-judicially that:
‘There is a complete disconnect between the willingness and ability of commercial corporations to operate and interact across borders in a seamless manner, on the one hand, and the restrictions that are still imposed upon public authorities, both regulatory and judicial, from acting in a similar manner.’
In a global economy, where technological and digital advancements have transformed the way business is conducted, it is now common for companies to operate in multiple jurisdictions, with assets and creditors located in many different countries. Effective cooperation protocols between courts can help to enhance efficiency, reduce wasted costs and minimise the duplication of insolvency proceedings across each of those jurisdictions.
One of the earliest examples of success in the use of cross-border insolvency communication protocols was the Maxwell Communication Corporation matter in 1992. In those proceedings, involving an administration in England and a parallel Chapter 11 process in New York, an examiner was appointed to facilitate coordination of the different proceedings in close communication with the English and United States courts. In the Nortel Networks matter, there were parallel insolvency proceedings in the United States and Canada for members of a large telecommunications group with subsidiaries located around the world. An insolvency agreement was facilitated by the United States and Canadian courts at the commencement of proceedings in June 2009, which laid the foundations for streamlined administrative processes, coordination in determining substantive issues, and the protection of creditors’ rights. The United States and Canadian courts also held a joint hearing conducted by audio-visual link. Following the collapse of Lehman Brothers in 2008, an insolvency agreement was negotiated to coordinate more than 75 insolvency proceedings across 16 jurisdictions worldwide – providing for cooperation and communication protocols, and the means for streamlining proceedings involving various judicial, administrative, government and regulatory bodies.
Other successes include Matlack, Madoff, Singer International, Owens Corning and Livent. More recently, in the Halifax matter, there were historic joint sittings of the Federal Court of Australia and the High Court of New Zealand in December 2020 in relation to parallel insolvency processes involving an Australian parent entity and a New Zealand subsidiary, before the issue of contemporaneous judgments and orders on 19 May 2021.
Frameworks for court-to-court cooperation
A foundational principle of the Model Law is that courts are required to cooperate ‘to the maximum extent possible’ with foreign courts (and foreign representatives) to achieve the objectives of the Model Law – including fairness and efficiency in the administration of cross-border insolvencies, protecting and maximising the value of the debtor’s assets for the benefit of creditors, and facilitating the rescue of financially troubled businesses.
The Model Law suggests possible means of cooperation – including the coordination of concurrent proceedings, approval or implementation of specific communication protocols, and the appointment of persons to act at the direction of the court. However, the mechanics of doing so – in the form of multilateral and bilateral agreements between different courts which guide the approach to cooperation and communication in a consistent, clear and predictable manner – are left to be negotiated and implemented outside the provisions of the Model Law.
In the earliest example of multilateral court-to-court cooperation and communication protocols in cross-border insolvency matters, in 2000, the American Law Institute (ALI) developed Court-to-Court Guidelines in advancing its transnational insolvency work in countries covered by the North American Free Trade Agreement. These Guidelines were endorsed by the International Insolvency Institute (III) and the Insolvency Institute of Canada, and were also used by courts in cross-border insolvency cases such as PSINet and Matlack. They were subsequently developed into the joint ALI-III Global Principles for Cooperation in International Insolvency Cases, released in 2012.
The ALI-III Global Principles were drawn on to inform the European Union’s Cross-Border Insolvency Court-to-Court Cooperation Principles and Guidelines (more commonly known as the JudgeCo Principles and Guidelines) released in 2014. This framework is intended to guide cooperation exclusively between EU nations under the framework of the European Insolvency Regulation and the European Insolvency Regulation (Recast).
Within the Asia-Pacific, an influential multilateral framework that has facilitated court-to-court cooperation and relationship building in cross-border insolvency matters is found in the principles devised by JIN – a network of insolvency judges from North America, South America, Europe, Asia, Australia and the Caribbean. JIN is intended to serve as a platform for sustained and continuous engagement to further cooperation and communication, best practices and judicial thought leadership. It was initiated by the Supreme Court of Singapore, with the inaugural JIN Conference held in Singapore in October 2016. At the conclusion of that Conference, JIN released Guidelines for Communication and Cooperation between Courts in Cross-Border Insolvency Matters (‘JIN Guidelines’).
The primary aim of the JIN Guidelines is to facilitate the preservation of enterprise value and the reduction of costs for distressed debtors in cross-border insolvency matters, by setting out principles for communication, joint hearings and other means of coordination between courts in different jurisdictions. The JIN Guidelines are structured so that, in each case involving parallel proceedings, courts should work together to encourage administrators in different jurisdictions to agree to a specific coordination protocol.
The protocol should cover matters such as coordination of requests for court approvals of related decisions and actions when required and communication with creditors and other parties. To the extent possible, the protocol should also provide for timesaving procedures to avoid unnecessary and costly court hearings and other proceedings.
The JIN Guidelines also provide for courts to directly communicate to resolve procedural, administrative and preliminary matters, and to coordinate on the making of submissions and the rendering of decisions. Joint hearings are also envisaged.
The Guidelines have now been adopted by 16 courts globally, and are supplemented by specific Modalities of Court-to-Court Cooperation (‘JIN Modalities’), issued in 2019, that deal with the mechanics for engaging in communication. This includes details concerning the time, method and language of communication, consent and confidentiality protections and a role for a facilitator to act as the primary individual to initiate or receive communications on behalf of courts in different jurisdictions.
In the Halifax matter, referred to above, Justice Gleeson (at the time a Judge of the Federal Court of Australia and now a Justice of the High Court of Australia) – for the first time in an Australian decision – referenced the potential for the cooperation between Australia and New Zealand courts in the matter to ‘be informed at least in part by the Guidelines developed by the Judicial Insolvency Network for Communication and Cooperation between Courts in Cross-Border Insolvency Matters’.
Apart from multilateral judicial cooperation frameworks, there are a number of bilateral frameworks that have been negotiated in the Asia-Pacific that may serve as a foundation for cooperation and communication in cross-border insolvency matters involving the signatory jurisdictions.
With effect from 23 July 2021, the Supreme Court of Singapore and the Federal Court of Malaysia have had in place a Protocol on Cross-Border Insolvency Matters, which enables the Courts to directly communicate upon the request of either Court to facilitate more efficient outcomes in winding up, judicial management, receivership or scheme of arrangement processes being pursued in either Singapore or Malaysia.
The Supreme Court of Singapore also signed a Memorandum of Understanding for Judicial Cooperation with the Supreme Court of Korea on 19 October 2020 – following an earlier Memorandum of Understanding on Improving the Efficiency and Effectiveness of Transnational Insolvency Proceedings through Cooperation signed by those Courts in 2018.
For other nations in the Asia-Pacific, there are also numerous examples of bilateral judicial cooperation agreements in commercial matters generally – rather than specifically in an insolvency context. For example:
- In Australia, bilateral cooperation frameworks have been established under the Treaty on Judicial Assistance in Civil and Commercial Matters between the Government of Australia and the Government of the Republic of Korea (2000) and the Agreement between the Government of Australia and the Government of the Kingdom of Thailand on Judicial Assistance in Civil and Commercial Matters and Cooperation (1998); and
- China has concluded 39 bilateral judicial assistance treaties to date, none of which deal specifically with insolvency.
These generic bilateral frameworks set out broad foundational principles for court-to-court cooperation – but given the immense complexity of cross-border insolvency matters, both legally and factually, the generality of the principles outside the specific procedural and substantive context of cross-border insolvency matters limits the potential of these frameworks to be used to guide courts towards early and proactive engagement in the management of cross-border insolvency matters.
Other bilateral arrangements exist that are intended to be used to deal not just with court-to-court cooperation in cross-border insolvency matters, but also the process for recognition – in place of the Model Law.
In the Asia-Pacific, the notable example of such an arrangement is the joint Record of Meeting signed by the Government of the Hong Kong Special Administrative Region and the Supreme People’s Court of the People’s Republic of China on 14 May 2021, in relation to the mutual recognition of and assistance concerning bankruptcy and insolvency proceedings between the courts of Mainland China and of Hong Kong.
The Record of Meeting provides for mutual recognition and cooperation between designated Intermediate People’s Courts in pilot areas in Mainland China and Hong Kong courts, both in relation to liquidation and provisional liquidation proceedings in Hong Kong, and bankruptcy liquidation, reorganisation and compromise proceedings in Mainland China.
It has already had great success in promoting closer cooperation and communication between these jurisdictions in cross-border insolvency matters. For example, in Samson Paper Company and Zhaoheng Hydropower, Hong Kong liquidators of Hong Kong incorporated companies, made successful applications for a letter of request to be issued to the Shenzhen Intermediate People’s Court requesting it to make an order for recognition and to provide assistance to the liquidators and the Hong Kong court. A successful application was also made in Ozner Water in the case of a company incorporated in the Cayman Islands. In Hong Kong Fresh Water, a successful application was made by liquidators in Hong Kong for a letter of request to be issued to the Shanghai Court for recognition and assistance.
Nevertheless, the optimal framework for court-to-court cooperation and communication remains the Model Law, as supplemented by additional protocols such as the JIN Guidelines and the JIN Modalities. Ad hoc bilateral arrangements – whether at a government-to-government level or a court-to-court level – are not only difficult to negotiate, but also only deal with a limited demarcation of economic activity. With the expansion of multinational global enterprises as part of a modern global economy, bilateral arrangements in many cases will not be suited to achieve the broader level of consistency and cooperation across multiple jurisdictions in a debtor’s cross-border insolvency proceedings. Even if a jurisdiction does negotiate multiple bilateral arrangements, then inherently the expansion of those arrangements adds to the complexity and potential for inconsistency that a best-practice cross-border insolvency framework is intended to overcome.
Multilateral judicial diplomacy – the way forward
The primary benefit of multilateral judicial cooperation protocols is that they establish and actively facilitate judicial exchange and diplomacy between judges in a collective forum. Specifically in relation to the JIN Guidelines, Professor Westbrook makes the point that:
‘A special virtue of the JIN initiative comes from the fact that the establishment of personal relationships among commercial judges from different countries is a key to success in multinational cases. In that regard, not the least important benefit of the JIN Guidelines is the likelihood that they will tend to produce early direct communication by judges (with due notice to all) and will incentivise professionals to act quickly as well.’
Indeed, given that the grant of recognition and ancillary relief under the Model Law framework involves a considerable degree of judicial discretion, cooperation and communication frameworks can help to build confidence in foreign insolvency systems and judicial processes, thereby increasing the willingness of local courts to grant recognition orders and other relief. Cooperation in that sense is not just purely procedural – it can lead to substantive outcomes that can limit the multiplicity of insolvency proceedings in different jurisdictions.
In relation to JIN as a network and forum (that is, apart from the JIN Guidelines and JIN Modalities), judges belonging to signatory courts also attend specially convened conferences to exchange ideas and approaches to the interpretation of cross-border insolvency laws, and to share practical case experiences and suggestions for enhancements to communication.
These people-to-people judicial exchanges are critical in building a thriving cross-border restructuring and insolvency ecosystem – and in enhancing the likelihood of cooperative approaches being taken between courts in substantive matters.
As identified by The Honourable Justice Jacqueline Gleeson, writing extra-judicially:
‘By developing relationships with insolvency judges in other jurisdictions, we learn from overseas experience and also develop an appreciation of courts with which an Australian court may, in due course, be required to cooperate under [the Model Law].’
This form of judicial diplomacy is also actively promoted by INSOL International, the World Bank and UNCITRAL. For example, INSOL and the World Bank have developed the Judicial Insolvency Program to assist with the capacity-building of judges, primarily in emerging markets and developing countries. The focus of the training is on insolvency and restructuring law through a particular lens of court procedure and judicial analysis.
Further, INSOL and UNCITRAL have been holding joint Judicial Colloquia since 1995. In 2007, the World Bank joined INSOL and UNCITRAL as a partner in delivering these Colloquia. They are attended by judges, civil servants from relevant ministries and judicial administrators worldwide. To complement these biennial Colloquia, INSOL, UNCITRAL and the World Bank collaborate to organise regional Judicial Roundtables to encourage discussion at a regional level and enable a greater number of judges and justice officials to participate. The Roundtables compare judicial practice in dealing with practical and theoretical issues arising in cross-border insolvency cases within a particular region, including in the Asia-Pacific.
These initiatives help to enhance the likelihood of proactive cooperation and engagement in cross-border insolvency matters. They also increase the potential for greater consistency in substantive outcomes – through a common approach to the interpretation of the Model Law, and a greater willingness to recognise foreign processes in the spirit of modified universalism (in contrast to a protectionist territorial approach).
Judicial cooperation protocols play a critical role in enhancing efficiency in cross-border insolvency matters. Early engagement among courts in multiple jurisdictions where the insolvent debtor has assets and creditors beyond the location of the primary insolvency proceedings can minimise the need for parallel proceedings. Even if parallel proceedings are initiated in one or more other jurisdictions, judicial cooperation protocols establish a process for courts to communicate proactively, minimise costs through joint hearings, and find commonality and consistency in making substantive orders impacting on the administration of the insolvency.
Within the Asia-Pacific, the JIN Guidelines and the JIN Modalities, and the overarching Model Law framework, have the greatest potential for progressing effective cooperation among courts across the region. They have the distinct advantage over bilateral arrangements in providing for common, predictable cooperation and communication measures extending across multiple jurisdictions where the signatory courts are located. This is more reflective of the realities of business in the modern commercial environment, where assets and creditors are not confined to two exclusive jurisdictions covered by a bilateral arrangement.
Uniquely, JIN also provides a forum to bring together judges in an extrajudicial setting to advance policy discussions, training and the exchange of knowledge and ideas on cross-border insolvency matters. Along with other measures such as the activities promoted by INSOL, the World Bank and UNCITRAL, this form of judicial diplomacy builds respect for and confidence in different insolvency systems throughout the region. This increases the likelihood of courts working together to proactively seek to centralise proceedings and achieve harmonised outcomes that maximise returns for creditors and promote corporate and business rescue.
The key to advancing judicial cooperation throughout the Asia-Pacific in cross-border insolvency matters will now be to encourage widespread adoption and implementation of the Model Law, the JIN Guidelines and the JIN Modalities, beyond the current signatory states.
(*) This article was originally published in International Corporate Rescue, Volume 20, Issue 3, 2023. It can also be found here.
 James Spigelman, ‘Cross Border Issues For Commercial Courts: An Overview’, paper for the Second Judicial Seminar on Commercial Litigation, Hong Kong, 13 January 2010.
 Model Law, article 25.
 Model Law, preamble.
 Model Law, article 27.
 This framework includes 37 Global Principles for Cooperation in International Insolvency Cases, and 18 Global Guidelines for Court-to-Court Communications in International Insolvency Cases.
 JIN Guidelines, Guideline 2.
 JIN Guidelines, Guideline 3.
 JIN Guidelines, Guideline 7.
JIN Guidelines, Annex A.
 Including United States Bankruptcy Courts in Delaware, New York, Florida and Texas, the Supreme Court of Singapore, the Chancery Division of England & Wales, the Federal Court of Australia, the Supreme Court of New South Wales, and relevant bankruptcy courts in Seoul, Brazil and the Netherlands.
 Re Kelly (No 5) (2019) 139 ACSR 56, 63.
 Jay Lawrence Westbrook, ‘Global Insolvency Proceedings for a Global Market: The Universalist System and the Choice of a Central Court’ (2018) 96 Texas Law Review 1473.
 The Hon Justice Jacqueline Gleeson, ‘Judicial Cooperation in Cross-Border Insolvency’ (2019) 46(8) Brief 26, 30.