The MLCBI, the COMI and Emerging Markets: Is it Time for Amendments?
By Rosa M. Rojas-Vertiz (Instituto Tecnológico Autónomo de México (ITAM) – Law School)
In a recent article, The MLCBI, the COMI, and Emerging Markets: Is it Time for Amendments?, published in the Chicago-Kent Law Review, I discuss how the debate on cross-border insolvency and the concept of Centre of Main Interest (“COMI”) have often been focused on countries with developed insolvency systems, assuming that any jurisdiction would render an equivalent result. My article argues that facilitating the choice of insolvency forum can often be necessary to achieve the rescue of the debtor, obtain new financing and facilitate an efficient and fair administration of an insolvency proceeding.
Many factors may generate inefficiencies on insolvency systems, especially in emerging markets. That should justify a more flexible approach for the choice of insolvency forum. Otherwise, even if companies from emerging markets are allowed to initiate insolvency proceedings in other jurisdictions, the recognition of the procedure may face some difficulties back in their home countries. In fact, my recent article analyzes the use of Chapter 11 by Latin American companies and it seems to be a concern that only in one case - out of over a hundred – those Latin American companies sought recognition of the U.S. Chapter 11 reorganization procedure as a foreign main insolvency proceeding.
My article contributes to the ongoing debate on whether the concept of COMI should be revisited. It discusses the difficulties that large Latin American companies regularly face to file for Chapter 11 in the United States, which is clearly not their COMI. Even though the United States increases the chances of reorganizing viable but financially distressed firms, Latin American companies filing for Chapter 11 face some problems associated with the recognition and enforcement of those procedures. After examining the alternatives available for such debtors seeking to achieve a successful reorganization, my article suggests a more flexible concept of COMI consistent with the goals pursued by the Model Law on Cross-Border Insolvency.