Abstract
An increase in economic globalisation and international trade has amounted to an increase in the number of multinational enterprises that have debt, own assets and conduct business in various jurisdictions around the world. This, coupled with the recent worldwide economic recession, has inevitably caused the increased occurrence of multinational financial default, also known as cross-border insolvency (CBI). The legal response to this trend has, inter alia, produced two important international instruments that were designed to address key issues associated with CBI. Firstly, the United Nations Commission on International Trade Law (UNCITRAL) adopted the UNCITRAL Model Law on Cross-Border Insolvency (the Model Law) in 1997, which has been adopted by nineteen countries including the United States of America and South Africa. Secondly, the European Union (EU) adopted the European Council Regulation on Insolvency Proceedings (EC Regulation) in 2000. Both the EC Regulation and Chapter 15 adopt a “modified universalist” approach towards CBI matters. Europe and the United States of America are currently the world leaders in the area of CBI and the CBI legislation adopted and applied in these jurisdictions seems to be effective. As South Africa’s Cross-Border Insolvency Act is not yet effective, there is no local policy guidance available to insolvency practitioners with regard to the application of the Model Law. At the basis of this article is the view that an analysis of the European and American approaches to CBI matters will provide South African practitioners with valuable insight, knowledge and lessons that could be used to understand and apply the principles adopted and applied in terms of the EC Regulation and Chapter 15, specifically the COMI concept, the “establishment” concept in the case of integrated multinational enterprises and related aspects.
Highlights
An increase in economic globalisation and international trade in the past two decades[1] has amounted to an increase in the number of multinational enterprises[2] that have debt, own assets and conduct business in various jurisdictions around the world. 3 Coupled with the recent worldwide economic recession this has inevitably caused the increased occurrence of multinational financial default, known as cross-border insolvency (CBI).[4]
It should be noted that the European Union Council Regulation (EC) Regulation provides rules concerning the intracommunity consequences arising from insolvency proceedings only, and applies only to disputes arising within the European Union (EU).[22]
The EC Regulation will apply to insolvency proceedings only where the centre of main interest (COMI) of the debtor is located within the EU23 and such insolvency proceedings were opened on or after 31 May 2002.24
Summary
Virgós and Garcimartín European Insolvency Regulation 51; 53. Virgós and Garcimartín refer to a matter in which a Swedish debtor had emigrated to and was habitually resident in Spain. (The matter was decided by the Svea Court in October 2002; see Virgós and Garcimartín European Insolvency Regulation 53.) The Swedish court found that the debtor had no COMI in Sweden. Virgós and Garcimartín refer to a matter in which a Swedish debtor had emigrated to and was habitually resident in Spain. (The matter was decided by the Svea Court in October 2002; see Virgós and Garcimartín European Insolvency Regulation 53.) The Swedish court found that the debtor had no COMI in Sweden. If a request for insolvency proceedings were to be made in Spain, the Spanish court would have to accept that the debtor does not have a COMI in Sweden. The EC Regulation does not recognise the principle of forum non convenience and a court may not refuse to accept the jurisdiction accorded to it under the EC Regulation on the ground that, in the court's opinion, it would be more appropriate for the case to be dealt with on proceedings opened in another Member State. It applies when there is a foreign insolvency proceeding relating to a debtor that is subject to any kind of bankruptcy matter in the US.[145]
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