The Institutional Challenges of a Cross-Border Insolvency Regime

Abstract

Policymakers in India deferred including a regime for cross-border insolvencies in the otherwise comprehensive Insolvency and Bankruptcy Code of 2016. Since then, the government has proposed adopting the UNCITRAL model law on cross-border insolvencies, spurring a flurry of discussion and debate about the design of that particular regime and other possible alternatives. It appears likely, although not certain, that the country will soon adopt the model law. This symposium Essay focuses on an important question of implementation, i.e., that the effectiveness of any approach to cross-border insolvency depends not only on the design of the applicable legal regime but also on other various institutional factors. Chief among these factors in India will be the performance of the National Company Law Tribunals that are charged with employing the regime to resolve cross-border insolvencies. As an initial matter, these tribunals will need to develop expertise in the growing jurisprudence related to the UNCITRAL model law. Furthermore, any modern approach to cross-border insolvencies, and especially the UNCITRAL model law, is premised on a high degree of international cooperation, efficient communication and coordination, predictability, and, occasionally, the exercise of deference to foreign jurisdictions and judicial actors. The tribunals have limited experience with this kind of highly cooperative and deferential approach to cross-border commercial litigation, so the underlying institutional capacity to employ the regime as designed will need to be developed over time. Policymakers should anticipate that after the legal design of India’s cross-border insolvency regime is settled, careful attention should be given to implementing it by, among other things, helping the NCLT develop the necessary expertise and an institutional commitment to facilitating cross-border insolvencies under the new regime.