Cross-border insolvency

Historically, most legal systems have developed on a territorial basis, and this is as true in relation to bankruptcy laws as other areas.

In Re African Farms 1906 TS 373 an English company with assets in the Transvaal Colony was in winding-up in England, and the Chief Justice of the Transvaal confirmed that the English liquidator would be recognised and that "recognition which carries with it the active assistance of the court", and that active assistance could include: "A declaration, in effect, that the liquidator is entitled to deal with the Transvaal assets in the same way as if they were within the jurisdiction of the English courts, subject only to such conditions as the court may impose for the protection of local creditors, or in recognition of the requirements of our local laws."

[13] At present 46 jurisdictions have substantially implemented the Model Law into their domestic legislation, including a number of states with both significant economies and large volumes of cross border trade—such as the United States, Japan, the United Kingdom, Australia and Canada, as well as leading emerging economies such as Mexico and South Africa.

The basic concept of the Model Law is to establish what the "main proceedings" are in relation to any international insolvency.

The Model Law does not require reciprocity between states, but focuses upon (i) ensuring that states give assistance to insolvency officials from other countries in relation to main proceedings and non-main proceedings, and (ii) eliminating preferences for local creditors over international ones.

Like the UNCITRAL Model Law, the EC Regulation also employs the concept of a centre of main interest (or "COMI").

The definition of the COMI is left to member states in their implementation of the Regulation, but paragraph (13) of the preamble states: 'The "centre of main interests" should correspond to the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties.'