Anderson, Kent --- "Testing the Model Soft Law Approach to International Harmonisation: A Case-Study Examinign the UNICITRAL Model Law on Cross-Border Insolvency" [2004] AUYrBkIntLaw 1; (2004) 23 Australian Year Book of International Law 1
[∗] Senior Lecturer, The Australian National University, Faculty of Law and Co-Director, the Australian Network for Japanese Law. I would like to thank Tanya Spisbah for her excellent research assistance. I would also like to thank those who helped me directly and indirectly including Roy Goode, David Levy (UNCITRAL), Takashi Kubota, Jay Westbrook, and participants at presentations to Osaka School of International and Public Policy, Nagoya University Law School, the Australian New Zealand Society of International Law, and the Australian National University. It goes without saying that all errors are mine alone.
[1] Professor Sir Roy Goode begins his influential essay on this subject stating: ‘Truly there is nothing new under the sun. Nearly two thousand years have elapsed since Cicero proclaimed the virtues of legal harmonisation.’ Roy Goode, ‘Reflections on the Harmonisation of Commercial Law’ in Ross Cranston and Roy Goode (eds), Commercial Law and Consumer Law (1993).
[2] Goode has categorised nine methods, ibid 57, however, David identifies only three. See René David, ‘Ch 5: The International Unification of Private Law’, in René David (ed), Legal Systems of the World: Their Comparisons and Unification, II International Encyclopedia of Comparative Law (1975) 3.
[3] Most notably exemplifying this approach in transnational commercial law are: United Nations Convention on Contracts for the International Sale of Goods 1980 (CISG) and (2) The World Trade Agreement 1994 (WTO).
[4] Most notably exemplifying this approach in transnational commercial law is: Maastricht Treaty on European Union and Final Act, 3 February 1992, 31 ILM 247 (establishing the European Union). The Limited Hard Law Approach may either be pursuant to bi- or multi-lateral agreements with a limited number of parties that rely on supranational agreement or it may be pursuant to unilateral domestic legislation of a inflexible uniform law.
[5] Hague Conference on Private International Law, Future Hague Convention on International Jurisdiction and Foreign Judgments in Civil and Commercial Matters, <http://www.hcch.net/e/workprog/jdgm.html> Brussels Council Regulation 44/2001, formerly 1968 Brussels and 1988 Lugano Conventions on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters.
[6] Incoterms 2000 (ICC publication No 560). Other examples include: Unidroit Principles of International Commercial Contracts 1994; Principles of Cooperation in Transnational Insolvency Cases Among the Members of the North American Free Trade Agreement (2000); ICC’s Rules of Conduct to Combat Extortion and Bribery in International Business Transactions of 1977, revised 1996. See also Roy Goode, ‘International Restatements of Contract and English Contract Law’ (1997) 2 Uniform Law Review 231.
[7] UNCITRAL, ‘Guide to Enactment of the UNCITRAL Model Law on Cross-Border Insolvency’ (1997) [11]-[12] <http://www.uncitral.org/english/texts/insolven/insolvency.htm> (hereinafter Guide to Enactment).
[8] United Nations Commission on International Trade Law (UNCITRAL), UNCITRAL Model Law on Cross-Border Insolvency, Report of UNCITRAL on the Work of Its Thirtieth Session, UN GAOR (52nd Sess) Annex I, 68-78, UN Doc A/52/17 (1997) <http://www.uncitral.org/english/texts/insolven/insolvency.htm> .
[9] Kurt H Nadelmann, Conflict of Laws: International and Interstate (1972) 299-300, 303, originally published as ‘Bankruptcy Treaties’ (1944) 93 University of Pennsylvania Law Review 58; Philip R Wood, Principles of International Insolvency (1995) 291.
[10] Arguing against the normative value of harmonised law as currently drafted see, Paul B Stephan, ‘The Futility of Unification and Harmonization in International Commercial Law’ (1999) 39 Virginia Journal of International Law 743. Arguing against the contents of this Model Law see, Lynn M LoPucki, ‘The Trojan Horse in UNCITRAL’ 33 BCD News and Comment (30 March 1999), available on LEXIS, bankruptcy/Legal News database.
[11] Michael J Bonnell, ‘International Uniform Law in Practice: Or Where the Real Trouble Begins’ (1990) 38 American Journal of Comparative Law 865.
[12] Regarding each of these international NGOs and their purpose in relation to harmonisation see, UNCITRAL <http://www.uncitral.org> International Institute for the Unification of Private Law (Unidroit) <http://www.unidroit.org> Hague Conference on Private International Law <http://www.hcch.net> .
[13] UNCITRAL Model Law on International Commercial Arbitration (1985); UNCITRAL Model Law on International Credit Transfers (1992); UNCITRAL Model Law on Procurement of Goods, Construction and Services (1994); UNCITRAL Model Law on Electronic Commerce (1996); UNCITRAL Model Law on Electronic Signatures (2001).
[14] See UNCITRAL, Status of Conventions and Model Laws (last updated 8 July 2003) <http://www.uncitral.org/english/status/status-e.htm> (hereinafter UNCITRAL Status Page).
[15] Most of the following specific rationales provided come from Goode. See Goode, above n 1, 72-73.
[17] J S Hobhouse, ‘International Conventions and Commercial Law: The Pursuit of Uniformity’ (1990) 106 Law Quarterly Review 530.
[21] A significant exception was realised following adoption of the Model Law when the EU finally enacted its insolvency rules. Council Regulation (EC) on Insolvency Proceedings No 1346/2000 of 29 May 2000 (2000) OJ L160/1. Otherwise, prior to this perhaps the most notable exception was the treaty among the Scandinavian countries. 1933 Nordic Convention on Bankruptcy, 7 November 1933, 155 LNTS [League of Nations Treaty Series] 115, as amended 11 October, 1977 and 11 October, 1982.
[22] Cf, Robert K Rasmussen, ‘A New Approach to Transnational Insolvencies’ (1997) 19 Michigan Journal of International Law 1 (advocating a cross-border insolvency regime based on freedom of choice of insolvency law). Of course, debtors and creditors in all countries may circumvent formal insolvency proceedings by privately agreeing to bilateral debtor-creditor debt restructuring or collective workouts. However, no country known allows for a selection of substantive insolvency law beyond the options given by domestic law, once formal insolvency becomes necessary or is engaged.
[23] Guide to Enactment, above n 7, [4]-[7]; UNCITRAL Working Group V, 1996-99, <http://www.uncitral.org/en-index.htm> .
[24] See Harold S Burman, ‘Harmonization of International Bankruptcy Law: A United States Perspective’ (1994) 64 Fordham Law Review 2543.
[25] Guide to Enactment, above n 7, [5].
[26] Working Group V, above n 23.
[27] Guide to Enactment, above n 7, [4].
[28] United Nations, Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade, GA Res 52/158, UN Doc A/52/649, 15 December 1997.
[29] See eg, Sara Isham, ‘UNCITRAL’s Model Law on Cross-Border Insolvency: A Workable Protection for Transnational Investment at Law’ (2001) 26 Brooklyn Journal of International Law 1177; M Cameron Gilreath, ‘Overview and Analysis of How the United Nations Model Law on Insolvency Would Affect United States Corporations Doing Business Abroad’ (2000) 16 Bankruptcy Development Journal 399; Ronald J Silverman, ‘Advances in Cross-Border Insolvency Cooperation: The UNCITRAL Model Law on Cross-Border Insolvency’ (2000) 6 ILSA Journal of International and Comparative Law 265; Andre J Berends, ‘The UNCITRAL Model Law on Cross-Border Insolvency: A Comprehensive Overview’ (1998) 6 Tulane Journal of International and Comparative Law 309. But see Stephans, above n 10; LoPucki, above n 10.
[30] See eg, ‘Speakers in Legal Committee Welcome Adoption of UNCITRAL’s Model Law on Cross-Border Insolvency’, M2 Presswire (7 October 1997), 1997 WL 14465719 (noting support for passage of the Model Law by Germany, India, Paraguay [on behalf of the Rio Group], Finland [on behalf of the Nordic countries], Malaysia, Thailand, United Kingdom, Russian Federation, Italy, Slovak Republic, Hungary and France).
[31] See eg, Mary Hiscock, ‘Remodelling Asian Laws’ in Timothy Lindsey (ed), Indonesia: Bankruptcy Law Reform and the Commercial Court (2000) 28, 29 (collecting citations).
[32] UNCITRAL Status Page, above n 14.
[33] World Bank, 'Eritrea at a Glance', (2001) <http://www.worldbank.org/cgi-bin/sendoff.cgi?page=%2Fdata%2Fcountrydata%2Faag%2Feri_aag.pdf> (noting Ertrea’s population is 4.2 million, its GDP is $0.69 billion, its total exports are $20 million, and its total imports are $490 million).
[34] Law on Business Organisation Insolvency, Official Gazette of Montenegro, 8 February 2002.
[35] World Bank, 'Yugoslavia at a Glance', (2001) <http://www.worldbank.org/cgi-bin/sendoff.cgi?page=%2Fdata%2Fcountrydata%2Faag%2Fyug_aag.pdf> (Statistics for Montenegro, separate from it dominate sister-state of Serbia, are not available. Montenegro’s population is 680,000, Yugoslavia’s whole GDP is $10.9 billion, its total exports are $2,003 million, and its total imports are $4,838 million).
[36] Regarding Mexico see, Decreto por el que se aprueba la Ley de Concursos Mercantiles reforma el articulo ochenta y ocho de la Ley Organica del Poder Judicial de la Federacion [Commercial Insolvency Law], Diario Official, 12 May 2000; Eduardo Martinez, ‘The New Environment of Insolvency in Mexico’ (2001) 17 Connecticut Journal of International Law 75; Hale E Sheppard, ‘The New Mexican Insolvency Law: Policy Justifications for U.S. Assistance’ (2001) 6 UCLA Journal of International Law and Foreign Affairs 45; Josefina Fernandez McEvoy, ‘Mexico’s New Insolvency Act: Increasing Fairness and Efficiency in the Administration of Domestic and Cross-border Cases’ Part I, 19 American Bankruptcy Institute Journal 16 (August 2000), Part II, 19 American Bankruptcy Institute Journal 12 (September 2000). Regarding South Africa see, Cross-Border Insolvency Act 42 (2000); Alastair Smith and Andre Boraine, ‘Crossing Borders into South African Insolvency Law: From the Roman-Dutch Jurists to the UNCITRAL Model Law’ (2002) 10 American Bankruptcy Institute Law Review 135.
[37] World Bank, 'Mexico at a Glance', (2001) <http://www.worldbank.org/cgi-bin/sendoff.cgi?page=%2Fdata%2Fcountrydata%2Faag%2Fmex_aag.pdf> (noting Mexico’s population is 99 million, its GDP is $617 billion, its total exports are $158,443 million, and its total imports are $168,396 million). World Bank, ‘South Africa at a Glance', (2001) <http://www.worldbank.org/cgi-bin/sendoff.cgi?page=%2Fdata%2Fcountrydata%2Faag%2Fzaf_aag.pdf> (noting South Africa’s population is 43.2 million, its GDP is $113 billion, its total exports are $26,606 million, and its total imports are $27,324 million).
[38] One of the Japanese representatives to the UNCITRAL Working Group stated, ‘We think that the model law is so much influenced by the common law approach on several points that it is difficult for civil law countries like Japan to accept it to the letter.’ See Kazuhiko Yamamoto, ‘New Japanese Legislation on Cross-Border Insolvency – As Compared with the UNCITRAL Model Law’ (2000) 43 Japanese Annual of International Law 83, 85. This conclusion is even further circumspect when considering that majority of drafters of the Model Law were from Civil Law countries. See UNCITRAL <http://www.uncitral.org> (listing members of UNCITRAL who comprised the Working Group that drafted the Model Law).
[39] For comparison, the United States’ statistics alone are: population 284 million, GDP $10,171 billion, total exports $730,897 million, and total imports $1,180,497.
[40] Gaikoku tōsan shori tetsuzuki no shōnin enjo ni kan suru hōritsu [Law Regarding Recognition and Assistance to Foreign Insolvency Proceedings], Law No 129, 2000 (hereinafter LRAFI), translated at 43 Japanese Annual of International Law 331 (J Matsushita trans); <http://www.moj.go.jp/ENGLISH/CIAB/lrtr01-1.html> (J Matsushita and S Steele trans).
[41] Yamamoto, above n 38, 115. See also Shinichiro Abe, ‘Recent Developments of Insolvency Laws and Cross-border Practices in the United States and Japan’ (2002) 10 American Bankruptcy Institute Law Review 47, 83 ([The new Japanese law is] based mostly on the ‘UNCITRAL Model Law on Cross-Border Insolvency’); Mie Fujimoto and Shinjiro Takagi, ‘Japan’s New Law on Recognition of and Assistance in Foreign Insolvency Proceedings’ (2001) 20 American Bankruptcy Institute Journal 14 (August 2001) (‘Japan introduced new legislation to cope with cross-border insolvency issued based on the UNCITRAL Model Law on Cross-border Insolvency’).
[42] Foreign observers, most disappointingly including UNCITRAL itself, have unfortunately interpreted Japanese hyperbole and looseness in English language regarding the relationship between Japan’s new law and the Model Law to mean that Japan has ‘adopted’ the Model Law. See UNCITRAL, Status page, above n 14; E Bruce Leonard, ‘The International Year in Review’, 20 American Bankruptcy Institute Journal 34 (January 2002).
[43] Yamamoto, above n 38, 83-85.
[44] Model Law, art 21(2).
[45] In the original, ‘will’ is shō’nin no kettei wo suru while other section use ‘shall’ (shinakereba naranai, LRAFI, art 21) and ‘may’ (suru koto ga dekiru, LRAFI, art 5). One drafter asserts that the ‘will’ language is mandatory. Kazuhiko Yamamoto, ‘Gaikoku tōsan shori tetsuzuki enjo hō ni tsuite (1)’ [Concerning the law on recognition and assistance to foreign insolvency proceedings] (2001) 1194 Juristo 56, 60 (suggesting it is mandatory). However, informal conversations with Japanese practitioners suggest that they would challenge that understanding if necessary.
[46] LRAFI, art 31(2).
[47] Jay Westbrook, ‘Multinational Enterprises in General Default: Chapter 15, the ALI Principles, and the EU Insolvency Regulation’ (2002) 76 American Bankruptcy Law Journal 1, 24-26.
[48] Ibid.
[49] Model Law, art 1(1)(c).
[50] LRAFI, arts 57, 59; Model Law, arts 28-30.
[51] LRAFI, art 57(1).
[52] Kent Anderson, ‘The Cross-Border Insolvency Paradigm: A Defense of the Modified Universal Approach Considering the Japanese Experience’ (2000) 21 University of Pennsylvania Journal of International Economic Law 679, 728-65.
[53] See eg, Minji saisei hō [Civil Rehabilitation Law], Law No 225, 1999, art 210.
[54] Stephan, above n 10, 758.
[55] Yamamoto, above n 38, 85.
[56] Anderson, above n 52 (discussing, in particular, Japanese court management of the Maruko cross-border insolvency in the early 1990s where the Japanese judge proposed and signed a jurisdiction sharing agreement with a Chapter 11 administering Bankruptcy Court judge in the United States).
[57] Ibid 728-65.
[58] Bankruptcy and Insolvency Act RSC 1985 pt XIII (Canada).
[59] Jacob S Ziegel, ‘Corporate Groups and Crossborder Insolvencies: A Canada – United States Perspective’ (2002) 7 Fordham Journal of Corporate and Financial Law 367; Jacob S Ziegel, The Modernization of Canada’s Bankruptcy Law in a Comparative Context’ (1998) 33 Texas International Law Journal 1; Jacob S Ziegel, ‘Corporate Groups and Canada-U.S. Crossborder Insolvencies: Contrasting Judicial Visions’ (2001) 35 Canadian Business Law Journal 459; Sean Dargan, ‘The Emergence of Mechanisms For Cross-Border Insolvencies In Canadian Law’ (2001) 17 Connecticut Journal of International Law 107; E Bruce Leonard and Melvin C Zwaig, ‘Developments and Trends in United States/Canada Cross-border Reorganisations’ (2000) 9 Journal of Bankruptcy Law and Practice 343; E Bruce Leonard, ‘Canada’s New Cross-Border Insolvency Legislation’ (1997) 16 American Bankruptcy Institute Journal 20.
[60] Ziegel, ‘Corporate Groups and Crossborder Insolvencies’ ibid 350; Leonard and Zwaig, ibid.
[61] New Zealand Law Commission, Cross-Border Insolvency: Should New Zealand Adopt the UNCITRAL Model Law on Cross-Border Insolvency? (1999) No 52.
[62] New Zealand Law Commission, Insolvency Law Reform: Promoting Trust and Confidence – an Advisory Report to the Ministry of Economic Development (2001) SP 11.
[63] Insolvency Act 2000 (UK) c 39, s 14.
[64] Consideration as to the effect of the Model Law provision (ibid s 14) is ongoing. Melanie Johnson MP, Speech to the Insolvency Lawyer’s Association 13 November 2002 <www.dti.gov.uk/ministers/speeches/MJohnson131102.html>.
[65] See Bankruptcy Reform Act of 2001, S 420, HR 333, 107th Cong, tit IV, subtit B; Bankruptcy Reform Act of 1999, S 625, HR 833, 104th Cong, tit IV, subtit B. The 1999 bill was vetoed by President Clinton on December 20, 2000. See ‘Legislation to Overhaul Laws on Bankruptcy Dies as President Fails to Sign It’ New York Times, 20 December 2000. The bill failed to emerge from joint conference committee in 2002. See Paul Wenske, ‘Congress Keeps Recycling Bankruptcy Reform Bill’, Kansas City Star, 8 December 2002, 2002 WL 101928616.
[66] Wenske, ibid.
[67] Compare Bankruptcy Reform Act of 2001, above n 65, with Model Law.
[68] See Stuart A Krause, Peter Janovsky and Marc A Lebowitz, ‘Relief Under Section 304 of the Bankruptcy Code: Clarifying the Principal Role of Comity in Transnational Insolvencies’ (1996) 64 Fordham Law Review 2591.
[69] See ‘Grassley Holds Hearing on UNCITRAL Model Law’ 31(21) BCD News and Comment (20 January 1998), available on LEXIS, Bankruptcy/Legal News database (quoting Westbrook as stating ‘[A] derivative of [current US cross-border legislation] should be fashioned to provide discretion to make leading edge decisions that go beyond the Model Law.’). LoPucki argues based on legislative history and intent, however, that section 1507(b)(4) will only be used when relief not provided by the standard Model Law provisions is sought. See LoPucki, above n 10.
[70] Draft Revised Bankruptcy Code, 11 USC s 1507(b)(4).
[71] See ‘Grassley’, above n 69.
[72] Commonwealth Treasury, Proposals for Reform – Cross-Border Insolvency, CLERP Paper No 8 (17 October 2002), <http://www.treasury.gov.au/contentitem.asp?pageId= & ContentID=448> .
[73] Ibid, Proposal 5C.
[74] Furthermore, the proposal’s express endorsement of Proposal 6B for adoption of the optional provision of art 13(2) which provides adoption does not affect the exclusion of revenue claims by a foreign state from insolvency proceedings indirectly undermines the progressive standard found in the current Corporations Act 2001 s 581 as interpreted by Ayers v Evans [1981] FCA 213; (1997) 39 ALR 129.
[75] LoPucki has similarly characterised the American adoption of the Model Law: The Model Law is seemingly innocuous endorsement of international cooperation – what one Congressional staffer described as ‘feel-good legislation’ that would not really change anything. Perhaps because of that perception, the Model Law has escaped critical examination: adoption by UNCITRAL, recommendation by the National Bankruptcy Review Commission, and inclusion in the omnibus bankruptcy legislation. The House, for example, will hear from only a single witness regarding the UNCITRAL provisions. LoPucki, above n 10.
[76] Bankruptcy Act 1966 (Cth) s 29; Corporations Act 2001 (Cth) s 581; Ayers v Evans [1981] FCA 213; (1997) 39 ALR 129. See also Kent Anderson, ‘Kokusai tosan ho-komon ro shokoku no keiken wo koryo shita teian’ [Cross-border insolvency-a proposal considering the experiences of various common law countries] (2001) 51 Hokkaido Law Review 1633, 1644-45, 1648-52 (discussing the Australian approach to cross-border cases and comparing with US, Japanese, and the Model Law’s approaches).
[77] Commonwealth Treasury, above n 72.
[78] Stephan, above n 10; LoPucki, above n 10.
[79] Asian Development Bank’s InsolvencyAsia, <http://www.insolvencyasia.com/insolvency_law_regimes/korea/section_p.html> , <http://www.insolvencyasia.com/insolvency_law_regimes/thailand/section_p.html> , <http://www.insolvencyasia.com/insolvency_law_regimes/indonesia/pdf/section_p.pdf> . Rumours of Korea’s consideration have floated. See Whon Il Park, ‘The Corporate Insolvency Scheme of Korea’ <http://onepark.netian.com/Engl/Insolregime.htm> .
[80] Sumant Batra, ‘Reforms in Indian Bankruptcy Laws’, INSOL World 8, 9 (January 2002) (‘At present, the Government is considering the adoption of the UNCITRAL Model Law on Cross-Border Insolvency to meet the demands of globalisation of economy and to deal with international insolvency’); Incorporating the UNCITRAL Model Law on Cross-Border Insolvency in India, in Reserve Bank of India, Standing Committee on International Financial Standards and Codes, Report of the Advisory Group on Bankruptcy Laws (vol 1, 2001) 54.
[81] See eg, Asian Development Bank, ‘Working Towards Bankruptcy Law Reform’ <http://www.adb.org/Media/Articles/2002/525_Bankruptcy_Law/default.asp> (2002).
[82] United Nations Convention on Contracts for the International Sale of Goods (New York, 1974) and as amended by the Protocol of 1980.
[83] Yamamoto suggests that Japan deviated in its law for procedural reasons such as the amount of discretion provided to judges under the Model Law compared to typical situations in Japan. Yamamoto, above n 38, 85.
[85] Professor Westbrook states: ‘If [the United States] adopts the model law, it’s likely others will. If we don’t, it’s unlikely any other countries will. It’s crucial [the US] takes a leadership role.’ See ‘Will US Pass UNCITRAL’s Model Law?’ 31(16) BCD News and Comment (9 December 1997), available on LEXIS, Bankruptcy/Legal News database (quoting Westbrook, internal punctuation omitted). See also Peter J Murphy, ‘Why Won’t the Leaders Lead? The Need for National Governments to Replace Academics and Practitioners in the Effort to Reform the Muddled World of International Insolvency’ (2002) 34 University of Miami Inter-American Law Review 121.
[86] Stephan, above n 10, 758.
[87] See ‘Speakers in Legal Communities’, above n 30 (noting UNCITRAL Chairman requesting more funding for the promotion of the Model Law).
[88] UNCITRAL, Possible Future Work on Insolvency Law A/CN.9/WG.V/WP.50.