5:30pm - 8:00pm, 22/09/10
Christine Nixon: Community Turnaround
Registration: 5.30pm - 6.00pmPresentation: 6.00pm - 7.00pm ...
5:15pm - 8:00pm, 28/09/10
Blue Sky Mining - Avoiding Boom Bear-traps
Registration: 5.15pm - 5.45pmPresentation: 5.45pm - 6.45pm ...
Why has the Model Cross Border Insolvency Law not been used on a regular basis in Australia? The answer is simple. Virtually all international businesses operate on a group basis. The Model Law, however, does not deal with group insolvency. It operates on a single corporate entity basis. That will change. UNCITRAL has a committed working group developing amendments to the Model Law to accommodate group cross border insolvency (Australian Treasury official Andrew Gellars is a member).
Australia is a geographically isolated island continent with a sophisticated and established corporations law. The vast majority of international companies operating in Australia do so via international Australian incorporated subsidiaries. In a group insolvency, the Centre of Main Interest for the Australian subsidiary will almost certainly be in Australia.
That is why our major cross border insolvency cases (together with the relative economic strength of the Australian economy) have not seen the operation of the Model Law.
There have been two successful cases of the Model Law: Samsun and Betfair. Both delivered excellent results for creditors. With many international collapses occurring without the Model Law being used, these two cases have stood out for their rarity.
That will change if a workable, group-based reform is made to the Model Law. As would be expected, the most difficult issue to be addressed is the definition of the location of the Centre of Main Interest.
Once that is resolved (and it is at least a year away), and the reforms are implemented, then we could see a tipping point for the use of the Model Law. The Centre of Main Interest would usually be the domicile of the parent as opposed to the Australian subsidiary. We could see far more foreign representatives obtaining recognition in Australia and more Chapter 11 style insolvency administrations being given recognition. When the reform comes in the next couple of years, it may prove to be the most significant reform since Harmer.
Michael Sloan is a partner in Blake Dawson's Restructuring and Insolvency team and an international consultant to the Asian Development Bank on international insolvency law reform.