Report on UNCITRAL Working Group V session

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Gregor Baer
UNCITRAL Liaison Officer, San Francisco, California
 

During the UNCITRAL Working Group V session in December 2020, a colloquium was held to consider whether UNCITRAL should be advised to undertake future work on applicable law (choice of law) in cross-border insolvency proceedings. The following are questions posed by the secretariat after the colloquium, together with the consensus responses of delegates from the IBA Insolvency Section.

1. Does the current lack of uniformity in applicable law in cross-border insolvency proceedings undermine or create obstacles to the achievement of the objectives of such proceedings?

   Yes. ‘Commercial predictability’ is a real world problem created by lack of certainty and uniformity in choice of law in cross-border insolvency proceedings. Commercial predictability is important for lowering finance costs and increasing capital availability (risk increases the price of capital and can restrict the willingness to commit to opportunities), and insolvency efficiency (easy to apply standards that are grounded in real world sign posts not metaphysics reduces litigation and speeds up insolvency decision making).

2. Would harmonisation of the rules governing applicable law in this area be feasible?

   Possibly. There are two relevant aspects of this feasibility question: can Working Group V reach consensus on recommendations, and it is likely that nations would enact the ensuing UNCITRAL recommendations? UNCITRAL Working Group V has, in the past, considered choice of law in several substantive law contexts and could not reach consensus recommendations. But it is worth exploring the subject again. Irrespective of whether nations adopt UNCITRAL consensus recommendations on this subject, if UNCITRAL and The Hague Conference on Private International Law developed a set of choice of law principles for cross-border insolvency cases, courts could point to them as a (non-binding) source of private international law. Further, UNCITRAL’s insolvency texts are potentially valuable as a code of best practices whether or not widely adopted, and have been cited as persuasive authority that way in the past. Therefore, the time and resources devoted to this project would be worthwhile, even if the likelihood of national or regional promulgation of model recommendations might be low at this time.

3. Should UNCITRAL's global insolvency work to date be supplemented with work in the area of applicable law in insolvency proceedings?

   Yes. The value of achieving greater uniformity in choice of law in cross-border insolvency proceedings would be so significant and worthwhile to practitioners that UNCITRAL’s global insolvency work should be supplemented with a systematic exploration to develop consensus principles in this area.

4. If work is undertaken in this area, what are the specific issues that should be addressed as priority matters (eg, avoidance actions, rights in rem, contracts of employment, set-off, pending proceedings etc)? 

   The only caveat worth remembering, voiced by Working Group V delegations in prior sessions, is that to the extent choice of law strays into areas considered by nations as implicating matters of fundamental public policy, the development of consensus principles will be more difficult. 

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