Resolving Insolvency

Methodology[edit]

Rather than prescribing a single set of rules for all states to adopt, the Model Law focuses on trying to:

1. 
   Identify the most relevant jurisdiction in relation to a cross-border insolvency (called the "foreign main proceeding");
   
2. 
   Ensure that insolvency officials from that jurisdiction are recognised in other states; and
   
3. 
   Ensure that other states provide the necessary cooperation to facilitate the insolvency process in the principal jurisdiction.
   

In order to identify the principal jurisdiction, the Model Law utilises the "centre of main interest" (or COMI) concept.^[3] The working assumption is that any international business will nonetheless have a centre of main interest, where the principal insolvency should take place. As far as possible the assets and claims should be channeled back to that main jurisdiction, and all other jurisdictions should seek to limit the exercise of their insolvency regimes to assisting with the liquidation of assets in their countries, the staying of claims, the redirecting of claims back to the principal jurisdiction. The basis of the Model Law is sometimes referred to as modified universalism.^[4]
The Model Law defines a foreign proceeding as "a collective judicial or administrative proceeding in a foreign State, including an interim proceeding, pursuant to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganization or liquidation".^[5] Accordingly, a number of regimes relating to the enforcement of security interests (such as receivership and administrative receivership) are not caught. Similarly, a number of debtor-in-possession rehabilitation and reorganisational processes which do not require the intervention of the courts are similarly not caught.
The Model Law recognises the risk that certain provisions of one state's insolvency laws may be repugnant to another state, and creates a public policy exception in relation to foreign laws,^[6] although the guidance notes express the hope that this would be utilised rarely in commercial insolvency matters.
The Model Law also seeks to limit insolvency regimes which favour domestic creditors over foreign ones.^[7]