Recapitulation Cross-Border Insolvency

Guest Post Authour: Riya Gulati


Cross-border insolvency modulates the treatment of financially distressed borrowers where such borrowers have creditors or assets in more than one nation. International insolvency chiefly accentuates on three modules: choice of law, jurisdiction and enforcement of dictum rules. Indeed, cross-border insolvency fetches with it a host of legal and ethical convolutions and ramifications. Nonetheless, in the matters pertaining to the international insolvency cases, the prime focus inclines on the recognition of foreign functionaries and their powers. The UNCITRAL Model Law on Cross-Border Insolvency and the EC Regulation on Insolvency Proceedings 2000 are the two fundamental contemporaneous regimes for the cross-border insolvencies that have been executed on something outspread than a territorial basis.

The Insolvency Law Committee (called ILC hereinafter) had recommended that India should embrace UNCITRAL Model Law of Cross Border Insolvency, 1997 for its international insolvency framework. The ILC discerned that the current provisions in the Insolvency and Bankruptcy Code, 2016 do not furnish comprehensive anatomy for international insolvency affairs. Hence, the ILC dogged to endeavour to proffer a comprehensive array for this purpose based on the UNCITRAL Model Law on Cross-Border Insolvency, 1997 that could be made a snippet of the IBC, 2016 by interposing a discrete segment for this purpose.

The adoption of the model law has proven to be the best international practice in dealing with cross border insolvency issues in the member states. The model law ensures that the supremacy is given to the national proceedings, greater credence generation amongst the foreign investors, protection of the public interest, a vigorous mechanism for international liaison and seamless unification with national insolvency law.

Benefits of espousing the UNCITRAL Model Law as recommended by the Committee:

  • Precedence to domestic insolvency proceedings: The UNCITRAL Model Law gives priority to the national proceedings in relation to foreign proceedings. The model legislation enables negation of acclamation of foreign provisions or proceedings of any other assistance if such activity contradicts the national public policy. Hence, it safeguards the domestic interest.
  • Pliability: The UNCITRAL Model Law has been delineated to be pliant and to regard the dissimilarities amongst domestic insolvency legislations. Hence, inevitable carve-outs may be made in connection to the Model Law to perpetuate equilibrium with national insolvency legislation whilst embracing ubiquitously accepted anatomy.
  • The mechanism for liaison: The model legislation assimilates a vigorous medium for coordination and cooperation between insolvency professionals and courts, in domestic and foreign jurisdictions. Thereby, it precipitates swift and constructive conduct of synchronous proceedings.
  • Inflating foreign investment: Although the foreign creditors have a remedy under the contemporary code, the espousal of the model legislation will provide added routes for the recognition of foreign insolvency proceedings and foster cooperation &communication between national and foreign courts and insolvency executives. The popularity of the UNCITRAL Model Law has scaled up in the current years and its espousal shall also entitle India to ally with the universal superlative applications in insolvency liquidation and resolution. Furthermore, there will be are markable affirmative signalling to international creditors, investors, multinational corporations, governments and international syndicates such as the World Bank with regards to the robustness of India’s economic sector reforms.

UNCITRAL Model Lawis based on the following principles of cross-border insolvency:

  • Access: The model legislation enables foreign creditor’s and foreign insolvency executives to have direct access to the national courts. It also confers on them the capacity to engage in and start off the national insolvency proceedings against a borrower. Albeit, with respect to foreign creditors direct admittance is envisioned under the Code currently. With regards to the access to Indian courts by the foreign insolvency officials, the ILC has commended that the Central Government be entitled to contrive a framework that is viable in the present Indian legal system.
  • Recognition: The UNCITRAL Model Law permits recognition of foreign lawsuits and provision of remedies by national courts based on such approbation. Relief can be granted if the foreign lawsuit is either a main or non-main proceeding. If the national courts ascertain that the borrower has its centre of main interests in the foreign country, then such a foreign insolvency lawsuit is regarded as the main proceeding. Whereas, if the national courts deduce that the borrower has an establishment (by exerting a test established on carrying on of non-transitory financial pursuit), then such a foreign insolvency lawsuit is contemplated as the non-main proceeding. Recognition as the main proceeding will upshoot in automatic relief, such as an embargo on the transfer of assets of the borrower and authorize the foreign representative substantial powers in administering the estate of the borrower. Whereas in the case of non-main proceedings, such relief depends on the volition of the national court.
  • Cooperation: The model legislation lays down the rudimentary anatomy for liaison between national and foreign insolvency executives and national and foreign courts. Provided that the framework of Adjudicating Authorities under the Code is still developing, the liaison between foreign courts and Adjudicating Authorities is propounded to be subject to recommendations to be apprised by the Central Government, and not intrinsically. Nevertheless, direct liaison between foreign insolvency executives and Adjudicating Authorities, national and foreign insolvency executives interse and between national insolvency executives and foreign courts have been perpetuated as is provided under the UNCITRALmodel legislation. Markedly, liaison may also be provided to foreign lawsuits that have not been recognised as either main or non-main.
  • Coordination: The UNCITRAL Model Law provides anatomy for the outset of national insolvency lawsuits when a foreign insolvency lawsuit has already begun or contrariwise. By invigorating liaison between the courts, it also provides coordination to two or more synchronous insolvency lawsuits in divergent nations.


The desideratum for adopting the UNCITRAL Model Law of Cross Border Insolvency, 1997 framework under the Insolvency and Bankruptcy Code ensues from the fact that many Indian corporations have a global standing and many foreign business entities have their footmarks in multiple states in India. Even though the posited model legislation will permit the foreign nations to deal with Indian corporations having foreign assets and vice versa. Yet, it still does not proffer anatomy for dealing with enterprise groups- it is still work in progress with UNCITRAL and other international organizations. The incorporation of the Cross-Border Insolvency section in the IBC, 2016 will herald a cardinal step ahead and will bring our insolvency law on par with that of the foreign jurisdictions.

Riya Gulati
Paralegal at Law Offices of Caro Kinsella & Youth Ambassador for the ONE Campaign, Ireland.
LL.M (Intellectual Property & Information Technology) from University College Dublin & BA.LLB from Bharati Vidyapeeth Deemed University, Pune



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