1. Washington, DC: 15 years of
the UNCITRAL Model Law
Jack Barton
21 October 2016
Washington, DCiStock.com/Sean Pavone
While global take-up of the UNCITRAL Model Law on Cross-Border Insolvency has
been slow, an assessment of trends and landmark rulings since the adoption of the
US’s Chapter 15 appears to demonstrate confidence in its philosophy.
A panel of prominent cross-border restructuring practitioners met at the International
Bar Association’s Annual Conference in Washington, DC, last month to assess the
health of the Model Law in its 15th
year, and they shared mostly positive reflections on
its past and future.
Chaired by Adrian Walters, Ralph L Brill professor of law at Chicago-Kent College of
Law, the session opened with an overview of four major historical studies into the
progress of the Model Law and Chapter 15, the US’s embodiment of the Model Law
in the US Bankruptcy Code. Simon Appell of AlixPartners in London then gave an
analysis of very recent data gathered by his firm.

2. Chapter 15’s past in figures
Walters began with the first historical study, Andrew Dawson’s 2009 article “Offshore
Bankruptcies” in the Nebraska Law Review: a study of the effect of Chapter 15 on
forum-shopping, particularly when used by US companies that have shifted their
centre of main interests (COMI) abroad then filed for bankruptcy protection in the US.
Dawson argued that Chapter 15 introduced a more regulated approach to court-to-
court comity, due to the requirement for companies to demonstrate they have property
in the US. He contrasted the pre-Chapter 15 National Warranty case, in which a
Cayman-registered company took advantage of US bankruptcy protections, with the
post-Chapter 15 Bear Stearns case, in which the company was unable to do so.
Walters said Dawson’s study raised interesting points, but it was now eight years out
of date and thus couldn't take into account jurisprudence such as the US Second
Circuit’s 2013 decision in In reFairfield Sentry Ltd; Morning Mist Holdings Ltd v Krys.
A 2011 article, “On the Road to Universalism: A Comparative and Empirical Study of
the UNCITRAL Model Law on Cross-Border Insolvency” by Irit Mevorach in the
journal European Business Organisation was the next major review of case law. This
study reviewed 195 Chapter 15 applications filed from eight jurisdictions up until the
end of 2010.
Mevorach found that the process was largely smooth, said Walters, with only 14% of
applications for recognition being rejected. She also found that 42% of the cases
involved multinational groups. Walters suggested the smoothness was not
unexpected, as the purpose of the Model Law and Chapter 15 is to facilitate
straightforward recognition, though in the early days of such legislation it was
inevitable that there would be issues with COMI.
The next study was Jeremy Leong’s 2011 article “Universalist or Territorialist?
Empirical Evidence from United States Bankruptcy Cases” in the Wisconsin
International Law Journal, which assessed not only the degree of success in
recognition applications, but also the extent to which courts behaved
“universalistically”, particularly regarding whether assets were handed over to foreign
proceedings.
Leong found that assets were turned over in 40 out of 88 cases (45.5%) and that where
relief was granted, it often came with conditions. Only 9.1% of applications for turn
over led to the relief being granted without conditions, even when there were known
US creditors and assets. Leong concluded that “Chapter 15 is not as universalist as
its proponents claim it to be”.
The final study, by Jay Westbrook, Benno C Schmidt chair of business law at the
University of Texas, “An Empirical Study of the Implementation in the United States of

3. the Model Law on Cross-Border Insolvency”, was published in American Bankruptcy
Law Journal in 2013. Westbrook, who participated in the creation of both the Model
Law and Chapter 15, challenged Leong’s findings and used a more recent set of case
law to show he had over-emphasised the failures of Chapter 15.
“The Model Law does what it says on the tin,” said Walters, in summary. The studies
all demonstrated a high amount of success at a basic level – due to the large numbers
of successful cross-border recognitions and access to basic relief, which is a result of
the Model Law’s aim of facilitating court-to-court comity. Results are more mixed
regarding diverse groups and access to discretionary relief.
Ultimately, Walters emphasised that these studies are outdated – the latest utilising a
dataset that took account of Chapter 15 filings up to 2012 – and noted a broad bias
towards North America, the UK and developed economies more generally.
On this note, Appell stepped in to discuss data AlixPartners has compiled, running up
to the end of June 2016. His team compared their findings with those of the previous
studies to see if the trends they found were reflected in the more comprehensive data.
Appell said that between its adoption in 2005 and 30 June this year, there have been
1,023 applications for recognition under Chapter 15, from 50 jurisdictions and
regarding over 90 types of foreign proceeding. UNCITRAL membership has had very
little bearing on where Chapter 15 is most popular, he said, ceding that the data was
slightly skewed by the overwhelming representation of Canada, followed by the UK,
as the sources of applications.
US courts have granted recognition in 88% of applications made, of which
approximately 34% were heard in New York, and a further 31% in Delaware. Around
73% of all applications made were for recognition of a foreign main proceeding, as
opposed to a foreign non-main proceeding.
The data spurred debate among the panel over the utility of such information to the
legal profession. Former New York bankruptcy judge James Peck, now senior of
counsel at Morrison & Foerster, and Judge Timothy Barnes, of the US Bankruptcy
Court for the Northern District of Illinois, were sceptical of how it can influence their
profession.
Judge Peck confessed to being slightly uncomfortable with the era of big data and
trends, noting that some industries were becoming increasingly dependent on it. "Data
doesn't matter to a judge," he argued: the role is "a particular exercise of the mind" in
applying the law to the facts.
Judge Barnes agreed, saying that while data can make you think, it is always based
on "certain premises". You can take it to build an argument in a direction you see fit,

4. or allow it to lead you in a way you wish to be led – attributes that are not useful for
judging.
Others on the panel were more open to the use of such information. Farrington
Yates, a partner at Dentons in New York, and Craig Martin, partner at DLA Piper in
Wilmington, argued it can help them help their clients know about the real life take-up
of the Model Law.
Seminal cases
The panel continued with a discussion of two of the most influential cases to have
utilised Chapter 15 to date: re Fairfield Sentry and re Elpida Memory. Martin reflected
that these cases, as well as Judge Barnes's recent ruling re Ace Track Ltd issued this
September, belie the notion that the US bankruptcy regulation will be as open and
flexible as a debtor would wish.
This jurisprudence highlighted two related points: the question of how to handle
inevitable gaps in the legislation that are a result of Chapter 15 needing to be flexible,
and the apparent tension between the text and purpose.
Yates noted that the flexibility required for Chapter 15 to be effective potentially leaves
issues of interpretation: where a bankruptcy judge in the first instance might rule on a
matter by looking at the broader purpose of Chapter 15 as a mechanism of the Model
Law, an appeals court might overturn this, applying a more limited reading of the text.
Yuri Ide, partner at Anderson Mori & Tomotsune in Tokyo, explained how the flexibility
of the text can actually be an advantage: Japan modelled its Recognition and
Assistance for Foreign Insolvency Proceedings Act (RAFIP) on the Model Law, but it
operates quite differently to Chapter 15.
Martin and Judge Barnes agreed that, when faced with a gap in the legislation, there
can be little instruction to go on. One example might be when encountering
restructuring mechanisms in different jurisdictions that are not accounted for in the
Model Law. Judge Barnes said it remains unclear whether in these cases he should
apply domestic, controlling rules of statutory rules under which the Model Law has
been codified in the US, or to apply the international principles governing the Model
Law. The panel agreed this was something that needs to be addressed, as it reinforced
Yates's point regarding different interpretations between different courts.
Judge Peck raised a recent decision from the US Bankruptcy Court for the Southern
District of New York, Hosking v TPG Capital, which relates to yet another highly
influential Chapter 15 bankruptcy – that of Luxembourg telecoms group WIND Hellas.
Judge Martin Glenn in the New York court originally denied recognition
in Hosking under Chapter 15 on the grounds of forum non conveniens, but in a

5. decision on 22 August he found that an action started in London had changed the facts
and circumstances of the case. Judge Glenn said he was not bound by his earlier
decision and imposed a stay in the US, allowing for the possibility that the New York
suit would need to be recommenced at a future date.
According to Judge Peck, Hosking was a decision in-keeping with the purpose of
Chapter 15 and the Model Law and did not require reliance on jurisprudence. "There's
something really great about a system that is not restrictive," said Judge Peck, "there
is something great about a Model Law that allows justice to be done."
Judge Peck, who oversaw Lehman Brothers bankruptcy during his time on the bench,
later offered his perspective on how it has driven progress around international group
insolvencies – and how Chapter 15 had provided him with the flexibility to approve
mutually beneficial arrangements between jurisdictions. "It's been eight years since
Lehman filed," said Peck, "and we're still talking about it." There is still much we can
still learn from the bank’s collapse, he noted.
Soon after the collapse in 2008, Lehman's chief restructuring officer told Judge Peck
it would take the group two years to emerge from bankruptcy, but this timeframe failed
to account for the need to have protocols of cooperation between various court
systems, something assisted by the flexibility of Chapter 15.
While the Model Law had virtually no impact on the Lehman insolvency itself, it set the
platform for the negotiations, said Yates, who advised the administrator to the German
branch of Lehman.
Yates noted that for practitioners the Model Law is really just "a statement of principles"
that contributes to a philosophy of cooperation, but does not provide much in terms of
practical guidance. However, the court comity protocol that Lehman's counsel
established as part of this philosophy was "off the scale" compared to previous court-
to-court agreements.
Towards a convention?
The second half of the session turned towards the future of the Model Law, including
its relatively slow take-up and whether it should be immortalised in some sort of legal
convention.
Appell outlined AlixPartners’ expectation that the need for cross-border restructuring
mechanisms is only going to increase in the near future. Factors such as the eventual
end of low interest rates, economic slowdown in China, and imbalance of supply and
demand in various sectors such as shipping and energy create a fragile economic
outlook, while the UK's vote to leave the EU has effectively raised the degree of risk
across the board, he said.

6. Moderator Walters said there has been a long-held view in certain legal corners that
to create a really strong system of cross-border resolution, the world needs an
international legal convention. Since the preamble of the Model Law (which
establishes its purpose as a means to facilitate the creation of mechanisms to more
efficiently and equitably resolve cross-border insolvencies) has not been fulfilled some
people would argue that this need is still present. This, Walters added, can particularly
be attributed to the fact that the Model Law has been adopted by relatively few
countries: "Has take-up of the Model Law been too low and too slow?"
Judge Peck said he didn’t think so, noting that for many countries adoption of the
Model Law has simply not been a priority and more time is needed – even in the US it
can take years of negotiation to change or adopt a law. What proponents of the Model
Law could do is look to why take-up has been lacklustre, whether there is resistance
and why, he said.
Judge Barnes agreed, adding that the view of adoption having been slow is really a
question of perception, since the US and other early adopters of the Model Law were
already effectively working within or towards similar frameworks through court-to-court
agreements.
It was not the right time for a convention 20 years ago, Judge Barnes said, and that
has not changed – development of a cross-border insolvency system will always be a
progression, and take-up of the Model Law is part of that. He argued that more time is
needed to allow countries to get round to adopting it, rather than trying to replace it.
Dan Glosband, of counsel at Goodwin Procter, contributing from the floor, pointed out
that in the 1990s the EU attempted to create a European Convention on Certain
International Aspects of Bankruptcy. There was only one holdout from the 15 countries
involved in this case (the UK), but that still prevented adoption, and even a smaller
group of countries operating within a more established and integrated community
could not get it done. That Convention was eventually superseded by the European
Insolvency Regulation in 2002.
Martin raised the point that, as populist political tides appear to be feeding a backlash
against globalism, questions over sovereignty are particularly hot-button: "It's hard to
imagine that the moment [for a convention] is now," he concluded.
Returning to Appell's points about the tide of business uncertainty around the
world, Patrick Rona, special counsel at Duane Morris in New York, commented in
closing remarks that proponents of the Model Law "can do better, and need to" to
promote its philosophy. "This need will not go away," he said.