With the development of international economic communication and transnational corporations, there are more and more insolvency cases concerning international or foreign elements. In this context, researches on legal issues resulting from cross-border insolvency became one of focuses of international legal scholar since 1990. China is now adopting reform and open policy and attracting foreign investment. During the course, China will face inevitably with legal issues in cross-border insolvency cases. The bankruptcy case of Guangdong International Trust and Investment Corporation, which attracts far-reaching close attention at present, gives a obvious illustration for this.
Cross-border insolvency concerns with so many legal issues that this dissertation cannot discuss them all due to the limitation of time, energy and scope of article, etc. Thus, the starting point should be to discuss some important and key problem raised by cross-border insolvency. With respect to the writing means, comparative researches and case studies are used in this dissertation in order to probe into some key problems more clearly and distinctly. In addition to this, Chinese relevant legislation and practice are combined into the necessary discussion and explanation. This dissertation is composed of twelve chapters, totaling about more than 300,000 Chinese words.
Chapter One, as an introduction to this dissertation, makes a brief glimpse on the general theory of insolvency, insolvency law, ross-border insolvency and ross-border bankruptcy laws, reveals the research background and foundation, the main contents, research means, practical significance and value of this dissertation to the readers. In this chapter, the dissertation illustrates the significance of this research to China at present through some facts.
The extraterritorial effect of bankruptcy, as the most important legal problem in cross-border insolvency, should be the basis of solving all cross-border insolvency cases. For this reason, this dissertation starts with the extraterritorial effect of insolvency proceedings. In the Chapter Two, the author at first analyses two theories on this issue, "universalist" view and territorial approach, including their meanings, inherent cause of choice by a country’s legislation and comments on their advantages and disadvantages. Thereafter, the author expounds the theory and judicial practice in some countries (including USA , UK , Canada , Japan , France , Germany , Australia , Argentina , Mexico , etc). Based on the above-mentioned researches, the author points out: the crux of the matter is how to keep balance between the protection of local creditors and international cooperation in cross-border insolvency cases from the point of view of increasing the international economic communication. In view of the concrete measures and strategies, although pure "universalist" view is still a kind of idealism, strict territorial approach should be given up. To some degree, the balance of emphasis being placed on the "controlled universalist" principle. Subsequently, a systematic train of thought is provided to Chinese uniform bankruptcy law’s formulation on this problem. The dissertation advises that China should choose "controlled universalist" principle in coming legislation. This attitude will conform to the development trends of modern insolvency laws, protect the interests of Chinese creditors and conduct the cooperation of cross-border insolvency cases.
Chapter Three probes into the recognition and assistance of foreign bankruptcy proceedings, which has very close relation with the extraterritorial effect problem. Firstly, this chapter discusses the differences between the recognition and assistance of common foreign judgments and foreign insolvency proceedings, and some particular problems resulting from the two kinds of effect of bankruptcy declaration. Hence, the dissertation inquiries into some factors considered by the courts when they recognize and assist foreign bankruptcy judgment, especially emphasizes the proper jurisdiction, reasonable application of laws, international comity, reciprocity, public policy, etc. The measures of providing assistance are also compared in this chapter. On these bases, some useful suggestions are given to Chinese relevant legislation.
Comparatively speaking, both Chapter two and Chapter three not only are the foundation and focal points, but also embody the contribution of this dissertation. Thus, these two chapters deserve much pen and ink. Direct liquidation, composition and reorganization are the three main means salvaging the insolvent enterprises. Most modern insolvency laws provide these three means. In cross-border insolvency, recognition and assistance of foreign composition, discharge and reorganization are still to be considered. Although there are many similarities among liquidation, composition and reorganization, the differences among them should not be ignored. In Chapter Four, the author gives more attention to some special issues of the composition and discharge in cross-border insolvency. The main problems that the author tries to solve include the particularity and conditions of recognition and assistance of foreign composition and discharge, the differences between the recognition of foreign composition and discharge. In addition to these, the recognition and assistance of Chinese courts to foreign composition and discharge are also concerned in this chapter.
One of the very key development trends of modern insolvency laws is to make insolvent enterprises recovery through such means as corporate reorganization, debt reconstruction, etc. Reorganizations of transnational corporate are proliferating in recent years, which put forward many new legal problems. Chapter Five observes the several basic legal problems in crossborder reorganizations, including the eligible debtor for reorganization proceedings, recognition of foreign reorganization proceedings, choice of measures of reorganization, etc. This chapter concentrates on the two ways by which cross-border reorganization conducts, one is single proceeding, and the other is parallel proceeding through two famous reorganization cases. In addition to these issues, this part also gives particular concern on the utilization and development of Alternative Dispute Resolution (ADR) in cross-border reorganizations. The author comments on the role of ADR in reorganization and thinks that for one hand, the active function of ADR should be admitted, on the other hand, the agreement of all parties is very important to the success of reorganization proceedings. In cross-border insolvency cases, due to the differences among the provisions on the composition, sequences, declaration and proof of bankruptcy claims in most countries’ insolvency laws, how to resolve and harmonize these problems should be considered. Moreover, whether foreign revenue claims are recognized also becomes one important issue needed to solve because of particularity of this kind of claims. In Chapter Six, the author touches upon the several problems over bankruptcy claim, especially recognition of foreign revenue claim. The author points out that the new development of recognition of revenue claim is relative with the decrease of sovereign sense and increase of cooperation concept in the world.
Owing to the international relations of debtors (or debtors abroad), they often conduct such behaviors as taking out capitals, transferring funds, fraudulent transfer and inequitable preferences, etc, which is very harmful to the whole creditor’s interests in cross-border insolvency. Thus, it is very necessary to provide with special protection and remedies for creditors in this context. Chapter Seven inquires into the creditors’ remedies in cross-border insolvency combining with the theories of corporate group. It concerns with the treatment of the payment obtained by the individual creditor abroad, equitable subordination, piercing the corporate veil and substantive consolidation. The latter three remedies mainly apply to dealing with the insolvency of transnational corporations. The methodology of solving the insolvent problems of transnational corporation includes entity law and enterprise law. Their advantage and disadvantage and application are also researched in this part.
Priority rights are important in corporate insolvency although they are not bankruptcy claims. Priority rights or secured interests influence the composition of bankruptcy claims directly. Chapter Eight explores the treatment of security interests in cross-border insolvency, mainly about the special form of security interests (for example, floating charge and consensual liens) and some problems resulting from security interests, including conflicts of laws. Chapter seven is another focal point in this dissertation. Although secured interests are not one kind of right in solvency laws, it influences the composition of bankruptcy estate and the payment to the unsecured creditors. Therefore, the attitude of insolvency laws on the secured interests, the kinds of secured interests is very different in most countries. Chapter Eight makes a detailed study on the special forms of secured interests, particular issues of secured interests in cross-border insolvency, including the applicable laws, floating charge and consensual liens, etc.
In insolvency laws, there are special rights concerning the bankruptcy estate, for instance, set-off, voidable transactions, etc. With respect to these rights, evading the researches of general issues, this dissertation mainly focuses on some special issues in cross-border insolvency. Voidable transactions (gift and transactions at an undervalue, unfair payment, voidable preference, fraudulent transfer, etc) are harmful to the most creditors’ interests, Chapter Nine lays an emphasis on the analysis of the theoretical foundation, components, practical application, conflicts of laws of voidable transactions. This chapter also concerns with the law of corporate group problems in the bankruptcy or reorganization of Parent and Subsidiary Corporation, including the issues of corporate guarantees.
In modern society, there is more and more mutual obligation due to the development of commercial transactions. A party may be both a creditor and debtor. This situation becomes very common. When one party is insolvent, whether the other party can set off the obligation is a very critical issue. At the same time, this problem has close relations with the interests of other creditors. Chapter Ten gives a comparative research on the set-off in cross-border insolvency, particularly how to solve the conflicting problems due to the different attitude among the different states.
The clause of reservation of title is often written into the international sale of goods contract to decrease the risk of buyer’s non-payment. When buyer obtains the goods (but not paying), if he is insolvent, this clause is of vital significance. It is most important for buyer whether the effect of this clause can be recognized. If the answer is "yes", the buyer can obtain his goods again and need not attend the insolvency proceeding. The legal effect of this clause is different in most countries and many conflicts result from this. Chapter Eleven mainly concerns with the effect of reservation of title in cross-border insolvency through some famous cases. The author thinks that a reasonable and pragmatic attitude is helpful to resolve these problems when the fundamental principles of bankruptcy laws and the goal of development of international trade contradict.
In recent years, the obvious trend of international cooperation leads to the production of unification of laws and practices of cross-border insolvency. Some important international organizations give impetus to this movement, and some progresses are made since 1980. The best cooperation way is through convention or treaty on cross-border insolvency in this field. In Chapter Twelve, on the basis of analysis of some influential conventions and model laws, the author reviews and summarizes the unification of laws and practices of cross-border insolvency, and prospects future development trends in this field. Some new achievements are mentioned in this chapter. For instances, EU convention on insolvency proceedings is the most remarkable achievement in cross-border insolvency law field for these years. The convention stands for new trends for bankruptcy cooperation. It will exercise good influence over the handling such insolvency cases. In addition to this convention, UNCITRAL model law on cross-border insolvency is also examined.
Key Words: bankruptcy, cross-border insolvency, composition, cross-border reorganization, extraterritorial effect of bankruptcy, creditors’ remedies