Cross-Border Debt Restructuring Insolvency Law Singapore UNCITRAL Model Law on Cross Border Insolvency

Part 2: Building “Brand Singapore”​ as an International Debt-Restructuring Hub

*Originally published on LinkedIn here. Certain further amendments and changes to the content may have been made.

[A] Adopting the Guidelines for Communication and Cooperation between Courts in Cross-Border Insolvency Matters

On 1 February 2017, the Singapore Supreme Court and the US Bankruptcy Court for the District of Delaware, announced that the respective Courts would adopt the Guidelines for Communication and Cooperation between Courts in Cross-Border Insolvency Matters (the “Guidelines”). These Guidelines may be found here.

This significant development cannot be understated, and the fact that the Guidelines have been adopted so soon after the Judicial Insolvency Network met in Singapore on 11 October 2016, demonstrates the push towards fast-tracking Singapore as an international (if not, at minimum, regional) centre for debt restructuring.

Now an official protocol in place to facilitate court-to-court communication where there are parallel insolvency or restructuring proceedings in Delaware and Singapore is in place. Insolvency practitioners are therefore advised to familiarise themselves with the Guidelines, since it is foreseeable that in the near future, orders will be made by the Singapore Courts (when faced with an appropriate matter) requiring local counsel to put in place the necessary infrastructure to facilitate such court-to-court communication.

Discussion and hypothesis as to potential cross-border court communication are now no longer theoretical; the Guidelines will supplement all legislation, rules and procedure in cross-border insolvency scenarios.

[B] The Common Law Fast Track

Apart from the Guidelines, it is a question of when (not if) the Model Law on Cross-Border Insolvency (the “Model Law“) will be implemented in Singapore. The proposed Singapore omnibus Insolvency Act is likely to be the primary piece of legislation implementing the Model Law, although it has yet to be read in Parliament.

One expects that this piece of legislation, which has been in the making for over 6 years, will now be fast-tracked as well as the Government strives to make good on its goal to develop Singapore as an international debt-restructuring hub.

The fact remains, however, that the Model Law is not yet implemented or in force. This, however, has not stopped the Singapore Courts from adopting the common law rules regarding the recognition of a debtor’s main interests (see the High Court decision in Re Opti-Medix Ltd (in liquidation) and anor matter [2016] SGHC 108) and, accordingly, the recognition of a foreign liquidator’s right to get in Singapore-based assets for repatriation to the place of principle liquidation (which, in the Opti-Medix case, was not the country of the insolvent companies’ incorporation, but Japan).

In a subsequent remarkable decision, the Singapore Court exercised its inherent jurisdiction in Re Taisoo Suk (as foreign representative of Hanjin Shipping Co Ltd) [2016] 5 SLR 787, to grant an injunction against the arrest of Hanjin’s vessels which were waiting to dock in Singapore, notwithstanding that the vessels were subject to prior security interests.

The order was made to facilitate the cross-border restructuring ongoing in Korea, and to that end, the Court exercised its inherent powers to effectively grant a moratorium on all proceedings and actions, including enforcement proceedings by secured creditors, against Hanjin and/or the vessels which sought to dock in Singapore.

The latest decision by the Singapore High Court (published earlier this year) underscores how the Singapore Courts have fully embraced a universalist, common law approach, in facilitating cross-border insolvencies.

In Re Gulf Pacific Shipping Ltd (in creditors’ voluntary liquidation) and others[2016] SGHC 287 (“Gulf Pacific“), available on Singapore Law Watch here, the Singapore Courts recognised the right of foreign liquidators (in this case Hong Kong liquidators of a Hong Kong company) to obtain information pertaining to the insolvent company’s closed bank account with ABN Singapore. The insolvent company in question had no assets or creditors in Singapore.

The orders sought were granted, notwithstanding that they were acknowledged as being wide-ranging in nature. One suspects that the orders given were effectively Bankers’ Trust-type orders.

At [10] of the Gulf Pacific, Judicial Commissioner Aedit Abdullah held (albeit obita) as follows:-

“...in my view, as stated in Re Opti-Medix (at [17]), the foundational doctrine in the recognition of foreign insolvency proceedings is the promotion and facilitation of the orderly distribution of assets, as well as the orderly resolution and dissolution of the affairs of entities being wound up. The traditional, territorial focus on the interests of local creditors no longer has primacy over more internationalist concerns. Thus, the precise mode of the winding up would not generally be material, and no distinction should be drawn between voluntary and compulsory processes, or between in court and out of court dissolution. That, I believe, was the philosophical basis of the approach in In re Betcorp Ltd, in which Judge Markell considered a broader approach to the interpretation of the relevant provisions of the US Bankruptcy Code, international usages and the UNCITRAL Model Law.”

[emphasis added]

For those au fait with Singapore’s insolvency jurisprudence, this marks a sharp departure from the previously territorialistic approach adopted by the Singapore Courts (and codified in Section 377(3)(c) of the Companies Act), endorsed extra-judicially by Singapore’s former Chief Justice Chan Sek Keong.

[C] Observations

Singapore has clearly embraced a universalist approach to cross-border restructuring, very much like the approach of Lord Hoffmann in Re HIH. The “golden thread” doctrine, which is undeniably flexible and pliable in how it may be applied, is a creature of common law and not legislation. Exercising and extending such jurisdiction effectively amounts to judge-made law. Whilst a useful tool, it must be applied with caution.

There is an obvious legislative and judicial agenda to develop Singapore as an international hub for debt-restructuring, and the general direction adopted by the Government and the Courts is to be commended. It is high time such a progressive approach was adopted.

That said, changes of this nature ought – in this author’s respectful view – to be introduced and implemented incrementally.

Moving too fast, even in the right direction, may lead to unnecessary slip-ups that then require back-tracking and fine-tuning. Perhaps, though, it is better to seek forgiveness than ask for permission.

It is hoped that as Singapore’s insolvency and restructuring jurisprudence continues to expand, that it does so bearing in mind the supremacy of Parliament, and the benefit of incremental developments in such a complex area of law.

February 2017

*The contents of this article represent the views of the author alone from a Singapore law perspective and are subject to copyright protection under the laws of the Republic of Singapore (as may from time to time be amended). No part of this article may be reproduced, licensed, sold, published, transmitted, modified, adapted, publicly displayed and/or broadcast (including storage in any medium by electronic means whether or not transiently for any purpose save as permitted herein) without the prior written permission of the author.

Please note that whilst the information in this article is correct to the best of the author’s knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice for and/or in respect of any particular course of action as such information may not suit your specific business, operational and/or commercial requirements. You are therefore urged to seek legal advice for your specific situation. All the author’s rights are expressly reserved and nothing herein shall be construed as a waiver thereof.

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