Insolvency and Restructuring International - September 2014

Insolvency and Restructuring International articles for the September 2014 issue are now available online to members of the IBA Insolvency Section ('IS'). To access the articles in this issue, you will need to sign in using your IBA username and password. Access login details.


A word from the IS Co-Chairs
Pekka Jaatinen and Josef Kruger

It is no exaggeration, we believe, to describe the Insolvency Section’s mid-year conference in Barcelona as a roaring success! Agustín Bou, Marcel Williams and the Insolvency Section (IS) subcommittees lived up to the promise and we were treated to not only a spectacular social programme, but also an academic programme which dealt with topics at the cutting edge of international insolvency. The Barcelona conference was very well attended, we had panels comprised of internationally recognised experts, and Bob Wessels’ workshop on the first day set the tone for what followed. Once again, our sincere appreciation to everyone who helped us make the mid-year conference such a stunning success.

Download the PDF


Co-Editors’ note
Elisabetta Caccavella and Virginie Gauthier

We are pleased to present you with the latest issue of Insolvency and Restructuring International, which is also our last as Co-Editors. We would like to take this opportunity to thank our readers and our many contributors without whom the Journal would not be possible. We have thoroughly enjoyed our experience at the helm of the Journal these last two years and hope that you continue to read and support IRI in the future. We strongly believe that Insolvency and Restructuring International is a leading tool to keep abreast of significant changes and developments in the insolvency and restructuring arena worldwide.

Download the PDF


Balancing stakeholder interests during insolvency
Steven J Weisz and Aryo Shalviri

Given our incessant and daily reliance on technology, it is trite to note that intellectual property rights have taken on increasing importance in the global economy. However, what is not widely known is the importance of Canadian insolvency laws in fostering innovation and the unfortunate reality that these laws have struggled to keep up. Furthermore, this trend shows no signs of slowing down: future global economic growth is expected to be driven by innovation, which will be followed by increased intellectual property (IP) claims during the insolvency process of businesses. This movement, coupled with the difficulties in identifying and valuing IP, have placed significant pressure on insolvency regimes and concomitantly, lawyers, trustees, monitors and receivers (collectively, the ‘Insolvency Practitioners’) to deal with IP rights upon insolvency in a balanced way.

Recognising these pressures, Industry Canada recently undertook a consultation of insolvency practitioners as part of the Industry Canada’s broader and statutorily mandated review of Canadian insolvency legislation (the ‘Consultation’).

Download the PDF


France’s new legislation is attempting to narrow shareholders’ powers in a restructuring scenario
Anja Droege Gagnier

French insolvency law has been significantly reformed by Ordinance No 2014-326, dated 12 March 2014, which came into force on 1 July 2014 and amended the sixth book of the commercial code. An implementing decree (No 2014-736) dated 30 June 2014 clarified the rules for its application. The reform mainly aims at simplifying the insolvency regime and rebalancing shareholders’ and creditors’ rights in the context of insolvency proceedings.

Download the PDF


German draft legislation to facilitate the management of group insolvencies
Kirsten Schümann-Kleber and Thomas Nicht

There is general consensus in Germany that the provisions of the German Insolvency Act are insufficient to ensure that group insolvencies are properly addressed. In 2013, the German Parliament presented draft legislation to facilitate the management of group insolvencies which was reactivated by the German Federal Government in January 2014. This article summarises the current status of this draft legislation as well as the most important changes proposed and evaluates these in the context of the current discussion on the management of group insolvencies within European legislative bodies.

Download the PDF


The insolvency of commercial trusts – contemporary issues with an historic arrangement
Orla M McCoy

Trusts are widely used in Australia for commercial activity, large and small. In recent years, the insolvencies of the corporate trustees of a number of high-profile pooled investment vehicles has prompted debate as to the suitability of these structures for commercial ventures, and the adequacy of the legal framework to respond in such situations.

This article examines some of the issues which the Australian courts have had to consider in the context of the insolvency of corporate trustees, including automatic disqualification of insolvent trustees, power of sale and the entitlement of liquidators to be remunerated from trust assets.

Download the PDF


Misconduct not grounds to terminate Chapter 15 recognition
Daniel M Glosband and Thomas H Good

A recent ruling from the US Bankruptcy Court for the Southern District of New York illustrates the limited, specific grounds for changing or terminating chapter 15 recognition. The ruling demonstrates that recognition may not be terminated as a sanction for misconduct and emphasises the limited grounds for modifying or terminating recognition under chapter 15, specifically that recognition may only be revoked where the facts which supported recognition no longer hold.

Download the PDF


Potential risks and lessons for debtor-licensors in Chapter 15 cases based on recent Fourth Circuit decision
Jonathan J Kim

Recent US cases regarding chapter 15 of the US Bankruptcy Code and semiconductor patent licences have raised questions as to whether certain US law protections for non-debtor licensees (specifically set forth in 11 USC section 365(n)) will and should be held applicable to foreign debtors and foreign representatives, notwithstanding potentially contrary foreign insolvency law. Based on the purportedly fundamental US public policy of technological innovation and a balancing of debtor’s and creditors’ interests, these courts determined US law to trump otherwise applicable foreign law, which should concern some foreign debtors, foreign representatives and practitioners and may impact the relief, if any, sought by such parties in the US courts.

Download the PDF


NML Capital v Argentina: A lesson in indenture interpretation
Howard S Steel, Elnaz Zarrini and Arkady A Goldinstein

On 16 June 2014, the United States Supreme Court denied Argentina’s petition for certiorari in an ongoing dispute between Argentina and certain holders of Fiscal Agency Agreement (FAA) bonds (on which Argentina defaulted in 2001), who did not agree to exchange their bonds in two earlier offers by Argentina in 2005 and 2010. Argentina and certain commentators have criticised the denial of certiorari as a victory for ‘vulture’ hedge funds and a blow to ‘New York’s status as the law of choice for sovereign debt.

This article provides an overview of the case and concludes that the outcome was not a result of any bias in New York law but a well-reasoned exercise in contract interpretation. Courts applying New York law recognise that efficient capital markets can only exist if freedom of contract and the expectations of the parties embodied within the contract are predictably enforced. A legal regime that enforces the terms of a contract as written is one that ‘dignifies’ both parties to a bond indenture. Thus, the denial of certiorari does not yield a one-sided victory for hedge funds, but instead provides future sovereign issuers and investors with support that bargained-for terms of indentures will be upheld.

Download the PDF


Liabilities that survive insolvencies and restructurings in Brazil
Fabio Rosas and Gabriela Martines Gonçalves

This article provides an overview of each of the main types of insolvency proceedings that were introduced in Brazil with the passage of the Brazilian Bankruptcy and Restructuring Law in 2005: incourt restructuring, out-of-court restructuring and forced liquidation. This article describes the types of debt that are not covered by in-court restructuring, the ranking of debt in forced liquidation and the liabilities that survive such proceedings. It further analyses the practice of purchasing branches and business units from a debtor in an in-court restructuring or forced liquidation proceedings and describes the arrangements required by law to ensure that a purchaser does not succeed to the selling debtor’s obligations and liabilities. It also contains a brief review of the Brazilian insolvency regime and its interaction with criminal-, environmental- and consumer-related claims and liabilities.

Download the PDF


New refinancing proceedings under Spanish law
Agustín Bou

Before March 2014, insolvency proceedings in Spain had some difficulties to perform restructuring and refinance processes due to, among other things, some formalistic and excessive requests which sometimes created difficulties to achieve those refinancing and restructuring agreements without the danger of reversal in insolvency. In order to ease the processes of company restructuring and to refinance potentially viable companies, the Spanish Insolvency Act was recently modified by the Royal Law Decree 4/2014, 7 March. In that sense the new law promotes, among other things, the relaxation of restructuring and refinancing processes of debtor companies to try to prevent those which could be viable proceeding to bankruptcy because of their excessive financial burden.

Download the PDF


Conference reports
20th Annual Global Insolvency and Restructuring Conference, Barcelona
Riches to Rags – from Prosperity to Insolvency
18–20 May 2014

• Rome is burning: who has the most effective insolvency system?
Sarah L Cave

• Where the music continues to play: distressed real estate investments
Róisín Peart

• When the car runs out of gas: restructuring in the European automotive sector
Lana Ashby

Download the PDF


The UNCITRAL Commission’s 47th Session
July 2014, New York

Gregor Baer

This is a report (with explanatory commentary) on cross-border insolvency law reform deliberations of the 47th Session of the United Nations Commission on International Trade Law (UNCITRAL) held in July 2014 and the 45th Session of UNCITRAL Working Group V (Insolvency Law) (Working Group V) held in April 2014. The International Bar Association Insolvency Section contributed to these sessions through a delegation of expert advisors.

Download the PDF


IS Subcommittee updates

• Creditors’ Rights Subcommittee
• Reorganisation and Workouts Subcommittee
• Insolvent Financial Institutions Subcommittee

Download the PDF


  • To become a member of IS, please click here.
  • To subscribe to the journal, please click here.
  • Individual issues of the journal are available to buy from the IBA shop.