Arbitration of Cross Border Insolvency Disputes

CHAPTER ONE: GENERAL INTRODUCTION

  • Background to The Study.

The world has seen the increased development in international trade and foreign investments. Money, as well as businesses have moved easily across border into various territories. Private individuals, Corporations and Government alike have been engaged in these activities either by raising capital, investing into foreign corporation, projects or governments or simply the provision of goods and services to foreign and local entities in exchange for a consideration. With the advancement of international trade, Business and Corporations have expanded into various countries across continental borders. However, in recent times, owing to many reasons, particularly the financial markets crash, many corporations have been unable to meet their obligations to their various creditors and investors. Hence resulting in insolvency and the need to be wound up. This process of insolvency has led to various complex disputes arising out of the uncertainty of creditors in redeeming their positions from the insolvent companies.[1]

 

There is no gain in denying the importance of insolvency and adequate insolvency regimes to the development of international trade and investment. There exist various Insolvency regimes in various countries, which apply locally. However, it is important to note that the business world has been globalized and there is the pressing need to develop an adequate Cross border Insolvency dispute resolution regime which would be universal in its approach and acceptance.  There have been various attempts to develop to develop a universally accepted and applicable insolvency regime, but this has been met with little success.

  • Statement of Research Problem

In recent times, Arbitration has been an effective tool in resolving complex commercial and investment disputes. The importance of arbitration to commercial disputes cannot be overemphasized.[2] It has been efficient in resolving such disputes in record time, while helping to maintain business relationships.  Arbitration and Insolvency regimes are on two opposite ends of the spectrum. Ordinarily, they are not connected in any way. While Arbitration thrives on private procedures like party autonomy, Insolvency is a public regime which seeks to address the collective interests of the creditors involved.

This research seeks to examine the possible connection between the two concepts. It seeks to highlight various points of intersection and ultimately examine how Arbitration can be useful tool in resolving cross border Insolvency disputes.

 

  • Specific Objectives of The Study

The objective of this study is to critically examine how Arbitration can be an effective tool for the resolution of Cross Border Insolvency Disputes. The following are the specific objectives of the study:

  1. To examine the concept of Insolvency, Cross Border Insolvency and Arbitration
  2. To examine the History and Development of Insolvency law in Nigeria, the UK and USA
  • To examine the various disputes arising out of Cross Border Insolvency
  1. To examine the Application of Arbitration to Cross Border Insolvency disputes
  2. To examine practical issues arising out the application of Arbitration to Cross border Insolvency disputes
    • Research Methodology

This study relies on primary and secondary sources of information. The primary source includes the Constitution of The Federal Republic of Nigeria, 1999 as Amended, The Company and Allied Matters Act, 2004, The Arbitration and Conciliation Act 2004, and other Local and Foreign legislation bearing directly on Insolvency and Arbitration practice; Judicial decisions of the Nigerian Courts as well as those of foreign courts; government policy statements and memoranda bearing upon the insolvency regime.

The secondary sources include Journals, books, government publications, Magazines as well as Internet sources. Information obtained from these sources were subjected to content analysis.

  • Structure of The Study

The study is divided into seven chapters. With the first chapter being dedicated to the background of the study, statement of research problem, objectives of the study, and research methodology among others.

Chapter Two serves as Literature Review, discussing the concepts of Insolvency, Cross Border Insolvency, Cross Border Insolvency Disputes and Arbitration and its Institutions for dispute resolution.

Chapter Three focuses on the History and Development of Insolvency Law. It gives an overview of the history and development of Insolvency Law in various jurisdictions including Nigeria, United Kingdom and Europe, and the United States of America.

Chapter Four focuses on Cross Border Insolvency Disputes. It critically examines the various forms of disputes particular to cross border insolvency; including jurisdiction disputes, procedural disputes as well as enforcement disputes.

Chapter five examines how Arbitration can be useful as tool in resolving Cross Border Insolvency disputes.

Chapter Six focuses on practical issues that can arise as a result of the application Arbitration in cross border insolvency dispute resolution.

Chapter Seven contains the Summary and Conclusions of the Study, as well as various recommendation from the study.

 

2.0 Chapter Two: Literature Review.

In this chapter, opinions of established writers on this subject matter will be reviewed. However, there is a dearth of literature in this regard. This is owing specifically to the relative novelty of the topic and obvious disconnection between Arbitration and cross border insolvency procedures. I will be embarking on a contextual review where I will define the salient terms, and afterwards an empirical review of the works of the established writers.

  1. Contextual Review

2.1 Definition of Insolvency

Insolvency is a term for when an individual or organization can no longer meet its financial obligations with its lender or lenders as debts become due.[3]  It involves a situation where an individual or corporation cannot raise enough money or cash to meets its obligations or pay its debt as they become due for payment. It occurs where the assets of individuals or corporations is not sufficient to cover their various obligations and liabilities.  Insolvency may also refer to a situation where a bankruptcy court determines that an individual or business cannot raise funds to pay his/her debts.[4]

In discussing the economics of the term Insolvency, Insolvency can be divided into two major types; Balance Sheet Insolvency and Cash Flow Insolvency. Balance sheet Insolvency is an accounting concept. It is used in a situation where the book value of a firm’s assets is less than the value of its liabilities.[5] This type of insolvency can be determined by the “balance sheet insolvency test”. This test is provided for in the United Kingdom Insolvency Act where it says that a company will be deemed unable to pay its debts;

“if it is proved to the satisfaction of the court that the value of the company’s assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.”[6]

 Cash flow Insolvency on the other hand occurs when “it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due.[7] This involves the debts of the company presently falling due, as well as those falling due in the reasonably near future. Where it happens that such debt obligations cannot be met, the company will be said to be cash flow insolvent.

Insolvency has also been given statutory definitions in the laws of various states. In Nigeria, Insolvency is defined in Section 409 of the Company and Allied Matters Act.[8] It provides that a company shall be deemed to be unable to pay its debt if:

  1. A creditor by assignment or otherwise to whom the company is indebted in a sum exceeding #2000 then due has served on the company by leaving it at its registered office or head office, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor or.
  2. execution or other process issued on a judgement, decree or order of any Court in favor of a creditor of the Company is returned unsatisfied in whole or in part or
  3. The Court after taking into account any contingent or prospective liability of the company is satisfied that the company is unable to pay its debt.

A similar provision is contained in the Insolvency Act of 1986 which is operative in the United Kingdom. Under the Act,

  1. A company is deemed unable to pay its debts
  2. if a creditor (by assignment or otherwise) to whom the pay debts. company is indebted in a sum exceeding £750 then due has served on the company, by leaving it at the company’s registered office, a written demand (in the prescribed form) requiring the company to pay the sum so due and the company has for 3 weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor, or
  3. if, in England and Wales, execution or other process issued on a judgment, decree or order of any court in favor of a creditor of the company is returned unsatisfied in whole or in part, or
  4. if, in Scotland, the induciae of a charge for payment on an extract decree, or an extract registered bond, or an extract registered protest, have expired without payment being made, or
  5. if, in Northern Ireland, a certificate of unenforceability has been granted in respect of a judgment against the company, or
  6. if it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due.
  7. A company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company’s assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.[9]

The purpose of insolvency law is to provide a legal framework to companies when they can no longer pay their debts. Ordinarily, Insolvency law is seen as a matter of national jurisdiction. This notion is evident in the existence of few binding international treaties on the subject. However, with the globalization of business, insolvency law and practice are evolving to cater for cross border insolvencies.

  • Cross Border Insolvency

Cross border insolvency occurs whenever a debtor’s assets or liabilities are located in more than one state, or if the debtor is subject to the jurisdiction of courts from two or more states. Multinational corporations operate in more than one country through the auspices of subsidiaries and affiliates. This happens for various reasons including breaking into the international market for their goods and services, the need to enjoy the benefits of tax havens among other reasons. Nevertheless, the corporations are still run centrally; controlled from the headquarters. However, when the corporation becomes insolvent and unable to pay its debts, the difficulties of cross border insolvency becomes pronounced. As mentioned earlier, Insolvency laws are nation-centric, hence courts of nations housing the various subsidiaries of the corporations are naturally in the position to the administer the insolvency proceedings, making it difficult for foreign courts to administer the insolvency procedures on assets outside their jurisdictions.

Over time, various cross border insolvency theories have been developed to explain the various approach of countries to cross border insolvency. These theories will be briefly examined in subsequent paragraphs.

2.2.1 Territorialism

Territorialism is the idea that insolvency and the insolvency procedure and rules is a national creature, interwoven intrinsically with the national sovereignty of the relevant country or jurisdiction[10] what this seeks to achieve is that the assets of an insolvent company is treated locally under the local insolvency laws. Territorialism, often called the “grab rule” espouses the administration of cross border insolvency through the exercise of jurisdiction by each national court that has control over the assets of the debtor. The courts act independently, applying their local law to the management and distribution of the assets they are able to seize.[11] This translates to the fact that every area of the insolvency proceeding including the recognition of foreign insolvency, the administration of the estate of the insolvent company is entirely based on the application of local laws. Under this approach, a Nigerian court presiding over the insolvency of a multinational would deal only with assets in Nigeria using Nigerians law including the Company and Allied Matters Act, 2004, among others. Likewise, a Ghanaian court would preside over assets of the same Multinational in its jurisdiction using its own laws.

Territorialism is advantageous as well as it is disadvantageous. One of its advantages is it that it allows a domestic court to shield local creditors from biased foreign courts and suspect foreign laws.[12] In addition, local creditors have a fairer chance to receive their portion of the multinational debtor’s assets located in their country.

On the other hand, Territorialism leads the multiplicity of insolvency proceeding across various jurisdictions leading to the application of various and sometimes entirely different rules. The multiple insolvency proceeding leads to increased costs to both the debtor and the debtor’s multinational creditors.[13] In sum, a court’s decision to adopt a territorial approach, while satisfying the interests of local creditors, will be overly burdensome for the debtor and multinational creditors, result in duplicative proceedings, and unnecessarily dissipate judicial resources.

2.2.2 Universalism

Universalism is the opposite of Territorialism. This theory seeks to achieve the cooperation of countries affected by the administration of a multinational debtor’s estate. With the application of this theory, all foreign courts apply the laws of the country where the main insolvency proceeding is being hosted. Creditors worldwide would be expected to submit their claims to the main proceeding while a trustee will turn over all the debtor’s assets to the main proceeding.  In this instance, a Nigerian court would apply Ghanaian insolvency laws and layer turn over the multinational’s Nigerian asset to the Ghanaian Trustee. Once the Ghanaian court has determined what the Nigerian creditors will receive, the Nigerian court must respect the decision.

Universalism is advantageous as it facilitates a single administration of the insolvency and equality of all creditors and assets. This ensures predictability and orderliness. Also, by reducing cost on multiple litigations in various countries, Universalism leaves more for the creditors as the assets are fully maximized for the interest of the creditors.

Universalism, however, is not without its problems. One of the problems associated with this is the uncertainty faced by local investors who are confronted with foreign and unfamiliar laws. In addition to this is the challenge of putting a truly functional and widely accepted universalistic insolvency system in place.[14]

Practically, the application of these principles has not been without their limitations. A primary concern about the application of Territorialism is the tendency to breach the principle of equal treatment of creditors. The concern with Universalism is the reservation of states regarding accepting and applying foreign insolvency laws. As a result of these concerns with the two main theories, various authors over time have suggested various modifications to them. One of the popular modifications is what the author LoPucki suggests as “Cooperative Territorialism”; essentially, this theory describes a system where all states control the assets within their borders, applying a territorial approach, but cooperation should be allowed when necessary.[15] The challenge with the application of this principle would in the application of the discretion to cooperate. The local courts might choose not to cooperate in most circumstances as they may see the foreign laws as not favourable. This in essence then returns this modification to the original theory of Territorialism.

Another concept that was developed is the concept of “Contractualism[16] this could be seen as a modification to the Universalism theory. This proposes that the applicable insolvency regime would be “contractually” decided upon at the start of the company’s legal life, and within certain boundaries, this choice should be uniformly accepted and applied. The practicability of this theory is however limited. This is owing to the reason that at the start of the company’s legal life, their insolvency is usually among the last concern, in fact, no concern at all. Furthermore, the scope of the company’s expansion is usually not certain at the start of the company, hence it will be difficult to agree on a specified accepted rules and laws of insolvency.

All of these theories and modification keep highlighting the difficulty in coming to a generally accepted insolvency regime. This task has been saddled on scholars, jurists and law makers over time and the search for a universality accepted principle is still on going.

  • Arbitration and International Commercial Arbitration

Arbitration is a form of dispute resolution mechanism where the parties agree to subject themselves to the authority of a neutral third party who is called the Arbitrator, who gives a decision which is binding on the parties. Arbitration is a very popular tool for the resolution of commercial and business disputes. Arbitration can be domestic as well as international. Arbitration is said to be domestic or national arbitration when it is between parties in a state and subject to such state laws on arbitration. The Arbitration and Conciliation Act 2004 provides help in defining International Arbitration. According to the Act, Arbitration is international if (a) the parties to an arbitration agreement have, at the time of the conclusion of the agreement, their place of business in different countries, or (b) any of the place of arbitration or the place of performance of the commercial relationship is situated outside the country (c) the parties expressly agreed that the subject matter of the arbitration agreement relates to more than one country or (d) the parties, despite the nature of the contract, expressly agree that any dispute arising from the commercial transaction shall be treated as an international arbitration.[17]

From the definition of international arbitration given above, one important feature of Arbitration can be deduced; Consensus. Arbitration thrives on the agreement of the parties. In essence, arbitration, is what the parties have agreed it to be. The agreement by the parties to submit any disputes between them to arbitration is the “foundation stone” of modern international arbitration. There must first be a valid agreement to arbitrate for an arbitration to take place. Once a party has provided consent to arbitration that consent cannot be unilaterally withdrawn. The arbitration agreement is an independent obligation separable from any contract within which an arbitration agreement may be contained.[18]

International arbitration is distinct from national arbitration basically because national arbitration is subject to a law while international arbitration is not, except in so far as the parties by their agreement make the law of a particular nation applicable to the contract or to any part of the contract.[19] International arbitration is called international commercial arbitration in order to differentiate it from arbitration between two sovereign nation which is applied under the principles of public international law.[20] International commercial arbitration is a private dispute resolution mechanism that relies heavily on the agreement of the parties, both as a means of demonstrating consent to arbitration and with respect to the structure of the proceedings.[21] parties in international commercial arbitration are free to adopt virtually any type of rules they prefer. This in turn means that parties can decide to submit their arbitration to the rules of an Arbitral institution or proceed with an ad hoc arbitration.  International arbitration differs from other forms of dispute resolution mechanism in that it allows the parties or the arbitrators to the decide the laws which guide the substance of their disputes. They can decide that it is to be guided by the laws of a particular country or it be governed by reference to general principles of law such as those found in the UNIDROIT Principles of International Commercial Contracts, the United Nation Convention on International Sale of Goods among others.[22]

  1. International Commercial Arbitration conventions and Framework

Two significant international instruments that established the basic requirements that contracting states recognize and enforce international arbitration agreements and awards (subject to specific limitations) were the 1923 Geneva Protocol and the 1927 Geneva Convention. [23] These instruments have been cited as marking the beginning of contemporary international efforts to facilitate and support the international commercial arbitration process.[24]
The New York Convention[25] (which superseded the 1923 Geneva Protocol and the 1927 Geneva Convention) is now the key international instrument that facilitates and promotes international arbitration by ensuring an international legal framework for the recognition and enforcement of international arbitration agreements and awards. For example, the New York Convention provides that: (1) each Contracting State must “recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences … concerning a subject matter capable of settlement by arbitration;”[26] (2) courts of the Contracting State, on being seized of a dispute to which an arbitration agreement covered by the Convention applies, “shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed;”[27] (3) each Contracting States “recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in” the Convention;[28] and (4) recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked under specified limited circumstances.[29]

Having noted that there is a key international convention which governs the recognition and enforcement of foreign arbitral awards, it is important to recognize the limits of this convention. The New York Convention is an instrument of international law; but its application with respect to any particular arbitration agreement or award is a matter for the domestic (or national) law and the domestic (or national) courts of the place of enforcement. The exact procedure to be followed, the way in which the convention is to be interpreted and applied are matters which are to be determined by the law of the country in which recognition and enforcement of a particular arbitration agreement or award is sought. Accordingly, the effect that a particular domestic insolvency law may have on the way in which an arbitration agreement or award is recognized or enforced may vary across jurisdictions, regardless of whether each country is a party to the same international convention.[30]

The UNCITRAL Model law was adopted by UNCITRAL in 1985 and was intended to “serve as a model of domestic arbitration legislation, harmonizing and making more uniform the practice and procedure of international commercial arbitration while freeing international arbitration from the parochial law of any given adopting state.” The UN General Assembly recommended “that all States give due consideration to the Model Law on International Commercial Arbitration, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice.”[31] Since its adoption by UNCITRAL the Model Law has come to represent the accepted international legislative standard for a modern arbitration law and a significant number of jurisdictions have enacted arbitration legislation based on the Model Law.[32]

EMPIRICAL REVIEW

Arbitration and cross border insolvency dispute resolution has been a subject gaining wider popularity in recent times. This is due to the need to find an efficient insolvency dispute resolution scheme in order to protect and facilitate the continuous growth of international trade and development. Various authors have given their opinions on how these two areas of interest can be linked and the relationship that exists between the two. In subsequent paragraphs, some of the opinions will be examined.

Judge Allan Gropper in his paper[33] explores the possibility of the application of arbitration to cross border insolvency. In doing this, he examines the UNCITRAL Model Law on Insolvency, Particularly the Center of Main interest provision and how limited it has been in its effectiveness. He then suggests arbitration to resolve some insolvency disputes including disputes among estates of affiliated debtors in Insolvency cases in different jurisdictions. This would be particularly effective as the Model law has very few provisions that apply to corporate groups. Additionally, he suggests the application of arbitration to the reorganization of the debt of an insolvent or financially distressed enterprise that does not have access to an effective reorganization law. He is of the view that arbitration would complement the “workout” process which the creditors and debtors ordinarily attempt to do.

He also opined that arbitration would enable the consolidation and centralizing of disputes relating to the debtor and its affiliates in a single proceeding in an ascertainable venue before expert arbitrators. Also considering the wide acceptance of the New York Convention, he is of the opinion that there would be no reason why the arbitration of issues relating to the financial distress of enterprise would be unenforceable. In considering the issue of consent to the arbitration, he is of the opinion that the benefits of arbitration ought to be great enough to ensure that the lenders and creditors consent to the process.

Edna Sussman and Jennifer Gorskie,[34] in their paper, commented on the current trend of insolvency that still borders on Territorialism. In exploring the possible benefits of Arbitration on cross border insolvency, they analyzed the Insolvencies of two American Giants; Nortel the Telecommunication company and Lehman Brothers, the fourth Largest investment bank in the US at the time of its insolvency. Stating the problem of the current insolvency regime to be contributive to delays, inefficient and increasingly expensive, they suggested an interest in international arbitration and other alternative dispute resolution mechanism as alternatives to the domestic judicial system.

Considering the fact that Insolvency is largely a matter of public policy, they noted that it would be difficult to subject every form of insolvency dispute to arbitration. In spite of this challenge, they suggested various forms of Insolvency disputes that could resolved with arbitration. They include:

Claims Allows Disputes: these are disputes between the debtor and a claimant who asserts a right to share in the pro rata distribution of the debtor’s assets. Intercompany/Affiliate Disputes: disputes among debtor affiliate entities that are subject to insolvency proceeding in different nations maybe particularly susceptible to arbitration. Allocation of Enterprise Value: where the assets of a multinational enterprise are subject to the jurisdiction of multiple courts, a coordinated effort to sell the assets for a single “enterprise value” may often be beneficial to all affiliate entities. Debt Restructurings of Multinational Enterprises; Disputes about Violations of Bankruptcy Orders; Disputes Involving Complex Financial Instruments

In concluding their paper, they suggested that the parties to the insolvencies have agreed to go to Arbitration, the insolvency courts should be willing to order such arbitrations, especially where the state is a party to the New York Convention.

In his paper,[35] Kovacs explored the Arbitrability of Insolvency matters. He was of the opinion that ordinarily, the commencement of an insolvency proceeding does not prevent an arbitral tribunal, seated in a foreign jurisdiction to the place of the insolvency from deciding issues with respect to disputes that have arisen out of or in connection with non-performance of contractual obligations. However, disputes that derive from the application of insolvency law and relate to the administration of the insolvency proceedings are generally considered not arbitrable.

He opines in his work that some matters which have been described as core or pure matters of insolvency law has been universally accepted to be not arbitrable. These matters are to be left to the jurisdiction of a competent state court. These matters include: issues as to the nomination of the trustee; the commencement of the insolvency proceeding; or the ordering of an amount to be paid out of the insolvent party’s estate. He believes this to be so because in his opinion, Arbitration is a method of dispute resolution, whereas, core insolvency proceedings do not resolve disputes but to ensure the orderly liquidation and reorganization of the insolvent party’s assets. There appears to be no answer universally accepted for the differentiation of core insolvency issues from other issues. This is due to the myriad of different insolvency regimes across jurisdictions, reflecting historic, cultural, economic and political norm of each state. Another reason for this difficulty is owing to the aims of insolvency provision which include organizing the conduct of the insolvency proceedings and permitting creditors to obtain judgement on their claims.

Hon. Samuel Bufford[36] writes that the legal basis for using arbitration in international insolvency cases rests principally in the Model Law and the E.U. insolvency Regulation. In addition, it is possible that, apart from these legal structures, the laws of the relevant countries in a particular case may provide for arbitration in a manner that would permit the use of arbitration in the insolvency context.

In examining the possible uses of Arbitration in international Insolvency cases, he is of the opinion that arbitration can be used to address certain core insolvency issues such as the liquidation of claims, the determination of an avoidance action (preferential, fraudulent or undervalued transactions), the resolution of conflicts among insolvency cases for related entities in different countries and the negotiation of a restructuring plan. He also adds that arbitration maybe useful for the location of a debtor’s center of main interests and the location of an enterprise group’s entity center of main interest. International arbitration is also useful to resolve disputes where the National courts do not have jurisdiction. He further highlights some limitations that could arise from the application of international Arbitration to Insolvency. They include enforcement limitations under the New York Convention, the sometimes-slow pace at which international arbitration is conducted among others.

From the various opinions of writers examined above, one thing is very clear; that there is no central arbitration and insolvency regime. There has been a consensus as to the inherent benefit of the application of international arbitration to international insolvency but the extent of the application is still not certain. This has left so many things undecided. One of which is the notion of the arbitration of core insolvency proceeding. Kovacs was of the opinion that such core proceedings are not arbitrable while Samuel Bufford takes the other route. The question then becomes: what are core issues in insolvency proceeding? And to what extent can arbitration address those issues? In subsequent chapters of this study, some of these issues will be examined.

 

CHAPTER THREE – HISTORY AND DEVELOPMENT OF INSOLVENCY LAW

Insolvency is not a new concept as businesses have been existing since time immemorial and due to several reasons, some of the businesses have failed and they have been insolvent. As a result of this insolvency laws have been developed to cater for these insolvencies. However, the approach taken by the various insolvency laws have varied according to the various jurisdiction where they have been enacted. In this chapter, the history and development of insolvency laws would be examined with a special focus on Nigeria, the United Kingdom and the European Union, the United States of America and the UNCITRAL Model Law on Insolvency.

3.1 Insolvency Law in Nigeria

Insolvency, just like other Nigerian Laws is based on common law, precedents and local statutes like the Company and Allied Matters Act, 2004[37] and to some extent the Asset Management Corporation of Nigeria Act.[38]

3.1.1 History

In Nigeria, there is no Insolvency Act. The source of the Nigerian corporate insolvency legislation is the Companies and Allied Matters Act (CAMA) 2004 which governs companies.  CAMA 2004 finds its roots in British company law, albeit with some indigenous modifications. As a result of its colonial pedigree, most Nigerian legislations, (including, of course, its company law), evolved from and are modelled on the laws of England and Wales. Though Nigeria gained her independence from colonial rule in 1960, the structure of her legal system has remained largely unaltered.[39] In light of this understanding, tracing the history of Nigerian Insolvency Law is the same as tracing the history of Nigerian Company law.

The first company law in Nigeria was the Companies Ordinance 1912.[40] This was an indigenous enactment of the Companies (Consolidation) Act 1908. With the amalgamation of Southern and Northern Nigeria in 1914, the Companies Amendment and Extension Act 1917 was enacted; to extend company law to the entire country.  Five years later, both the Ordinance of 1912 and that of 1917 were repealed and replaced by the Companies Ordinance 1922; which was modelled after the British Companies Act 1929.[41] The 1922 Ordinance was amended by subsequent ordinances in the following decades; based on subsequently enacted British Companies Acts.[42] In 1968, the Companies Decree 1968 was enacted and remained in force for the next two decades.

The Companies Decree 1968 was, largely, a direct transplant of the British Companies Act 1948.The Decree was an amalgam of some sections of the repealed (Nigerian Companies) Amendment Act 1958 and some (new) provisions of the British Companies Act 1948.
Ironically, at the time the 1968 Decree was promulgated, the Companies Act 1948 had been amended by the Companies Act 1967.[43] As the failure of the 1968 Decree to support economic development in Nigeria during the (post) oil-boom era became more apparent, there were heightened calls for its amendment or repeal. In 1990, the Companies and Allied Matters Decree replaced the failed Companies Decree 1968. Though CAMA 1990 was amended in 2004, the insolvency provisions in both statutes are the same. The key purpose of the amendment was to separate the portion that became the Investment and Securities Decree.

3.1.2 Provisions

Inability to pay debt have been statutory described in the CAMA [44].According to it, a company shall be deemed to be unable to pay its debt if.

  1. A creditor by assignment or otherwise to whom the company is indebted in a sum exceeding #2000 then due has served on the company by leaving it at its registered office or head office, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor or.
  2. execution or other process issued on a judgement, decree or order of any Court in favor of a creditor of the Company is returned unsatisfied in whole or in part or
  3. The Court after taking into account any contingent or prospective liability of the company is satisfied that the company is unable to pay its debt.

Even though Section 409 provides a test for declaring a company insolvent in Nigeria, when compared with the English provisions on situations that constitute inability to pay debt, section 409 of the Companies and Allied Matters Act has been said to be a lazy test or condition for declaring a company insolvent. Considering the amount involved in section 409 (1), it is not only ridiculous but also laughable. The challenge posed by such provision is that there is the tendency that the law on this aspect might be abused, especially with regard to putting an end to an otherwise viable companies on such condition. One of the requirements is that a demand must also be made on the company for payment of the debt owed.[45] It is the opinion of Chief Anthony Idigbe SAN that the basic framework for insolvency in Nigeria is rather obsolete[46]. The highly revered Senior Advocate of Nigeria was of the view that the Nigeria general Insolvency framework is deficient.

It is worthy of mention here that the bulk of the framework of Nigeria Insolvency regime is contained in part XIV (14), XV (15) and XVI (16) of CAMA on Receivership and Manager, Winding up of companies, Arrangement and Compromise respectively.

Winding up is one of the consequences of Insolvency. But it does not necessarily mean that once a company is insolvent, it must automatically be wounded up.  Part XIV (14) deals with Receivership and Manager. Section 387(1) provides for the categories of people that cannot be appointed as a receiver. They include an infant, person of unsound mind, corporate body, undischarged bankrupt, a director or auditor of the company or any person convicted of offences involving fraud. It is the view of a senior author that failure of the Act to expressly provide for any qualification for the appointment of a receiver may give room for the appointment of incompetent persons as receivers since there is a presumption anyone that does not fall within the list of disqualified persons can be so appointed.[47]

Section 387 (2) makes it voidable if any of the persons named above act as receiver and it also went further to provide a fine of #2000 for corporate body or a term of imprisonment for 6 months for individual or #500 fine. The framework for Receivership and Manager is contained in section 387 -400 of Companies and Allied Matters Act of 2004.

3.1.2.1 Winding Up

Part XV deals with Winding up and by virtue of Section 401(1) of CAMA, winding up can be by;

  1. The Court
  2. Voluntarily
  3. Subject to the supervision of the Court

3.1.2.1.1      Winding up by the court

A company may be wound up by the Court in the following circumstances

  1. When the Company has by special resolution resolved that the company be wound up by the court.
  2. Default is made in delivery of the statutory report to the Commission or in holding statutory meetings
  3. The number of members is reduced below two
  4. The Company is unable to pay its debt
  5. The Court is of the opinion that it is just and equitable that the company be wound up

Under this head, before presenting a Petition for winding up by the court, a resolution has to be passed for voluntary winding up and winding up would have been deemed to have commenced immediately except when fraud, mistake is proved .After the petition, for winding up, the court may dismiss it, adjourn the hearing on a condition or unconditionally or make an interim order or any orders that it deem fit. Section 418 provides that an order for winding up shall operate in favor of all the creditors and of all the contributories of the company as if made on a joint petition of a creditor and of a contributory. The court also have the powers to appoint an official receiver and a liquidator for the purposes of conducting the winding up.

3.1.2.1.2 Voluntary Winding Up

The company may voluntarily wind up on the condition listed below; –

  1. when the period fixed for the duration by the has expired or if an event provided by the article has occurred
  2. If the Company resolve by special resolution to wind up.

It is worthy of mention that the effect of winding up, is that from the commencement of winding up, the company ceases to carry on business. Also, within 14 days after a resolution for winding up has been passed, the notice of the resolution has to be advertised in the Gazette or two daily newspapers and to the Commission.

3.1.2.1.3 Winding up subject to the supervision of the court

When a company passes a resolution for voluntary winding up, the Court may on petition order that the voluntary winding up shall continue but subject to the Courts supervision. The effect of this type of winding up is that it is deemed to be a petition for winding up by the court. Just like the situation of the provisions in the CAMA which provide for disqualification of receiver under section 387, section 509 (1) provide for disqualification of liquidator.

Section 519 (1) provides that in all matters relating to winding up of company, the court can order for a meeting of the creditors to be called and it shall have regard to individual debt.

The Corporate Affairs Commission can also strike out the name of the Company from its registers, if the company no longer carry on business. However, an aggrieved member may within 20 years apply for restating of the name of the company on the register.

After completion of winding up, officers of the court are expected to make a return to the commission. This is the provisions of section 530 of CAMA. Part XVI deals with arrangements and compromise

It is noteworthy that under Corporate Insolvency, where there is insufficiency of assets of the company to meet the debt need of the company, it is the general creditors that are usually at risk. However, with the emergence of the Act, which established the Asset Management Corporation of Nigeria[48], bank related insolvency has been further strengthened with a rescue-friendly environment.  And because in most cases, debt may not be paid on fully to every creditor, then creditors will have to stand in competition with one another for a share of the remaining assets. Therefore, in cases of insolvency a statutory priority fixes order among the different types of creditors.

In order of priorities in relation to Insolvency, section 494 of CAMA provides for preferential payment in case of winding up and these include all local rates and charges due from the company at relevant date and having become due within 12 months .They include PAYE tax, deductions, assessed tax, property or income tax from companies, deduction under National Social Insurance Trust Fund Act, salaries of servants, wages of workmen and accrued holiday remuneration just to mention a. few. It was on this basis that Dr Kunle Aina posits that the essence of registration of charges is to give potential lenders and parties dealing with a company the accurate and actual situation of the obligation of the company to its creditors, especially whether the company is already overburdened with loan obligation and credit, mostly as to ranking of creditors in the event that the company becomes insolvent[49].

3.1.2.2 Receivership

Next to liquidation, receivership is the most prevalent insolvency regime in Nigeria. Although there are no actual statistics reflecting the trend, insolvency case law is representative of possible percentages.[50]

CAMA 2004 does not define receiver or manager: it merely states that a receiver includes a manager. [51] Likewise, the Act does not specify the persons who may be appointed as receivers, (including managers), but it prohibits a list of persons from acting in that capacity.[52]Prohibited persons include: infants and persons of unsound mind, [53] bodies corporate, 46 director(s)[54] or auditor(s) of the debtor company, [55] persons who have been convicted of offences involving fraud, corruption or moral turpitude, as well as undischarged bankrupts.[56]Appointments which contradict these stipulations are void; appointees, except infants and those of unsound mind, will be guilty of an offence and liable to a fine.[57]As the Act sets out no (minimum) qualifications for a prospective receiver, any person, apart from the outlined, may be appointed as receiver.

CAMA 2004 provides dual routes to the office of a receiver or receiver/manager. The first is the court-initiated appointment.[58] The court may appoint a receiver on the application of the trustee of a covering debenture trust deed, the debenture holder(s), or an interested person.[59]CAMA 2004 does not define ‘interested persons.’ Regardless, interested persons may pray the court to appoint a receiver if the company defaults in making necessary disbursements on the principal or interest, or where they perceive the security or property of the company to be in jeopardy.52 On receipt of the prayer, the court may appoint a receiver even if the charge has not, in fact, become enforceable; so long as the court is satisfied that certain events have occurred, or are about to occur, that make it unreasonable, in the interests of the debenture holder(s), for the company to continue to hold the right to dispose of the secured assets.53Nonetheless,the court may prefer to appoint an Official Receiver instead, if the company was in liquidation at the time of the application. [60] The second route into receivership is out of court. The debenture holder(s) or trustee(s) may appoint a receiver when the security becomes enforceable.[61]

The receiver, (including a manager), takes possession of the assets subject to the rights of previous encumbrancers.[62]During its pendency, the powers of directors in relation to the assets subject to the receivership will be in abeyance until the receiver is discharged.[63]If the company was in a members’ voluntary liquidation at the time the receiver was appointed, the liquidator’s power over the assets shall also be deferred until the receivership culminates.[64]If the company was in a creditors’ voluntary liquidation or the assets were in the possession of an officer of the court at the time of appointment, the liquidator or officer of the court is not bound to relinquish the assets to the receiver, except the court so orders.[65]

The receiver appointed by the court is deemed to be an officer of the court.[66] As an agent of the court, the receiver is required to act according to the directions of the court.[67]Likewise, the receiver appointed under a debenture, is the agent of the debenture-holder(s).[68]Such a receiver is entitled to act according to the powers and remedies conferred by the debenture.[69]The out-of-court appointee may also apply to the court for directions in relation to any matter arising out of the performance of his functions.[70]In addition to the powers specified in the debenture, certain powers outlined in Schedule 11to CAMA2004 are implied in all receiverships, subject to the terms of the debenture.[71]

The receiver, who is not also manager, is to realize the security for the benefit of the persons on whose behalf he is appointed.[72] To that end, the receiver is entitled to take possession of, and protect the assets subject to the security. He may receive rents and profits from the assets; he may sell the assets or enter into arrangements in respect of them.[73]If he chooses to sell or enter into arrangements, he must choose the most favourable terms available. [74] When executing his duties, the receiver who is not also a manager is however prohibited from carrying on the business of the company unless also appointed manager.[75] In contrast, a receiver/manager is to manage the company’s business with a view to the beneficial realization of the security on behalf of the debenture-holder(s).[76]Though the receiver/manager may give special consideration to the interests of the debenture holder(s), CAMA 2004 stipulates that such consideration must not be to the exclusion of other interests.[77] CAMA 2004 requires the receiver/manager to, in considering the best course of action to take, have regard to other interests in the company’s existence, including those of the employees and members.[78]

3.2 Insolvency Law in The United Kingdom

Insolvency law in the United Kingdom pre-dates company law by several centuries. The first insolvency legislation was passed in 1542, during the reign of Henry VIII. That was an Act dealing with the insolvency of individuals whereas modern company law and its attendant insolvency rules are generally understood to derive from the Companies Act 1862. Recognizable traces of the insolvency provisions of the 1862 Act survive to this day in the Insolvency Act 1986.[79]

The Insolvency Act 1986 defines insolvency as the “inability to pay debts”. There are two tests, as discussed in earlier chapters, in determining the inability of a corporation to pay debts. They are the Cash-Flow Test and the Balance Sheet Test. The cashflow test tests the ability of the company to pay its debts as they fall due. The balance sheet test considers the liabilities of the company, taking into account also, contingent and prospective liabilities, exceeding the assets. These are free standing tests either of which is sufficient to establish insolvency, although, in any given case, both maybe found to be satisfied. [80] the balance sheet test is not about whether liabilities which have not matured due for payment exceed the present value of assets but rather whether those liabilities will exceed the value of the assets when the time for payment comes.[81]

In English insolvency law there are two signifiers which may or may not be applicable to the insolvency laws of other jurisdictions. The first of these is that English law eschews debtor in possession procedures where the debtor company’s own management remain in control of the process; English insolvency proceedings involve the appointment of an authorized insolvency practitioner to act as the office-holder and to administer the proceeding. The second is universalism. English procedures purport to address the assets and liabilities of the debtor worldwide. Foreign creditors have full rights of participation and the governing law of obligations does not affect their ranking.[82]

Outside the 1986 Act (and its associated delegated legislation), important rules of law can be
found in other acts of Parliament and in the rules of common law. There are common law rules affecting the application of provisions of the 1986 Act to which no reference is made in the legislation itself. The so called ‘rule against double proof’ is one important example. the process of distribution in liquidation and administration involves the submission of a claim by the creditor which is called a proof of debt. The rule against double proof precludes the admission of more than one proof in respect of what is, in substance, one liability. The most usual situation in which the rule is encountered arises out of guarantees. Where a debtor’s liability has been guaranteed, the creditor has an ordinary claim against the debtor and the surety will also have an indemnity claim. The function of the rule is to prevent two dividends being paid out of the estate to the detriment of other creditors.[83]

There are three forms of corporate insolvency proceeding in English law. Liquidation (whether compulsory or voluntary) is a terminal proceeding designed to realize the assets of the debtor company and distribute the realized value amongst creditors according to their respective priorities, following which the company is dissolved. Administration and company voluntary arrangements (not mutually exclusive and often used together) are two different forms of proceeding designed to preserve going concerns.

3.2.1 Liquidation

A Company may go into voluntary or compulsory liquidation or, if it is a bank or building society, it may be made subject to a special insolvency regime under the Banking Act 2009 and related secondary legislation.[84] A voluntary liquidation is called a ‘members’ voluntary liquidation’ (MVL) if the company is solvent or a ‘creditors’ voluntary liquidation’ (CVL) if the company is insolvent, both of which are initiated by the company itself passing a resolution at a meeting of members. An MVL is only possible where the directors are able to make a statutory declaration that all the liabilities of the company will be met within the period not exceeding 12 months. In this case, it is the company who appoints the liquidator. If the directors are not able to make the declaration; the company is insolvent, the company will be placed into CVL. In this case, the creditors will have a greater say and are also able to appoint a liquidation committee to supervise certain aspects of the winding up.

A compulsory liquidation is initiated by the presentation of a winding up petition to the court. The petition may be presented by the company, the directors, any creditor, any person liable to contribute to the assets of the company in the event of a winding up.[85] The presentation of a petition can of itself cause irreparable harm to a company and the court will grant an injunction to restrain the presentation of a petition where there is reason to anticipate proceedings being wrongly
commenced. The petitioning creditor must have a petition debt which is not genuinely
disputed and must satisfy the court of the company’s insolvency. The court does not hesitate
to dismiss petitions based on disputed debts or to make costs orders against petitioners
misusing the procedure. [86] In both a voluntary and compulsory liquidation, the liquidator is under a duty to collect in and realize the assets of the company for distribution to the creditors. Once this process has been completed, the company will be dissolved.

3.2.2 Administration.

Administration is a means to an end. In itself, it merely results in a temporary suspension of
creditor remedies while the administrator pursues the statutory purpose of administration.
That purpose is rescuing the company as a going concern, failing which, achieving a better
result for creditors than would be likely in a liquidation, or, failing both of which, realizing
assets in order to make distributions to secured or preferential creditors.[87] The procedure is initiated either by applying to the court for an administration order or by filling papers with the court documenting an out of court appointment of an administrator. Practically, more than one administrator is usually appointed by the company. A court-based application will usually be made by the company’s directors or creditors. An out of court application will be made by the company or its directors or by a secured creditor who is the holder of a “qualifying floating charge”.[88] The company must be insolvent or likely to become so unless the appointment is being made by the holder of a qualifying floating charge in which case the test is whether the security has become enforceable (which, in practice, is likely to mean much the same thing). The purpose of administration must also be reasonably likely to be achieved.

Administration triggers what is referred to in the legislation as a moratorium although it is not
strictly speaking a moratorium because the company’s debts remain payable despite the
suspension of remedies for non-payment. The moratorium prevents all forms of proceedings
against the company and its property, repossession of leased goods, forfeiture of leased
premises and security enforcement without the consent of the administrator or the leave of
the court.

3.2.3 Company Voluntary Arrangements

A company voluntary arrangement is an informal but binding agreement between a company and its unsecured creditors in which the company’s debts are compromised. It may be used to avoid or supplement other insolvency procedures, such as administration or liquidation. The procedure enables a proposal to be put to a company and its creditors (usually by its directors but possibly by a liquidator or administrator) for a composition in satisfaction of its debts or a scheme of arrangements of its affairs. The proposal must nominate an insolvency practitioner, the ‘nominee’, to act in relation to the implementation of the proposal if it is approved. If the proposal is being made by the directors, they must submit it to the nominee who must report to the court on whether there is a reasonable prospect of the arrangement being approved and implemented and meetings should be summoned to consider it.

3.2.4 Cross Border Insolvency in the UK

There are three major statutory cross border insolvency regimes in place in the UK. The European Commission Insolvency Regulation 2000, the Cross-Border Insolvency Regulation 2006 and the provisions relating to cooperation between courts in the Insolvency Act 1986. Common law principles may also apply and all form part of national law.

The European Insolvency Regulation applies in all EU member states except Denmark. Its main purpose is to establish a framework within which the different insolvency regimes of individual member states can interact more effectively. It does this partly by providing for automatic EU-wide recognition of collective insolvency proceedings. these proceedings are opened in a member state where a debtor has its center of main interests (COMI) and are regarded as the main proceedings. they are governed by the insolvency laws of that member state.

The Cross-border Insolvency regulation 2006 implement the UNCITRAL Model Law on Cross Border insolvency in the UK. They provide a basis for judicial cooperation where the European Commission Insolvency Regulation does not apply[89]  they provide for a recognition of foreign insolvency proceedings in Britain and access to British Courts for foreign insolvency practitioners and creditors in cross border insolvencies. The Insolvency Act 1986 contains provisions for cooperation and assistance in relation to corporate insolvencies between the courts of UK jurisdictions (England and Wales, Scotland and Northern Ireland) and between those courts and the courts of certain designated countries.

3.3 Insolvency Law in the USA

There are three basic forms of proceeding, under Chapters 7, 11 and 13, respectively, of the Bankruptcy Code.[90] The first two may be voluntary or involuntary whereas the third one is only voluntary. Some debtors (mostly insurance companies, banking institutions, farms and charitable corporations) are not subject to involuntary bankruptcy. Insolvency, defined as non-payment of debts, nationally or internationally, as they become due as determined under U.S. law, is a condition precedent only to involuntary petitions.

The principal features of the three forms are as follows: (A) Liquidation (Chapter 7). The vast majority of bankruptcy cases arise under Chapter 7. Any debtor “person,” individual, partnership or corporation, other than a railroad, a domestic insurance company and a domestic banking institution, may file, or may be subjected to, a liquidation petition (Sections 101(33) and 109(b) of Title 11). Wage earners are now not excluded. Similarly, any “entity”, including persons, trusts, estates and governmental units, qualifies as a creditor to file or join in the filing of an involuntary petition (S 101(14), 303). (B) Reorganization (Chapter 11). The same active and passive eligibility requirements apply as in liquidation except that railroads are included and brokers are excluded as debtors (S109(d)). (C) Adjustment of Debts (Chapter 13). Only individuals who have regular income and whose debts amount to less than $100,000 (unsecured) and $350,000 (secured) may file a petition under Chapter 13 (S109(e)). It should be pointed out that protection under the various chapters of the Bankruptcy Code is not limited to merchants, business- men or corporate bodies.

3.3.1 United State Cross border insolvency practice.

The United States became the first nation in the world to codify a policy that foregoes a bit of its own sovereign jurisdiction to the order of a foreign court concerning the U.S. assets of a foreign debtor’s bankrupt estate.[91]

The United States universalism exists on the other side of the cross-border insolvency spectrum.[92] Universalism states that Court A—and any other courts dealing with the company’s assets within its jurisdiction—should transfer the ability to deal with those assets to Court B where the main proceeding occurs.[93] Court B can then make a unified distribution to creditors regardless of their location. Universalism’s central idea provides the judge of the main proceeding with the ability to make a more equitable allocation of resources as the court has more of the company’s assets at its disposal.

Section 304 of the U.S Bankruptcy Code is considered the first concrete step taken by any nation in the world towards universalism. The section recognized that other nations could have jurisdictions over the distribution of a debtor’s assets located in the United states. Although Section 304 fell under Chapter 11 of the U.S Bankruptcy code, the foreign debtor was not required to be eligible for a bankruptcy proceeding in the United States as long as it was subject to a foreign proceeding.[94] The foreign proceeding must be in the jurisdiction of the foreign debtor’s principal place of business or principal assets.[95]

Section 304 provides for an injunction against any action taken by creditors against the bankrupt’s estate on assets in the United States. It also allowed the turnover of assets to the foreign representative to be distributed under the jurisdiction of the foreign court. A turnover order is the ultimate objective of any foreign representative, and understandably, a foreign representative seeks a turnover quite frequently.[96] In addition to all of these, Section 304 also allowed judges to grant “other appropriate relief”.[97]

United States’ universalism regime adopted the Model Law. Chapter 15 of the Bankruptcy Code adopts the Model Law nearly verbatim. Unlike other statutes, the introductory section of Chapter 15 details the rationale and benefits of adopting the Model Law.[98] These ideas reflect the specific reasons for adopting the universalism regime, including cooperation, legal certainty, fairness, maximizing value of debtor’s assets, and rescuing financially troubled businesses. From an American perspective, the benefits of universalism provide certainty regarding bankruptcy laws to the corporations that conduct business in the country.  Chapter 15 allows a court to grant permission for a trustee to act on behalf of an estate in a foreign jurisdiction.

3.4 UNCITRAL Model Law on Insolvency

The United Nations Commission on International Trade Law (UNCITRAL) adopted a Model Law on Cross- Border Insolvency in 1997. Ordinarily, the model law has no binding force but tries to convince local (national as well as regional) legislators by its quality and the authority of its authorship.[99] The model law is designed in such a way that it can be adopted without greater efforts by any legislator of this world. The global impact of the model law on cross border insolvency has become more visible. Although at the outset, there was not a “big run” on the national enactment of the model law – most countries adopted a wait and see attitude.[100]

The purpose of the Model Law is to assist countries in developing a modern, harmonized, and fair framework for cross-border insolvencies. It attempts to achieve this goal by respecting the differences between national procedural laws and not addressing issues of substantive law. Additionally, the Model Law’s preamble expressly provides that it strives to promote: (1) cooperation between courts and other competent authorities where the debtor has assets, (2) greater certainty for trade and investment, (3) fair and efficient administration, (4) fortification and value maximization of the debtor’s assets, and (5) successful financial reorganization of troubled businesses.[101] The scope of the model law is very broad. Essentially it extends to any foreign proceeding relating to the debtor’s insolvency, where the debtor’s assets and affairs are under the jurisdiction of a foreign court.[102]

The Model Law is drafted on the assumption of the following considerations: first, there is just one main proceeding; second, the recognition of a foreign proceeding does not restrict the right to initiate a domestic proceeding; third, a domestic proceeding can be given local priority against the foreign proceeding, although not necessarily so; whenever there are two or more proceedings pending they shall be coordinated by means of cooperation; fourth, such coordination may encompass support for the foreign administrator, provided that assets are at stake that “belong” to the foreign proceeding’s estate; fifth, creditors are allowed to lodge their claims in any one of the proceedings, but their dividend in one proceeding will be recognized in another one; sixth, the court may turn over local assets for distribution in the main proceeding; and seventh, a surplus in a non-main proceeding shall be handed over to the main proceeding[103]

The Model law approaches the universality principle by allowing several proceedings under the lead of one main proceeding. According to Article 2, this is the proceeding in that state
“where the debtor has the center of its main interests.” The goal of the Model Law, according to Article 1, is to supply assistance for any of these foreign proceedings. Article 6, however, has the general proviso that no court is required to grant such assistance where the action in question would be manifestly contrary to the public policy (ordre public) of this state. [104] like foreign representatives, the Model law also allows foreign creditors access to the local court for the purpose of initiating or taking part in, an insolvency proceeding. It does so under the express principle that the local court should treat foreign creditors equal to creditors of the enacting state.  While the model law requires equal treatment of foreign creditors, it also provides that this requirement need not be extended to priority of claims in insolvency proceedings.

The model law further establishes requirements for the local courts in determining recognition of the foreign proceeding, stating that the local court may grant temporary relief[105] before recognition is determined in appropriate circumstances. The application of a foreign representative shall be based on, for example, “a certified copy of the decision commencing the foreign proceeding
and appointing the foreign representative” whereby a translation of the respective documents may be requested. If these requirements are met, the recognition (exequatur) shall be granted if the domestic court comes to the conclusion that within the meaning of Article 2: (a) the foreign
proceeding is a (main or non-main) insolvency proceeding; and (b) the person applying for recognition is a proper representative.[106]

3.5 Conclusion.

In Conclusion, Insolvency has developed and evolved peculiarly to different states. The Nigerian Insolvency law, though traceable to the British law is contained and embodied in the Company and Allied Matters Act. Similar to the UK Insolvency Act of 1986, it provides for Liquidation, Receivership and Administration as various insolvency practices. The European Union Regulation of Insolvency is also applicable in the United Kingdom. It has similar provisions to the UNCITRAL Model Law on Cross Border insolvency as they are both premised on the principle of Universalism and promote the cooperation of states in cross border insolvency.

 

CHAPTER FOUR- CROSS BORDER INSOLVENCY DISPUTES

Cross border insolvency poses various international challenges owing greatly to the ‘nation centric’ nature of various insolvency laws. Insolvency laws are of this nature mainly due to the economic and political structure of the various countries they are enacted. These factors affect the theories and rules the nations will put in place.  The various challenges have been described in this study as “disputes.” These challenges can be described as challenges under the ambit of private international law. The fundamental issues that arise include determining the proper jurisdiction to open the main proceedings, the appropriate choice of law to govern the proceedings and the means of enforcing the judgements in foreign jurisdictions among others. In subsequent headings, these challenges will be examined

4.1 Jurisdiction and Procedural Dispute

The challenges from jurisdiction arises manly from the application of the two major theories of cross border insolvency; Territorialism and Universalism. Since the assets of various corporation are located in more than one country, the question that arise is how the insolvency proceeding will be commenced and to which jurisdiction it will be subjected. Territoriality is the restrictive approach, as it designates a law that confines its applicability strictly to that physical area governed by the respective jurisdiction.[107]  assets outside the territory which the rules are applied are not affected. Territoriality is dependent on the principle of the supremacy of the sovereignty of a nation. This principle does not only restrict itself to its jurisdiction, it also bars another state’s claim to reach assets that happen to be located within the reach of such state’s territory.[108]

On the other hand, Universalism ignores such territorial restrictions and claims instead worldwide applicability of the law governing the case.  This is not to say the sovereignty of the other states are ignored, rather, this approach respects the sovereignty of the other states by leaving it to their discretion to accept such outreaching claims. As stated in previous chapters, one of the advantages of Universalism is the opportunity it provides for equal sharing of proceeds among creditors and increased proceeds by avoiding unnecessary costs.[109]

In light of the fact that no theory exists only in its pure form, various modifications have been made to the original theories of Territorialism and Universalism.[110]  One of such modification is One-sided Universalism. This is also known as One sided Territorialism. This theory implies that a jurisdiction requests or expects worldwide recognition of its own domestic cross border cases but bars foreign cases with the same claim on its own territory. Another approach is what is termed as “Contractualism”; this allows a corporation to specify in its charter the jurisdiction that will administer its bankruptcy. This approach would give the greatest benefit to multinational corporations, as some corporations would benefit from a single, unified international insolvency proceeding, while others might prefer to have insolvency issues of their corporate subsidiaries administered by the separate individual jurisdictions of incorporations.[111]

One of the major modifications to these theories is the Modified Universalism as practiced in a state like Hong Kong. Modified Universalism allows the state to reap the benefits of both regimes. The states can cooperate with other countries during insolvency proceedings, but courts are not forced to cooperate. Hong Kong also can invoke the provisions that protect the creditors within its borders by utilizing the company’s assets within the territory[112] this modification is very similar to the One-sided Territorialism or One-sided Universalism proposed earlier.

From the foregoing, it is evident that jurisdiction disputes will only arise from the application of Universalism. Territorialism is a restrictive theory and as such the states establish jurisdiction over assets within their borders. It is in application of Universalism that various questions need to be answered. Theoretically, the consequence of the Universality principle is that, ideally, there should be just one proceeding dealing with the debtor’s insolvency, no matter where the assets are located in the world. However, this theoretical approach is faced with practical obstacles arising from the disparities in many areas of law around the world.[113] A possible solution that has emerged is the division of the “Only” proceeding into several proceedings in the foreign jurisdictions. This seems like a turn back into Territorialism but this is different in the sense that there is a ranking of the proceedings and the coordination of them as well as the cooperation of the persons involved. Based on this approach, there is a Main proceeding and other ancillary proceedings.[114]

Over the years, it has proven very difficult to determine the Main proceeding and what amounts to the ancillary proceedings. these difficulties are particularly felt in the context of insolvencies of groups.[115]

4.1.1 Main Proceeding:

In determining the Main proceeding in an insolvency, two options can be explored. These include the Priority principle and the Centre of Main interests’ approach.

Following the priority principle, one could say that the jurisdiction in which to open a main proceeding shall be the court where the first filing of a petition has been lodged. However, such a rule could easily result in randomness when, for example, an obvious branch of the company gets the lead in the insolvency of the whole company or group; moreover, such a rule could easily be misused by creditors or debtors who were free to choose a jurisdiction for the main proceeding that is most favorable for them (forum shopping).[116] Therefore, it appears to be preferable to determine in advance which court has the jurisdiction to open a main proceeding and which court only a subordinated proceeding rather than leaving this decision to chance or strategic behavior.

The Center of Main Interest (COMI) approach is espoused in the provisions of the European Union Insolvency Regulation and the UNCITRAL Model Law on Cross Border Insolvency and it is widely becoming an accepted practice. This approach says that the correct place for opening the main proceeding should be the center of the debtor’s main interest. As a consequence, the jurisdiction to open a main proceeding is with that court where the center is located.[117]

Article 3 of the EU Insolvency regulation in prescribing the center of main interest and how it is to be determined, provides:

“1. The courts of the Member state within the territory of which the center of a debtor’s main interests is situated shall have jurisdiction to open insolvency proceedings. in the case of a company or legal person, the place of the registered office shall be presumed to be the center of its main interests in the absence of proof to the contrary.

  1. where the center of a debtor’s main interests is situated within the territory of a Member State, the Court of another member state shall have jurisdiction to open insolvency proceeding against the debtor only if he possesses an establishment within the territory of that other member state.”

However, even though the European Union Regulation has been in force only since 2002, the experiences of the first years of application of this law have made quite obvious that the term “center of main interests” is far from being sufficiently clear. Despite the additional specification that this center is to be presumed at that place where the legal person or the company has its registered office, uncertainties exist as to whether an affiliate’s center is where its own office is registered (that is, located) or where the parent company (so called “head office functions” or “mind of management”) is registered. This is where the jurisdictional question interacts with the unsolved problem of the treatment of insolvent groups. To find a more precise determination of the competent jurisdiction is certainly one of the most urgent challenges of the present-day international insolvency law.[118]

4.1.2 Ancillary or Non-Main Proceedings:

After the determination of the main proceeding, the next question to be addressed is what countries should have jurisdiction to open ancillary proceedings; or under what condition should a non-main proceeding be opened? Does it suffice if only a few of the debtor’s assets (or even just non-central interests) are located in the jurisdiction or should more than that be required, such as a branch (however this might be defined)? The decision for the one or the other alternative depends on the degree to which a country’s law wants to protect its local insolvency policies. As a matter of fact, certain local creditors, who will be among the beneficiaries of a local proceeding, for various reasons (language, travel efforts, familiarity with local authorities, and so on), will be more comfortable with a domestic proceeding than a foreign one. On this basis, a number of countries establish, as a sufficient reason for opening a domestic proceeding, that the debtor has just a single asset located within this jurisdiction.[119] This approach allows for the fragmenting of coherent trans-border cases and thus destroying the approach of universality principle that strives to have, to the extent possible, one proceeding governed by just one law. Hence, the need to hold that the mere location of an asset should not be enough for the opening of a non-main proceeding.

The EU Insolvency Regulation and the UNCITRAL Model Law proposes the requirement of an “establishment” in the open of a non-main proceeding. “Establishment” is defined in the model law to mean “any place of operations where the debtor carries out a non-transitory economic activity with human means and goods or services”[120] this provision goes further than the initial approach as it presupposes the existence of active business activity in the country

4.1.3 Choice of Law

Another prominent jurisdictional and procedural challenge in cross border insolvency is the choice of applicable law. It is of central importance to distinguish between choice of insolvency law and choice of non-insolvency law. As to a given dispute, both choices may be necessary and it is crucial to see which choice a particular statute or court decision is making. For example, take a particular claim arising in contract and asserted to be entitled to priority in distribution. The law governing the validity of the contract, the amount of damages, and related issues are usually governed by non-insolvency law. Once those questions have been answered and the amount of the claim determined, then insolvency law will determine the proper priority in distribution.[121]

4.2 Recognition and Enforcement Dispute

Recognition is reaching out beyond the borders of the opening jurisdiction, which requires trust of that foreign country’s legal system, such as adherence to the rule of law or the comparability of that insolvency proceeding. There are various forms of recognition, they include No Trust, No Recognition, General Trust etc. the first form mentioned is what obtains in a territorialist state where the state is not open to any form of international corporation. General Trust implies that there is an automatic recognition accordingly. This is the general rule underlying the European Union Regulation on Insolvency.

Between these two major positions, there are common alternatives. This midground is where the modifications of the universality principle come into play. A “No Trust/No Recognition” can be mitigated by offering, for example, an ancillary or parallel proceeding, as described above. Another quite common modification is to make recognition dependent on an explicit decision by a court or agency. The granting of such an “exequatur,” as it is usually called, can be subject to conditions; prominent examples are reciprocity of recognition, the conviction that the foreign proceeding fulfils the domestic functions and requirements of what an insolvency proceeding is; jurisdiction of the foreign court or institution to open the proceeding in question; and / or the compliance of the foreign proceeding with the domestic public policy (ordre public). The consequence of granting an exequatur generally is that the foreign administrator may, all or in part, act in this jurisdiction as he may in his home-jurisdiction or, alternatively, as a domestic counterpart would be allowed to act.[122]

Effects of Recognition.

The major effect of the recognition of a foreign proceeding is in the access and assistance given to the proceeding by the recognizing state. The recognition enables a rapid activation of a moratorium or stay against debtor and creditor activity. This implies that all activities and concerned assets are frozen until the court can learn the facts. This effect is embodied in Article 20 of the UNCITRAL Model law where it states:

  1. Upon recognition of a foreign proceeding that is a foreign main proceeding,
  2. Commencement or continuation of individual actions or individual proceedings concerning the debtor’s assets, rights, obligations or liabilities is stayed; and
  3. Execution against the debtor’s asset is stayed; and
  4. The right to transfer, encumber or otherwise dispose of any assets of the debtor is suspended

As it has been observed, the effects of recognition would differ based on the approach taken. On one side, the foreign administrator has no access to the domestic institutions or proceedings. in this case, everything is handled through the local procedure and authorities, who eventually hand over the collected surplus to the administrator. On another side, the foreign administrator is granted access to the domestic institutions as he is allowed in the opening jurisdiction. This approach presupposes a high degree of compliance with and confidence in the other jurisdiction’s law.[123]

International cooperation has also been a developing concept in recent times. This implies the cooperation between the main actors in a proceeding i.e. the administrators and the judges. Cooperation implies that under these circumstances, the relevant actors communicate with each other and they follow the goal that the debtor’s insolvency case is handled in the best interest of all parties involved.

4.3 Conclusion.

In conclusion, cross border insolvency challenges; which arise from the application of the various theories of insolvency continue to pose a difficulty to academics, as well as practitioners. The major disputes of jurisdiction and recognition are vital to the success of any cross-border insolvency. Various insolvency regimes including the European Union Insolvency regulation and the UNCITRAL Model law on Insolvency have made propositions which in their practicality have also turned out to be not so efficient. The task of finding lasting and efficient solutions is still on going in this regard.

 

CHAPTER FIVE – ARBITRATION AS A TOOL FOR RESOLVING CROSS BORDER INSOLVENCY DISPUTE

Arbitration is a private system of adjudication. Parties who arbitrate have decided to resolve their disputes outside any judicial system.[124] Arbitration as a dispute resolution tool has become a widely used tool especially for the resolution of international commercial disputes. Arbitration has been favored in commercial transactions because of the flexibility and convenience it offers. Cross border insolvency disputes are disputes from international commercial transactions, hence, ordinarily Arbitration should be an applicable dispute resolution tool. This is however not a certainty. This is due to the varying underlying ideologies of Arbitration and Cross border insolvency. While Arbitration favors a private arrangement where the parties to the dispute are autonomous to decide how the proceeding is handled, insolvency on the other hand aligns more with a public arrangement. The court is more concerned with the swift management of the debtor’s assets to satisfy the various claims from every creditor as effective as possible. In this chapter, the application of arbitration to cross border insolvency disputes will be examined in the light of the jurisdiction, enforcement and technical advantage which arbitration provides as a dispute resolution tool.

5.1 Consent and Jurisdiction

One of the very essential features of arbitration is the idea of parties’ consent. Arbitration derives its validity from the consensus of the parties to the dispute to subject themselves to the authority of the proceedings. in other words, the Arbitrators in a proceeding derive their jurisdiction; the authority and competence to decide on the matter, from the consensus of the parties to the proceedings.[125] In highlighting the importance of consensus to arbitration, Emilia Onyema states in her book[126] that “the arbitration agreement is the basis of any consensual arbitration, so that there cannot be an arbitral reference in the absence of a valid and enforceable arbitration agreement.” The consensus of the parties is usually issued in form of an Arbitration Clause. This is a statement or clause, which may be part of a main contract or in a separate document which highlights the decision of the parties involved to submit their commercial disputes to an arbitral panel. The Arbitration agreement is defined in the UNCITRAL Model law as:

“an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement”[127]

While it is the popular practice that parties agree to arbitration during the formation the contract, before the disputes arise, they can still enter into an agreement to arbitrate after a dispute has arisen. This is possible with the means of a “Submission Agreement.”

Cross border insolvency does not make the derivation of consent for international commercial arbitration an easy attempt. This is mainly due to the inherent nature of different insolvency regimes around the world. Nations might be reluctant to subject the assets within their borders to arbitration as against the natural positions of the courts. This, coupled with the fact that cross border insolvency involves creditors in many nations around the world makes the consent to arbitration a herculean task. The application of arbitration in this regard will require the need to determine the “parties” to consent to the arbitration agreement and the process of ensuring the consent.

Judge Allan Gropper wrote extensively in his paper[128] addressing the idea of consent to insolvency arbitration. He suggested the use of arbitration in two contexts – when there is a dispute between the estate representatives of formerly affiliated entities and in connection with a debt restructuring. In the first instance involving the affiliates of the same entity, only the estate administrators would have to consent to the arbitration.[129] In the United States, the approval of the court would be needed for the agreement to arbitrate. The estate administrators can only agree to arbitrate after the appointment of the Administrator.

Acquiring consent for the second option of debt restructuring according to Allan Gropper poses more complex issues. To make this arbitration more manageable, the consenting parties will be limited to the “debtor and its principal financial creditors, its lenders.”[130] It is understandable that in a cross-border insolvency there would be a lot of creditors, hence the need to limit the consent to just the principal financial creditors. The principal financial creditors, according to him, are those few creditors with claims vastly greater than those of all other creditors combined. They are ordinarily the only parties other than the debtor whose consent to a binding arbitration would be required. However, if this is the case, all other creditors would have to be paid in full or left unimpaired by the arbitral proceeding and any restructuring that followed.[131]

While the issue of consent as it relates to the jurisdiction in arbitration has been settled, another pivotal aspect to the derivation of jurisdiction is the arbitrability of cross border insolvency disputes.

5.1.1 Arbitrability of cross border insolvency disputes.

Arbitrability goes to the root and validity of any arbitration process. An arbitration agreement entered into to resolve a non-arbitrable dispute puts the validity of such agreement in doubt, and any award granted from such arbitration would be unenforceable.[132] Arbitrability essentially concerns:

“what types of issues can and cannot be submitted to arbitration and whether specific classes of disputes are exempt from arbitration proceedings and belong exclusively to the domain of state courts”[133]

In relation to insolvency matters, there is no clear-cut approach to determining matters which are arbitrable or non-arbitrable. This is primarily due to the various ideologies underlying various nations’ approach to insolvency matters and the general idea that insolvency is a matter of public policy. Kovacs[134] was of the opinion that insolvency matters can be divided into “Core” and “non-core” insolvency matters. According to him, core insolvency matters are almost universally considered not arbitrable. This is due to the fact that “core insolvency matters are not “disputes” in themselves but rather proceedings for the orderly liquidation or reorganization of the debtor’s assets.[135] Under English law, there is no specific legislation defining which insolvency matters are non-arbitrable.[136] However, the court has held that an arbitral tribunal cannot wind up a company or make orders affecting third parties.[137]

The position in the United States is as described by Kovacs. Arbitrability of insolvency matters is determined on the basis of “core” and “no core” insolvency matters. [138] core bankruptcy proceedings are considered not arbitrable. Core bankruptcy matters are not defined in the Bankruptcy Code; hence it has been defined by the court as “involving a right created by federal bankruptcy law and which would only arise in bankruptcy”[139] it must however be noted that “distinguishing between core and non-core proceedings is not a mechanical exercise.”[140] Nonetheless, United States courts have found that many matters in the context of bankruptcy proceedings are arbitrable, particularly those which relate to international arbitrations due to the strong policy of the FAA favoring arbitration in international cases.[141]

While commenting on the arbitrability of insolvency issues, Edna Sussman and Jennifer Gorskie[142] also conceded to the fact that arbitration is not a “viable alternative for every type of cross border insolvency dispute.” They suggested some instances where arbitration will be helpful in resolving the disputes and they include: Claim allowance disputes, Intercompany/ Affiliate disputes, Allocation of Enterprise value, Debt restructuring of multinational enterprises, disputes about the violations of bankruptcy orders, disputes involving complex financial instruments, among others.

Claim allowance disputes are disputes between the debtor and a claimant who asserts a right to share in the pro rata distribution of the debtor’s assets. Intercompany or affiliates disputes is similar to what Judge Allan Gropper described in his paper. These are disputes among debtor affiliates that are subject to insolvency proceedings in different nations. Also taking inspiration from Allan Gropper, arbitration can be used for debt restructuring where the COMI nation does not have a robust or developed reorganization law. Allocation would be really useful in the allocation of the enterprise value of the sold assets of a multinational to avoid the risk of double recovery. Arbitration would also be useful in disputes concerning the violation of bankruptcy offers in favor of the debtor. Arbitration would be particularly helpful in the resolution of disputes involving complex financial instruments because the high probability of the arbitrators to be experts in the field. in addition to the various options mentioned above, Samuel Buford[143] further opines that arbitration could be effective in resolving insolvency disputes which is beyond the jurisdiction of national courts or where such jurisdiction requires supplementation.

5.2 Technical Expertise Advantage

Arbitration is popular for the autonomy it grants to the parties to determine the terms of their arbitration. Parties are at liberty to determine the applicable law, the seat of arbitration and their arbitrators among other things. A major factor in selecting arbitrators is the expertise of such arbitrator in the subject matter at hand. In arbitration proceedings, it is the duty of the lawyer to select the arbitrators for his client, especially where it is a three-man arbitral tribunal. This is particularly an important duty as the selection of the arbitrators is significant to the success of the proceeding. Selecting an arbitrator with the right skill set, experience and knowledge of the subject matter will have a significant impact on the success of the proceeding.[144] The advantage of selecting an arbitrator with expertise in that subject matter is the fact that it eliminates the time and effort that would be necessary, if parties were litigating before a randomly selected judge, to educate the judge about the particular industry or the matter at issue.[145]

In discussing the arbitrability of cross border insolvency disputes, it was discovered that arbitration could provide a great assistance in the resolution of claims allowance disputes, debt restructuring of multinationals, the allocation of enterprise value and the determination of complex financial instruments. One thing to be observed from this class of disputes is the fact that they are inherently technical disputes which would require expertise in the various subject matter for their proceedings to be successful. In making the case for these points, Edna Sussman and Jennifer Gorsckie[146] examined the insolvencies of Nortel Telecommunication company and Lehman Brothers.

Nortel Networks was a Canadian company and one of the biggest makers of telecommunication equipment in the world with 93000 employees and a market capitalization of $250 billion at the height of the 1990s technology bubble[147] After an accounting scandal and a series of management missteps, the company filed for bankruptcy in January 2009.[148] At the time of the insolvency, Nortel had affiliate operation in 140 jurisdictions. Vanja Ginic[149] describes the proceedings as follows:

“Nortel initiated creditor protection proceedings in multiple jurisdictions including Canada, the US and the UK in an attempt to restructure the company. Nortel subsidiaries in Canada and the US submitted a protocol (the “Protocol”) to streamline proceedings between Canadian and US courts. The Protocol affirmed that Ontario and Delaware courts would have respective jurisdiction over Canadian and US subsidiaries but that motions could be filed and heard in either court or simultaneously by both courts.

On June 19, 2009, Nortel announced that it would abandon restructuring efforts and instead focus on liquidating its assets. Nortel recognized that selling its subsidiaries as a going concern and its patents as a bundle would generate more revenue, but that this would require cooperation among its affiliates. To achieve this goal, Nortel affiliates from Canada (“Canadian Debtors”), the US (“US Debtors”) and the UK (“EMEA Debtors), (collectively, “the Parties”), entered into an Interim Funding and Settlement Agreement (“IFSA”) in which the Parties agreed to cooperate in the sale of substantial assets, the proceeds of which would be held in escrow. The IFSA also provided that escrow accounts would not be distributed until the Parties could agree on an allocation, or in absence of agreement until the dispute resolvers could allocate the funds. The sale of Nortel subsidiaries generated US $2.8 billion while the residual intellectual property was sold for US $4.5 billion,44 for total proceeds of $ 7.3 billion held in escrow.

Despite the successful sales, the Parties could not agree on how to allocate the proceeds. After two years of failed negotiation and mediation, the US and Canadian Debtors brought a motion before the US and Canadian courts seeking approval for an Allocation Protocol that would give these courts jurisdiction to allocate the funds between the Parties. The US and Canadian Debtors relied on the IFSA and subsequent escrow agreements to argue that the Parties consented to the exclusive jurisdiction of the US and Canadian courts. Conversely, the EMEA Debtors argued that the courts lacked jurisdiction because the Parties validly agreed to arbitrate allocation related disputes in the IFSA.  Ultimately, both the US and Canadian courts assumed jurisdiction, finding that the Parties failed to conclude a valid arbitration agreement in the IFSA.

The Allocation Proceeding was unique because it was the first time that a full trial was conducted simultaneously in two international courts. The trial was governed by the legal practices and civil procedure rules applicable in each country respectively. Special technology allowed the judges to conduct a live trial simultaneously in each jurisdiction. Counsel in the two jurisdictions would take turns making submissions to their courts and would otherwise observe the ongoing proceeding in the other jurisdiction.  They also questioned witnesses over live closed-circuit feeds.  Both judges took note of evidence produced in each courtroom.  They are allowed, under the Protocol, to discuss the case but they must render independent decisions on how the proceeds will be allocated.”[150]

It can be gleaned from the foregoing how complex the claim allowance can be. In fact, the proceeds of the Nortel sale remained in escrow till 2017, which is almost nine years after the initial proceedings commenced costing over 2.5 billion US dollars in legal costs. Arbitration would have provided an easier and faster resolution while reducing the legal fees by a substantial amount. Selecting arbitrators who are Cross border insolvency experts would have ensured the speedy and efficient resolution of the claim’s allocation disputes.

The insolvency of Lehman Brothers resulted in the largest cross border insolvency in history, with 75 distinct insolvency proceedings brought in over 40 countries. The Lehman Brothers insolvency further goes to show the importance of arbitration to cross border insolvency. During the course of the proceedings, courts in England and the United States had to address issues bothering on complex financial instruments. United States Bankruptcy Court for the Southern District of New York was asked to decide an issue arising under a swap transaction governed by ISDA Master Agreement between Metavante Corporation and Lehman Brothers Special Financing, Inc. this same matter came up for address in the Court of Appeal of England and Wales and it is interesting to note that both the US Courts and the English courts arrived at different conclusions on the effect of the financial instrument. Similarly, conflicting decisions were reached by the US and English courts on the issue of payment priority for swap counterparties upon an event of default.[151]

Reiterating the position earlier made, the selection of finance experts, economist and investment bankers as arbitrators for an arbitration to resolve this cross-border insolvency dispute would have avoided the situation where the courts were giving conflicting positions of the law and the arbitrators would address the issues with expertise, to give a more informed decision.

5.3. Universal Enforceability of Awards

The aim of every litigation or arbitration is to get a binding decision the subject matter involved. In Arbitration, this binding decision is called an Award. An enforceable Award is the ultimate end of any arbitration. International arbitration is different from national arbitration as a result of the universality of the enforcement of awards. This is particularly made possible through the instrument of The Convention on Recognition and Enforcement of Foreign Awards,[152] which is popularly referred to as the New York Convention. This convention requires courts of the more than 145 states parties to enforce both arbitration and arbitration awards in their jurisdictions.[153] The New York provides in Article 3 that:

“Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which the Convention applies than are imposed on the recognition or enforcement of domestic awards.”

In differentiating between “Recognition” and “Enforcement”, Margaret Moses opines that Recognition implies the court acknowledges that the award is binding and thereby gives it a preclusive effect with respect to the matters determined in the award. Enforcement on the other hand means different things in different jurisdictions. It could mean, the process by which an international arbitration award is reduced to a judgement. It could also mean the use of available means in the enforcing jurisdiction to collect the amount owed or carry out the mandate provided in the award.[154] It is the position here that arbitration agreements and awards for cross border insolvency should be enforceable.

Commenting on the enforceability of arbitration agreements and awards for cross border insolvencies, Judge Allan Gropper[155] stated that no authority has found this type of arbitration proposed as incapable of being performed. Considering Article V(2)(b) of the New York Convention, which provides for permission of a signatory state to deny recognition or enforcement of arbitral award if it would be contrary to the public policy of that country. This exception is only applicable where the most basic notions of morality and justice are at issue. It must be noted that insolvency is a matter of public policy, however an agreement to arbitrate should not be denied enforcement on the basis that it violates that countries’ fundamental notions of morality and justice.”[156] He further states:

“Article V (2) of the New York Convention also provides, “Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: (a) the subject matter of the difference is not capable of settlement by arbitration under the law of that country.” No legal authority has been found to the effect that insolvency disputes are not arbitrable because of the nature of the subject matter. The subject definitely involves an economic interest, which is a core requirement for all international arbitration”[157]

Circuit court decisions have held that an arbitration clause will be enforced in a bankruptcy case even where the issue is considered “core”, so long as the arbitration will not “seriously jeopardies the objectives of the bankruptcy code.”[158] In Europe, insolvency cases have also permitted parallel arbitration and insolvency proceedings. French courts generally permit international arbitration to proceed even when the subject matter is under the jurisdiction of the French insolvency courts, so long as the arbitration does not affect the rights of third parties.[159] Taking a look at the various issues which the learned writers have agreed to be arbitrable, it is without a doubt that such arbitrations will be enforceable. This is because these issues are more commercially inclined than they are bordering on the public policy of insolvency. For instance, the arbitration to determine and navigate complex financial instruments, or an arbitration to determine the enterprise value of the debtor’s asset would be enforceable under the provisions of the New York Convention.

Looking further into the provisions of Article V of the New York Convention[160] which provides mainly for the grounds for the refusal of enforcement for an award, it provides:

“1. Recognition and enforcement of the award may be refused at the request of the party against whom it is invoked only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:

 (a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to Which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or

(b)The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or

(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration maybe recognized and enforced; or

 (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or

 (e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made”

Examining the provision above, cross border insolvency arbitration will be enforceable when it has been duly consented to by the parties, who would by virtue of being a part of the insolvency proceeding, capable of entering into a valid arbitration agreement. In resolving the cross-border insolvency dispute, the parties to the arbitration would be duly notified of the procedure, duly select their arbitrator and given the chance to present their case. Also, considering the fact that the arbitration agreement will be properly negotiated, the chances of having disputes which will be out of the agreement would be slim and as such it would not affect the validity of the arbitration. In light of this provision, Hon. Samuel Bufford was of the opinion that these matters are in the capacity and jurisdiction of the insolvency court to ensure they are complied with to ensure the award is eventually enforceable.[161] For instance, he suggested that the insolvency courts could determine the capacity of the participants, the sufficiency of notice to the parties to the arbitration, whether the dispute falls under the terms of the arbitration agreement, and the finality of the arbitration award.

 

CHAPTER SIX – PRACTICAL PROCEDURAL ISSUES WITH ARBITRATION OF INSOLVENCY DISPUTE

The application of arbitration to international insolvency cases have seemed very enticing and glamorous. International arbitration is poised to resolve many of the difficulties inherent in international insolvency proceedings including the jurisdiction difficulties, arbitrability and international enforcement of judgments and awards among others. However, the application of arbitration to this subject matter poses its own challenges itself. Considering the different nature of international arbitration and international insolvency, some procedural issues arise in the combination of this concept. These issues or limitations are naturally inherent in international arbitration, however in this chapter, the relationship of these limitations to international insolvency will be examined and where practical, possible solutions will be recommended. Subsequently, these limitations will be examined with a special focus on Cost, Conflict of Interest and Arbitral clause and drafting.

6.1 Costs

Just as in international litigation and other forms of dispute resolution, there are also expenses and costs to be covered in arbitration.  The UNCITRAL Model Law on International Commercial Arbitration does not define what amounts to “Cost of Arbitration”,[162] hence recourse is made to institutional arbitration laws and national laws to determine what amounts to the costs of arbitration. The recourse to different sources for the definition of costs automatically implies that there would be slight variations to the accepted component of Cost of Arbitration. Costs is defined in UNCITRAL Arbitration Rules 2010 to include:

  1. “The fees of the arbitral tribunal to be stated separately as to each arbitrator and to be fixed by the tribunal itself in accordance with article 41;
  2. The reasonable travel and other expenses incurred by the arbitrators;
  3. The reasonable costs of expert advice and of other assistance required by the arbitral tribunal;
  4. The reasonable travel and other expenses of witnesses to the extent such expenses are approved by the arbitral tribunal;
  5. The legal and other costs incurred by the parties in relation to the arbitration to the extent that the arbitral tribunal determines that the amount of such costs is reasonable;
  6. Any fees and expenses of the appointing authority as well as the fees and expenses of the Secretary-General of the PCA.”[163]

Costs according to the Nigerian arbitration law is defined similarly to the one above, it states:

“1. The arbitral tribunal shall fix costs of arbitration in its award and the term “cost” includes only-

(a) the fees of the arbitral tribunal to be stated separately as to each arbitrator and to be fixed by the tribunal itself;

(b) the travel and other expenses incurred by the arbitrators;

(c) the cost of expert advice and of other assistance required by the arbitral tribunal;

(d) the travel and other expenses of witnesses to the extent that such expenses are approved by the arbitral tribunal;

(e) the cost for legal representation and assistance of the successful party if such cost were claimed during the arbitral proceedings, and only to the extent that the arbitral tribunal determines that the amount of such cost is reasonable.

  1. The fees of the arbitral tribunal shall be reasonable in amount taken account the amount in dispute, the complexity of the subject-matter, the time spent by the arbitrators and any other relevant circumstances of the case.
  2. If an appointing authority has been agreed upon by the parties or designated by the Secretary General of the Permanent Court of Arbitration at The Hague, and if that authority has issued a schedule of fees for arbitrators in international cases which it administers, the arbitral tribunal in fixing his fees shall take that schedule of fees into account to the extent that it considers appropriate in the circumstances of the case.
  3. If such appointing authority has not issued a schedule of fees for arbitrators in international cases, any party may at any time request the appointing authority to furnish a statement setting forth the basis for establishing fees which is customarily followed in international cases in which the authority appoints arbitrators; and if the appointing authority consents to provide such a statement, the arbitral tribunal in fixing its fees shall take such information into account to the extent that it considers appropriate in the circumstances of the case.
  4. In cases referred to in subsection (3) and (4) of this section when a party so requests and the appointing authority consents to perform the function, the arbitral tribunal shall fix its fees only after consultation with the appointing authority, which may make any comment it deems appropriate to the arbitral tribunal concerning the fees.”[164]

From the definitions provided by the institution and national legislation, one thing that is common is the fact that Costs of Arbitration includes Party costs, which accounts for lawyers’ fees and expenses, expenses related to witness and expert evidence, and costs incurred by other parties for the arbitration;[165] and Arbitrators’ costs, which accounts for Arbitrators’ fees and case administration cost. Arbitration, ordinarily is preferable because of its tendencies to save time and cost. However, according to recent developments, Arbitration has been growing exponentially expensive.[166] In determining how the costs listed in the definitions above is covered and allocated, there are two models and they are the American rule and the English rule.[167] The American rule provides that parties cover their own “Parties’ cost” irrespective of the outcome of the arbitration and they share the “Arbitrators’ and institutional” costs. This is based on the notion that justice is to be enhanced by removing the barriers to it. The English rule on the other hand provides that the successful party or winner in the arbitration, recovers reasonable costs from the other party, who also pays the arbitrators and institutional costs. This is based on the “philosophy of indemnity – if I was right to take this action, then I should not be out of pocket for doing so.”[168]

One of the major incentives for choosing arbitration for the resolution of insolvency disputes is the potential it has to be fast and cost efficient. However, the recent trend of the increasingly expensive cost of arbitration poses a great threat to this opportunity. This is owing to the fact that it contradicts a major underlying principle of cross border insolvency. Cross border insolvency aims to appropriate the assets of the debtors in the best possible way, catering for the creditors accordingly, while incurring the least possible expense. This is in a bid to ensure the maximum allowance of the assets to the creditors. This is particularly one of the arguments made by legal writers for the need to have subject the Nortel Insolvency cited in earlier chapters to Arbitration. At the end of that insolvency proceeding, over 2 Billion US dollars has been incurred in legal representation fees, out of the total estate of a little over 7 Billion dollars to be administered to the creditors.

What accounted for the high cost of legal representation in the Nortel arbitration was the duration of the whole insolvency proceeding. The start of the proceeding in January 2009, to the period where the court approved the allocation of the proceeds to the creditors in 2017 was a little short of nine years. With the recent trend in international arbitration, where lawyers employ tactics to elongate the proceeding, arbitration poses the challenge of being very expensive in the long run. In addressing the issue of the expensive arbitration costs, the US Supreme Court held in Green Tree Fin. Corp – Alabama v. Randolph, that though the arbitration agreement included in a consumer credit agreement was indeed valid and enforceable, “the existence of a large arbitration costs could preclude a litigant such as Randolph from effectively vindicating her federal statutory rights in the arbitral forum.”[169] Furthermore, the German Federal Supreme Court also held that an arbitration agreement may be incapable of being performed, if the claimant lacks the financial means to initiate arbitration proceedings specifically as regards the payment of the advance on costs required under most arbitration law and rules…[170]

Another major challenge of arbitration to international insolvency is the determination of the allocation model to employ. In other words, who bears the cost of arbitration in an international insolvency arbitration.  It would be natural to think about the parties who have consented to the arbitration agreement, but it is not as straightforward as it seems. applying the American model to cross border insolvency seems lofty but the success is not particularly feasible. The American model requires parties to cover their costs and share the arbitrators and institutional costs. Parties costs usually amount to about 80% of the total costs. In light of the exponential increase in arbitration costs, getting creditors to consent to arbitration under this model would be very difficult. Creditors are all about getting as much as they can get in the administration of the debtors’ assets to offset their investment. With the expensive cost of arbitration, the creditors stand a chance to gain nothing when they are having to pay for the arbitration which amounts to a cost more than what they would recover from the insolvency.  This reality would make the creditors averse to consenting to an arbitration under this model.

Applying the English model, which is based on notion of “cost follows the event”, to international insolvency is not without its difficulties either. Under this model, the “loser” bears most of the costs. The possibility of the Creditor having to cover most of the costs of arbitration including their legal costs, the arbitrators cost and the cost of the other party would not make them consent to this model easily. The logic for this is similar to the one described in the application of the American model above. The possibility of the Debtor covering the major cost of the arbitration also negates the initial aim of the insolvency arbitration to reduce cost and maximize the assets to the benefits of the creditors.

In light of the foregoing, it might seem that the arbitration of international insolvency is impossible based on the cost that follows it, it must however be noted that there is no dispute resolution mechanism without its inherent costs. Litigation has been notorious for the high costs involved in it. Arbitration on the other hand can be managed to ensure its cost effectiveness. One way this can achieved is in the negotiation of the arbitration agreement and the willingness of the insolvency courts to facilitate the process. To ensure that this insolvency disputes is taken to arbitration, the debtor should be willing to make a few concessions and compromise which would be beneficial to all parties at the end. One of such concession is the agreement to cover more the cost of insolvency arbitration. While negotiating the arbitration agreement, parties are encouraged to negotiate the funding of the arbitration. To ensure that the arbitration does not become too expensive, the parties can set timelines and benchmarks for the costs of the arbitration. the concession mentioned earlier does not mean the debtor will automatically cover the cost of arbitration in all of the instances, but where possible the debtors’ willingness to cover some cost might make the other party more willing to participate in the arbitration. also, the ratio of the cost to be covered will also vary according to the dispute to be resolved in the arbitration and all of these should be accounted for in the arbitration agreement. To ensure that the arbitration agreement is followed, the parties can approach the insolvency court for the sanctioning of the agreement such that it becomes enforceable in court in case of any breach.

  1. 2 Conflict of Interests

Conflict of interest in international arbitration usually implies the non-independence of the arbitrators. In this case, however, the conflict of interest that will be examined is in relation to the conflict of ideologies surrounding international arbitration and international insolvency. This conflict of ideologies has been discussed in previous chapters, hence, this section would not go elaborately into them.

The first ground for conflict is in the idea of speed. Ordinarily, international arbitration is seen as a faster alternative to litigation,[171] however, in recent times, international arbitration has been dragged along by lawyers through some of the procedures. The selection of arbitrators, the sometimes-unnecessary challenge of arbitrators, pretrial conferences among others have the capacity to elongate the proceeding longer than expected. Insolvency, especially international insolvency thrives on speed. The faster the insolvency disputes are solved, the better it is for the parties involved. This urgency is seen in the “First day orders” granted under a typical US Chapter 11 insolvency case. These are usually issued within a few days of the commencement of the case without which a restructuring might be impossible.[172] To reconcile this, it is suggested that the court work closely with the parties to the arbitration to ensure that the arbitration is completed within a timeframe. The court could grant an order requiring the parties to complete the arbitration within a specified period and after which the court could take other measures to ensure the swift dissipation of the insolvency proceeding.

Another ground for conflict is the intricate nature of arbitration to be a private affair which is in contradiction with the nature of insolvency as a public affair. One of the reasons corporations opt for arbitration is the privacy and confidentiality it offers.[173] Arbitration happens between parties who choose a private individual to decide their matter, outside the courts. Insolvency ordinarily happens with the instrument of the courts which in itself is a public institution. One of the importance of making insolvency a public matter before the court is the need to ensure consistency and predictability[174] by making caselaw. The insolvency courts resolve ambiguities in the interpretation of a statute which promotes consistency in its interpretation.[175] Arbitration awards are not public and not binding to create case law and where the awards are published, they are rarely treated as persuasive authority. In light of this, it is suggested that the arbitration be awards be submitted to the court for recognition as judgements. This will ensure that they are enforceable within that jurisdiction, and will also accord them some persuasive effect for further reference.

As it would have been observed from the preceding paragraphs, to ensure the success of international arbitration to international insolvency, the importance of the insolvency courts cannot be understated. The courts must be ready and willing to make orders that will facilitate the arbitration and also give the required recognition to the arbitration awards.

6.3 Arbitration Clause and Drafting.

As it has been discussed in the previous chapter, the arbitration clause is important to the application of arbitration as a dispute resolution tool. The arbitration agreement is the means by which the parties create their own private system of justice[176] where the scope of the arbitrators’ powers, the applicable laws, the arbitral institution etc. determined. It is the common practice that the parties decide to arbitrate even before the disputes arise, as the arbitration agreement is usually contained in the parties’ commercial contract. However, it also happens that the parties do not envisage a dispute, or even where they did, they did not initially agree to arbitrate. When they subsequently decide to take their disputes to arbitration, they will be able to achieve with the help of a submission agreement. Submission agreement is an agreement made after the disputes have arisen, containing the consent of the parties to subject their disputes to arbitration.

The New York Convention gives validity to every arbitration agreement. In its Article II, it provides:

  • Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a define legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration
  • The term “agreement in writing” shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams
  • The court of a Contracting State, when seized of an action in a matte in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed

From the provision above, contracting states to the New York Convention are obliged to honor and enforce every valid arbitration agreement. In addition to that, the agreement should be in writing. In defining the scope of the “writing” it further provides that the clause could be contained in an arbitration agreement or in emails or telegrams exchanged between the parties. This implies that for every international insolvency arbitration to be valid, it must comply with this requirement. It must be in writing either in a clause in an arbitration agreement or in telegrams exchanged between the parties. The consideration of letters and telegrams is particularly helpful for international arbitration because it makes consenting to the arbitration agreement really easy. This is due to the fact that the parties are resided in various parts of the world, sending telegrams around to themselves, consenting to the arbitration agreement is very convenient.

The drafting of the arbitration clause is a very essential constituent of the success of the arbitration. a well drafted arbitration clause has a significant impact on how well the parties resolve the disputes; efficiently, fairly and successfully.[177] Proper attention must be paid to the drafting of the clauses to avoid a “pathological clause”- a defective clause which may be ambiguous, equivocal or contain mistaken information. In cross border insolvency arbitration, where the intricacies are not certain yet, a lot of care is to be taken in the drafting of the arbitration clause.

The arbitration clause differs according to the type of arbitration preferred by the parties. Where the parties prefer institutional arbitration, the content of the clause would be different compared to when they prefer Ad hoc arbitration. in fact, in the case of institutional arbitration, some institutions provide sample arbitration clauses which the parties can follow to draft their clause.

One of the important contents of the arbitration clause is the choice of arbitrators. Under this, the parties would determine if they are opting for a single arbitrator or a three arbitrators’ tribunal. This choice can be affected mainly by the complexity of the dispute involved. Complex, and high value disputes like international insolvency disputes are suitable for a three-man tribunal. This will help the issues be better appreciated and properly examined. In addition to this, parties might want to specify the qualifications of the arbitrators. Parties might require finance and insolvency experts to handle their cross-border insolvency arbitration.

Other requirements for the arbitration clause include the Seat of Arbitration, Substantive law, and Language of the Arbitration. the seat of the arbitration determines where the arbitration will be held and what procedural laws will apply to the arbitration. the laws of the seat of arbitration usually binds the arbitration. hence parties to an international insolvency arbitration are advised to choose an arbitration friendly seat of arbitration with developed and advanced international insolvency and international arbitration laws. Parties to the international insolvency arbitration can also spell out the substantive laws they would prefer to govern their commercial disputes. The language of arbitration should a language which suits the parties. And where the parties are not speaking a uniform language, provisions should be made for interpreters.

In addition to the content of the arbitration clauses discussed above, other pertinent issues to be negotiated and included include the Costs of Arbitration, technical expertise. As discussed above cost of arbitration is an integral part of international arbitration. hence, in international insolvency arbitration, it is best if the costs of arbitration are negotiated in the preliminary stage and concluded in the arbitration clause. Also considering the potential of cross-border insolvency to get quite technical involving various financial instruments, parties may decide to involve the use of experts in resolving the disputes and this should be included in the arbitration clause.

6.4 Conclusion.

Cross border insolvency brings a peculiarity to the procedural issues in international arbitration. these issues which include costs of arbitration, conflicting ideologies of the two concepts and the arbitration clause and its drafting need to be careful, addressed, negotiated and consented to. The payment of the costs of arbitration must properly outlined, the ideologies of both arbitration and insolvency must be properly balanced to ensure the process is successful and the arbitration clause must be adequately drafted to contain the essentials to the success of the arbitration.

 

CHAPTER SEVEN – SUMMARY, CONCLUSION AND RECOMMENDATIONS

This study was motivated by largely by the insolvency of multinational corporations like the Lehman Brothers; the 4th largest investment bank in the United States of America at that time, which crashed at the height of the financial crisis in the 2008. The crash of that particular company raised a lot of issues, not just in America but all around the world. This is primarily due to the fact that its business was globalized as a result of the development in international trade and investment. the insolvency of multinationals or cross border insolvency creates a lot of uncertainty for the debtors and more uncertainty for the creditors who have claims over the assets of the company. This problem is not particular to Lehman Brothers alone, there are many other insolvencies of multinational corporations worldwide including Nortel Telecommunication communication which was also examined in this study. This uncertainty is largely due to the absence of a universally accepted uniform cross border insolvency dispute resolution regime. This study sought to examine the existing regime while proposing the use of Arbitration as an alternative to the existing regimes.

7.1 Summary

This study has revealed that though insolvency is a universal concept, there is still no widely accepted definition of insolvency. Insolvency has been said to mean when an organization can no longer meets its financial obligations with its lenders as debts become due.  Insolvency has been divided into two kinds; Cash Flow Insolvency and Balance Sheet Insolvency.  Balance Sheet Insolvency occurs when the book value of a firm’s assets is less than its liabilities. Cash flow insolvency occurs when its proved satisfactorily that the company is unable to pay its debt as they fall due. Cross border insolvency occurs whenever a debtor’s assets or liabilities are located in more than one state, or if the debtor is subject to the jurisdiction of courts from two or more states.

There are two major theories in cross border insolvency; Territorialism and Universalism. Territorialism is the idea that insolvency and its rules is nation centric, and the assets of an insolvent company are treated locally according to the rules of the country. Universalism on the other hand seeks to achieve cooperation with all the countries involved in the international insolvency.

Arbitration is a private dispute resolution tool where the parties agree to subject their dispute to the authority of a neutral third party who is called the Arbitrator, who renders a binding decision called an Award. Arbitration is divided into domestic and international arbitration. international arbitration is conducted in line with international law and conventions including the New York Convention, 1958, the UNCITRAL Model Law on International Commercial Arbitration among others.

Delving into the history and development of Insolvency laws, the Nigerian insolvency regime is governed primarily by the Company and Allied Matters Act, 2004. The history of the Nigerian insolvency law is the history of Nigerian company law as there has not been different insolvency laws in Nigeria. The Nigerian company law traces its history directly to the British company law. CAMA provides for winding up, Administration and Receivership among the options available to an insolvent company in Nigeria. Insolvency law in the United Kingdom is governed primarily by the Insolvency Act, 1986, which provides for the Balance sheet test and the Cash Flow test for the determination of insolvency. In the UK, insolvency law pre-dated the Company law. The first insolvency law was enacted as early as 1542.  The insolvency Act also provides for three form of corporate insolvency proceedings including Liquidation, Administration and Company Voluntary Arrangements. Insolvency in the United States of America is governed by Chapters 7, 11 and 13 of the US Bankruptcy Code. The code provides for Liquidation, Reorganization and Adjustment of Debts. The US has a universalism approach to cross border insolvency. The UNCITRAL Model Law on Cross border Insolvency was enacted in 1997. The aim was to assist countries in developing a modern, harmonized and fair framework for cross border insolvencies.

Taking a look at the major disputes arising from cross border insolvency, Jurisdiction and procedural disputes as well as enforcement disputes rank top of them. The challenges for the jurisdiction are caused mainly from the application of the major theories of cross border insolvency. Territorialism restricts itself on all fronts including the enforcement of a foreign judgement on assets within its jurisdiction. The disputes to jurisdiction arise mainly from the application of universalism. This raises question such as “where will the main proceeding be opened”, “can there be non-main proceedings? and if possible, what are the criteria for opening them?” Recognition of foreign proceeding still poses a challenge of itself. Recognition ensures that individual actions against the assets of the debtor is stayed, execution against the debtor’s assets is stayed and no transfer or action against the asset is allowed until the proceeding is finally decided.

Delving into the study of Arbitration as a tool for the resolution of cross border insolvency disputes, salient issues were addressed. Paramount to the success of the arbitration is the consent to the arbitration which in turn creates a valid jurisdiction. Deriving consents in international insolvency arbitration is not an easy task owing to the natural reluctance faced by the courts to subject the assets within their border to arbitration and also the location of the creditors around the world. However, in most arbitrable cases, the primary consent needed is that of the debtors and the principal financial creditors. Also central to the idea of jurisdiction in arbitration is the arbitrability of the issues. In Cross border insolvency, there is no consensus on what matters are arbitrable and those which are not. However, the courts have been willing to refer some matters to arbitration.

Also considering the technical disputes that characterize cross border insolvency, arbitration offers a technical advantage in the choice of arbitrators. The parties are at the liberty to select arbitrators who are expert in the field of disputes to address their issue. This gives them the confidence in the decisions and it saves the time which would have been employed in educating the court judges. Probably the greatest advantage of arbitration is the universal enforceability it offers through the instrument of the New York Convention.

The application of arbitration to cross border insolvency is not without its difficulties and challenges. These challenges are seen mainly in the payments of the costs of arbitration, conflict of interest and ideologies and in the arbitration clause and its drafting. Due to the increasing cost of arbitration, the expensive cost of arbitration might be an hinderance to the success of the arbitration considering the fact this is an insolvency matter and the central aim is to cut cost as much as possible. The conflict of ideologies between arbitration as a private arrangement and insolvency as a matter of public policy also poses a challenge to the application of arbitration in international insolvency.

7.2 Conclusion

The findings of this study improve on the opinion of available literature internationally on the adoption of arbitration as a viable alternative for the resolution of cross border insolvency disputes. This study concludes that international commercial arbitration, if properly harnessed could provide a lasting solution to the cross-border insolvency inadequacies.

While the European Union Insolvency regulation has promoted universalism at its fullest within the European Union states except Denmark, it must be noted that it is still limited in application. The UNCITRAL Model Law on Cross Border Insolvency has not been met with much success either. The number of states that have adopted this model law is still below the expectations of the commission, hence, its success has been limited. It is important to note that over 145 states of the world have adopted the United Nations Convention on the Enforcement of Arbitral Awards, also known as the New York Convention. In light of this, this study further concludes that the application of arbitration to resolve this kind of dispute stand a better chance at success than the various insolvency regimes currently in place.

This study also takes a critical look at the various factors that might pose as hinderances to the practical success of the proposed arbitration regime including the matters or arbitrability, enforcement, costs or arbitration and the conflicting ideologies. At the end of this, this study also concludes that with adequate negotiation among the parties and the willingness of the court to support the system, arbitration is bound for success as a tool for the resolution of cross border insolvency disputes.

 

7.3 Recommendations

Having examined the various insolvency regimes available in Nigeria, the United Kingdom and the United States of America, and the various cross border insolvency regimes including the European Union Insolvency Regulation and the UNCITRAL Model Law on Cross Border Insolvency, and understanding their inadequacies, the recommendation of this study is to adopt International Arbitration as the primary tool for the resolution of Cross Border Insolvency disputes. This is a deviation from the current regime which favors the insolvency courts over the private arrangement of insolvency. In other to make this achievable, the following is further recommended

  • The review of the current insolvency regime to include the use of arbitration as a dispute resolution mechanism. This is mainly because statutory recognition would ensure the greatest compliance and success of the proposed regime. In addition to the inclusion of arbitration in the various insolvency instruments, salient cross border insolvency issues like “Core” and “non-core” insolvency disputes, arbitrable insolvency issues among others, should be properly delineated.
  • The increased willingness of the insolvency courts to refer disputes to arbitration. the court should show the readiness to suggest, encourage and support parties in the arbitration of their insolvency dispute. This process would include the granting of court recognition to the proceeding, and the enforcement of the arbitration agreement and subsequently the award. This could also include the regulation of the arbitration in terms of speed and the time frame allowed for the arbitration proceedings.
  • The proper and adequate channel for negotiation between the parties to the arbitration. this is to ensure the important issues pertaining to that particular arbitration are discussed and adequately expressed in the arbitration agreement. The issues to be properly negotiated include the issues of costs of arbitration, the technical experts and expertise of the arbitrators among others

 

BIBLIOGRAPHY

BOOKS

  • Orojo, Company Law and Practice in Nigeria, (3rd Edn, Mbeyi & Associates (Nig) Ltd, 1992)
  • L. Westbrook, A Global View of Business Insolvency Systems, (Martinus Nijhoff Publishers, 2010)
  • Moses, The Principles and Practice of International Commercial Arbitration, (Cambridge University press, 2nd edition, 2012)
  • Onyema, International Commercial Arbitration and the Arbitrator’s Contract, (Taylor and Francis Group, 2010)

JOURNALS

  • L. WestBrook, “Multinational Financial Distress: The Last Hurrah of Territorialism” 2006, Texas International Law Journal, Vol 41
  • L. Howell, “International Insolvency Law” 2008, The International lawyer, Vol 42,
  • M LoPucki, ‘Universalism Unravels’ (2005) 79 The American Bankruptcy Law Journal 143 143,
  • Salafia, “Cross border Insolvency Law in the United States and Its Application to Multinational Corporate Groups”, Connecticut Journal of International Law, Vol 21.
  • Schwartz, ‘A Contract Theory Approach to Business Bankruptcy’ (1998) 71 Yale LJ 1807 Ch. II
  • B. Kovacs, “A Transnational Approach to the Arbitrability of Insolvency Proceedings in International Arbitration,” 2012 International Insolvency Institute
  • Gropper, “The Arbitration of Cross-Border Insolvencies” 2012, American Bankruptcy Law Journal, Vol 86, pg. 201-242
  • Sussman and J. L. Gorskie, “Capturing the Benefits of Arbitration for Cross Border Insolvency Disputes” 2012, The Fordham Papers, pg. 158-172
  • J. Chung,” The Retrogressive Flaw of Chapter 15 of the Bankruptcy Code: A Lesson from Maritime Law,” 17 Duke J. Comp. & Int’l L. 262-263 (2007)
  • S Deshpande, “The Applicable Law in International Commercial Arbitration”, 1989, Journal of the Indian Law Institute, Vol 31, No, 2, pg. 128
  • Mistelis and C. Baltag, “Trends and Challenges in International Arbitration: Two surveys of In-House Counsel of Major Corporations”,2008, World Arbitration and Mediation Review, 2008, vol 2 No. 5
  • L. Westbrook, “Theory and Pragmatism in Global Insolvencies: Choice of Law and Choice of Forum,” 1991, American Journal of Comparative Law, Vol. 38, pg. 271-272
  • Nwakoby and C. Aduaka, “Obstacles facing International Commercial Arbitration” 2015, Journal of Law and Conflict Resolution, Vol 7(3) 17-20
  • Bufford, “International Insolvency Law and International Arbitration – A Preliminary Perspective”, 2015, Penn State Law Legal Studies Research Paper No. 2-2015
  • Anderson, (2016) ‘An Introduction to Corporate Insolvency Law’, Plymouth Law and Criminal Justice Review, 8, pp. 16-47.

 

WEBSITES, ONLINE ARTICLES, CONFERENCE PAPERS, COMMAND PAPERS, ETC

  • Armour, “The Law and Economics of Corporate Insolvency: A Review” (2001) ESRC Centre for Business Research, University of Cambridge Working paper no. 197,
  • Fabian Van de Ven, “Insolvency in International Commercial Arbitration: where two fields meet”, 2017,
  • Federal Judicial Center International Litigation Guide, “International Commercial Arbitration: A guide for U.S. Judges”, 2012
  • Halimi, Ryan, “An Analysis of the Three Major Cross-Border Insolvency Regimes” (2017). International Immersion Program Papers. 47. https://www.chicagounbound.uchicago.edu/international_immersion_program_papers/47
  • Slaughter and May, “An introduction to English Insolvency Law” 2015
  • Akinola, ‘A Critical Appraisal of the Doctrine of Corporate Personality under the Nigerian Company Law’ (NLII Working Paper Series 002).
  • Nigerian Law Reform Commission, ‘Report on the Reform of Nigerian Company Law and Related Matters’ (Volume 1, Review and Recommendation, 1988) (‘The Commission Report’)
  • The Nigerian Insolvency Law and the right of creditors and Account holders of intermediated Security vis a vis the insolvent intermediary being a paper delivered at SEC on Unidroit workshop on intermediated securities held in Nigeria in May 2009
  • Vanja Ginic, “Nortel Allocation Proceedings: Making the Case for Arbitration in Cross Border Insolvency” 2015, University of Ottawa,
  • Neil Cooper, Corporate Groups & Insolvency (paper presented at the Seminario international de insolvencia, insolvencia transfronteriza y conteactacion publica, held in Bogota, Colombia, on March 29, 2006)
  • ICC Commission Report, “Decisions on Costs in International Arbitration”, 2015,
  • Michael O’Reilly, “Provisions on Cost and Appeals: An Assessment from an International Perspective”, 13th Annual Review of the Arbitration Act 1996,
  • Illiana Karagianni, “Arbitration and Insolvency Proceedings”, 2014, International Hellenic University,
  • Estine Ojoh Okolo, “Insolvency Law in Nigeria”
  • “Nortel cleared to end bankruptcy, distribute $7 billion to creditors”

 

STATUTES AND LEGISLATIONS

  • UK Insolvency Act 1986
  • Arbitration and Conciliation Act, 2004, Cap A, Laws of the Federation of Nigeria
  • Geneva Protocol on Arbitration Clauses in Commercial Matters, 27 L.N.T.S. 158 (1924); Geneva Convention on the Execution of Foreign Arbitral Awards, 92 L.N.T.s. 302 (1929).
  • “The Convention on the Recognition and Enforcement of Foreign Arbitral Awards” done at New
    York on June 10, 1958, United Nations Treaty Series (1954) Vol.330, No.4739, p.38 (the “New York Convention”).
  • Resolution adopted by the General Assembly, 40/72. Model Law on International Commercial
    Arbitration of the United Nations Commission on International Trade Law (11 December 1985)
  • UNCITRAL Arbitration Rules 2010

CASELAW

  • BNY Corporate Trustee Services Ltd v Eurosail-UK 2007-3BL plc [2013] 1 WLR 1408 (SC)
  • Fulham Football Club (1987) ltd v Richards [2011] EWCA Civ 855
  • Wood v Wood (in re Wood), 825 F.2d 90, 97 (5th Cir. 1987)
  • JPMorgan Chase Bank, N.A. v. Charter Communications Operating, LLC (In re Charter Commc’ns), 409 B.R. 649 (Bankr. S.D.N.Y. 2009)

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[1] Jay Lawrence Westbrook, A Global View of Business Insolvency Systems, (Martinus Nijhoff Publishers, 2010) 1

[2] Margaret Moses, The Principles and Practice of International Commercial Arbitration, (Cambridge University press, 2nd edition, 2012) 3

[5] John Armour, “The Law and Economics of Corporate Insolvency: A Review” (2001) ESRC Centre for Business Research, University of Cambridge Working paper no. 197, 3

[6] Insolvency Act 1986, S123(2)

[7] Ibid, S123(1)

[8] Cap C20, Laws of the Federation, 2004

[9] Insolvency Act 1986, S 123.

[10] Fabian Van de Ven, “Insolvency in International Commercial Arbitration: where two fields meet”, 2017,

[11] Jay L. Westbrook, “Multinational Financial Distress: The Last Hurrah of Territorialism” 2006, Texas International Law Journal, Vol 41, 322

[12] Jonathan L. Howell, “International Insolvency Law” 2008, The International lawyer, Vol 42, pg. 115

[13] Jonathan Howell, ibid

[14] Fabian Van de Ven, “Insolvency in International Commercial Arbitration: where two fields meet”, 2017,

[15] Lynn M LoPucki, ‘Universalism Unravels’ (2005) 79 The American Bankruptcy Law Journal 143 143, pg. 163

[16] Alan Schwartz, ‘A Contract Theory Approach to Business Bankruptcy’ (1998) 71 Yale LJ 1807 Ch. II

[17]Arbitration and Conciliation Act, 2004, Cap A, Laws of the Federation of Nigeria; S 57

[18]  Robert B. Kovacs, “A Transnational Approach to the Arbitrability of Insolvency Proceedings in International Arbitration,” 2012 International Insolvency Institute, pg. 7

[19] V. S Deshpande, “The Applicable Law in International Commercial Arbitration”, 1989, Journal of the Indian Law Institute, Vol 31, No, 2, pg. 128

[20] ibid

[21]  Federal Judicial Center International Litigation Guide, “International Commercial Arbitration: A guide for U.S. Judges”, 2012, pg.3

[22] Ibid, pg. 10

[23] Geneva Protocol on Arbitration Clauses in Commercial Matters, 27 L.N.T.S. 158 (1924); Geneva
Convention on the Execution of Foreign Arbitral Awards, 92 L.N.T.s. 302 (1929).

[24] Robert B. Kovacs, “A Transnational Approach to the Arbitrability of Insolvency Proceedings in International Arbitration,” 2012 International Insolvency Institute, pg. 8

[25] “The Convention on the Recognition and Enforcement of Foreign Arbitral Awards” done at New
York on June 10, 1958, United Nations Treaty Series (1954) Vol.330, No.4739, p.38 (the “New York
Convention”).

[26] Art. II (1) New York Convention.

[27] Art.II(3) New York Convention.

[28] Art.III New York Convention

[29] Art.V New York Convention

[30] Robert B. Kovacs, “A Transnational Approach to the Arbitrability of Insolvency Proceedings in International Arbitration,” 2012 International Insolvency Institute, pg. 8

[31] Resolution adopted by the General Assembly, 40/72. Model Law on International Commercial
Arbitration of the United Nations Commission on International Trade Law (11 December 1985)

[32] Robert B. Kovacs, “A Transnational Approach to the Arbitrability of Insolvency Proceedings in International Arbitration,” 2012 International Insolvency Institute, pg. 12

[33] Allan L. Gropper, “The Arbitration of Cross-Border Insolvencies” 2012, American Bankruptcy Law Journal, Vol 86, pg. 201-242

[34]Edna Sussman and Jennifer L. Gorskie, “Capturing the Benefits of Arbitration for Cross Border Insolvency Disputes” 2012, The Fordham Papers, pg. 158-172

[35] Robert B. Kovacs, “A Transnational Approach to the Arbitrability of Insolvency Proceedings in International Arbitration”, International Insolvency Institute, 2012

[36] Hon. Samuel Bufford, “International Insolvency Law and International Arbitration – A Preliminary Perspective”, 2015, Penn State Law Legal Studies Research Paper No. 2-2015

[37] Company and Allied Matters Act, 2004, Cap C20, Laws of the Federation of Nigeria

[38] Estine Ojoh Okolo, “Insolvency Law in Nigeria” pg.

[39] Bolanle A. Adebola, “Corporate Rescue and the Nigerian Insolvency System” pg. 30

[40] This ordinance was in force only in the Lagos colony. Akinola, ‘A Critical Appraisal of the Doctrine of Corporate Personality under the Nigerian Company Law’ (NLII Working Paper Series 002).

[41] CAP 38, LFN, 1948 and CAP 37, LFN, 1958. See also, Olakunle Orojo, Company Law and Practice in Nigeria, (3rd Edn, Mbeyi & Associates (Nig) Ltd, 1992) 17.

[42] For example, amendments were made by the Companies Amendment Ordinances 1929, 1949 and 1954. See generally, Nigerian Law Reform Commission, ‘Report on the Reform of Nigerian Company Law and Related Matters’ (Volume 1, Review and Recommendation, 1988) (‘The Commission Report’).

[43] At the time the 1968 Decree was promulgated, the Law makers had the Jenkins Report of 1962, the new Companies Act, 1967 of England and Wales, as well as the Final Report of the Commission of Enquiry into the Working and Administration of the Company Law of Ghana, a commission chaired by Professor Gower, to provide information on the inherent problems of the Companies Act 1948. Yet, then government still went ahead to promulgate provisions of the 1948 Act as law in Nigeria.

[44] CAMA 2004, s409

[45] Esther Okolo, Ibid

[46] The Nigerian Insolvency Law and the right of creditors and Account holders of intermediated Security vis a vis the insolvent intermediary being a paper delivered at SEC on Unidroit workshop on intermediated securities held in Nigeria in May 2009.

[47] Dr Kunle. Aina Rethinking the Duties of a Receiver and Powers of Companies in Receivership under Nigerian Law.

[48] Asset Management Corporation of Nigeria Act of 2010.

[49] Procedure for Registration of Charges in Nigeria-Need for urgent reforms-Kunle, Aina, Senior Lecturer faculty of Law, University of Ibadan Nigeria

[50] Bolanle Adenike Adebola, “Corporate Rescue and the Nigerian Insolvency System”, pg. 113.

[51]  CAMA 2004, s.400; s 650.

[52] CAMA 2004, Part XIV.

[53] CAMA 2004, s 387 (1) (a) & (b).

[54] CAMA 2004, s 387 (1) (C).

[55] CAMA 2004, s 387 (1) (e).

[56] CAMA 2004, s 387 (I) (d) & (f).

[57] CAMA2004, s 387 (2). A body corporate will be liable to a fine of NGN 2000; while an individual will be liable to a fine of NGN 500, or a term of imprisonment not exceeding 6 months.

[58] See CAMA 2004, s 180; s 209; s 388; s 389, s 390. For a receiver to be appointed as a means of enforcing a debenture, however, such a debenture must be secured by a charge. CAMA 2004, s 180 (3).

[59] CAMA 2004, s 180; s 209 (1) (d); s 388; s 389. Federal High Court (Civil Procedure Rules) 2009, Order 40.  CAMA 2004, s 389 (1) (a) & (b). 53 CAMA 2004, s 180 (1).

[60] CAMA 2004, s 388.

[61] CAMA 2004, s 209. Also, CAMA 2004, s 390.

[62] Generally, CAMA 2004, s 393 (1).

[63] CAMA 2004, s 393 (4).

[64] Ibid.

[65] CAMA 2004, s 393 (5).

[66] CAMA2004, s 389 (2)

[67] CAMA 2004, s 389 (2).

[68] CAMA 2004, s 390 (1)

[69] CAMA 2004, s 393 (3).  

[70] CAMA 2004, s 391.

[71] CAMA 2004, s 393 (3).

[72] CAMA 2004, s 209 (3); s 393 (1).

[73] CAMA 2004, s 393 (1).

[74] CAMA 2004, s 209 (3).

[75] CAMA 2004, s 393 (1).

[76] CAMA 2004, s 393 (2).

[77] CAMA 2004, s 390 (2).

[78] Ibid.

[79] Anderson, H. (2016) ‘An Introduction to Corporate Insolvency Law’, Plymouth Law and Criminal Justice Review, 8, pp. 16-47.

[80] ibid

[81] BNY Corporate Trustee Services Ltd v Eurosail-UK 2007-3BL plc [2013] 1 WLR 1408 (SC)

[82] Anderson H. Ibid, pg.23

[83] Anderson H. Ibid, pg. 26

[84]Slaughter and May, “An introduction to English Insolvency Law” 2015,

[85] Slaughter and May, ibid

[86] Anderson H, ibid

[87] ibid

[88] Slaughter and May, ibid.

[89] Slaughter and May, ibid

[90] John Kozyris, “Cross-Border Insolvency”, The American Journal of Comparative Law, Vol. 38, pg. 271-272

[91] Jay Lawrence Westbrook, “Theory and Pragmatism in Global Insolvencies: Choice of Law and Choice of Forum,” 1991, 65, American Bankruptcy Law Journal 457, 471

[92] Halimi, Ryan, “An Analysis of the Three Major Cross-Border Insolvency Regimes” (2017). International Immersion Program Papers. 47. http://chicagounbound.uchicago.edu/international_immersion_program_papers/47

[93] John J. Chung, The Retrogressive Flaw of Chapter 15 of the Bankruptcy Code: A Lesson from Maritime Law, 17 Duke J. Comp. & Int’l L. 262-263 (2007) 7 Companies Act (Cap 50, 2006 Rev Ed) s 1501(a)

[94] In re Brierley, 145 B.R 151, 159 (Bankr S.D.N.Y. 1992)

[95]  Lesley Salafia, “Cross Border Insolvency Law in the United States and its Application to Multinational Corporate Groups” pg. 10

[96] Ibid, pg.11

[97] 11 U.S.C S304 (b)(3) (2000)

[98]Companies Act (Cap 50, 2006 Rev Ed) s 1501(a)

[99] Jay Lawrence Westbrook, A Global View of Business Insolvency Systems, (Martinus Nijhoff Publishers, 2010)

[100] ibid

[101] Jonathan L. Howell, “International Insolvency Law” The International Lawyer, Vol. 42, No. 1 2008, pp. 113-151

[102] Ibid; Article 1 of the Model Law

[103] Jay Lawrence Westbrook, A Global View of Business Insolvency Systems, (Martinus Nijhoff Publishers, 2010) pg. 267

[104] ibid

[105]Article 19, UNCITRAL Model Law on Cross Border Insolvency.

[106] Jay Lawrence Westbrook, A Global View of Business Insolvency Systems, (Martinus Nijhoff Publishers, 2010) pg. 268

[107] Jay Lawrence Westbrook, A Global View of Business Insolvency Systems, (Martinus Nijhoff Publishers, 2010) pg.229

[108] Ibid, pg. 230

[109] Jonathan L. Howell, “International Insolvency Law”, The International Lawyer, Vol 42, No1, Spring 2008, Pg. 5

[110]Jay Lawrence Westbrook, A Global View of Business Insolvency Systems, (Martinus Nijhoff Publishers, 2010). 231

[111] Lesley Salafia, “Cross border Insolvency Law in the United States and Its Application to Multinational Corporate Groups”, Connecticut Journal of International Law, Vol 21. pg. 4.-5

[112] Halimi, Ryan, “An Analysis of the Three Major Cross-Border Insolvency Regimes” (2017). International Immersion Program Papers. 47. http://chicagounbound.uchicago.edu/international_immersion_program_papers/47

[113]. Jay Lawrence Westbrook, A Global View of Business Insolvency Systems, (Martinus Nijhoff Publishers, 2010) 232

[114] ibid

[115] Neil Cooper, Corporate Groups & Insolvency (paper presented at the Seminario international de insolvencia, insolvencia transfronteriza y conteactacion publica, held in Bogota, Colombia, on March 29, 2006) at 101.

[116]  Symposium, William C. Whitford, Courting Failure? The Effects of Venue Choice on Big Bankruptcies, 54 BUFF. L. REV. 321,322 (2006)

[117] Re Bear Stearns High-Grade Structures Credit Strategies Master Fund, Ltd, 374 B.R. 122 (Bankr. S.D.N.Y. 2007)

[118] Jay Lawrence Westbrook, A Global View of Business Insolvency Systems, (Martinus Nijhoff Publishers, 2010) pg. 237

[119] ibid

[120] Article 2 (f) of the UNCITRAL Model Law on Cross Border Insolvency.

[121] Jay Lawrence Westbrook, A Global View of Business Insolvency Systems, (Martinus Nijhoff Publishers, 2010) pg. 239

[122] ibid

[123] Ibid, pg. 242

[124] Margaret Moses, The Principles and Practice of International Commercial Arbitration, (Cambridge University press, 2nd edition, 2012) pg. 1

[125] Margaret Moses, ibid, pg. 2

[126] Emilia Onyema, International Commercial Arbitration and the Arbitrator’s Contract, (Taylor and Francis Group, 2010) pg. 8

[127]  UNCITRAL Model Law on International Commercial Arbitration, 1985, Article 7 (1)

[128] Judge Allan Gropper, “Arbitration of Cross border Insolvencies” 2012, American Bankruptcy Law Journal, vol. 86, pg. 228

[129] Allan Gropper, Ibid, pg. 229

[130] Allan Gropper, Ibid, pg. 229

[131] Allan Gropper, Ibid, pg. 230

[132]Robert B. Kovacs, “A Transnational Approach to the Arbitrability of Insolvency Proceedings in International Arbitration”, International Insolvency Institute, 2012, pg. 32

[133]  Robert Kovacs, ibid, pg. 33

[134] Robert Kovacs, ibid, pg. 57

[135] Ibid

[136] Robert Kovacs, ibid, pg. 78

[137] Fulham Football Club (1987) ltd v Richards [2011] EWCA Civ 855 per Lord Justice Patten at 33.

[138] 28 U.S.C Section 157 (b)

[139]Wood v Wood (in re Wood), 825 F.2d 90, 97 (5th Cir. 1987)

[140] JPMorgan Chase Bank, N.A. v. Charter Communications Operating, LLC (In re Charter Commc’ns), 409 B.R. 649 (Bankr. S.D.N.Y. 2009)

[141] Robert Kovacs, ibid, pg. 86

[142] Edna Sussman and Jennifer Gorskie, “Capturing the Benefits of Arbitration for Cross border Insolvency disputes” The Fordham papers, 2012, pg. 168-169

[143] Hon. Samuel Bufford, “International Insolvency Law and International Arbitration – A Preliminary Perspective”, 2015Penn State Law Legal Studies Research Paper No. 2 – 2015

[144] Margaret Moses, The Principles and Practice of International Commercial Arbitration, (Cambridge University press, 2nd edition, 2012) pg. 122

[145] Margaret Moses, ibid, pg. 123.

[146] Edna Sussman and Jennifer Gorskie, “Capturing the Benefits of Arbitration for Cross border Insolvency disputes” The Fordham papers, 2012, pg. 168-169

[147] “Nortel cleared to end bankruptcy, distribute $7 billion to creditors”

[148] ibid

[149] Vanja Ginic, JD Candidate 2015, University of Ottawa

[150] Vanja Ginic, “Nortel Allocation Proceedings: Making the Case for Arbitration in Cross Border Insolvency” 2015, University of Ottawa, pg. 7-9

[151] Edna Sussman and Jennifer Gorskie, “Capturing the Benefits of Arbitration for Cross border Insolvency disputes” The Fordham papers, 2012, pg. 165

[152]  Adopted in 1958

[153] Margaret Moses, The Principles and Practice of International Commercial Arbitration, (Cambridge University press, 2nd edition, 2012) pg. 211

[154] Margaret Moses, ibid, pg. 212.

[155] Judge Allan Gropper, “Arbitration of Cross border Insolvencies” 2012, American Bankruptcy Law Journal, vol. 86, pg. 237

[156] Judge Allan Gropper, ibid.

[157] Ibid.

[158] Judge Allan Gropper, ibid, pg. 238, MBNA Am. Bank v. Hill, 436 F.3d 104, 109 (2d Cir. 2006)

[159] Allan Gropper, ibid, pg. 239

[160]  Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 1958.

[161] Hon. Samuel Bufford, “International Insolvency Law and International Arbitration – A Preliminary Perspective” Penn State Law Legal Studies Research Paper No. 2-2015, pg. 18

[162] Mika Savola, “Awarding Costs in International Commercial Arbitration” pg.276-314, pp. 278

[163] Article 40(2) UNCITRAL Arbitration Rules 2010

[164] Section 49, Arbitration and Conciliation Act, 2004, Laws of the Federation of Nigeria

[165] ICC Commission Report, “Decisions on Costs in International Arbitration”, 2015, pg. 3

[166] Michael O’Reilly, “Provisions on Cost and Appeals: An Assessment from an International Perspective”, 13th Annual Review of the Arbitration Act 1996, pg. 1

[167] Michael O’Reilly, ibid, pg. 2

[168] Michael O’Reilly, ibid, pg. 2

[169] Illiana Karagianni, “Arbitration and Insolvency Proceedings”, 2014, International Hellenic University, pg. 25

[170] Illiana Karagianni, “Arbitration and Insolvency Proceedings”, 2014, International Hellenic University, pg. 25

[171] Chukwudi Nwakoby and Charles Aduaka, “Obstacles facing International Commercial Arbitration” 2015, Journal of Law and Conflict Resolution, Vol 7(3) pp. 17-20, pg. 18

[172] Hon. Samuel Bufford, “International Insolvency Law and International Arbitration – A Preliminary Perspective” Penn State Law Legal Studies Research Paper No. 2-2015, pg. 18

[173] Loukas Mistelis and Crina Baltag, “Trends and Challenges in International Arbitration: Two surveys of In-House Counsel of Major Corporations”,2008, World Arbitration and Mediation Review, 2008, vol 2 No. 5 pg. 94

[174] Jay Lawrence Westbrook, A Global View of Business Insolvency Systems, (Martinus Nijhoff Publishers, 2010) pg. 2

[175] Hon Samuel Bufford, ibid, pg. 20

[176]Margaret Moses, The Principles and Practice of International Commercial Arbitration, (Cambridge University press, 2nd edition, 2012), pg. 18

[177] Margaret Moses, The Principles and Practice of International Commercial Arbitration, (Cambridge University press, 2nd edition, 2012) pg. 43

 

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