The snapshot from 2021
How do you restructure a 21st century company that has operations across the world and assets and liabilities governed by different legal systems? This is the question that restructuring professionals have been grappling with more than ever over the last year. Unfortunately, there is still not a simple answer, and bespoke solutions often need to be crafted depending where in the world the debtor and its assets are located, and what law governs the relationships between the debtor and its stakeholders.
In the UK, amidst all the furore and drama associated with Brexit, the cross-border recognition of UK restructurings wasn’t exactly high on the agenda. But with the judgments and insolvency regulations ceasing to ensure EU-wide recognition for UK restructurings, Brexit has forced debtors and their advisers to explore other (more traditional) ways of achieving recognition through UNCITRAL, Rome I, bilateral or multilateral treaties, or under the common law. So London is still “open for business” for EU-based forum shoppers, albeit there is more analysis required in the absence of the reciprocity previously enjoyed by the UK, and the “shopping” precinct is starting to look more crowded…
Within the EU, the focus is on member states’ efforts (or lack of efforts!) at implementing the Restructuring Framework Directive – the EU’s first attempt at substantive harmonisation of EU insolvency law. While the insolvency regulation will continue to ensure mutual recognition across the EU’s internal borders, the directive is helping EU businesses restructure without coming to the UK by providing some of the restructuring tools that have been available in the US and UK over a period of years. The one exception is the need for forum shopping in the UK (subject to Gibbs – see below). Beyond the EU, old debates around universalism versus territoriality continue to rumble on. In particular, the rule in Gibbs has come under renewed scrutiny following some recent UK court decisions. The US, which takes a broad and outcomes-focussed approach to recognition of discharges of US law governed obligations under Chapter 15, is already quite happy with giving effect to foreign compromises. And some US judges have not been backwards in directing criticism at the perceived parochialism associated with the policy underlying Gibbs, indicating that UK law’s love affair with it is out of step with modern day flows of capital and related expectations of creditors. Of course, that will all change if the UNCITRAL Model Law on the Recognition and Enforcement of Insolvency Judgments is implemented in the UK (and elsewhere). The direction of travel is pretty clear…
