cross-border insolvency

 There is a need to integrate perspectives on the importance of insolvency laws with global trade in multilateral or bilateral routes

सीमा-पार दिवालियापन

उन कंपनियों से जुड़ा एक कॉर्पोरेट दिवालियापन और वित्तीय संकट का मामला है जिनकी संपत्ति या लेनदार एक से ज़्यादा देशों में हैं. 

इस मामले में, कई न्यायालयों में संपत्ति और देनदारियों वाली कंपनियों के समाधान के लिए सीमा-पार दिवालियापन प्रक्रिया अपनाई जाती है. इस प्रक्रिया के तहत, विदेशों में मौजूद कंपनी की संपत्ति, लेनदारों, और उनके दावों की पहचान की जाती है. इसके साथ ही, विभिन्न देशों की अदालतों के बीच समन्वय भी किया जाता है.

cross-border insolvency laws

The adoption of cross-border insolvency laws is vital to international trade.

 Integration of cross-border regimes into a nation’s legal ecosystem is considered the hallmark of sound insolvency laws. 

Besides providing legal certainty, they also improve the health of trading entities with cross-border operations, thereby benefiting investments and international trade.

Implementing the Model Law

laws to deal with cross-border insolvency 

यूनाइटेड नेशंस की तरफ़ से सपोर्ट 

Since the late 1990s, the UN Commission on International Trade Law (UNCITRAL) has endeavoured / supported  to implement its Model Law developed on four pillars (access, recognition, cooperation, and coordination) across nations.

 कुछ अन्य देशों की इसके फ़ायदे के बारे में जानते हैं और भारत क्या लेके आया ?

several countries, including India, by the Bankruptcy Law Reform Committee while drafting the Insolvency and Bankruptcy Code (IBC), 2016, as well as the Indian government (Economic Survey, 2022).

Adoption is slow ?

However, progress on the adoption of the Model Law has been slow. As per UNCITRAL, only 60 countries have adopted it. 

क्या भारत कुछ मॉडल क़ानून ले के आने वाला है ?

India is also yet to adopt the Model Law despite several committee recommendations on the subject.

no  money in budget ?

The Union Budget, while in support of improving the IBC’s efficiency through technology platforms/augmenting judicial infrastructure, was also silent on this issue.

अभी भारत कैसे डील करता है ? 

At present, India relies on limited provisions, which allow bilateral agreements on a case-by-case basis for cross-border insolvencies. These have been seen as ad hoc and inadequate.

कुछ और क़ानून जो कि भारत में अभी चल रहे हैं ?

In parallel, in the last few years, India has been executing Free Trade Agreements (FTAs), Comprehensive Economic Corporation Agreements (CECAs), Comprehensive Economic Partnership Agreements (CEPAs) and their equivalents. 

अन्य देशों के साथ में समझौते 

1 As per the Commerce Ministry, India has signed such agreements with more than 54 countries. 

2 The Ministry describes FTAs as arrangements between countries to reduce or eliminate tariff /non-tariff barriers on substantial trade with the scope of covering areas such as intellectual property rights (IPRs) and investments. 

3 CECAs/CEPAs 

are described as more integrated agreements on goods, services, and investments while including broader areas such as trade facilitation and cooperation.

Insolvency provisions

Lack of laws in FTA

However, despite growing FTAs/CEPAs and their importance to trade, they lack detailed cross-border insolvency provisions. 

While FTAs are relatively limited in scope, CEPAs /CECAs are said to be “more ambitious and look at deeper regulatory aspects of trade” (Commerce Ministry). 

Current handle method 

most contain only general disputes or trade remedy clauses. It can be argued that FTAs facilitate trade, which leads to calls for cross-border insolvency laws. 

After signing four new FTAs (2021-2024), India is working on similar agreements with several nations (Economic Survey, 2024). 

complementary integration of cross-border provisions

There can be complementary integration of cross-border provisions in FTAs /equivalents. In their present form, these agreements capture disputes, IPRs, and even sustainability, but mostly ignore insolvency. 

If CECAs/CEPAs are conceptualised to capture deeper regulatory aspects, why can they not cover insolvency dimensions?

Interestingly, the vacuum is not found only in bilateral/regional agreements but even in some important World Trade Organization reports, which omit an explicit discussion of cross-border insolvency while discussing factors influencing the future of trade. 

Thus, there is a need to integrate perspectives on the importance of insolvency laws with global trade in multilateral or bilateral routes. Specifically, FTAs are incomplete without cross-border dimensions.

Way forward

This would only strengthen the edifice of FTAs being signed by India. This may also form part of the government’s agenda of framing SOPs for FTAs. 

While the practical feasibility of interlinking insolvency with FTAs is best assessed by the Commerce Ministry, the Insolvency and Bankruptcy Board, and legal experts, considering the reality of insolvency with cross-border ramifications, the sooner these issues are addressed, the greater the benefits to India’s trade.

Source the hindu