With cross-border bankruptcy cases potentially a growing trend, Singapore courts are taking the lead to work out communication guidelines with other court jurisdictions in order to deal consistently with the assets of a failed company spread across different countries.
Singapore will next week host the inaugural Judicial Insolvency Network conference. At the event, 11 insolvency judges from eight territories including the United States and Australia will meet to develop guidelines for communication and cooperation between national courts in cross-border restructuring and insolvency cases.
Judicial Commissioners Aedit Abdullah and Kannan Ramesh will represent the Singapore judiciary.
SHOPPING FOR COURTROOMS
It would lead to creditors shopping from one jurisdiction to another to lay claim to assets, creating uncertainty, increasing costs and diminishing asset value.
MR CHOU SEAN YU, WongPartnership lawyer, on what will happen if courts do not cooperate.
In January, Chief Justice Sundaresh Menon cited cross-border insolvency as a "prime example" of how Singapore "will have to be open to new ways of doing things" in the face of globalised businesses.
"Cross-border corporate failure raises the prospect of multiple proceedings in different jurisdictions which can give rise to inconsistent outcomes and a rush to lay claims over available assets," he said, as he called for guidelines for courts from diverse jurisdictions seeking an orderly resolution to the same case.
Lawyers say when courts do not cooperate, each might decide differently on how to deal with the bankrupt enterprise.
"It would lead to creditors shopping from one jurisdiction to another to lay claim to assets, creating uncertainty, increasing costs and diminishing asset value," said leading restructuring and insolvency lawyer Chou Sean Yu of WongPartnership.
Another leading practitioner, Mr Ashok Kumar of BlackOak LLC, said the conference is a step in the right direction, as without such a universal approach, coming up with a cross-border corporate rescue plan would be difficult.
In 2009, bilateral court-to-court communication helped facilitate the insolvency proceedings of telecoms giant Nortel in the US and Canada, leading to consistent decisions in distributing the US$7.3 billion (S$10 billion) gleaned from selling its assets.
In a statement, the Singapore Supreme Court said the conference "dovetails with the increasing focus and concerted efforts of various local stakeholders to fortify Singapore's position as an international debt restructuring centre".
The event is timely as regional law firms are seeing a significant increase in insolvency and restructuring work amid rising global corporate defaults, it added.