With major firms having a footprint all over the world, there is a need for a common court framework that makes tackling cross- border insolvency matters more efficient and less expensive.
The first step was taken yesterday, with the Singapore Supreme Court and US Bankruptcy Court for the District of Delaware adopting guidelines for cost-cutting cooperation and communication.
Delaware is historically the most popular state in the United States to incorporate companies.
More countries, including Australia, and England and Wales, are expected to join in the pioneering move. They were all represented at the inaugural Judicial Insolvency Network (JIN) meeting initiated by Singapore last October.
The guidelines released by the Supreme Court yesterday were first worked on during the JIN meeting and provide a road map for how courts communicate.
In appropriate situations, the different courts may hold joint hearings while each retains its independence and impartiality.
How the guidelines apply
•Parties notify courts if the case would benefit from cross-court coordination; courts encourage parties to consider guidelines
•Where appropriate, a protocol or court order is issued following parties' application or at court's own motion
•Court order may include means or circumstances in which courts coordinate or communicate
•For instance, courts may communicate directly or send documents such as judgments or transcripts of proceedings to each other or direct counsel to send pleadings to courts concerned
•Courts may also conduct joint hearings so that two or more courts may simultaneously record evidence and hear arguments, but each court retains independence and impartiality.
Chief Justice Sundaresh Menon had mooted the idea for greater coordination early last year.
The Supreme Court then reached out to other commercial courts around the world, with Judicial Commissioners Aedit Abdullah and Kannan Ramesh representing the Singapore judiciary.
"In substance, the philosophy is to avoid inconsistency between courts involved in a cross-border insolvency case," said Judicial Commissioner Ramesh yesterday, while describing the guidelines as bold and forward-looking.
The scheme will benefit stakeholders by reducing legal costs and preserving the value of financially distressed businesses.
It comes at a time of globalisation and the shift in how corporations conduct their businesses and organise themselves.
"If you don't have these guidelines, people have to start from scratch each time a case crops up," added Judicial Commissioner Abdullah.
Prior to these guidelines, communication between the courts was ad hoc and uncertainty prevailed.
Rajah &Tann deputy managing partner Patrick Ang cited the Lehman Brothers collapse in 2008 as an example. A US judge tried to move a common approach by suggesting a protocol for the Lehman entities worldwide but that took a long time and incurred a lot of professional fees to negotiate the terms of the protocol.
"The JIN initiative is great because if another Lehman were to happen there would be default guidelines that people can turn to immediately to save time and costs," he added.
The pact with Delaware is a good start, say lawyers.
That is where more than 60 per cent of Fortune 500 companies, including Google, Coca-Cola and Bank of America, and more than half of publicly traded US companies are incorporated.
WongPartnership lawyer Chou Sean Yu said: "As a result, its company law has been the most progressive because of the higher volume of cases and, consequently, it also has a wider restructuring/ insolvency profile.
"The latest guidelines are a significant step forward and will help bolster Singapore's aspirations to be a global restructuring hub."