SPEAKERS IN LEGAL COMMITTEE WELCOME ADOPTION OF UNCITRAL'S MODEL LAW ON CROSS-BORDER INSOLVENCY

6 October 1997

Press Release
GA/L/3036

SPEAKERS IN LEGAL COMMITTEE WELCOME ADOPTION OF UNCITRAL'S MODEL LAW ON CROSS-BORDER INSOLVENCY

19971006 Chairman of UNCITRAL Calls for More Resources for Its Secretariat, Greater Efforts to Make Commission's Texts Known in Developing Countries

The Model Law on Cross-Border Insolvency, adopted last May by the United Nations Commission on International Trade Law (UNCITRAL), offered an opportunity for useful additions and uniformity into insolvency regimes, the Sixth Committee (Legal) was told this afternoon as it began its substantive work.

The Chairman of UNCITRAL, Joseph F. Bossa, introducing the report of the Commission on the work of its thirtieth session, said the Model Law was designed to assist States to formulate a modern, harmonized and fair legislative framework to address more effectively instances of cross-border insolvency.

Noting that the UNCITRAL Vienna-based secretariat was fully occupied with major ongoing projects -- including those relating to electronic commerce, receivables financing, privately financed infrastructure projects and finalization of the guide to enactment of the UNCITRAL Model Law on Cross- Border Insolvency -- he called for more resources for the secretariat to carry out its work and also for greater efforts to make UNCITRAL texts known in developing countries, particularly in Africa. Better knowledge of those texts would save governments the great expense of relying on overseas experts to devise trade and commercial laws, he said.

Speakers generally welcomed the adoption of the new Model Law, while representatives of some European countries said they would have preferred the Model Law to follow the same lines as the European Convention on Insolvency Proceedings.

Statements were made by the representatives of Germany, India, Paraguay (on behalf of the Rio Group), Finland (on behalf of the Nordic countries),

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Malaysia, Thailand, United Kingdom, Russian Federation, Italy, Slovak Republic, Hungary and France.

Under-Secretary-General for Legal Affairs and United Nations Legal Counsel Hans Corell also spoke.

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In addition this afternoon, the Committee elected Greg Daniel (South Africa) as its second Vice-Chairman, thus completing its bureau. The other officers of the Committee are: Peter Tomka (Slovenia), Chairman; Rolf Welberts (Germany), Vice-Chairman; and Ghassan Obeid (Syria), Rapporteur. Mr. Welberts was, this afternoon, also elected Chairman of the Committee's working group on the United Nations Decade on International Law (1990-1999).

The Committee will meet again at 3 p.m. tomorrow, Tuesday, 7 October, to continue its discussion of the UNCITRAL report.

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Committee Work Programme

The Sixth Committee (Legal) met this afternoon to begin consideration of the report of the United Nations Commission on International Trade Law (UNCITRAL) on the work of its thirtieth session (Vienna, 12 - 30 May).

The Commission was established by the General Assembly in 1966 to further the progressive harmonization and unification of the law of international trade, bearing in mind the interests of all peoples, particularly those of the developing countries, in the extensive development of international trade.

According to the Commission's report (document A/52/17), a Model Law on Cross-Border Insolvency was adopted at its thirtieth session. The Model Law is intended to assist States to improve their national insolvency legislation so as to cope with the growing number of bankruptcies involving enterprises and individuals with assets in more than one country. The Secretary-General was to transmit it, together with guidelines on enactment of the law, to governments and other interested bodies. The Commission recommended that States review their legislation to determine whether it meets the objectives of a modern and efficient insolvency system, bearing in mind the need for an internationally harmonized law.

Work on the model law began in 1995 by the Commission's Working Group on Insolvency Law. Prior to that, UNCITRAL and the International Association of Insolvency Practitioners had held a colloquium on cross-border insolvency in Vienna in April 1994, involving insolvency practitioners from various disciplines, judges, government officials and representatives of other interested sectors, including lenders. It was suggested at the meeting that the Commission's work should, initially, be limited to facilitating judicial cooperation, court access for foreign insolvency administrators and recognition of foreign insolvency proceedings. A subsequent international meeting of judges and government officials held in Toronto, Canada, in March 1995, proposed a legislative framework for that purpose.

The Commission considered that, in order to make the model legislative text a more effective tool for modernizing international aspects of insolvency law, it would be useful to formulate a guide designed to assist in enacting and applying the model provisions. At its thirtieth session, the Commission mandated the publication of the final version of the draft guide to enactment of the UNCITRAL model provisions on cross-border insolvency to be prepared by its Vienna-based secretariat together with the text of the Model Law on Cross- Border Insolvency, as a single document.

During its three-week session, the Commission also began substantive work on legislative guidelines for build-operate-transfer (BOT) and related types of projects. The Commission noted that the implementation of privately

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financed infrastructure projects, which often involved foreign investors and contractors, required a favourable legal framework that fostered investor confidence and safeguarded national interests. It was considered useful to provide legislative guidance to States preparing or modernizing legislation relevant to those projects, and that documents provided by the secretariat presented a good basis for the Commission's work in that field. The Commission had before it a table of contents setting out the topics proposed to be covered by the legislative guide, as well as initial drafts of chapter I, "Scope, purpose and terminology of the Guide"; chapter II, "Parties and phases of privately financed infrastructure projects"; and chapter V, "Preparatory measures".

In addition, the Commission continued its work on legal aspects of electronic commerce, including the question of digital signatures and certification authorities. A report of its Working Group on Electronic Commerce said the group had reached a preliminary conclusion that it was feasible to undertake the preparation of draft uniform rules at least on issues of digital signatures and certification of authorities, and possibly on related matters. The working group noted that, in addition, future work in the area of electronic commerce might need to address: issues of technical alternatives to public-key cryptography; general issues of functions performed by third-party service providers; and electronic contracting.

The Commission endorsed the conclusions of the working group and entrusted it with the preparation of uniform rules on the legal issues of digital signatures and certification authorities. It felt that the uniform rules should be consistent with the media-neutral approach taken in the UNCITRAL Model Law on Electronic Commerce adopted by the Commission last year. In dealing with public-key cryptography, the uniform rules might need to accommodate various levels of security and to recognize the legal effects and levels of liability corresponding to services provided in the context of digital signatures. With respect to certification authorities, it was widely felt that the working group might appropriately envisage the establishment of a minimum set of standards to be met, particularly where cross-border certification was sought.

The Commission also considered a revised version of a draft convention on assignment in receivables financing prepared by its secretariat. The Commission noted that the draft convention had aroused the interest of the receivables financing community and governments, since it had the potential of increasing the availability of credit at more affordable rates. It was noted that the Working Group on International Contract Practices, which is preparing the uniform law, had reached agreement in principle on a number of issues. The Commission expressed the hope that the Working Group would proceed with its work expeditiously so that after three more sessions, scheduled to take place at Vienna from 20 to 30 October, in New York from 2 to 13 March 1998 and later that year at Vienna, it would be able to submit the draft convention for consideration by the Commission at its thirty-second session, in 1999.

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During the session, the Commission reiterated its call to States parties to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards to respond to a questionnaire relating to their legal regime governing such awards. At its 1998 session, a special commemorative meeting would be devoted to issues of arbitration to celebrate the fortieth anniversary of the 1958 New York Convention.

Finally, after considering training and assistance programmes carried out by the secretariat, the Commission emphasized their importance for promoting awareness of its work and disseminating information on the legal texts it had produced. It was pointed out that the seminars and briefing missions organized by the secretariat were particularly useful for developing countries lacking expertise in the areas of trade and commercial law covered by UNCITRAL's work. The Commission also noted the relevance of uniform commercial law, in particular texts prepared by it, in the economic and integration efforts being undertaken by many countries and emphasized the important role that the secretariat's training and technical assistance activities might play in that context.

At its fifty-first session, the General Assembly reaffirmed the mandate of the Commission as the core legal body within the United Nations system in the field of international trade law and to coordinate legal activities in that field.

Statements

JOSEPH F. BOSSA, Chairman of the United Nations Commission on International Trade Law (UNCITRAL), introducing its report, said the Model Law on Cross-border Insolvency adopted by the Commission was designed to assist States to formulate a modern, harmonized and fair legislative framework to address more effectively instances of cross-border insolvency. Those instances included cases where the insolvent debtor had assets in more than one State or where some of the debtor's creditors were not from the State where the insolvency proceeding was taking place. The increasing incidence of insolvencies with cross-border attributes reflected the continuing global extension of trade and investment. He noted that national insolvency laws were often ill-equipped to deal adequately with cross-border insolvency cases.

Elaborating on the benefits of the Model Law, he said it did not attempt a substitute unification of insolvency laws, but offered solutions that helped in several modest, but significant ways. It provided access, for the person administering a foreign insolvency proceeding, to the courts of the enacting State to determine what coordination among the jurisdictions or other relief was warranted for optimal disposition of the insolvency. It also determined when a foreign insolvency proceeding should be accorded recognition and what the consequences of that might be.

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Other benefits included providing a transparent regime for the right of foreign creditors to commence, or participate in, an insolvency proceeding in the enacting State; and permitting courts in that State to cooperate more effectively with foreign courts and foreign representatives involved in an insolvency, he stated. It would also authorize courts in the enacting State and persons administering insolvency proceedings there to seek assistance abroad; and, finally, it would also provide for court jurisdiction and facilitate coordination in cases of concurrent insolvency proceedings.

Currently, he said, the UNCITRAL secretariat was fully occupied with five major ongoing projects -- electronic commerce, receivables financing, privately-financed infrastructure projects, finalization of the guide to enactment of the UNCITRAL Model Law on Cross-Border Insolvency and legislative implementation of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. There were several suggestions for future work which could not be implemented because of lack of sufficient resources. In addition, UNCITRAL had a case law reporting system, which was supervised by one staff member. Moreover, the number of requests for training and legislative technical assistance was far beyond what could be reasonably handled by 6 or 7 professionals. He, therefore, appealed urgently for substantial strengthening of the UNCITRAL's Vienna-based secretariat.

He also called for greater efforts to make UNCITRAL texts known in developing countries, particularly in Africa. Better knowledge of those texts would save their governments the great expense of relying on overseas experts to devise trade and commercial laws. He proposed the incorporation of UNCITRAL texts into the curricula of law faculties at African universities. He also urged members of the Sixth Committee to promote awareness of UNCITRAL and to help it undertake the vast training and assistance efforts needed in developing countries.

Looking back on the Commission's work in the past 30 years -- which was commemorated at its thirtieth session last May -- he said that at its creation, UNCITRAL was an organization wanted by all. Until then, efforts at harmonization and unification of international trade law had been either regional or been limited to specific sectors of law, which were often associated with the sectoral interests of the sponsoring organization. With the growth of international trade, the time had become ripe for an organization that would give an impetus to global harmonization and unification of the broad range of subjects that constituted international trade law. That universal need for the kind of work done by UNCITRAL continued to be at the root of its success, he said.

HANS CORELL, Under-Secretary-General for Legal Affairs and United Nations Legal Counsel, in a short statement, said that the UNCITRAL Vienna- based secretariat was short of staff because of a recruitment freeze. Efforts

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were being made to restore the cuts in the budget for the next biennium, he added.

ROLF WELBERTS (Germany) said the UNCITRAL played an important role in a world where economic progress and prosperity of every single State were increasingly generated by international trade. Global trade required a global legal framework and that was contingent upon dependable instruments of law applicable in an appropriate and timely fashion. Swift settlement of legal disputes was another important prerequisite in international trade. In an increasingly interdependent world, UNCITRAL was vested with the task of developing a global legal framework in which international trade could grow and thrive.

Other institutions, such as the World Trade Organization, the International Institute for Unification of Private Law and The Hague Conference for International Private Law shared similar goals with UNCITRAL, he said. The Commission and its secretariat should take a new role in coordinating those efforts. While his Government welcomed the Model Law, it competed, at a regional level, with the European Convention on Insolvency Proceedings. His Government would have preferred that the Model Law had followed the same lines as the European Convention.

He expressed great interest in the work on the legislative guide for privately financed infrastructure projects. With the need for special expert knowledge in the field of private infrastructure projects, the Commission's secretariat had pursued the right path by preparing the guide with specially chosen experts. The secretariat could also fulfil an important need by offering seminars and briefing missions to offer advice and assistance in the national implementation of UNCITRAL texts, he said, adding that it should have a sufficient budget to offer that training and technical assistance.

S. RAMA RAO (India) said his Government shared the view of the UNCITRAL working group on insolvency law that the form of its output should be a draft model law instead of draft legislative provisions. The Model Law, in his delegation's view, reflected a realistic compromise between the preferred positions of delegations from different legal systems and would contribute to meet the objective of setting out a model for a modern and efficient insolvency system in a uniformed manner. The strength of the Model Law lay in its flexibility, which could contribute to promotion of wider acceptability and adoption by enacting States. His Government would closely examine the Model Law's provisions in the light of relevant Indian legislation, judicial decisions, past practice and pertinent procedures.

As regards the ongoing preparation of a model law on electronic data interchange, he noted the recommendation of the Commission that the working group on the subject should add to its future work other issues relating to jurisdiction, applicable laws and dispute settlement mechanisms. On the

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subject of assignment of receivable financing, he said the issue of the effect of assignment on third parties should be discussed to find an acceptable but efficient system of uniform law on assignment in receivable financing so that the convention could be adopted by 1999.

On the question of built-operate-transfer (BOT) projects, he said it was necessary at the policy level to find a balance between the interests of a private company that built, operated, managed and then transferred such infrastructure projects to the government, on one hand, and the interests of host governments, their citizens and users of services or goods generated by such projects, on the other. The model law should be designed to promote investment and protect returns for private companies but should also be such as to fall within the broad public policy of the host State and economic interests of end users.

BERNARDINO HUGO SAGUIER CABALLERO (Paraguay) said the Commission should be given recognition for its achievements in helping the growth of international trade law. With the increase in those debtors who hold assets in more than one country, there was a need for international cooperation and the recognition of credit laws between countries. The Model Law helped create a uniform system for such cooperation.

On the topic of electronic commerce, he said efforts to make uniform laws on such commerce were important, but the Commission should take care not to fall into overregulation which would hamper the development of those industries.

His Government also acknowledged the Commission's work to promote its documents, particularly its use of the World Wide Web to disseminate information. The international community should be encouraged to make use of that information and adopt the Commission's model laws into their own legal codes in order to bring to fruition the efforts of the United Nations.

MARJA-LIISA LEHTO (Finland), speaking on behalf of the Nordic countries -- Denmark, Iceland, Norway, Sweden and her own country -- said UNCITRAL had made an important contribution over the last three decades to the removal of legal obstacles to international trade flows, thus fostering the overall increase in commerce at the global level. The group was convinced that the Commission's work would continue to benefit different sectors of business worldwide and contribute to cooperation among States. The Model Law on Cross- Border Insolvency offered flexibility for States with different legal traditions while at the same time increasing the necessary harmonization of international insolvency law. The Nordic countries welcomed the decision to prepare and publish a guide to enactment of the UNCITRAL Model Legislative Provisions on Cross-Border Insolvency.

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The working group on electronic commerce should continue its significant work bearing in mind that the future rules should be as technology-neutral as possible and ensuring that the implications of electronic commerce for consumer transactions were not forgotten, she went on. An international conference on "Dismantling the Barriers to Global Electronic Commerce" would take place in Turku, Finland, in November this year, she announced. She also said that the Nordic countries were confident that work on a uniform law on assignment in receivables financing would be successfully completed. They further hoped that the preparation of a legislative guide on privately- financed infrastructure projects would also be successfully completed.

NOH OMAR (Malaysia) said the Model Law would further enhance the flow of international trade and it should be completed as a model legislation, the form that was best suited to induce harmonized modernization of national laws on cross-border insolvency. The legislative text on international cooperation should have a high degree of uniformity and to achieve that, there should be a treaty on that topic. Creating a treaty would be influenced by the implementation and response to the Model Law.

On the topic of privately financed infrastructure projects, he said there was a need for a favourable legal framework that could foster the confidence of potential investors. The table of contents setting out topics for a legislative guide on that subject should keep the appropriate balance between the objective of attracting private investment for infrastructure projects and the protection of the investment of the host government.

On the topic of electronic commerce, he said the uniform rules on digital signatures were important in view of the increasing role of public-key cryptography in electronic commerce practices. But the rules should be consistent with the media-neutral approach taken by the UNCITRAL Model law on Electronic Commerce. He also commended UNCITRAL on its work in disseminating Case Law on UNCITRAL Texts (CLOUT) over the Internet, adding that resources for that activity should be made available.

KARN CHIRANOND (Thailand) said the conventions and model laws of the Commission had proven to be significant in the growth and orderly management of international trade. Many countries had adopted legal texts prepared by the Commission, and members of the international business community had taken serious note of its work. The success of the Commission lay in the adoption of a flexible approach in preparing legal texts which were acceptable to all countries regardless of their economic or legal systems.

Continuing, he said the adoption of the UNCITRAL Model Law would result in greater legal certainty for trade and investment; fair and efficient administration of cross-border insolvencies; the protection and maximization of the value of the debtor's assets; and the facilitation of the rescue of financially troubled businesses. Although his Government supported the

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principles of the model law, some of its provisions were inconsistent with insolvency procedures in Thailand, for insolvency in Thailand involved not only economic but social aspects as well.

His Government also endorsed the work of the Commission on electronic commerce and in preparing a convention on assignment in receivables financing, he said. The latter would increase the availability of credit at more affordable rates. The need for a legal framework to guide privately-financed infrastructure projects was also important and the Commission should bear in mind the need of keeping a balance between attracting private investment for infrastructure and protecting the interests of the host Government and the users of the infrastructure facilities.

JOHN GRAINGER (United Kingdom) said the Commission was meeting its objectives, which were to promote progressive harmonization and unification of the law of international trade. It was the view of the United Kingdom that the Model Law contained sensible and practical provisions to assist insolvency representatives to overcome the problems associated with cross-border insolvencies.

He commended the Commission for its proposal to use experts rather than setting up a working group in the preparation of a legislative guide to privately financed infrastructure projects. That approach would provide the secretariat with greater flexibility in tapping into sources of expertise on particular topics, which was desirable for the most effective advancement of the work. Further work being undertaken on electronic commerce would play an important role in the development of secure and trusted electronic commerce between trading nations. The United Kingdom was keen for the work to be advanced with all speed.

He expressed disappointment that, as in previous years, the Commission's report had only been made available at the last moment.

SERGUEI TARASSENKO (Russian Federation) said UNCITRAL was duly fulfilling the functions assigned to it. The Russian Federation regarded the Model Law on Cross-Border Insolvency as a further step towards the harmonization of laws of States with different legal systems. It believed the Model Law was based on a realistic approach to resolving insolvency issues and provided a very speedy access to courts of enacting States. He expressed satisfaction over the work on a legislative guide on privately-financed infrastructure projects. The guide was of extreme importance to his country because of its interest in attracting foreign investment. He supported further work by the Commission on electronic commerce.

The Russian Federation hoped work on a draft convention on assignment in receivables financing would be completed as scheduled, he said. He was pleased to note that the UNCITRAL website on the Internet had been equipped

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with a search engine for case laws. He commended the useful work of UNCITRAL in training and technical assistance, and underlined their importance for countries in transition and with different legal systems.

MAURO POLITI (Italy) said his country attached great importance to the work of UNCITRAL of which it was a member. The adoption of the Model Law on Cross-Border Insolvency represented a major step towards the harmonization of provisions relating to that issue. Italy agreed with the proposal to conduct an assessment on the impact of the Model Law in various States and to monitor the practices, experience and issues that would emerge from the use of national laws based on the Model Law. He was confident that work on a draft convention on assignment in receivables financing would soon be completed, noting that the preparation of a body of uniform rules on that matter would be extremely helpful to governments and to the financial community.

He praised the initiative to organize commemorative meetings to mark the fortieth anniversary of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and expressed support for the Commission's work on monitoring legislative application of the Convention. The idea of elaborating a new convention or providing additions to the UNCITRAL Model Law on International Commercial Arbitration deserved favourable consideration, he added.

JAN VARSO (Slovakia) said the report of the Commission demonstrated the importance of work done by UNCITRAL and its working groups. His country particularly commended the work done on the Model Law which was a further step in the United Nations legal framework on international trade law.

Because of its flexibility, the Model Law should offer national legislatures the ability to adapt it to their own circumstances and to modernize their insolvency legislation, he said. It would also help establish cooperation between courts and other relevant governmental authorities in handling cross-border insolvency cases.

On the issue of electronic dissemination of UNCITRAL documents he said the practice of placing reports and draft laws on the Internet had made them easily accessible. That means of distributing documents should be encouraged.

CSABA SZ. NAGY (Hungary) said his delegation considered the adoption of the Model Law on Cross-Border Insolvencies a major achievement. It shared the view of some delegations that, at least in Europe, the acceptance of the Model Law would have been easier if it had followed the same lines as the European Convention on Insolvency Proceedings. Hungary supported the view that the discussion of work on privately financed infrastructure projects should be resumed at the Commission's thirty-first session. His delegation was satisfied at some positive results reached by UNCITRAL on training and technical assistance and supported efforts to make its achievements more widely known.

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DAMIEN LORAS (France) said his Government welcomed the adoption of the Model Law which should eliminate the discrepancies and shortcomings suffered by countries due to non-uniform insolvency laws. It was important, however, to monitor the results of the Model Law and gather the input from other bodies dealing with international trade law.

He commended the progress made by the working groups on issues of privately financed infrastructure projects and on electronic commerce. Drawing up laws should remain a priority for the working groups and work already started in those groups should be completed.

On a separate issue, he said the translation of UNCITRAL documents to French continued to be issued late and he hoped that problem would be addressed so it would not hamper the work of the Commission.

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