House debates
Thursday, 20 March 2008
Cross-Border Insolvency Bill 2008
Second Reading
10:44 am
Craig Emerson (Rankin, Australian Labor Party, Minister Assisting the Finance Minister on Deregulation) Share this | Hansard source
I present the explanatory memorandum to the bill and move:
That this bill be now read a second time.
This bill adopts the model law on cross-border insolvency developed by the United Nations Commission on International Trade Law. Australia had a significant involvement in the development of model law, with work commencing in the early 1990s under the then Attorney-General, Michael Lavarch, who, Mr Deputy Speaker Thomson, we both know very well. The United Nations commission finalised its work on the model law back in 1997, and I am pleased to note that Australia took a leading role in the project.
The previous government published a proposals paper dealing with adoption of the model law in 2002, and it introduced this same bill just prior to the 2007 election being called. It is now time to complete the work that Labor started.
Enactment of this bill will reduce complexity, risk and cost to business. Given Australia’s place in the world economy, it is particularly important for us to implement measures that promote international trading efficiency. The adoption of the model law represents a departure from the territorial approach to cross-border insolvency where each country assumes that it has exclusive jurisdiction over a debtor and that separate proceedings will be undertaken in each country. Obviously, this territorial approach results in a significant duplication of costs, which ultimately are borne by the creditors. But an even greater concern is that this approach creates opportunities for debtors and creditors to take advantage of time delays and differences in laws to minimise their own losses. Also, there is little scope for coordinating the rescue of viable business operations if the business assets are split across several different proceedings. The adoption of the model law will move us closer to the universal approach to cross-border insolvency, which assumes that one coordinated proceeding will be recognised by all jurisdictions in which the debtor has assets.
The relevant provisions are found in chapters II, III, IV and V of the model law. The provisions in chapter II of the model law will allow foreign representatives direct access to Australian courts. Foreign representatives will be able to commence proceedings under our insolvency and bankruptcy laws and make submissions directly to the court when a proceeding concerning a debtor has taken place in Australia. The model law clearly articulates the principle that foreign creditors, when they apply to commence or file claims in an insolvency proceeding in Australia, will not be treated worse than local creditors.
Chapter III of the model law introduces a regime for Australian courts to recognise a foreign proceeding and make orders consistent with the universal approach. It introduces a quick and simple process for recognition and provides the court with a discretionary power to grant any urgent relief that is required to preserve the assets of the debtor. The court will then make a determination of whether the foreign proceeding is a foreign main proceeding or a foreign non-main proceeding. This question is determined by reference to the location of the debtor’s centre of main interest. In the absence of evidence to the contrary, this will be taken to be the jurisdiction in which the debtor has its registered office or habitual residence. If the foreign proceeding is recognised as the main proceeding, the court will automatically grant a stay on actions against the debtor and suspend any rights to transfer assets of the debtor. The scope of the stay and suspension is subject to Australian insolvency and bankruptcy law.
It is important to note here that the model law does not introduce foreign laws into Australia. If the foreign proceeding is recognised as a non-main proceeding, the court will have a discretion to grant relief if it considers that is appropriate. In exercising its discretion to grant relief, the court must be satisfied that the interests of creditors and other interested persons are adequately protected.
Chapter IV provides that Australian courts will cooperate with foreign courts and foreign representatives to the maximum extent possible when dealing with cross-border insolvency matters.
Finally, chapter V of the model law sets out procedures to be followed where there are concurrent proceedings under the laws of different countries. These provisions allow for an Australian insolvency or bankruptcy proceeding to be commenced in relation to the assets held by a debtor in Australia, even where a foreign main proceeding has been recognised.
In conclusion, the bill will improve certainty for businesses engaged in international trade. It will bring our laws into line with those of key trading partners such as the United States, the United Kingdom and Japan, and it will provide a platform for future work in improving insolvency laws. I commend the bill to the House.
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