| Summary: | Cross-border insolvency law primarily deals with the situation where an
insolvency procedure is initiated in one jurisdiction, in relation to the property
of a debtor who is situated in another jurisdiction.' The liquidator then has to
consider which procedures to follow and which system of law would apply in
the administration of the debtor's property, wherever situated, for the benefit
of local and foreign creditors. To regulate cross-border insolvency procedures
more effectively, South Africa has assented to the Cross-Border Insolvency
Act 42 of 2000 (hereafter the CBA). This act is based on the UNCITRAL
Model Law on Cross-Border Insolvency. The CBA is still not operational,
mainly because of the failure of the Minister of Justice to designate certain
states and will only be applicable to cross-border insolvency proceedings
once a state is designated. This has the effect that the CBA will assist
insolvency agents and creditors of the foreign designated states when they
institute insolvency proceedings against a debtor who also has assets or a
business in South Africa. The CBA does, however, not assist a South African
insolvency agent or South African creditors when instituting insolvency
proceedings against a debtor who also has assets or a business in a foreign
country. To achieve such reciprocity the foreign state would need a similar act
in which South Africa is a designated state. Company N, for example, is
situated in the Netherlands, which has not incorporated the UNICTRAL Model
Law on Cross-Border Insolvencies. Company S, its creditor, is situated in
South Africa. Suppose company A has movable and immovable property in
South Africa and the Netherlands. If company N goes bankrupt, a number of
problematic questions arise: Where should company S institute insolvency
proceedings? Which system of law would apply to the insolvency proceedings
and would the courts in the Netherlands recognise a South African court order
for the winding-up of company N?
In the absence of a binding international insolvency act that applies
universally, states have to turn to their own domestic laws for guidance to
regulate these proceedings. The sovereignty of states and the protection of
national interests contribute to the inefficiency of these proceedings. The
question of the appropriate jurisdiction is further complicated by the different
insolvency approaches states follow. Some states follow the territorial
approach while others follow the universal approach which leads to great
conflicts in the determination of the proper forum to institute cross-border
insolvency proceedings. With the universal approach two further
complications arise, namely forum-shopping and COMI. With forum shopping
creditors seek the forum that will provide the greatest advantage to their
interests, while COMI (centre of main interest) as a means to determine the
appropriate forum under the universal approach is very vague and increases
uncertainty rather than clarity. Multinational treaties or conventions prove to
be less effective in an effort to increase co-operation between states than
expected. Few examples of functional multinational treaties on insolvency
exist. Bilateral treaties between countries are another option and easier to
negotiate, but just as few examples of functional bilateral treaties exist.
The question that will henceforth be discussed in this dissertation, is whether
a protocol between South Africa and foreign countries would contribute to a
more workable and effective solution to jurisdiction problems in cross-border
insolvency proceedings between these states? In order to address the above
mentioned question, the jurisdiction problem, together with the occurrence of
the territorial and universal approach in cross-border insolvencies will be
discussed in chapter 2. In chapter 3 the South African position in relation to
cross-border insolvency jurisdiction will be discussed. Thereafter a discussion
on cross-border insolvency protocols will follow in chapter 4. A conclusion and
recommendation will then follow in chapter 5. === Thesis (LL.M. (Import and Export Law))--North-West University, Potchefstroom Campus, 2007.
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