• UNIVERSAL PRAYER FOR PEACEFUL RESOLUTION: ॐ शान्तिः Unto the Heaven be Peace, Unto the Sky and the Earth be Peace, Peace be unto the Water, Unto the Herbs and Trees be Peace, Unto all the Gods be Peace, Unto Brahma and unto All be Peace. And may We realize that Peace. ॐ शान्तिः शान्तिः शान्तिः ॐ शान्तिः ॐ 

Access to Foreign Representatives

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  • Right of access
  • Regulating the foreign representative
  • Participation in a proceeding under the Code
  • Access of foreign creditors to a proceeding under the Code
  • Notice to foreign creditors
 

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Right of access to Foreign Representatives
  1. Article 9 of the Model Law provides that the foreign representative shall have the right to have direct access to a court in the enacting country. This allows the foreign representative to approach courts to seek remedies directly and aims to simplify the process of availing remedies from the court in relation to the foreign proceeding. Formal requirements such as registration, license or consular action which may be applicable domestically are intended to be dispensed with for foreign representatives.
  2. UK and Singapore have adopted Article 9 into their cross-border insolvency law as it is. However, the US has made a deviation while adopting Article 9 which allows the foreign representative direct access only after recognition of the foreign proceeding for which she is appointed. This is to allow some check on the right of access by a foreign representative.
  3. The Committee discussed that one of the issues which may affect providing foreign representatives with direct access is that Indian law currently does not allow foreign lawyers to practice law in India. However, the Committee discussed that foreign representatives may form a separate class of professionals akin to insolvency professionals in India and may therefore not have a legal bar to access courts in India.
  4. The Committee was of the opinion that it may be desirable to adopt a conservative approach in providing access to foreign representatives till the development of infrastructure regarding cross-border insolvency in India. It was also noted that a possible option may be to allow foreign representatives access to courts, and exercise of their powers under the draft Part Z, through domestic insolvency representatives. However, the Committee deemed it appropriate for the Central Government to provide the extent of the right to access, in this regard, through subordinate legislation.
 

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Regulating the foreign representative
  1. Article 10 of the Model Law provides that merely based on an application of the foreign representative under the Model Law, a court in the enacting country shall not exercise jurisdiction over the foreign representative or foreign assets of the debtor. The UNCITRAL Guide to Enactment discusses that this is a “safe conduct” rule which controls excessive imposition of jurisdiction by courts. However, it clarifies that Article 10 does not bar courts from imposing penalties for any misconduct by the foreign representative according to the law in the enacting country.
  2. It may be noted that jurisdictions like US, UK and Singapore have adopted Article 10 in their respective cross-border insolvency laws. UK has also provided a penalty provision for misfeasance by foreign representatives, similar to the penalty applicable to local insolvency practitioners in UK.
  3. The Committee discussed that Article 10 may be adopted in draft Part Z. Additionally, foreign representatives may be subject to a code of conduct which may be specified by the IBBI and to a penalty provision, similar to that applicable to domestic insolvency professionals under Code, which may be inserted in draft Part Z.
  4. It was also deliberated by the Committee that foreign representatives may be made to register with the IBBI though no conclusion was reached in this regard. This may be contemplated by the Central Government, in consultation with the IBBI. It was also discussed by the Committee that the extent of obligations imposed on foreign representatives as well as the manner of imposition of penalty should be proportionate to the degree of access provided through subordinate legislation.
 

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Participation in a proceeding under the Code
  1. The Model Law allows the foreign representative to commence and participate in domestic insolvency proceedings against the debtor. The power to commence domestic insolvency proceedings is provided as a remedy, to the foreign representative, exercisable without availing recognition of the foreign proceeding in which she is appointed. The Committee discussed that the foreign representative may be allowed to participate in domestic insolvency proceedings, subject to the manner of access to be prescribed by subordinate legislation. However, since creditors under the Code include foreign creditors, the Committee discussed that allowing the foreign representative to initiate domestic insolvency proceedings against the corporate debtor may not be necessary.
  2. Article 24 of the Model Law also permits the foreign representative to intervene in any proceeding in which a debtor is a party, if the requirements of the law in the enacting country are met. This is intended to include any proceedings regarding the debtor and not just insolvency proceedings. The Committee discussed that this may be an expansive power to give to the foreign representative. It was noted that it may not be necessary to provide such power in the draft Part Z as the foreign representative can satisfy the court that she is a party of interest to intervene in such proceeding. It was therefore concluded that this provision may not be included in draft Part Z.
 

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Access of foreign creditors to a proceeding under the Code
  1. Article 13 of the Model Law embodies the principle that subject to the exclusions provided in this article, foreign creditors who apply to commence insolvency proceedings in the enacting country or file claims in such a proceeding, should not be treated worse than domestic creditors. The exclusions envisaged in this provision essentially pertain to foreign social security and tax claims. Singapore has adopted this provision without any substantial modification. The US has stated that treatment of foreign revenue
  2. claims, foreign public law claims and foreign tax claims shall be as per domestic US law and treaties entered into with different countries.The Committee concluded that Article 13 of the Model Law be adopted in the draft Part Z without any substantial modification.
 

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Notice to foreign creditors
  1. Article 14 of the Model Law provides that known foreign creditors may be given notice individually whenever notice is to be given to creditors of the debtor. This is to enable foreign creditors to have easy access to information regarding the insolvency of the debtor since many modes of service of notice may not be easily accessible to foreign creditors. For example, it may not be convenient for a foreign creditor to check local newspapers in the enacting country. To ensure that time taken to make such notice is not excessive, requirements such as letters rogatory or such similar formalities are dispensed with.
  2. The Committee discussed that Article 14 may be adopted in the draft Part Z.The Committee also discussed that the requirement of individual notice in Article 14(2) of the Model Law may increase costs and therefore may not be mandated. In order to ensure that costs of providing notice are not too high, the Committee decided that the IBBI may specify the mode of providing notice to a foreign creditor. Electronic notice and uploading notices on the website of the corporate debtor or the IBBI may also be considered.
  3. The Committee noted that the Code currently accounts for foreign creditors also while giving notice to the creditors of the corporate debtor. However, since a special provision for foreign creditors is provided in the Model Law, it was decided to retain it in the draft Part Z. It was also noted, in this regard, that the intention of adopting this provision is not to give any special treatment to foreign creditors but to merely ensure that notices are served in a manner that is accessible to foreign creditors as well. The Committee therefore concluded that while framing the subordinate legislation regarding notice to foreign creditors, the IBBI must ensure that no favourable treatment is given to foreign creditors over the domestic creditors under the Code.
  4. Article 14(1) of the Model Law also provides that the court may order appropriate steps regarding notice to foreign creditors whose addresses are not known. The Committee discussed that this may not be required to be inserted in the draft Part Z since the manner of giving notice, may account for giving notice to such creditors as well.
 
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