Insolvency international standards

International standards in insolvency have developed especially over the last few years. The EBRD is closely involved in their development and adoption.

World Bank principles and guidelines for effective insolvency and creditor rights systems

The World Bank with the assistance of international financial institutions, leading insolvency organisations and international insolvency experts has developed principles that underpin sound insolvency and creditors rights around the world. The EBRD and other organisations and individuals participated in conferences, work shops, and drafting sessions to complete the Principles. They were approved in April 2001 and authorised to use for a series of pilot country assessments in 2002.

The World Bank principles emphasise contextual, integrated solutions and the policy choices involved. The Principles rely on the fundamental premise that sustainable market development requires access to affordable credit. Capital investment can only happen in an environment where parties can manage the insolvency risk associated with credit relationships.

There are 35 core principles identified in the World Bank principles. These principles distill international best practice in the design of insolvency and creditor rights mechanisms and are used to benchmark strengths and weaknesses of existing systems. They allow flexibility in domestic policy choices and take comparative domestic laws and institutions into account.

More about the World Bank principles:
Towards international standards on insolvency: the catalytic role of The World Bank  (0.1Mb), Law in Transition, Spring 2000

UNCITRAL Model law on cross-border insolvency and draft legislative guide on insolvency law

The United Nations Commission on International Trade Law (UNCITRAL) adopted the Model Law on Cross-Border Insolvency in 1997. The Model Law does not attempt to harmonise the substantive insolvency laws of participating jurisdictions, but provides a procedural framework to facilitate co-operation between courts and office holders in differing states. Countries are free to adopt and adapt the Model Law by modifying and excluding its provisions to accommodate local laws.

The central focus of the Model Law is to recognise and co-operate in cross-border insolvency. Unlike the EU Regulation on Insolvency Proceedings, the Model Law does not contain rules determining jurisdiction or choice of law. The UNCITRAL is also working on a Draft Legislative Guide on Insolvency Law.

2000 EU Regulation on insolvency proceeding

The European Union Regulation on Insolvency Proceedings came into force on 31 May 2002. The objective is to introduce uniform conflicts of law rules, not substantive rules, for insolvency proceedings and judgements. The Regulation addresses difficulties that arise when an insolvency case involves a number of different European jurisdictions. In broad terms, the main insolvency proceedings should be open in the member states where the debtor has the "centre of his main interests". These proceedings have universal scope and encompass all the debtor's assets and affect all creditors, wherever located.

The Regulation also provides that secondary proceedings may be opened in one or more other states. Such proceedings are limited to the assets in that state. The Regulation principally assists in those cases where a company or business has a branch, presence or significant assets or activity in more than one EU member state.