Solving cross-border insolvency problems – a UK perspective

There’s more to international insolvency issues than ringing a contact in Sydney, being referred to their colleague in Brisbane who got a retired lawyer friend off their sun lounger on the South Pacific island of Vanuatu to serve legal documents on a runaway British bankrupt transiting through the airport there.

Restructuring and insolvency laws, regimes and practicalities vary all over the world. In fact no two systems are the same. Each one is influenced by local business and banking cultures, politics, judicial systems, and professional expertise and capacity, among many other factors. Unfortunately, harmonisation of laws will never happen, but cross-border recognition and court assistance can and usually does help.

The global financial crisis of 2008 provided some fine examples of the world’s insolvency professionals and commercial judges coming together to resolve apparently irreconcilable differences, when faced with the absolute necessity of avoiding the systemic collapse of inter-connected banking regimes around the globe. The Lehman Brothers case is the classic example.

The Covid-19 pandemic also brought unique challenges as restructuring and insolvency regimes worldwide were re-invented virtually overnight, and creditor enforcement rights suspended to prevent otherwise viable businesses failing because of the gross disruption the crisis caused.

With a centuries-old global trading tradition and as one of the world’s major banking and dispute resolution centres, the UK’s history of dealing with insolvent businesses has involved regular exposure to international issues. Insolvency professionals in the UK must find workable and cost-effective solutions more often than in most other countries.

The situation has been made much worse by Brexit, which removed the UK from the EU-wide protocols for cross-border recognition of insolvency proceedings and office holders. A perfectly effective wheel had to be re-invented for the 27 countries who collectively were previously the UK’s largest trading market.

Some high profile examples of successful cross-border co-operation include unravelling the first-ever collapse of a cybercurrency exchange involving a GBP 30 million fraud and over 25 bank accounts around the world, and navigating a variety of sanctions regimes while dealing with the failure of a UK-listed company operating gold mines in Russia and with other assets in Cyprus, Luxembourg and Canada. More mundane but equally challenging tasks occur regularly on smaller insolvency cases. 

The answer to these international challenges is always much more involved than reading an AI summary of local insolvency legislation and using Google to identify an insolvency lawyer in the relevant jurisdiction. The key is knowing and using the right local professional and trusting their local knowledge and experience. It’s not just what the law says – it’s how it works in practice.

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Nick Hood is Senior Adviser to the Opus Business Advisory Group.