Increase in cross-border insolvencies anticipated, as practitioners call for more collaboration amongst jurisdictions
New research commissioned by leading business and financial adviser Grant Thornton UK LLP and barristers chambers South Square, suggests insolvency professionals are anticipating an increase in cross-border insolvencies.
The report, From discord to harmony, finds that 63% of respondents surveyed say the number of insolvencies involving offshore jurisdictions will increase over the next three years. This includes one in five respondents (19%) who say the level of activity will 'increase considerably' over this period, predominantly driven by an uplift in activity in the financial services sector.
The majority of respondents also want to see collaboration between offshore jurisdictions rise further up the agenda. 85% said that courts in different jurisdictions should collaborate more to make multi-jurisdictional insolvencies fairer and more efficient. Suggestions for fostering further collaboration range from formal mechanisms such as enacting the UNCITRAL Model Law through to informal channels for greater dialogue and information sharing between judges.
The top three factors when evaluating the attractiveness of a jurisdiction are: its legal process and infrastructure (84%), cross-border assistance provisions (63%) and enforceability of foreign court orders and judgements (40%).
Steve Akers, Recovery and Reorganisation Partner at Grant Thornton UK LLP, commented: "With an anticipated uptick in cross-border insolvencies on the horizon, jurisdictions need to ensure their basic legal process and infrastructure is fit for purpose. Clearly, no single jurisdiction has got everything absolutely right, so we should be encouraging a wider debate about how all those involved in the legislative and judicial process might learn from each other and work more closely together to help ensure consistent and reliable standards are in place around the world."
The research points to the Cayman Islands as a preferred offshore jurisdiction for having the most effective insolvency laws. Almost two-thirds of respondents (63%) place the Cayman Islands among the three most effective offshore jurisdictions. It is followed by the British Virgin Islands (48%) and Hong Kong (37%).
Singapore emerged as a very effective location for cross-border insolvency for those with direct experience of multi-jurisdictional insolvency in the territory (75%). However, Singapore was not ranked very highly by respondents who provided feedback on the jurisdiction without direct experience there, indicating a potential gap in perception.
Felicity Toube, QC at South Square, added: ”This research was primarily aimed at looking at the perceptions of practitioners in the insolvency arena. What we find is relatively low satisfaction level, particularly with court infrastructure. It seems that our respondents think that court systems need financial help from their governments so that offshore jurisdictions can meet the increasing demands on them, and can sell themselves better too. We look forward to sharing and discussing the research findings.”
About the research:
The report, From discord to harmony: the future of cross-border insolvency, provides insights into the perceptions of leading insolvency practitioners on undertaking cross-border insolvencies in major offshore jurisdictions. Commissioned by Grant Thornton UK LLP and South Square, the research was undertaken by independent consultancy Meridian West, who gathered the views of lawyers and other insolvency professionals, together representing views from 50 of the leading firms involved in cross-border insolvency from around the world.