News

Asset tracing and recovery (ATR) in insolvency proceedings
The 63rd session picked up from the previous session and commenced with a review of an updated draft of the descriptive, informational and educational draft text on asset tracing and recovery in insolvency proceedings (ATR). The objective of the Working group is to raise the level of awareness of ATR tools that are available in cross-border cases. The current draft, which now reflects the latest submissions by, inter alia, the EU, Grip 21 and UNIDROIT and other observers as well as delegate input, provides an extensive overview of ATR tools found in the insolvency regimes of certain jurisdictions and in UNCITRAL insolvency texts to achieve said objective. Indeed, policy makers, legislators and judges but also practitioners and researchers will no doubt will find the (further updated) text very helpful when assessing the availability, accessibility, effectiveness and efficiency of their domestic (and cross-border) ATR frameworks.

The Working group acknowledged that increasing ATR tools’ effectiveness on a global level is essential in a digital age, given namely the ease of movement of (digital) assets cross-border and the instant conclusion of multiple transactions whose parties may not be (immediately) identifiable. That said, it is also acknowledged that technological advancement may allow for more flexible, creative and innovative ways to keep up with (traditional) ATR challenges. The toolkit intends to assist with those endeavours and, at the same time, connects the reader to the work of other organisations that are active in this area of policy making (for instance UNIDROIT).

The Working Group – principally – supported both the text of the current draft and the associated appendix. The toolbox approach for ATR in insolvency proceedings as described in appendix I was widely welcomed, although more debate is required. For anyone interested in the topic of ATR, the draft text can already provide an insightful read.

Applicable law in insolvency proceedings
The second part of the session was devoted to the very difficult matter of the law applicable in insolvency proceedings. The project on applicable law in insolvency proceedings has already reached the stage of draft legislative provisions with accompanying commentary. 

A lively session highlighted the complexities of cross-border insolvency and workout-situations both for practitioners and law-makers. The Working Group deliberated the scope and content of the issues covered by the lex fori concursus but the most difficult discussions evolved around the carve-out provisions in the legislative text and namely the law applicable to avoidance claims, the treatment of secured creditors enjoying rights in rem security, the potential impact on payment and settlement systems in the financial sector and the potential impact on pending litigation or arbitration proceedings. Most prominently, the ability of the lex fori concursus of a (main) insolvency process to stay or amend the security interest in collateral situated/located abroad was a topic of intense debate. While some delegations strongly supported the application of the lex fori concursus, others disagreed fundamentally.

On all subjects, the Working Group made significant progress but also requested that the Secretariat performed additional research on options that were discussed. For the European lawyer it will be interested to hear that the EU delegation appears to have abandoned a position that firmly demanded the adoption of Art 8 EIR, which would prohibit any impairment of security rights in assets located/situated in another Member State. Instead, the EU introduced a compromise text that included the ability to impair such security rights under the insolvency law of the country where the assets are located/situated. It stands to reason that such a compromise would also be the approach for a tentative reform of Art 8 EIR in the near future.

Frank Tschentscher, Deloitte Legal
Florian Bruder DLA Piper