What are the CBIR and how are they useful?
The Cross-Border Insolvency Regulations 2006, a UK statutory instrument (SI 2006/1030), have become a more significant tool for insolvency practitioners since 31 December 2020, when the transition period ended after the UK had left the EU. Other EU insolvency office-holders now need to use the CBIR (or the Northern Ireland equivalent) to deal with assets in the UK, whereas previously they were able to use the provisions of the European Insolvency Regulation, which no longer applies to the UK. What this means is that a UK insolvency practitioner may well be appointed to act on behalf of an EU office-holder if an insolvent EU company or individual has assets in the UK.
This is not new law
The CBIR are the British implementation of the UNCITRAL Model Law on Cross-Border Insolvency, adopted by the UN in 1997. Some 50 countries have implemented the Model Law and we have 15 years of experience of using the CBIR in the UK in non-EU cross-border insolvency cases.
How do the CBIR work?
The first step is an application by the non-UK office-holder, the “foreign representative”, to the UK court for recognition of the foreign insolvency proceedings. Once recognised, but often by means of a concurrent application, the foreign representative can apply for powers equivalent to those of a UK office-holder in UK proceedings. Since most foreign representatives are not intimately familiar with the law and practice in the UK, they commonly seek the assistance of a UK insolvency practitioner. That role may be advisory, but frequent use is made of the provision for the court to entrust the administration or realisation of all or part of the debtor’s assets located in Great Britain to a person designated by the court, and that person will almost always be a UK insolvency practitioner.
Communication and cooperation
At Mercer & Hole, we have a long history of communicating and cooperating with insolvency professionals from other jurisdictions. We know many of them through INSOL Europe, INSOL International, the TAGAlliances and hww cooperation partners. Communication and cooperation are fundamental to the successful execution of any cross-border restructuring or insolvency; they are the lubrication allowing the mechanism of the legal framework to function. Without communication and cooperation that mechanism will seize up. In our world of restructuring and insolvency we are used to our own local laws, rules and systems. The challenge comes when we try to make them work with someone else’s. The CBIR require cross-border cooperation between courts and insolvency office-holders. Communication and cooperation are also likely to be the best way to achieve your objectives in a jurisdiction other than your own where the law, practice and customs are not familiar to you. Do contact us if you think you may need to use the CBIR or have any other UK cross-border issue and we will be happy to help and advise you.