Modified Universalism and the Proposed Adoption of the UNCITRAL Model Law on Cross-Border Insolvency in Hong Kong-From the Hanjin Shipping Bankruptcy Case

• Published in: Journal of maritime law and commerce Vol. 50; no. 1; pp. 21 - 43
• Main Authors: Wang, Eugene Y C, Yeung, Jacky C K, Chen, Linsey
• Format: Journal Article
• Language: English
• Published: Bristol Roger Williams University, School of Law 01.01.2019
• Subjects: Access; Bankruptcy; Borders; Bunkers; Collapse; Cooperation; Court hearings & proceedings; Economic conditions; Economics; Financial services; Insolvency; Interest groups; International cooperation; International trade; Jurisdiction; Law; Legislation; Local knowledge; Morality; Provisions; Ratings & rankings; Recognition; Reorganization; Residence; Shipping; Shipping industry; Signatures; Sovereignty; Universalism; United Kingdom > UK; Hong Kong China; China
• ISSN: 0022-2410; 2162-4127

In Hong Kong, the principal piece of legislation governing corporate insolvency is the Companies (Winding Up and Miscellaneous Provisions) Ordinance ("C(WUMP)0"). In about October 2015, the Companies (Winding Up and Miscellaneous Provisions) (Amendment) Bill 2015 ("the 2015 Bill"), was introduced in the Legislative Council of Hong Kong. At the consultation stage, insolvency practitioners and the Hong Kong Institute of Certified Public Accountants proposed that Hong Kong should consider adopting the UNCITRAL Model Law on CrossBorder Insolvency ("Model Law") to give greater certainty to the framework of the cross-border insolvency practice and to align with the development of various developed economies, including Australia, the United Kingdom, Canada, the United States, Japan and South Korea. Such a proposal was, however, not taken by the Legislative Council and the Hong Kong Government. It was the view of the Hong Kong Government that there were only 23 signatories adopting the Model Law, and most of the Hong Kong major trading partners had not done so. It would be better for Hong Kong to keep in view international developments before deciding whether to adopt the Model Law. As a result, when the 2015 Bill was passed in May 2016, there were no provisions seeking to incorporate the Model Law into the legislation of Hong Kong.Neither those proposing the incorporation of the Model Law nor the Hong Kong Government gave a detailed illustration of how the Model Law could possibly lead to a greater certainty to crossborder insolvency, or why it was necessary to adopt a 'wait and see' approach. This paper first seeks to fill such a knowledge gap by: (i) examining the theories of cross-border insolvency; (ii) the provisions of the Model Law; and (iii) other methods of promoting the doctrine of Modified Universalism. The authors of this paper propose that Modified Universalism appears to be the most ideal approach to cross-border insolvency. However, while agreeing to the view that the Model Law is comprehensive and shall promote Modified Universalism and achieve some procedural certainties, it is proposed that adopting the Model Law into local legislation may not be what creditors desire.And there is a simpler method to achieve Modified Universalism compared to adopting the entire Model Law in Hong Kong. Taking the recent collapse of the Hanjin Shipping Co. Ltd ("Hanjin Shipping") as an example, the authors of this paper shall further illustrate the limitations of adopting the Model Law. It is argued that the creditors of an insolvent debtor company may not be able to gain as much certainty as they thought in terms of how the court in the foreign jurisdiction will decide on the matter of collection, realization and distribution of the debtor's assets.