Vol 19 (2022) - Issue 5

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UK Consultation on New UNCITRAL Model Laws: Gibbs Survives (for Now)

Synopsis
Proclaiming the UK's commitment to international cooperation in respect of insolvency proceedings and the sponsoring of international best practice, the UK Insolvency Service launched a public consultation which proposes to adopt:
– a modification to the UNCITRAL Model Law on Cross-Border Insolvency (the 'Original Model Law') which would facilitate the recognition and enforcement of insolvency-related judgments, via a provision known as 'Article X' – though stopping short of overturning the long-standing 'rule in Gibbs' (that any discharge of, or variation to, a contractual obligation must be governed by the proper law of the contract); and
– the UNCITRAL Model Law on Enterprise Group Insolvency (the 'Group Model Law'), which provides tools to manage and co-ordinate insolvencies within corporate groups, while respecting that each company remains a separate legal entity.
The UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments (the 'Judgments Model Law') is a separate model law providing for recognition of foreign insolvencyrelated judgments (which would include foreign plans of reorganisation compromising English law debt, thereby effectively overturning the 'rule in Gibbs').
The consultation announces that the Insolvency Service does not consider it appropriate to implement the Judgments Model Law in full at the present time, to avoid 'as yet unanticipated effects' upon domestic contract law. Instead, the Insolvency Service will issue a further call for evidence on the 'rule in Gibbs' in due course.
If the UK does implement Article X or the Group Model Law into national law, it would be the very first jurisdiction to do so.