Cross-Border Insolvency Law in China and Hong Kong: A Critical Analysis based on the UNCITRAL Model Law on Cross-Border Insolvency

This thesis discusses what features and advantages of the Model Law regime that Chinese law could learn to improve the Chinese cross-border insolvency system at both international and regional levels. Cross-border insolvency is one inevitable consequence of the globalisation of business activity. For solving transnational insolvencies, there is a clash of competing national laws on issues, including the recognition of foreign claims, the process related to the distribution of assets, and different policy preferences for protecting different groups of creditors. The ongoing trend of harmonising cross-border insolvency laws has been actively promoted by the UNCITRAL Model Law on Cross-Border Insolvency. The Model Law was developed based on the principle of modified universalism, and its soft law nature aims to assist national insolvency laws and facilitate recognition of foreign proceedings. Although the interpretation of the law in enacting countries can be different, the thesis concludes that the Model Law can interconnect individual insolvency proceedings in an orderly and effective manner through its main features such as the centre of main interests (COMI) and cooperation and communication. Cross-border insolvency rules in China are conservative, and the only relevant article (article 5 EBL 2006) sets the basic recognition rules, which have a restrictive application, based on the principle of reciprocity and bilateral agreements. However, after reviewing relevant Chinese laws for dealing with international matters, the thesis finds that there are legal concepts under the Chinese commercial law system sharing similarities with the Model Law system, which provide legal potential for China to adopt a modified universalism approach, and this study also argues that adopting COMI could be a good start to improving Chinese international insolvency law. As China includes various jurisdictions, this research also focuses on Hong Kong because of its legal and financial significance. Although Hong Kong has not developed statutory international insolvency law, there is a flexible common law approach, which can achieve similar results as the Model Law system. The interregional insolvency within China is a dilemma between treating cases from other regions (such as Hong Kong) as foreign matters and politically highlighting such matters as national matters. This thesis argues that the close political and economic connections between the mainland and Hong Kong require an effective interregional insolvency recognition regime and transplanting the Model Law regime into a regional context, applying a COMI-based recognition approach, could be a workable system.