Complex multi-jurisdictional insolvencies are an inevitable consequence of the increasingly global nature of big business. The collapse of the likes of Barings, Enron and most recently Lehmans (the latter involving insolvency proceedings in some 16 jurisdictions) have highlighted the growing need for legislative action to promote cross-border co-operation and protect the interests of international creditors. Comprehensive reform is needed, not least to curtail the inequitable practice of forum shopping.

In an ideal world, a global harmonised insolvency system is the logical next step in insolvency policy evolution. However, for the moment it is Europe that is leading the charge. Reform at a European level has been a long term goal since the 60’s but the European Commission’s 2014 recommendations placed harmonisation firmly at the top of the agenda. With international policy powerhouses such as Insol International, The Capital Markets Union and the UN Commission on International Trade also turning their attention to the issue, it seems that a European wide insolvency regime could at last become a reality.

But can one size ever fit all? Kuwait’s recent rejection of proposed insolvency reforms, which essentially sought to impose the US Chapter 11 process, serves as timely reminder that achieving comity will not be as straightforward as exporting one nations system to all. National insolvency regimes have evolved to meet the particular social, economic and legal needs of that state. The Irish examinership process introduced in 1990 to deal with the insolvency of the Goodman group of companies and Italy’s Marzano law which was implemented to save Parmalat, and later amended to deal with the Alitalia case, are both clear examples of this in action.

Whilst there are regional similarities, domestic policy objectives will inevitably clash and so it is widely accepted that effective harmonisation must retain some flexibility, most probably through a best practice or minimum standard approach. The most obvious route is for European wide reform to take its lead from successful national insolvency policy reform where legislators have cherry picked effective and compatible insolvency practices from around the world to implement. This should avoid the resistance encountered in Kuwait where the banks in particular felt they were being shoe horned into the US model.

 The UK, French, German and US regimes, all advocates of the rescue culture, are already key influencers in both established and developing economies. As matters stand, the UK scheme of arrangement and the US Chapter 11 process are viewed as the leading cross-border restructuring regimes with international debtors keen to take advantage of their protections. Tunisia and Morocco have both implemented the French procedures of ‘reglement amiable’ (which promotes pre-insolvency settlement)and ‘redressment judiciare’ (the preparation of restructuring plans during insolvency proceedings). Germany adopted debtor in possession proceedings analogous to those found in Chapter 11 and it is anticipated that the forthcoming UAE system will be heavily influenced by the French regime whilst also bearing the hallmarks of both the German and US models. It is therefore a natural progression to assume that these four heavy weight national insolvency regimes, should and will form the basis of a harmonised European insolvency system.

Such a bespoke regime, adopting international best practices, with universally applicable characteristics has a realistic prospect of success if implemented appropriately. The foundations for this revolutionary step have now been laid but there is undoubtedly a long road ahead to be navigated with caution, particularly if the new system is to meet the specific needs of developing economies whilst preserving and enhancing the position of the more economically sophisticated nations in the global financial markets.