First full recognition of foreign insolvency proceedings in the Federal Court under the CBIA

12 June 2009

---

Earlier this year, we reported on consideration by Australian courts of the Cross-Border Insolvency Act 2008 (Cth) (CBIA) and in particular, the interaction between the CBIA and the Corporations Act 2001 (Cth) and between the CBIA and the Bankruptcy Act 1966 (Cth).

In Hur v Samsun Logix Corporation [2009] FCA 372, the Federal Court of Australia recognised Korean insolvency proceedings as foreign insolvency proceedings under the CBIA. This case represents the first time the Federal Court has recognised foreign proceedings under the CBIA on anything other than an urgent/temporary basis.

Cross-Border Insolvency Act

In 1997, the United Nations Commission on International Trade Law (UNCITRAL) adopted the UNCITRAL Model Law on Cross-Border Insolvency (Model Law). The intent was to provide member states with template legislation for adoption into domestic law.

Prior to the introduction of the CBIA, the Model Law had already been adopted in some form into the domestic laws of a number of countries.

The CBIA gives the Model Law the force of law in Australia subject to some minor modifications. As previously reported, the CBIA supplements Australia's existing cross-border insolvency assistance laws.

Facts

Samsun Logix Corporation (Samsun) is a maritime freight forwarder incorporated in South Korea with assets in Australia. In March 2009, the Korean bankruptcy courts placed Samsun into rehabilitation proceedings under which Samsun obtained temporary statutory protection from creditors to allow for corporate reorganisation (Korean Proceedings). The Korean court also appointed Mr Hur, a director of Samsun, as a receiver.

Mr Hur commenced proceedings in the Federal Court for recognition of the Korean Proceedings as "foreign main proceedings" for the purpose of the Model Law. He also sought orders protecting the defendant's Australian assets. In addition to the Federal Court proceedings, Mr Hur had already made similar applications in the United States, the United Kingdom, Singapore and Belgium.

Pursuant to interlocutory orders by the Federal Court, Mr Hur notified potential creditors of his application both directly and by way of advertisements in daily newspapers. No creditor sought to oppose the application.

Mr Hur filed an affidavit setting out the facts which he asserted proved that the Korean Proceedings fell within the meaning of "foreign main proceedings" under the Model Law and that Mr Hur was a "foreign representative" entitled to make the application. These facts were uncontroversial.

On the basis of the affidavit, Jacobsen J was satisfied the relevant criteria under the Model Law had been fulfilled. His Honour accepted that the Korean Proceedings were foreign main proceedings under the Model Law. As such, his Honour granted the protective orders sought.

Comment

One of the stated objectives of the Model Law is the promotion of the "fair and efficient administration of cross-border insolvencies". This fairly simple and straight forward matter demonstrates that the CBIA can serve as a useful tool in facilitating the swift and easy administration of insolvent multi-national corporations.

Given the current global economic conditions it is expected that proceedings under the CBIA will become a more prominent feature of Australian insolvency law in the next few years.

---

This article provides information about topical legal issues.
Information contained in this article is intended as an introduction only and should not be relied on in place of legal advice.