Uncertainty in the UNCITRAL Model Law and the European Insolvency Regulation?
Although he describes Judge Drain's decision in In re SPhinX Ltd as pragmatic and commercial, Chris Mallon of Weil, Gotshal & Manges uses the case in an article entitled:
Bankruptcy Blunder
to illustrate his view that the uncertainty inherent in the Model Law makes credit-risk assessment very difficult and encourages forum shopping (and he expresses similar concern about the European Insolvency Regulation).
I think the benefits of legislation encouraging cooperation between insolvency regimes far outweigh the risks of forum shopping. Of course parties will seek to gain advantage from any perceived uncertainty and some courts may react less predictably than others, but the COMI concept and its interpretation is becoming familiar to most practitioners.
Certainly in Europe the debate has moved beyond COMI to considering how to manage cooperation between main and secondary proceedings, particularly in relation to creditors' rights to claim in either or both, or whether secondary proceedings are better avoided altogether by recognition of creditors' local rights in main proceedings.
