Cross-border insolvencies as a global economic problem

Abstract

As a result of the continuing expansion of international trade and investment, there has been an increase in the occurrence of cross-border insolvencies. National insolvency laws have not kept pace with the trend, and there is a need to develop an efficient and fair system for the administration of cross-border insolvencies. The lack of predictability in the handling of cross-border insolvency cases impedes capital flow and constitutes a disincentive to cross-border investment. The object of the Cross-Border Insolvency Act is to create provisions for a fair framework to address instances of cross-border insolvency effectively. It is based on UNCITRAL’s Model Law on Cross-Border Insolvency. The practitioner-inspired solutions that the South African legislation offers are satisfactory and definitely an improvement on the common law position. The only contradiction is that the South African approach towards solving the complicated problems of cross-border insolvencies improves the position of foreign creditors, foreign representatives and foreign courts, while it is still doubtful how foreign courts will treat South African creditors. From this point of view the lack of predictability in the handling of cross-border insolvencies is still subject to criticism as a disincentive to cross-border investment.