A number of investors, including the World Bank and the International Monetary Fund, are demanding reforms on global insolvency laws.
At a meeting held by the United Nations Commission for International Trade Law (Uncitral) and sponsored by the International Bar Association (IBA) and professional insolvency body Insol, financial institutions and representatives from 46 countries put forward proposals for a new draft legislation. Uncitral has set up a working group to look at the proposals and will prepare a draft that is expected to include business reorganisation for both in and out-of-court restructuring. Current insolvency laws are diverse, with some jurisdictions favouring local more than foreign backers. But investors claim that for a country to have a strong economy, it needs to have strong insolvency laws, and investors need to know that if something goes wrong they can get their money out. Neil Cooper, partner at Kroll Buchler Phillips and director of Insol, said that efficient insolvency systems are important for international trade and for stable economic development. "Effective insolvency systems are more relevant now than at any time in the last decade," he said. "Increasing globalisation and the effects of major economies going into recession will test the efficiency of many of the systems of countries where there has been massive investment in recent years." The model draft is expected be ready in two years.