In anticipation of the UK’s economic downturn, US law firms are lobbying the UK Government to change insolvency laws in the UK, making them more like those established in the US.
The European High Yield Association, a trade association with a significant number of US law firm members, has proposed amendments to the Insolvency Act that would reduce the power of customers and suppliers during administration.
Firms such as Cadwalader Wickersham & Taft, Kirkland & Ellis and Latham & Watkins are members of the association, along with a number of investment banks such as Goldman Sachs and investors such as BlueBay Asset Management.
Clifford Chance partner Nicholas Frome said: “I think any focus on the UK’s insolvency regulations is welcome. However, the complexity of the system in the UK needs to be considered carefully.
“It’s not as easy as just taking laws and putting them in another jurisdiction.”
UK laws on insolvency have come under fire for not incorporating an interim phase for company directors to establish the best rescue procedure for the business.
Latham partner Bryant Edwards said: “Investors in the US suffer much less during administration. I don’t think this is about picking up a US regime and applying it to the UK. It will take aspects of US law that will work in the UK and will benefit everyone.”
A bouyant market has left restructuring practices with far fewer instructions than in previous years.
Edwards said: “Who knows when the music will stop, but at some point there’ll be a downturn and London will need to be prepared for it.”