The American Law Institute (ALI) has been embarked on its precedent-setting Transnational Insolvency Project for more than five years. The project is based on an analysis and comparison of insolvency laws and procedures in the United States, Canada and Mexico, and is intended to produce a statement of principles and guidelines for cooperation in cross-border reorganizations and insolvencies.

Among the crucial elements of cooperation in such cases are not only the administrations in the countries involved, but that the supervising courts be able to coordinate their activities to assure the maximum available benefit for the stakeholders of the financially troubled enterprise.

The ALI formulated guidelines to reduce the duplication and overlap between administrations and to narrow the issues in controversy between the parties, consistent with the interests of justice and respect for the laws of each jurisdiction.

The guidelines (which are called "Rules" for convenience) are not intended to be formal or static, but to be adapted and modified to fit the circumstances of individual cases and to evolve as the international insolvency community gains experience from working with them. ABI Journal readers are encouraged to submit comments and suggestions by Dec. 31, 1999 from their own perspectives or experiences that would help the Rules achieve their goals and objectives.¹

The preliminary draft rules applicable to court-to-court communications in cross-border cases are printed below with the ALI's permission.²

Rule 1. A court may communicate with another court in connection with matters relating to proceedings before it for the purposes of coordinating and harmonizing proceedings before it with those in the other jurisdiction.

Rule 2. A court may communicate with an insolvency representative in another jurisdiction or an authorized officer of the court in that jurisdiction in connection with the coordination and harmonization of proceedings before it with those in the other jurisdiction.

Rule 3. A court may permit a duly-authorized insolvency representative to communicate with a foreign court directly, subject to the approval of the foreign court, or through an insolvency representative or an authorized officer of the court in the other jurisdiction.

Rule 4. A court may receive communications from a foreign court or from an authorized officer of the foreign court or from a foreign insolvency representative and shall respond directly if the communication is from a foreign court (subject to Rule 6 in the case of two-way communications) and may respond directly or through an authorized officer of the court or through a duly-authorized insolvency representative if the communication is from a foreign insolvency representative.

Rule 5. Communications from a court to another court may take place by or through the court:
a) Sending or transmitting copies of formal orders, judgments, opinions, reasons for decision, endorsements, transcripts of proceedings or other documents directly to the other court and providing advance notice to counsel for affected parties in such manner as the court considers appropriate;
(b) Directing counsel or a foreign or domestic insolvency representative to transmit or deliver copies of documents, pleadings, affidavits, factums, briefs or other documents that are filed or to be filed with the court to the other court in such fashion as may be appropriate and providing advance notice to counsel for affected parties in such manner as the court considers appropriate;
(c) Participating in two-way communications with the other court by telephone or video conference call or other electronic means in which case Rule 6 shall apply.

Rule 6. In the event of communications between the courts by means of telephone or video conference call or other electronic means, unless otherwise directed by the two courts:
(a) Counsel for all affected parties shall be entitled to participate in person during the communication and advance notice of the communication shall be given to all parties in accordance with the Rules of Procedure applicable in each court;
(b) The communication between the courts shall be recorded and may be transcribed. A written transcript may be prepared from a recording of the communication which, with the approval of both courts, shall be treated as an official transcript of the communication;
(c) Copies of any recording of the communication, of any transcript of the communication prepared pursuant to any direction of either court and of any official transcript prepared from a recording shall be filed as part of the record in the proceedings and made available to counsel for all parties in both courts;
(d) The time and place for communications between the courts shall be to the satisfaction of both courts and personnel other than judges in each court may communicate fully with each other to establish appropriate arrangements for the communication without the necessity for participation by counsel unless otherwise ordered by either of the courts.

Rule 7. In the event of communications between the court and an authorized officer of the foreign court or a foreign insolvency representative by means of telephone or video conference call or other electronic means, unless otherwise directed by the court:
(a) Counsel for all affected parties shall be entitled to participate in person during the communication and advance notice of the communication shall be given to all parties in accordance with the Rules of Procedure applicable in each court;
(b) The communication shall be recorded and may be transcribed. A written transcript may be prepared from a recording of the communication which, with the approval of the court, shall be treated as an official transcript of the communication;
(c) Copies of any recording of the communication, of any transcript of the communication prepared pursuant to any direction of the court and of any official transcript prepared from a recording shall be filed as part of the record in the proceedings and made available to the other court and to counsel for all parties in both courts subject to such directions as to confidentiality as the court may consider appropriate;
(d) The time and place for the communication shall be to the satisfaction of the court and personnel of the court other than judges may communicate fully with the authorized officer of the foreign court or the foreign insolvency representative to establish appropriate arrangements for the communication without the necessity for participation by counsel unless otherwise ordered by the court.

Rule 8. A court may conduct a joint hearing with another court. In connection with any such joint hearing, the following shall apply, unless otherwise ordered:
(a) Each court shall be able to simultaneously hear the proceedings in the other court;
(b) Evidentiary or written materials filed or to be filed in one court shall, in accordance with the directions of that court, be transmitted to the other court or made available electronically in a publicly accessible system in advance of the hearing. Transmittal of such material to the other court or its public availability in an electronic system shall not subject the party filing the material in court to the jurisdiction of the other court;
(c) Submissions or applications by any party shall be made only to the court in which the party making the submission is appearing unless such party is specifically given permission by the other court to make submissions to it;
(d) Subject to Rule 6(b), the court shall be entitled to communicate with the other court in advance of a joint hearing, with or without counsel being present, to establish guidelines for the orderly making of submissions and rendering of decisions by the courts, and to coordinate and resolve any procedural, administrative or preliminary matters relating to the joint hearing;
(e) Subject to Rule 6(b), the court, subsequent to the joint hearing, shall be entitled to communicate with the other court, with or without counsel present, for the purpose of determining whether coordinated orders could be made by both courts and to coordinate and resolve any procedural or non-substantive matters relating to the joint hearing.

Rule 9. The court shall, except upon proper objection on valid grounds and then only to the extent of such objection, recognize and accept as authentic the provisions of statutes, statutory or administrative regulations and rules of court of general application applicable to the proceedings in the other jurisdiction without the need for further proof or exemplification thereof.

Rule 10. The court shall, except upon proper objection on valid grounds and then only to the extent of such objection, accept that orders made in the proceedings in the other jurisdiction were duly and properly made or entered on or about their respective dates and accept that such orders require no further proof or exemplification for purposes of the proceedings before it, subject to all such proper reservations as in the opinion of the court are appropriate regarding proceedings by way of appeal or review that are actually pending in respect of any such orders.

Rule 11. The court may coordinate proceedings before it with proceedings in another jurisdiction by establishing a "service list," which may include parties that are entitled to receive notice of proceedings before the court in the other jurisdiction (non-resident parties). All notices, applications, motions and other materials served for purposes of the proceedings before the court may be ordered to also be provided to or served on the non-resident parties by making such materials available electronically in a publicly accessible system or by facsimile transmission, certified or registered mail or delivery by courier or in such other manner as may be directed by the court in accordance with the Rules of Procedure applicable to the court.

Rule 12. The court may permit the foreign insolvency representative or a representative of creditors in the proceedings in the other jurisdiction or an authorized officer of the court in the other jurisdiction to appear and be heard by the court without thereby becoming subject to the jurisdiction of the court.

Rule 13. The court may direct that any stay of proceedings affecting the parties before it shall, subject to further order of the court, not apply to applications or motions brought by such parties before the other court or that relief be granted to permit such parties to bring such applications or motions before the other court on such terms and conditions as it considers appropriate. Court-to-court communications in accordance with Rules 5 and 6 hereof may take place if an application or motion brought before the court affects or might affect issues or proceedings in the court in the other jurisdiction.

Rule 14. A court may communicate with a court in another jurisdiction or with an authorized officer of such court in the manner prescribed by these Rules for purposes of coordinating and harmonizing proceedings before it with proceedings in the other jurisdiction regardless of the form of the proceedings before it or before the other court wherever there is commonality among the issues and/or the parties in the proceedings. The court shall, absent compelling reasons to the contrary, so communicate with the court in the other jurisdiction where the interests of justice so require.

Rule 15. Directions issued by the court under these rules are subject to such amendments, modifications and extensions as may be considered appropriate by the court for the purposes described above and to reflect the changes and developments from time to time in the proceedings before it and the other court. Any directions may be supplemented, modified and restated from time to time and such modifications, amendments and restatements shall become effective upon being accepted by both court.

Rule 16. Arrangements contemplated under these Rules do not constitute a compromise or waiver by the court of any powers, responsibilities or authority and do not constitute a substantive determination of any matter in controversy before the court or before the other court nor a waiver by any of the parties of any of their substantive rights and claims or a diminution of the effect of any of the orders made by the court or the other court.

Footnotes

¹ Comments may be directed to E. Bruce Leonard, Cassels, Brock & Blackwell, Suite 2100, Scotia Plaza, Toronto, Ontario M5H 3C2; Fax (416) 360-8877; e-mail: [email protected]. Return to article

² The following materials have not been considered by the Council or the membership of the American Law Institute and therefore do not represent the position of the Institute on any of the issues with which they deal. Return to article