Navigating Cross-Border Insolvency in International Trade

Importance of Cross-Border Insolvency Laws
• Sound insolvency laws integrate cross-border regimes into a nation’s legal ecosystem, providing legal certainty and improving the health of trading entities.
• They benefit investments and international trade.

Implementing the Model Law
• The UN Commission on International Trade Law (UNCITRAL) has been implementing its Model Law since the late 1990s.
• Only 60 countries have adopted the Model Law, with variations due to its non-binding nature.
• India has yet to adopt the Model Law despite several committee recommendations.

India’s Current Insolvency Provisions
• India has been executing Free Trade Agreements (FTAs), Comprehensive Economic Corporation Agreements (CECAs), Comprehensive Economic Partnership Agreements (CEPAs) and their equivalents.
• FTAs/CEPAs lack detailed cross-border insolvency provisions, despite their importance to trade.
• The ground-level verdict on the Model Law is not out on its optimum solution, but some scholars suggest that international treaties, frameworks, and protocols can be tailored to address individual cases.

The Need for Insolvency Laws in FTAs
• FTAs are incomplete without cross-border dimensions.
• There is a need to integrate perspectives on the importance of insolvency laws with global trade in multilateral or bilateral routes.
• FTAs need to factor in appropriate mechanisms to weather the consequences of insolvency of trading entities.
• The practical feasibility of interlinking insolvency with FTAs is best assessed by the Commerce Ministry, the Insolvency and Bankruptcy Board, and legal experts.