Table Of ContentGlobal Insolvency and Bankruptcy Practice for Sustainable
Economic Development
Global Insolvency and
Bankruptcy Practice for
Sustainable Economic
Development
Vol 1, General Principles and Approaches
in the UAE
Edited by
Tarek M. Hajjiri
Director of Legal Policy, Dubai Economic Council, UAE
and
Adrian Cohen
Partner, Clifford Chance LLP, UK
© Dubai Economic Council 2016
Softcover reprint of the hardcover 1st edition 2016 978-1-137-51574-2
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First published 2016 by
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Title: Global insolvency and bankruptcy practice for sustainable economic
development : international best practice / Tarek M. Hajjiri, Director of
Legal Policy, United Arab Emirates, Adrian Cohen, Partner, Clifford Chance
LLP, UK.
Description: New York, NY : Palgrave Macmillan, 2015. | Includes
bibliographical references and index.
Identifiers: LCCN 2015023523| ISBN 9781137561749 (hardback : alk. paper) |
Subjects: LCSH: Bankruptcy. | Sustainable development – Law and legislation |
Economic development.
Classification: LCC K1375 .H34 2015 | DDC 346.07/8—dc23
LC record available at http://lccn.loc.gov/2015023523
Contents
List of Figures v i
Preface v ii
Notes on Contributors x
1 Regulatory Framework Priorities – The Four Pillars 1
Gordon Stewart
2 Regional and Global Initiatives and Lessons: UNCITRAL
Global Insolvency Standards 19
Jenny Clift
3 The Changing Landscape of Restructuring and Bankruptcy
Law and its Challenges for Financial Institutions 5 9
Derek Sach and Angelina Bopp
4 Law and Development in the Treatment of the Insolvency
of Natural Persons: The World Bank Report on the
Treatment of the Insolvency of Natural Persons 9 5
José M. Garrido
5 Insolvency in Shari’ah and Law: A Comparative Study 1 39
Shaikh Muddassir H. Siddiqui, Esq .
6 Bankruptcy and Bankruptcy Procedure in the United
Arab Emirates 175
James Farn
7 Legal Infrastructure of the DIFC Courts 2 33
Sir Anthony Evans
8 Legal Infrastructure in the UAE – Initiatives and
Development, Banking and Financial Environment 2 43
Ismail Al Bloushi
Index 2 69
v
List of Figures
3.1 UK national income during and after recessions
(pre-recession peak level = 100) 6 1
3.2 Before and after restructuring 7 8
3.3 The sale of an intermediate holding company to a
new company 79
3.4 Turnaround 84
3.5 Business sale/share sale 89
3.6 Use of pre-packs 9 0
vi
Preface
There is a growing acceptance of the importance of legal reform in the
field of bankruptcy and restructuring law as a cornerstone to successful
economic and social advancement. This is evidenced by the increasing
rate of legal reform, over the past 10–15 years or so, across the globe,
whether implemented by jurisdictions influenced by civil or common
law, and whether in countries with mature or emerging economies. The
financial crisis of 2007–2008 and its aftermath merely served to act as a
catalyst to this trend and perhaps brought an added focus to bank reso-
lution and the need to address the systemic threat of bank failure to the
financial system.
How an economy handles financial and business distress has a
major impact on the confidence of business, which in turn determines
the availability of investment and cost of credit, which in turn drive
economic growth.
Bankruptcy tests a legal system to destruction. It takes a stakehold-
er’s rights – whether under contract, property, security, company or
employment law (the list is inexhaustible) – in each case subject to
an overlying legal framework designed to resolve the inherent conflict
between competing interests and produces a result often under extreme
stress. It gives rise to important questions: Does the bankruptcy regime
facilitate the turnaround of business where there is considerable enter-
prise value? Does it enable the efficient reallocation of capital where
there is little enterprise value left? Does it provide readily understood
rules for entrepreneurs, investors, employees, trade and financial credi-
tors? Does it provide for transparency and due process? And does it
provide, on the one hand, for appropriate sanctions, and on the other,
for the opportunity for rehabilitation? All of these questions have to be
addressed in turn against the backdrop of each jurisdiction’s history,
culture, tradition and social and economic needs. Having said that,
there is also a great deal of international convergence, whether through
the adoption of the UNCITRAL Model Law on Cross-Border Insolvency,
the application of the EU Regulation on Insolvency and other EU
legislations, or simply through the adoption of similar practices at the
domestic level, encouraged by international agencies including, promi-
nently, the World Bank.
vii
viii Preface
The origins of the twin volumes constituting Global Insolvency and
Bankruptcy Practice for Sustainable Economic Development lie in a far-sighted
conference hosted by the Dubai Economic Council in 2012, following
the financial crisis of 2009 and 2010 in the Gulf. The conference brought
together representatives from the key institutions of the United Arab
Emirates, as well as local practitioners and experts, including lawyers,
bankers, accountants and judges, from a number of key jurisdictions,
including the United States, England and Wales, and Singapore.
The conference produced a number of papers on a wide range of
subjects. These two volumes consist of chapters based on those papers,
reflecting the context in which they were given but edited and revised
to bring the content up-to-date.
Volume 1 focuses on general principles as well as practice within the
United Arab Emirates. Volume 2 focuses on international best practice.
Volume 1 starts with a chapter by Gordon Stewart, president of Insol
at the time of the conference, who sets the context with his expos-
ition of the four pillars of regulatory framework principles. Jenny Clift
explains the history and application of the UNCITRAL Model Law on
Cross-Border Insolvency that has done so much to drive comity. Derek
Sach gives the perspective of a major UK clearing bank on the chal-
lenges faced by financial institutions. Jose Garrido, of the World Bank,
focuses on the treatment of the insolvency of natural persons. Muddassir
Siddiqui gives a comparative study of Islamic Shari’ah principles with
modern bankruptcy regimes. James Farn, a local practitioner with Hadef
& Partners, describes bankruptcy in the UAE, and Sir Anthony Evans
describes the legal infrastructure of the DIFC Courts.
Volume 2 has chapters on English, US, and Singaporean law. The first
chapter, by Adrian Cohen and Gabrielle Ruiz, provides an overview of
corporate restructuring and insolvency in England and Wales. Hani
Bishara of Ernst & Young describes the role of insolvency practitioners in
the UK. Mitchell Seider, Adam Goldberg and John Holman of Latham &
Watkins describe the reorganisation process in the United States under
Chapter 11 of the US bankruptcy code. Judge Arthur Gonzalez, chief
judge of the US Bankruptcy Court, gives the perspective from the court-
room on enforcing US bankruptcy law. David Curry, a legal consultant
and attorney advisor to the commercial law development program of
the US Department of Commerce, and former partner at Mayer Brown
LLP, and Joe Schorer, of Kirkland & Ellis, provide a comparative analysis
of duties and liabilities of directors and officers under US and UK law.
Finally, Andrew Chan, of Allen & Gledhill, provides the perspective on
financial restructuring and bankruptcy from Singapore.
Preface ix
As we are going into print, we understand that the UAE Cabinet has
approved a final draft of the new UAE federal bankruptcy law. Although
we have only been able to review an unofficial translation of a near
final draft, it appears that the law will introduce: (a) a new enhanced
protective composition regime; and (b) a twin track bankruptcy process,
encapsulating either (i) rescue and restructuring within bankruptcy
proceedings, or (ii) formal liquidation procedures, in each case with
the inclusion of many useful features such as moratoria, ipso facto
provisions (which prohibit the use of insolvency triggered contractual
termination clauses in commercial contracts) and debtor in possession
financing, enabling a debtor to raise priority funding during a rehabili-
tation process. Importantly, the new law also fully embraces the inclu-
sion of accredited industry experts to oversee the new bankruptcy and
composition procedures and assist the court, which is a welcome and
pragmatic step.
As the existing UAE bankruptcy law was last updated in 1993, it is
indeed time for the law to be modernised, in order to keep pace with the
impressive growth and sophistication of the UAE economy in the inter-
vening years. It is hoped that the new law will provide a viable mech-
anism for UAE companies to rehabilitate and restructure, promoting a
spirit of entrepreneurialism, whilst maintaining appropriate safeguards
for the rights of creditors.
The UAE government’s efforts to seek to integrate international best
practices into local legislation in order to promote a rescue culture are
highly commendable, and which will undoubtedly benefit the wider
UAE economy.
The editors sincerely hope that in each of the chapters, readers will
find insights will influence the future factors which have driven the law
reform agenda of recent years and into the direction of travel for legisla-
tive change in the UAE and elsewhere.
Finally, the editors would like to take the opportunity to thank Kara
Gouyez Benallal, a legal associate at the Dubai Economic Council, and
Gabrielle Ruiz, a senior lawyer at Clifford Chance, together with the staff
of Palgrave Macmillan, for all their hard work in helping to realise this
project.
Tarek M. Hajjiri and Adrian Cohen
