In 2023 the American Law Institute (ALI) will celebrate its 100th anniversary. Since decades, ALI is the leading independent organization in the US producing scholarly work to clarify, modernize, and otherwise improve the law. With its Restatements of the Law, Model Codes, and other soft law instruments, ALI is enormously influential in the US courts and its legal research and education.
ALI goes international in 2003. It took seventy years for ALI to clearly look beyond the US borders. It initiated an ‘international’ study in the area of bankruptcy. Its result came to be known as ‘Transnational Insolvency Project: Principles of Cooperation Among the NAFTA Countries’ (1993-2003), with Jay Westbrook, University of Texas School of Law, Austin, Texas, as its main reporter. This work was a joint effort of ALI with the International Insolvency Institute (III) as weel as a pioneering effort in cross-border or ‘transnational’ law reform influenced bankruptcy cooperation among the NAFTA- states, ie United States, Canada, and Mexico. The ALI Guidelines Applicable to Court-to-Court Communications in Cross-Border Cases produced together with the 2003 Principles were already soon endorsed by several organizations, including the National Conference of Bankruptcy Judges, the National Bankruptcy Conference, and the Canadian Judicial Council.
ALI-III Global Principles and Guidelines 2012. In 2006 a study was undertaken by Ian F. Fletcher and myself, professors at University College London (UK) and at the University of Leiden (the Netherlands) respectively. ALI (represented by its Director Geoffrey Hazard) aan III (presided then by Bruce Leonard, Canada) assigned to us a research concentrating on the query whether a worldwide acceptance of ALI NAFTA Principles would be possible (and if so, what changes etc should be made) and which refinements would then be necessary for the ALI Guidelines Applicable to Court-to-Court Communication in Cross-Border cases. The study undertaken was conducted over a period of six years, ending in 2012, in a 300-page supportive report demonstrating that, subject to certain necessary modifications, the essential provisions of the 2003 ALI report would be fully capable of acceptance in jurisdictions across the world.
Text. The full text of the Final Report of the ALI-III Global Principles and Guidelines 2012 is available via https://www.ali.org/publications/show/transnational-insolvency/project. The Report was produced in collaboration with expert consultants (members of ALI or III and independent advisors, around 100 in total) representing more than 30 different countries, reflecting a wide and representative cross section of the different legal traditions and styles around the globe. These ALI-III Global Principles and Guidelines 2012 constitute a nonbinding statement, drafted in a manner to be used both in civil-law as well as common-law jurisdictions, and aim to cover all jurisdictions in the world.
Re-posting in 2027. III recommended the ALI-III Global Principles and Guidelines 2012 for use in all regions of the world. In August 2017 III re-posted the ALI-III Global Principles for Cooperation in International Insolvency Cases 2012. See https://bobwessels.nl/blog/2017-09-doc1-ali-iii-global-principles-and-guidelines-2012/. In the publication posted in August 2017, the blackletter text of the ALI-III Global Principles and Guidelines 2012 is reproduced. In the Final Report detailed Comments, Notes, and references pertaining to the individual Principles and Guidelines are provided.
Impact upon European legislative practice. It has been gratifying to note that the Global Principles and Guidelines were welcomed, for instance by the European Commission, drafting its recast version of the European Insolvency Regulation of 2015, coming into effect 2017. See: Commission Staff Working Document (Impact Assessment, SWD(2012) 416 final), p. 24:
“In order to ensure the coordination of proceedings opened in several Member States, the Regulation obliges insolvency practitioners to communicate information and cooperate with each other. Several guidelines for practitioners on cooperation and communication in cross-border insolvencies have been developed by associations of practitioners” [footnote 51]
[footnote 51] “The most recent example are the Global Principles for Cooperation in international insolvency cases from the American Law Institute and the International Insolvency Institute, elaborated by Ian Fletcher and Bob Wessels (2012).”
Impact upon courts in UK and US. One of the first courts already in the year of publication of the ALI-III Global Principles and Guidelines 2012 is no less than the Supreme Court of the The United Kingdom (Conjoined Appeals in (1) Rubin & Anor v Eurofinance SA & Ors and (2) New Cap Reinsurance Corp Ltd & Anor v Grant and others) [2012] UKSC 46 (24). The Supreme Court has referred to
‘… the modern approach in the primary international and regional instruments, the EC Insolvency Regulation on Insolvency Proceedings … and the Model Law, which is that the jurisdiction with international competence is that of the country of the centre of main interests of the debtor (an expression not without its own difficulties). It is ultimately derived from the civil law concept of a trader’s domicile, and was adopted in substance in the draft EEC Convention of 1980 as a definition of the debtor’s centre of administration: see Report by M Lemontey on the draft EEC Bankruptcy Convention, Bulletin of the European Communities, Supp 2/82, p 58; American Law Institute, Transnational Insolvency: Global Principles for Co-operation in International Insolvency Cases (2012), Principle 13, pp 83 et seq.’
It was soon followed by a court of appeal example from the US, see United States Court of Appeals for the Third Circuit (in Re ABC Learning Centres) on 27 August 2013. The Court made references to Global Principle 1, citing that it sets out
‘… the overriding objective [which is to] enable … courts and insolvency administrators to operate effectively and efficiently in international insolvency cases with the goals of maximizing the value of the debtor’s global assets, preserving where appropriate the debtors’ business, and furthering the just administration of the proceeding’.
Another part of the June 2012 Global Principles Report is cited too:
‘… [T]he emphasis must be on ensuring that the insolvency administrator, appointed in that proceeding, is accorded every possible assistance to take control of all assets of the debtor that are located in other jurisdictions.” Id. at cmt. to Global Principle 24’.
I do not know of a research looking for other court cases referring to the Global Principles.
Structural impact upon courts in England and Wales. The Business and Property Courts of England & Wales Chancery Guide of 2022, see https://www.judiciary.uk/wp-content/uploads/2022/08/Chancery-Guide-2022-28-7-22.pdf, include – since its earlier version of 2017 – the Global Principles among the three sets of soft law instruments to use in cross-border insolvency cases. That can be quite significant given the UK’s open attitude for cross-border cooperation in insolvency matters. The Chancery Guide provides:
‘Court-to-Court communications in cross-border insolvency cases
21.79 Communication between courts in different jurisdictions may be of assistance in the efficient conduct of cross-border insolvency cases. Reference should be made to:
(a) The American Law Institute/International Insolvency Institute’s Guidelines for Court-to-Court Communications in International Insolvency Cases
(b) The EU Cross-Border Insolvency Court-to-Court Cooperation Principles
(c) The Judicial Insolvency Network Conference’s Guidelines For Communication And Cooperation Between Courts In Cross-Border Insolvency Matters
21.80 In a cross-border insolvency case, the insolvency practitioner involved, together with any other interested parties, should consider at an early stage in the proceedings whether the court should be invited to adopt one of these sets of guidelines for use in the proceedings, with such modifications as the circumstances of the case may require.’
Impact on 4 courts adopting cross-border insolvency protocol. In the ongoing restructuring of the LATAM Airlines group, the joint provisional liquidators of four group members pursued the adoption of a cross-border insolvency protocol in the Cayman Islands. This protocol was (i) with a view to enabling direct court-to-court communication between the courts in the US (New York), Chile, Columbia and the Cayman Islands. The approval of a protocol on court-to-court cooperation and communication, an idea which was raised by the court in Chile, was a ‘first’ for the Grand Court of the Cayman Islands, which urged a review of the jurisdictional basis for entering into the protocol. Kawaley J considered that the exercise of the court’s power is derived from its inherent jurisdiction ‘… fortified it might be said by the constitutional protections for judicial independence’, to manage its own processes.
In a 2018 Cayman Island’s court Practice Direction, it was stipulated that liquidators could enter into cross-border insolvency protocols, with the court’s approval. For that purpose, the Practice Direction recommends that parties consider two specific soft law instruments: the ALI-III Global Guidelines and the JIN Guidelines. The joint provisional liquidators proposed a protocol that was distilled from the ALI-III Global Guidelines to be concluded between the courts. Kawaley J: ‘… courts have inherent jurisdiction’ also for a protocol between the courts themselves, facilitated by the JOLs, see In the Matter of LATAM Finance Limited et.al – FSD 105, 106 and 154 of 2020 (IKJ) Reasons, at 26, available at: <https://files.lbr.cloud/public/2020-08/Latam%20Cayman%20protocol%20judgment.pdf?WRo8Xc6doJUPniNxLgaMPFPyMta3j13B=>.
Kawaley J considered in particular the importance of soft law instruments to assume its jurisdiction to approve court-to-court cross-border insolvency protocols: ‘The Practice Direction and the ALI/III and JIN Guidelines may be viewed as emerging sources of law which have been described as “soft law instruments”: Gert-Jan Boon and Bob Wessels, ‘Soft Law Instruments on Restructuring and Insolvency Law: Why They Matter (or Not)’. It is these instruments that most directly provide a jurisdictional basis for approving the Protocol, building on the more substantive common law principle mandating assisting foreign insolvency courts as far as possible and the inherent jurisdiction of the Grand Court to manage its own processes. (…)’. The judge has been reading our blog on Oxford Business Law Blog, see https://blogs.law.ox.ac.uk/business-law-blog/blog/2019/07/soft-law-instruments-restructuring-and-insolvency-law-why-they-matter
Impact on European soft law insolvency instruments: EU JudgeCo Principles and Guidelines. In 2015, I published a set of EU cross-border insolvency court-to-court cooperation principles (the EU JudgeCo Principles) to try to overcome some of the present obstacles for courts in EU member states – such as formalistic and detailed national procedural law, uneasiness with the use of certain legal concepts and terms, and, of course, language. The 26 EU JudgeCo Principles include a set of 18 EU cross-border insolvency court-to-court communications guidelines (EU JudgeCo Guidelines), which aim to strengthen efficient and effective communication between courts in EU member states in insolvency cases with cross-border effects. The EU JudgeCo Principles are a sign of the times, in that they promote international cooperation in restructuring and insolvency, and strive to achieve greater, timely co-ordination among countries in multinational business reorganisations or restructurings. The EU JudgeCo Principles and EU JudgeCo Guidelines to a large extent were inspired by the ALI-III Global Principles and Guidelines 2012. For the EU project I served as the main drafter and prof. Fletcher chaired a 50+ experts Review & Advisory Group. As the instrument’s aim was to provide a (legally non-binding) standard or statement of Principles and Guidelines suitable for application within the specific EU context in cross-border insolvency cases (ie the later EU Insolvency Regulation (recast of 2015), the EU JudgeCo Principles and EU JudgeCo Guidelines were tailored into the specific legal environment of the EU Insolvency Regulation and aligned with its specific legal concepts. These guided our work, generally reflected in six areas: (1) consistency with international norms in the area of international insolvency, (2) the goals of the EU, (3) the existence of different national procedural law in the EU Member States, (4) the existing EU Insolvency Regulation, (5) ongoing European case law, and (6) developments within the EU legislature and the European Judicial community. For further background and the full texts of the EU JudgeCo Principles and Guidelines see https://www.universiteitleiden.nl/en/research/research-projects/law/eu-judgeco-platform.
A personal assessment. ALI-III Global Principles and Guidelines 2012 have been used by the European legislature, have assisted courts in their decision making and generally have been viewed (the original guidelines or its European sister) as useful and practical by both scholars and practitioners. In the last decade in the area of court-to-court cooperation they have formed a solid building block. The ALI-III Global Principles and Guidelines 2012 form a part of an ever growing volume of soft law instruments. Together with Gert-Jan Boon, a PhD researcher from Leiden (known as he is from the decision of the Gant Court of the Cayman Islands) we have been studying ‘soft law in insolvency matters’, and writing about it, see e.g. https://bobwessels.nl/blog/2019-05-doc2-soft-law-restructuring-and-insolvency-instruments/. Soft insolvency law has its pros, with expert knowledge around the table, a less politicised compromise, ‘soft’ as it does not compromise sovereignty and challenging, as it be convincing in its own right. European scholars and practitioners, generally, have been positive with regard to the use of the EU JudgeCo instruments, see (several parts in) Wessels/Madaus, International Insolvency Law Part II. European Insolvency Law, Deventer: Wolters Kluwer, 5th ed., 2022,
However, I am aware of the cons too. These instruments can sometimes hardly be found (libraries/websites, I’m afraid this goes for the ALI-III Global Principles and Guideines 2012 too) and many times ignore a revision or update (in, say, seven to ten years after its first publication. Evidently, they are non-binding and in Europe especially by the judiciary they encounter unfamiliarity, professional reluctance as well as uncertainly, because many times soft laws instruments are written in English (see e.g. Lynch Fannon/Gant/Finnerty, Corporate Recovery in an Integrated Europe. Harmonisation, Coordination, and Judicial Cooperation, Edward Elgar 2022. The EU JudgeCo instrument is used by English courts, as well as Dutch courts, see https://www.rechtspraak.nl/English/Pages/International-Insolvency.aspx#cb01f363-fd8e-4073-8fe3-1113887a8b5a5a3194d6-d64d-45e7-929b-bc40836492a26. However, from the latter publication it follows that obstacles in cross-border judicial cooperation in several other European countries are problematic. Many of the soft law instruments, including those applying in Europe, demand the judiciary to face and tackle the inherent challenges cross-border preventive restructuring will present in the very near future.
Congratulations ALI! My sincere congratulations, American Law Institute, with your (double golden!) birthday. I congratulate you on your grand achievements and convey my best wishes for your active life in 2023 and further. In the area of cross-border insolvency someone is needed to stand out from the rest, which you did in the last decade of the last century. This has been an inspiration for many to follow. Today, international insolvency law is confronted with growing differences in social, economic and political priorities, a new born self-belief (Brexit) leading to upcoming territorialism, signs of increasing protectionism (‘America First’), while in existing insolvency instruments the existence of adequate and judicial capacity is presumed and their texts do not fully reflect economies in areas beyound North America and Europe. Moving into your second century, your work will be all the more important. Consider initiating a new initiative in the cross-border insolvency and restructuring area, with existing and new members, with existing and new insolvency instruments and with other soft law organisations from around the world. By fostering the spirit of judicial cooperation in insolvency, you can stay young for a long time rather than grow old (although healthy). The most beautiful years of your ‘transnational’ life begin anew every decade.