In an earlier article we discussed The Insolvency Service's proposals for the UK to be an early adopter of two new "model laws" published by UNCITRAL relating to insolvency, namely the Model Law on Recognition and Enforcement of Insolvency-Related Judgments (MLIJ) and the Model Law on Enterprise Group Insolvency (MLEG).

The response to the consultation was published last week. The government proposes to proceed with implementation of MLEG as soon as possible. However, the proposed implementation of MLIJ has been paused while the government considers how to address concerns raised by a number of respondents.

The government's proposed adoption of the MLIJ would assist non-UK officeholders looking to gain recognition of "insolvency-related" judgments in the UK. This might include judgments relating to the avoidance of prior transactions and the liability of directors, as well as restructuring plans sanctioned by overseas courts. 

The proposals set out in consultation would enable UK courts to grant recognition and enforcement of an insolvency-related judgment in certain circumstances. However, while the benefits of such recognition may seem obvious, there are also potentially wider, unintended consequences. 

In particular, recognition under the MLIJ could override the longstanding rule that an English-law governed debt cannot be compromised or discharged under the laws of a different jurisdiction. There is a concern that the proposed implementation of MLIJ could create uncertainty for financial market participants, who rely on legal predictability in relation to English-law governed financial market contracts and netting agreements.

While implementation of MLIJ has been put on hold to enable these issues to be considered further, the government proposes to proceed with implementation of MLEG. In doing so, it is likely that the UK will be the first adopter of this model law, which relates to the procedural co-ordination of multi-jurisdictional group insolvencies. The adoption will have little impact in the short-term, until MLEG is widely adopted by other jurisdictions internationally. 

The progress of these model laws (both in the UK, and in other countries) is one to watch. The UK proposals seem to be at least in part motivated by the hope that other jurisdictions will follow suit - but as to that, it seems we may be waiting some time.