Richard Marles (Corio, Australian Labor Party) Share this | Hansard source

The Cross-Border Insolvency Bill 2008 connects this country to a global insolvency scheme. Laws governing insolvency are utterly fundamental to the economy. They provide for the timely notification of corporations which are going into a stage of financial ill-health. They provide for careful dealing with sick companies, if you like, by company doctors through careful notification of those procedures. And when a company gets into a position where it does, in effect, die and its assets need to be divided up, insolvency laws provide for measured and fair means by which those assets are divided between the various creditors of the company.

In 2008 both companies and individuals are increasingly becoming debtors and creditors across international borders; increasingly, contracts are being made across varying jurisdictions. In May 1997 the United Nations Commission on International Trade Law adopted the model law on cross-border insolvency, which was an attempt to put in place a global scheme covering insolvency laws. Indeed, the Australian government had been a key player in the early 1990s in the development of the model law. This bill we are discussing today gives application to the model law in the Australian jurisdiction. The Corporations Law Economic Reform Program discussed the application of the model law to Australia on a number of occasions, and it was first raised and a number of recommendations were put forward in the CLERP 8 paper in December 2002 entitled ‘Cross-border insolvency’. This bill closely follows the recommendations in that paper. As the previous speaker mentioned, it is a pity that it has taken 11 years from the original model law being adopted by the UN Commission on International Trade Law and more than five years since the CLERP paper was published—a significant amount of time since both those actions—for it to become law in this country. It is a credit to the Rudd Labor government that this will become law within a few months of its election. This bill is also the result of significant consultation with a range of practitioners, lawyers and academics in the field.

The model law connects to the Australian jurisdiction by referencing a number of laws which exist within our own jurisdiction. Clause 8 of part 2 of the bill cites the Bankruptcy Act in relation to individuals and chapter 5 of the Corporations Act 2001, excluding parts 5.2 and 5.4A, as being the relevant provisions of the Australian law to which the model law is referenced. In addition to that there is also section 601CL of the Corporations Act which applies to companies. Clause 10 of part 2 of the bill refers to the relevant courts in Australia as being the Federal Court of Australia when we are talking about individual bankruptcy and the Federal Court of Australia and the various supreme courts of the states and territories where we are talking about insolvency of corporations.

Subclause 12(1) of part 2 of the bill provides that foreign creditors are given the same rights as Australian creditors in relation to an Australian debtor when we are talking about an insolvency. So foreign creditors will have exactly the same rights as Australian creditors in terms of commencing proceedings or participating in proceedings which have already been commenced as if they were Australian creditors. This bill does not seek to disturb the rankings or the preferences which exist within our current insolvency laws, so foreign creditors will not be ranked any differently in terms of their access to the assets of an insolvent company by virtue of being foreign creditors.

Clause 13 of part 2 of the bill provides for the recognition in Australian courts of a foreign proceeding in relation to a liquidation or an insolvency proceeding, because often, when a company is becoming insolvent, you will see proceedings in a number of jurisdictions. This then embodies one of the really important principles of this bill, which is to basically facilitate the cooperation of various proceedings across jurisdictions and to facilitate the cooperation involved in that. So any application to provide for the recognition in the Australian court system of a foreign proceeding must contain within it information about any other foreign proceedings which are occurring and, indeed, any other Australian proceedings which are known to the foreign representative.

Clause 16 of part 2 of the bill importantly enacts Article 20 of the model law in the Australian system. What this provides is that, when recognition of a foreign proceeding is granted in the Australian system, a stay of all actions and proceedings against an Australian debtor is automatically granted in precisely the same way as would occur if a proceeding were initiated under either the Bankruptcy Act or the relevant parts of chapter 5 of the Corporations Act.

Clause 17 of part 2 of the bill provides for foreign representatives of foreign proceedings being recognised in the Australian context. So, in referring to a foreign representative, we are really talking about the equivalent of a liquidator or a trustee in bankruptcy operating in another country. And those foreign representatives, under this particular clause, are able to make applications in relation to voidable transactions in the Australian system in the same way that those rights exist for liquidators in the context of division 2 of part 5.7B of the Corporations Act or a trustee in bankruptcy under the relevant provisions of the Bankruptcy Act.

I mentioned earlier that an important principle of this bill is to facilitate and encourage the cooperation between the courts and the various representatives of differing jurisdictions and, in clause 18 of part 2 of the bill, there is a non-exhaustive list of the kinds of cooperation that can occur directly between a court in Australia and a court in a foreign jurisdiction—or, indeed, between a liquidator or a trustee in bankruptcy in Australia and a foreign representative.

There is one further general point in relation to the model law which I am keen to describe. This bill adopts the model law with as little modification as possible. It is an adoption of the model law in a sense to the fullest extent that can be done in the Australian context. This is important for a number of reasons. Firstly, as a middle power, it is in Australia’s interests to have one set of consistent global laws relating to insolvency which we can be a part of and comply with. So to that end, it is consistent and in the national interest for us to be adopting this consistent set of global laws in our country to the fullest extent possible. Again, as the previous speaker mentioned, this is very consistent with Labor’s ongoing commitment, in terms of international diplomacy, to multilateralism. There is also another advantage in giving as complete as possible an application of the model law to the Australia context. It allows this country to rely on the significant body of international precedent law, which is now arising as a result of the model law applying in other countries, so that Australian jurisprudence can take advantage of the jurisprudence which is already growing up around the model law in other countries.

Australia is increasingly becoming connected to the global economy—indeed, the economy in which we all live is increasingly characterised by the global economy. There is no greater symbol of this, in my view, than my own electorate of Geelong, where the three iconic employers are Ford, Alcoa and Shell. Each is an Australian company but each is part of a global corporation with parent companies in other parts of the world. The other symbol of the global economy in my electorate is the vibrant port of Geelong, which is an international port that sees goods entering and leaving our country every day. In all of that you have a representation of contracts and financial transactions being engaged in across borders every single day.

In 2006-07 total trade in Australia amounted to $444 billion, or 42 per cent of GDP. In the same year, Australians invested $921 billion abroad, or the equivalent of 88 per cent of GDP; of that, $532 billion was in the form of equity, which in turn equated to 51 per cent of GDP. In the same year, foreigners invested $1,567 billion into Australia, or 150 per cent of GDP; of that, $634 billion was in the form of equity, or 61 per cent of GDP. In the June quarter of last year Australian equity on issue equated to $2,195 billion; of that, $634 billion was held by foreigners, which meant that 29 per cent of Australian equity was held in foreign hands. Those statistics give a compelling picture of the extent to which Australia is utterly connected to the global economy and, more importantly, how significant it is for Australia’s ongoing economic prosperity that we see ourselves as a trading nation that is very much connected to the global economy. The Cross-Border Insolvency Bill 2008 is an important measure to put in place an international global insolvency scheme, which is an important building block in the global economy. This bill is an important plank in ensuring certainty and security in international financial transactions. Most importantly, it provides security for those people who are investing their money into this country.

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