Singapore’s new debt restructuring regime – the steak knives are out

Competition between courts and the legal regimes in which they operate is perhaps an odd concept, contrary to the image of the strict independence and objectivity expected of our judicial system and its officers. It does exist, at various levels, and is perhaps reinforced by individuals’ inherent competitiveness for territory and status.

steak knives


The apocryphal offer by a court of a free set of steak knives with every new court application filed has some truth.



Singapore has just endorsed a debt restructuring package, with an obvious message to the region, and the world, that its courts are seeking more and new “business” in that line of judicial work. It is said to be a bid by Singapore – whom or whatever that term identifies – to attract debt restructuring work from the region. One mechanism is for Singapore courts’ jurisdictional reach to be extended to deal with foreign corporate debtors in financial distress, and their financiers and creditors. The marketing message is that Singapore will provide an efficient, fair and quick one stop jurisdiction to resolve the company’s world-wide financial position.

Without offering a full review of the report and the recommendations, on the debt restructuring side, Singapore says it will be:

  • extending its courts’ jurisdiction over foreign corporate debtors;
  • offering an automatic moratorium against creditor claims during a corporate restructuring, extending to related entities;
  • allowing super-priority liens for debt financing, subject to court approval; and
  • allowing and supporting pre-packaged restructurings.

As to the courts, the plan is to:

  • give Singapore judges greater powers of oversight, direction and control;
  • resource the courts so that there will be a specialist bench in debt restructuring, perhaps along the line of the experience and authority of US bankruptcy judges; and
  • arrange for the hearing of any number of related insolvency and restructuring proceedings before the one judge; and
  • promote alternative dispute resolution (ADR) processes in the debt restructuring field, such as mediation and arbitration.


English schemes

One existing area of judicial competition has been the English courts’ successful jurisdictional reach and promotion of English schemes of arrangement under the Companies Act, with their courts’ substantial body of expertise and successful outcomes well known. Government investment in what is a high quality and well resourced judicial system appears to be justified and spent in order to attract ‘business’, being legal disputes and claims, including, in view of the geography, those extending to Europe, the Middle East and the US. That legal business no doubt has other flow-on benefits. It is said to be like any other investment, in technology or agriculture or oil and gas.  

And the Dutch

English schemes, and courts, do have competition, a new development being the Netherlands continuity of enterprises law, offering debt restructurings outside formal insolvency, and supported and no doubt promoted by the new Netherlands Commercial Court, which is ‘opening for business’ in 2017. It is being promoted as offering judges who are specialized in international corporate law and commercial litigation, with proceedings conducted in English, as may be required, and, it is said, all less expensively – cheaper – than proceedings in England.  

How does Australia compare and compete?

Coming back to Singapore, one of its obvious judicial competitors, and arbitral, is Australia. Your commentator won’t enter the minefield of odious comparisons, and the respective societies, laws and governments are different, but these points are made:

First, Australia is not good on research and inquiry and implementation of reforms. We have a long list of inquiries and reports into our insolvency – or debt restructuring – regime, some going back years, all well considered and worthy of attention. However, upwards of 90% of these have been left unattended and un-actioned, including ones recommending that core information be gathered and assessed. Recent government moves for insolvency reform, based more on anecdotal evidence, nevertheless valid, may help, but the reforms are themselves limited and belated.

Second, our high quality legal system does suffer from our federal structure, with many areas of business not covered by ‘Australian’ law, rather by disparate and conflicting state laws. We may be used to this, but internationally it would be a puzzle, though perhaps no more than the US. But federation must offer some benefits …..

Third, the courts are similarly federally structured, and while many federal laws come under a national court, the sharing of corporate law jurisdiction between state and federal courts does allow for disharmony and uncertainty. Current conflicts between judges in the application and interpretation of insolvency laws do not help.

One need only have to explain to a foreign lawyer that corporate insolvency in Australia is handled by the Federal Court and the State Supreme Courts, but not the Federal Circuit Court, which however has personal insolvency jurisdiction, along with the Federal Court but not with the State Supreme Courts.  But the Federal Circuit Court, alone, has jurisdiction in bankruptcy and family law, with some query if a cross-border issue is involved.

pre-packs, judicial intervention, debtor in possession and pre-insolvency advisers

As to Singapore’s reforms in core insolvency law, some of their more ‘progressive’ aspects may go too far for Australia, ‘pre-packaged insolvencies’ being one, judicial intervention being another. Australia is also said to have severe debt culture that would eschew the ‘failed’ debtor’s continued accountability and involvement in any formal restructuring, that is, by way of a ‘debtor in possession’ arrangement, usually coloured as “US debtor in possession” to reinforce its unacceptability.  

Australia is making tentative steps towards that in the ‘pre-insolvency’ (or rather ‘financial concerns’) period, under its proposed ‘safe (but highly regulated) harbour’ reforms, with external advisers to the company likely to be prescribed. At the same time, we have high anxiety about those ‘other’ advisers whose relatively simple if unethical and possibly illegal task is to point out to directors the limitations in the operation and enforcement of the insolvency and corporate law regimes in Australia, and others besides. Many of those limitations are the subject of the 90% of law reform recommendations lying with government.

More to come…..

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