New Zealand – the outlier of international insolvency regulation

Australia and other countries will be relieved that New Zealand is again looking at licensing and regulating its insolvency practitioners. From a cross-border perspective, this relief is in light of the fact that an unqualified NZ liquidator has the right to pursue cross-border insolvency investigations, conduct examinations and take court proceedings in Australia without the level of licensing and regulation that generally applies to what is a highly regulated profession, in Australia and elsewhere. Under cross-border law, while there appears to be some level of regulation of overseas practitioners by the courts, including of Australian practitioners working overseas, regulator and professional body oversight appears non-existent. 

This was the subject of a paper I gave on 25 August 2016 at a judicial and legal conference in Sydney on ‘foreign representatives’, that is practitioners, under the cross-border insolvency laws. 

New Zealand

NZ is a real outlier in the international scene of the registration and regulation of insolvency practitioners, having in effect no real requirements to be appointed as trustee or liquidator.  The NZ report acknowledges this, saying that “New Zealand is not within the range of internationally accepted regulatory insolvency practitioner systems for a developed country. The countries that we usually compare ourselves with all have formal insolvency practitioner regulation systems”.

UNCITRAL Model Law

Australia and other jurisdictions subject to the UNCITRAL Model Law on Cross-Border Insolvency have agreed that by adopting that Model Law, liquidators and trustees from other countries may apply to have their local insolvency proceedings “recognised”, thus giving them the right to act, in effect, as local insolvency practitioners.  This right is available to Australian practitioners in other countries that have adopted the Model Law. 

The Model Law regime is a very good achievement in assisting cross-border insolvency investigations.

While not quibbling with the regime, it does mean that a wide range of insolvency representatives, of differing levels of training and qualifications (some might be lawyers), and cultures and language, may be authorised to work here on their particular matter. These include US and other countries’ “debtors in possession”, that is, companies represented by their directors; and Hungarian IPCs (insolvency practitioner companies).  From NZ, any person of age and lack of criminal record could also be so authorised.

Codes of practice and minimum standards

There is work proceeding in the EU on devising codes of practice and minimum standards for the myriad of practitioners operating under the differing regimes in Europe. International research is also being conducted from the UK on standards of regulation across a large number of jurisdictions, including Australia. 

Practitioner regulation includes not only that of the courts, but also of the regulators themselves – ASIC and AFSA – and the professional bodies.  My initial inquiries indicate there is little if any cross-border regulatory focus from those agencies.  Co-regulation might exist, but it appears to be only inward focused.  The same appears to be the case internationally.

The NZ inquiry raises many other issues of interest to Australian insolvency reform. Our respective governments had at one stage an agreement to co-ordinate and seek to harmonise our insolvency laws, but that focus seems to have been abandoned. That is no reason for us not to look at what NZ is considering, though it might look with some caution at the directions our insolvency and practitioner regulation reforms are taking. 

I am finalising my cross-border paper for publication and am continuing to examine this issue from a local and an international perspective.  Anyone interested in knowing more, or offering any comments, may please contact me.  

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