Cross-border regulation of insolvency practitioners – INSOL Tokyo – where are the government regulators?

This commentary has now been updated.  See The cross-border regulation of insolvency practitioners – Murrays Legal


I was pleased to speak at the INSOL Academic Colloquium in Tokyo on 12 September 2023 on the extent and nature of regulation of insolvency practitioners when they are outside their home jurisdiction in a capacity as foreign representative under the UNCITRAL Model Law or acting under a letter of request.

While I am continuing to respond to numerous issues raised during and after my session, the limited role of the government regulators, in Australia at least – ASIC and AFSA – in overseeing conduct of IPs while overseas is highlighted now for early attention.  

As I explained at the INSOL session, there appears to be no mechanism whereby the Australian regulators can monitor the misconduct of Australian IPs overseas, or whereby the two Australian regulators might be informed of such misconduct; and vice versa. 

There appears to be no international regulatory framework for dealing with such circumstances. 

Despite its name, the IAIR: The International Association of Insolvency Regulators assumes no relevant role.  

Further thoughts on this, and on my INSOL session generally, will follow shortly.  Comments welcome.

Michael Murray 17 September 2023


4 September 2023

I am pleased to be speaking at the INSOL Academic Colloquium in Tokyo on 11-12 September 2023. 

Briefly, my focus is on the extent and nature of regulation of insolvency practitioners when they are outside their home jurisdiction in a capacity as foreign representative under the UNCITRAL Model Law or acting under a letter of request. In such circumstances, how are practitioners overseen and regulated and according to what rules?

My interest in this issue arose from a NZ decision where two Australian foreign representatives were found to have engaged in misconduct about which complaint was made. The New Zealand High Court said that the IPs were “officers of the court” of Australia, not NZ, and the Australian court, which originally appointed the IPs, should deal with it: ANZ v Sheahan.

That officer of the court status, which I do not find useful or satisfactory, nevertheless prevails as important.  In the UK it has been said that “status as an officer of the court entails amenability to the court’s supervisory jurisdiction, including its punitive and disciplinary powers. [But] there is no indication that the Cross Border Insolvency Rules were intended to permit this court to exercise such powers against a foreign professional, merely because he had obtained an order for recognition”: Glasgow v ELS Law Ltd.

So, an Australian court would not exercise its supervisory powers over an English, or Japanese or Brazilian practitioner’s misconduct.  This is consistent also with Article 10 of the Model Law which provides that an application for recognition does not subject the foreign representative etc to the jurisdiction of the courts of the recognising state for any purpose other than the application. 

But England seems to make an important exception in relation to conduct of a foreign representative resulting in losses to the estate.  Rule 29 of the English Cross-Border Insolvency Regulations 2006 allows the court to make orders against a foreign representative in respect of misfeasance etc causing loss; that is, irrespective of the fact that the IP was an officer of the courts of another country. 

A particular issue here is the applicable law, a project which UNCITRAL WGV is currently debating. The draft UNCITRAL guide provides that “the lex fori concursus governs the mechanisms for selection, appointment, removal and replacement of the insolvency representative … a method of calculating remuneration … the role of the court and creditors in oversight of the work done by the insolvency representative; and liability of the insolvency representative. With respect to the latter, non-insolvency laws may be applicable especially if the insolvency representative is subject to certain professional standards and regulations …”.

In the case of an Australian liquidator in England, the applicable law would be that of Australia, but Rule 29 appears to apply English law in respect of any misfeasance. In that case the position may not be that much different in that English and Australian law would be similar in respect of principles of misfeasance and negligence.    

But Rule 29 would not extend to allow the English court to apply English, or Australian, disciplinary processes, although there should be some avenue for the English court to convey its concerns. Perhaps that is a valid and necessary division, between conduct matters, and claims, although the two may be intertwined.

Such issues of misconduct can arise at the application for recognition stage (Re OGX Petróleo e Gás), or later (Creative Finance).

Then there are the insolvency regulators and the professional bodies, none of which appears to have relevant cross-border focus.  This is despite Australian law, and code law, purporting to have extra-territorial operation. 

There is also the potential for codes to be in conflict, including where the court appoints a local agent to assist the foreign representative. 

Differences between IPs appointed under letters of request and under the Model Law are also in issue.

The absence of any clear rules of IP regulation is odd given the emphasis which most jurisdictions place upon the regulation of their insolvency practitioners. While the law is not necessarily clear, of more significance is that there is no real framework established by which cross border regulation can be achieved. For example, if an English court were to exercise power under rule 29 and found that the conduct of the Australian liquidator was unsatisfactory, there is no real process whereby that concern would be conveyed to the regulator or the courts in Australia.

Relevant decisions and their jurisdiction include Rizzo-Bottiglieri-De Carlini Armatori SpA and Re Palmer (Australia), ANZ v Sheahan (NZ), Glasgow v ELS Law, Re OGX Petróleo e Gás and Cherkasov v Olegovich (UK), and Cozumel Caribe and Creative Finance (USA).

Any comments are welcome.

Michael Murray

4 September 2023


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