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irrespective of [their] internationality, something like a territoriality principle on a larger…scale.’231 This characteristic feature of the regional cross-border insolvency regime, arguably, defies the very essence of the enlargement of markets and its resulting consequences.
This idea arguably merits research in its own right. However, there are some key considerations that deserve brief attention. Firstly, in pursuing this idea, it might be a practical approach to consider enabling the Model Law adopted as a regional instrument to apply in certain respects within the context of the regional cross-border insolvency that operates among member states. As far as EAC is concerned, one possibility is to enable proceedings commenced under the adopted Model Law in one member state to have effect in all other member states in the nature of the universal effect of the proceedings commenced in a regional framework such as BRR.232 In this regard, it is the law of the member state in which such proceedings have been commenced that would apply to the other member states. Indeed, there should be no problem in this approach given that the law of member states will be a harmonised law and therefore similar in all respects. The competent courts in the other member states may only, if need be, have a very limited power in such proceedings as it is the case under the BRR.233 Again the East Africa Court of Justice could very well serve as an appellate court in matters originating from the competent court of respective member state jurisdictions.
The second and probably less complicated approach is providing for customisation and adoption of the Model Law by member states of the EAC as part of the harmonisation policy requirement without having the Model Law enforced and applied at a regional level but unilaterally by individual member states in matters involving a non-member state. Despite the simplicity of this approach, it does not augur well for the policy perspective of strengthening of regional integration and enlargement of markets in a regional context for development of trade and investment. Additionally, it does not necessarily
231Ibid 259
232Text to n 220 above
233Text to n 226 above; and text to n 195 and 196 in chapter 6
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provide any clear link with a regional cross-border insolvency regime.234 The last possible option would be to incorporate third countries or regions by means of treaties into the applicable scope of the regional initiative.235
7.7Thinking Outside the Box: Resolving Indeterminacy of Local Policies
As noted above, despite the potential utility of the national policies, they could be indeterminate in many respects including the fact that they might not necessarily encapsulate truly relevant local interests. In particular, there are concerns as to the degree of community participation in social policy formulation in both countries and the extent to which they truly represent the local contexts. The concerns are such that the participation is limited and the masses are not empowered, politically and economically to take an effective role in formulating and implementing the policies.236
These concerns may mandate the need to resort to extraneous means beyond the national policies and having regard to realities of the societies to gain an understanding of what is truly representative of a national-wide consensus of a country.237 A consensus from which local interests relevant to cross-border insolvencies can be derived ‘…so that a person committed to a global approach to multinational insolvency would nonetheless agree that this or that sort of claim or claimant would best be governed by local insolvency law.’238 Clearly, such undertaking requires full involvement of highly qualified peoples ‘…already in the countr[ies] deeply knowledgeable about [them] and working daily on solving
234JL Westbrook and others (n 1) 248, 263 and 264
235Ibid 264
236AST Mchomvu, TFK Ngalula, GS Nchahaga, FSK Tungaraza, and S Maghimbi, ‘Social
Policy and Research Practice in Tanzania’ (1998) 13 J Soc Dev in Afr 45, 48. Some policies stipulations seem to be based on the Washington Consensus or neo-liberalism which could mean that their prescription could not necessarily reflect the local contexts. Some policies could also be too old to reflect the present needs and priority. And thirdly and lastly, although in many cases, these policies raise elements which pose a danger for contradiction in implementation, it is not always clear how a balance should be struck. This is particularly with regard to protection of local enterprises and promotion of investment both foreign and local. It seems that one must be aware of these concerns while making use of the policies.
237PH Brietze, ‘The Politics of Legal Reform’ (2004) 3 Wash U Global Stud L Rev 1, 24 and 25; and G Johnson, ‘Towards International Standards on Insolvency: The Catalytic Role of The World Bank’ (2000) Law in Transition online 1. <http://www.ebrd.com/pubs/legal/lit072.pdf> accessed 15 June 2009
238JL Westbrook (n 6) 515-516.
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those countr[ies’] problems.’239 It is these very people that may help interpret better the policies, venture beyond the national policies and draw attention of insolvency experts to the relevant local aspects which, if reflected in the law, could facilitate its smooth implementation, usage and achievement of its objectives. This consideration also informs the nature of the reform process.240 It follows that reform undertaking should not be an overnight or dramatic process which would increase the chances of missing the local contexts. Rather, what is required is an incremental, gradual and less complex process aiming at a less complicated output which is not wholesalely alienated from the local concerns and policies. Accordingly, there is also merit in having the propositions made in this chapter, which are less complex than they may seem to be, approached in a piece meal basis rather than rapidly.
7.8Conclusion
This chapter addressed the challenge of identifying local contexts that have to inform and be served by a cross-border insolvency law system. It has demonstrated that official national policies of the countries under study potentially offer an insight into the local contexts within which reform and implementation of cross-border insolvency law can be effected in SSA using Tanzania and Kenya as case studies. The examination of selected official national policies of the countries under study identified relevant policy perspectives that should inform any cross-border insolvency law reform effort and help determine the extent to which these countries may ‘…assimilate [the international benchmarks] as they deem to be compatible with their social goal and priority.’241 Clearly, the policy perspectives appear to inform both the ingredients of the cross-border insolvency law systems, such as the nature of the priority system in the cross-border insolvency setting, and the theoretical approach appropriate in serving and promoting the identified local policies and interests whilst having regard to the existing international insolvency benchmarks. The theoretical approach of modified universalism was found to be
239J Stiglitz, Globalization and Its Discontent (Penguin Books, London 2000) 34-36. See also text to n 113 in chapter 3
240See text to part 2.7 in chapter 2; and text to part 3.6 in chapter 3
241IF Fletcher (n 163) 774
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the most appropriate as it enables a country to evaluate the fairness of a foreign system before cooperating and/or deferring. This approach is significant in enabling the countries under study to address policy aspects, for example, those related to national interests and protection of small local creditors. Given the nature of the Model Law, this chapter found that it has the capacity of being customised and adapted in a manner that is commensurate with the local interests using modified universalism as the overall organising theoretical approach. Throughout the discussion of the characteristics of the local policy perspectives, it became clear and it was vividly shown how the Model Law, customised and adapted for its fitness for purpose, is relevant and suitable to the circumstances of the countries under study. However, a slightly different approach is arguably needed to deal with co-operation in cross-border insolvencies involving member states in a regional community whereby the EAC was used as a case study and other countries with which the countries under study have, for example, long standing relationships and bilateral co-operation.
Indeed, the significance of using the official governments’ policies is essentially crucial as it helps create harmony and predictability in the entire legal systems of the countries under study, since it is from such policies that most of the on-going reforms and governments’ actions are based. Clearly what is needed for these countries is to overcome their socio-economic vulnerability that could lead them to succumb to international pressure and end up making improper policy choices as discussed in chapter four.
In view of the foregoing, the overall recommendations in this chapter can be outlined as thus. First, modified universalism is the appropriate theoretical approach for crafting a cross-border insolvency law system for the countries under study, given the special circumstances of the countries under study as discussed above. Second, the Model Law is relevant and indeed well suited to accommodate the local contexts using modified universalism as the organising theoretical framework. Third, the existing bilateral co-operations and long standing traditional relationships between the countries under study and foreign countries appear to dictate a different approach that is based on existing trust. On
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this point, it is argued that such special arrangement can still be well accommodated within the adopted version of the Model Law or through conclusion of a separate mutual agreement. And fourth, given the importance accorded to regional integration in SSA, it is important to have a regional crossborder insolvency regime that is based on the relevant historical, cultural, and socio-economic values. However, the Model Law should also be adapted within the context of the relevant regional integration to facilitate co-operation with foreign countries that do not fall within the regional integration.
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CHAPTER EIGHT
CONCLUSION AND RECOMMENDATIONS
8.1Introduction
This chapter concludes the study. It is divided into four main parts. The first part summarises the main insights that emerged from different chapters of this study. The contribution to knowledge which was made by this study is outlined in part two. In part three, legal and policy implications of the contributions made are highlighted before pointing out the limitations of the study and possible avenues for further direction of research.
8.2Main Insights of the Study
This study has carried out an in-depth examination and discussion of the challenges that SSA countries face in reform and application of cross-border insolvency law.1 The study sought to address the potential challenges of crossborder insolvencies emerging from the globalisation of trade and capital. Tanzania and Kenya were used as case studies for SSA countries, though occasionally and where appropriate reference was made to other countries or regions within SSA. The focus of the study was on the risk of failure of SSA legislative processes to properly address the potential challenges of cross-border insolvencies in a manner that is sensitive to the local contexts and which provides a balance with international insolvency benchmarks. The traditional doctrinal legal scholarship was the main approach used in pursuing the study. The following are the major insights of the study.
The context for the study was provided in chapter one, which also served to justify the need for undertaking a study of this nature from the perspective of SSA. It was argued in this chapter, and consistently proved in subsequent
1 See text n 21 in chapter 1 whereby South Africa is excluded from the scope of this study on account of the fact that it has inter alia received a relatively more attention in insolvency discourse than any other SSA country or region in SSA.
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chapters in the course of reviewing the literature, that although a substantial body of literature has developed in recent years in the area of cross-border insolvency, this scholarship has been lacking in a perspective from developing countries in SSA. The preoccupation of the thesis therefore was to provide this perspective.
Chapter two of this study made a theoretical and conceptual analysis of the crossborder insolvency landscape from the perspectives of SSA whilst clearly bringing out the issues that emerge in the quest for crafting a workable and appropriate cross-border insolvency framework for SSA countries. It was argued that the theories and the debate that ensued have exclusively been developed and addressed from the viewpoints of developed economies, which might not necessarily be relevant to SSA. Since examination of this area in relation to SSA (except South Africa) has almost been overlooked by existing literature, the argument posed in chapter one in the course of setting the context of this study became much clearer and was indeed further established. It was accordingly maintained that the position of developing countries, in particular the least developed economies such as those in SSA, deserves to be considered, given the pressures towards globalisation and the potential for this pressure to result in unsuitable legislative reforms. While it could be argued that the theoretical models emerging from the scholarship may help provide and perhaps develop an important benchmark for any reform measure in SSA, it still presents challenges of convincingly translating such models to the local circumstances and contexts of SSA. It further became clear that the endeavour of exploring the relevant local contexts does also present challenges in the reform process. Nevertheless, it was clear that the theoretical debate serves to expose the benefits and ills of each theoretical approach and a theoretical model which any reform measure ought to take into account, though from the perspectives and local contexts of SSA countries.
Examination of the global drivers for convergence of insolvency law systems including cross-border insolvency regimes was undertaken in chapter three in the context of the quest for an appropriate and workable framework for cross-border
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insolvency regulation in SSA countries. It was observed that in view of the globalisation of trade and capital and the extent to which SSA is increasingly integrated into the global economy, the development of effective cross-border insolvency systems is now more relevant in SSA countries than ever before. The international insolvency standards therefore have, arguably, the potential of facilitating the reform of cross-border insolvency law.
However, an important challenge presented by the international insolvency standards that emerged and was discussed in chapter three is that although these benchmarks envisage local innovations and adaptation, in reality they still seem to envisage that ‘one-size-fits-all’, especially in relation to the vulnerable SSA countries which do not have the capacity to challenge the prescriptions of the responsible multilateral institutions. The other major limitation inherent in these international insolvency standards is that their compliance and assessment process conducted by the multilateral institutions does not seem to delve into the details of the local contexts that may influence the shape and implementation of the insolvency laws, and correspondingly cross-border insolvency law of a country. This is critical because the international insolvency standards do not contain a version translated into the contexts of circumstances specifically pertaining to SSA, though they appear to allow, with some inherent restrictions, innovations to reflect local circumstances. The other limitation is perhaps in the extent and manner in which local experts are employed in the process, which limits their role and influence in the assessment exercise and compliance process. Nevertheless, the key challenge is to balance the local contexts against the international insolvency benchmarks in a manner that will improve and modernise their cross-border insolvency frameworks. The danger is looming that these countries may adopt the benchmarks in their laws to please the international community and the responsible multilateral institutions in anticipation of attracting financing without necessarily having them complied with in the actual practice.
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Two theoretical approaches for complying with the standards were noted in chapter three as offering frameworks on how effective adoption and implementation of the standards by low income countries such as SSA countries could be effected without jeopardising the interests of such countries. The first approach insists on the importance of ensuring that standards adoption, implementation and assessment give due consideration to the domestic focus, experience, needs, and capabilities of a low income country with the objective of market development and enhancing market efficiency. The other approach insists that countries must adopt a more gradual approach to the implementation of the standards when a substantial amount of reform is required. Notably, whereas the former approach was seen to reflect the theoretical view against transplants and a ‘one-size-fits-all’ approach and to encourage consideration of local contexts, the latter reflects the incrementalist theory which advocates for modesty and gradual reform of global insolvency law giving allowance for substantial deviation while also reducing the risk of outright rejection. Nevertheless, both approaches complement one another in so far as their application to a developing country is concerned. The emerging practice of reforming insolvency laws and their crossborder insolvency regimes as part of the poverty reduction strategy is welcome. However, the close involvement of the multilateral institutions in the formulation, implementation, monitoring and evaluation of such strategies including provision of technical and financial support for the whole process may present some form of indirect pressure which could again lead to legislation being adopted just for the sake of pleasing such institutions without having due regard to the local contexts.
Chapter four examined various arrangements for facilitation of cross-border trade and investment in which SSA countries have been involved and considered the extent to which, and how, the arrangements implicate cross-border insolvency regulation in such countries. The arrangements were considered in the context of:
(i)the SSA market liberalisation and reform strategies undertaken under the auspices of the multilateral institutions (mainly the IMF, and the World Bank);
(ii)international trading systems as they affect developing countries in SSA; (iii)
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the bilateral investment treaties concluded between SSA countries and, mainly, developed countries; and (iv) regional and interregional economic co-operation among SSA countries and between SSA countries and developed and emerging economies respectively. It was found that while such arrangements, especially the bilateral investment treaties that SSA countries have been concluding, mainly, with developed countries, provide an important base for determining the needs of SSA countries and shaping their respective cross-border insolvency frameworks, they significantly limit the space in which SSA countries as host countries of foreign investors could regulate the foreign investments and deal with them in insolvency proceedings in a manner that does not compromise local circumstances.
It further became clear in chapter four that the growing body of these treaties and other arrangements restrict the ability of these countries to customise the international insolvency standards to suit their local circumstances and interests, as in doing so they have necessarily to take into account their obligations and promises under such treaties. This, for instance, means that the ability of the host countries in SSA to adopt a policy within the framework of a cross-border insolvency system that may seem to treat domestic interests more favourably than foreign ones, or treat investors from a certain country more favourably than others, is significantly restricted. An interesting feature that emerged from the chapter with regard to the bilateral investment treaties is that they are based on reciprocity and do not generally recognise the special circumstances of SSA countries in the world of finance, trade, investment and technological advancement which could have necessitated giving prominence to protection of local interests, such as the promotion of local industries, protection of natural resources, and poverty reduction.
It was pointed out further in chapter four that the implication of the arrangements for facilitation of trade and investment suggests that SSA countries would not need an entirely different framework from those suggested by the consensus emerging from the debate on the theories and the international insolvency
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