Учебный год 2023 / phd

to make appropriate choices commensurate with the local contexts and which also takes account of the international insolvency standards.

There are significant challenges that are likely to be faced and encountered in the reform process. The challenges may pose far reaching implications for the legislative processes that SSA countries might undertake. The constant pressure to strengthen their troubled economies, desperation to attract capital inflow and boost trade, the vulnerability to external pressures and the nature of the global norms providing benchmarks for reform, may all present different types of challenges that might need to be carefully dealt with in order to allow reform that would result in to an effective and relevant regime for the countries under study.

It is common knowledge that some laws that were enacted to facilitate the implementation of liberalisation policies imposed by the multilateral institutions have not been working well in some respects, as they do not appropriately reflect the local circumstances.23 It has been argued that in some instances they have tended to have an adverse impact on the societies that have been required to embrace them. The adverse impact on such societies is mainly because in some respects such laws are designed and implemented with little, if at all, regard for specific needs of the particular countries concerned.24 In fact, there is an ongoing debate, which investigates the effectiveness of the liberalisation policies in developing countries which were imposed under the umbrella of the multilateral institutions, notably the IMF and the World Bank. This debate has produced large volumes of literature with fundamental degrees of divergences.25 The

23CRP Pouncy, ‘Stock Markets in Sub-Saharan Africa: Western Legal Institutions as a Component of Neo-Colonial Project’ (2002) 23 U Pa J Int’l Econ L 85; TA Kelley, ‘Exporting Western Law to the Developing World: The Troubling Case of Niger’ (2007) 7 Global Jurist (Frontiers) Article 8 < http://wwwbepress.com/gj/vol7/issu3/art8 > accessed 01/06/2010; T Halliday ‘Crossing Oceans, Spanning Continents: Exporting Edelman to Global Lawmaking and Market-Building’ (2004) 38 L & Soc’y Rev 213, 217; and A Anghie (n 2) 259

24Ibid

25See for example, A Berg and A Krueger, ‘Trade, Growth and Poverty: A Selective Survey’, (2003) IMF Working Paper 03/30 < http://www.imf.org/external/pubs/ft/wp/2003/wp0330.pdf .> accessed 31 August 2009; AL Winter, N McCulloch and A McKay, ‘Trade Liberalization and Poverty’ (2004) 42 Journal of Economic Literature 72-; A Harrison, A and G Hanson G, ‘Who Gains from Trade Reforms? Some Remaining Puzzles,’ (1999) Journal of Development Economics 59; and J Stiglitz (n 2 )

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implication of this trend for the reform of insolvency related laws in SSA countries might be far reaching given that insolvency laws and their implementation and usages are considerably sensitive to local policies. 26

A number of measures have been developed to deal with cross-border insolvencies.27 Most of these measures have traditionally been effected either by treaties concluded between two or more countries having close commercial relations or unilateral initiatives undertaken by respective countries.28 More recently, international initiatives have significantly emerged. One of the significant developments in this respect is the UNCITRAL Model Law on CrossBorder Insolvency, which may be adopted by countries as part of their domestic legislation.29 The EC Regulation on Insolvency Proceedings (“ECIR”) is another example of such initiatives undertaken in respect of a regional community.30 The measures that have been developed all along underlie the divergence that exists between substantive laws of different countries because of different local contexts to which insolvency laws are sensitive.31 Lessons that can be learnt from such measures need to be considered in light of the ever increasing cross-border co-operations in trade and investment within and outside the existing regional arrangements. The apparent question is which strategy these countries should use in responding to such challenges and developments, taking into account the socio-economic, cultural, and institutional conditions, to mention but a few, that pertain to these countries and the realities of the world economy.

26N Martin ‘The Role of History and Culture in Developing Bankruptcy and Insolvency Systems: The Perils of Legal Transplantation’ (2005) 28 BC Int’l & Comp L Rev 1, 4; JAE Pottow, ‘Greed and Pride in International Bankruptcy’ (2005-2006) 104 Mich L Rev 1819; and F Tung, ‘Fear of Commitment in International Bankruptcy’ (2000-2001) 33 Geo Wash Int’l L Rev 555, 561

27B Wessels, BA Markell and JJ Kilborn (n 9); and Fletcher, Insolvency in Private International Law(2nd edn OUP, Oxford 2005)

28Ibid

29For the trends on adoption of the Model Law see generally, LC Ho (ed), Cross-Border Insolvency, A Commentary on the UNCITRAL Model Law (Globe Law & Business, London 2009)

30Council Regulation (“EC”) No 1346/2000 of 29 May 2000 on Insolvency Proceedings

31See n 26 above

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1.4Aim, Objectives, and Research Questions of the Study

In view of the focus of the study mentioned above, the aim that this study seeks to achieve is to provide, through doctrinal legal scholarship, and from a SSA perspective, an insight into the challenges involved in the development, implementation and use of law in dealing with and regulating cross-border insolvencies. Tanzania and Kenya are used as case studies for SSA, though occasionally, reference is made to other countries in SSA where it is appropriate to do so.

1.4.1 Objectives

In seeking to attain the aim of this study, the following key objectives guided this study.

i)Examining the challenges to cross-border co-operation in trade and investment posed by globalisation, bilateralism and multilateralism, as well as regional schemes.

ii)Investigating the laws and practices on cross-border insolvencies in SSA and establishing the extent to which they recognise and address the challenges of potential cross-border insolvencies arising from cross-border co-operations in trade and investment.

iii)Exploring the challenges and aspects to be considered in developing a framework to be used as a guide in addressing cross-border insolvencies in SSA countries, given the socio-economic, cultural and institutional environment and aspirations of the countries under study.

1.4.2 Research Questions

To the research problem stated above and based on the above objectives, the following questions guided this study.

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i)What implications do the co-operations in trade and investments have for Tanzanian and Kenyan law and in particular on insolvency issues?

ii)Do the existing regulatory frameworks and practices for insolvencies in Tanzania and Kenya adequately cater for cross-border insolvency issues that are prone to arise as a result of enhanced cross-border cooperations in investment and trade?

iii)What challenges, aspects and strategies should respectively be considered and employed in Tanzania and Kenya in formulating, negotiating, enacting, and concluding an effective mechanism for regulation of cross-border insolvencies?

1.5Research Methodology and Sources

A traditional doctrinal legal scholarship that involves analysis of primary and secondary sources of law has been used in this study to address the focus and aim of this study. This is the methodology that is overwhelmingly used in similar legal studies. A critical legal analysis of relevant legislation, case law, policies, research studies, multilateral and international institutions’ reports, governments’ reports, treaties, international insolvency standards, and protocols related to or on the subject under study has been undertaken.

The use of various legal methods, especially rules of statutory interpretations, and various forms of legal reasoning such as deductive reasoning and inductive reasoning have been applied in appropriate circumstances in the study. It is through this methodology and from the mentioned sources that materials were generated, analysed and systematically presented and explained in relation to the context of this study.

The sources were obtained mainly from libraries, relevant websites, such as those of governments of the countries under study, law reform commissions of the countries under study and international and multilateral institutions. Relevant

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reports/treatises by governments of the countries under study, international and multilateral institutions and law reform commissions in the countries under study have been sought and used in determining whether, and to what extent, consideration of an appropriate approach to cross-border insolvencies cooperation has been made. To some extent, and without compromising the relevance of local contexts, relevant experience from other countries and regions derived from source materials were used to assess the legal frameworks of the countries under study and to gain insights and lessons that could be considered in addressing the challenges and to provide an insight into the crafting of a workable and appropriate cross-border insolvency framework for SSA. Tanzania and Kenya have been used as representative case studies for SSA countries. The use of the case studies was intended to allow in depth investigations of the research questions to be undertaken. The use of the case study approach in this study was however not intended to completely preclude occasional reference to other SSA countries where it was considered desirable to do so. While Tanzania and Kenya are used as case studies, the study was not strictly speaking meant to be a comparative study.

1.6Organisation of the Study

This study is structured in eight chapters as follows. The present chapter has laid out a contextual framework of the study. Chapter Two provides a critical review of the conceptual and theoretical aspects of the cross-border insolvency landscape from a SSA perspective.32 Chapter Three revisits the global drive for convergence of insolvency law systems in the context of the international insolvency benchmarks and the quest for a cross-border insolvency framework for SSA. Chapter Four makes an in-depth examination of the arrangements for the facilitation of cross-border trade and investment and inquires into the extent to which they implicate and inform cross-border insolvency regulation in SSA. Accordingly, Chapter Four in particular answers the question whether SSA

32 An article based substantially on chapter two of this thesis won the 2010 International Insolvency Institute (2010 III) Bronze Medal Award and has since been published. See BS Masoud, ‘Theoretical Aspects of the Cross-Border Insolvency Landscape: Issues and Perspectives for Sub-Saharan Africa’ in [2011] Norton Annual Review of International Insolvency 338-378

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would need a different framework from those suggested by the theories and the benchmarks.

Chapter Five and Six basically look at the existing legal frameworks and practices for cross-border insolvencies in Tanzania and Kenya as case studies for SSA while considering their historical backgrounds and origin as well as the emerging reform trend. The chapters consider the extent to which the existing legal frameworks address cross-border insolvencies in the context of the existing theories, and international insolvency benchmarks. The application of the common law and its impact is used as a case study for the impact of colonial legacy in cross-border insolvency regulation.

Chapter Seven explores the specific practical challenges and aspects that might need to be considered in developing a framework for Tanzania and Kenya-the case studies for SSAfor addressing the challenges of cross-border insolvencies. The chapter demonstrates the manner in which different systems diverge from one another because of differing local policies and the emerging trend of accepting and recognising legitimate local interests that deserves to be protected. It also shows how the existing national policies can be used to identify relevant policy perspectives to be served in the insolvency systems and the challenges involved in negotiating the local contexts and the corresponding policy choices to be made in developing a framework for cross-border insolvency.

Chapter Eight concludes and summarises the main insights from the findings of this study based on the chapters from which they emerge. The chapter states the contribution to knowledge that the study claims to make and outlines limitations of the study and gaps for further research. Notably, the main thrust of the foregoing chapters is to expose the challenges that SSA countries face in addressing the challenges of cross-border insolvencies and providing an insight for crafting of a workable and appropriate cross-border insolvency framework.

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CHAPTER TWO

CONCEPTUAL AND THEORETICAL ASPECTS OF THE CROSSBORDER INSOLVENCY LANDSCAPE WITH REFERENCE TO SUBSAHARAN AFRICA

2.1Introduction

Problems that arise in the event of an insolvency in which an insolvent company’s creditors and assets are spread across more than one jurisdiction, have long given rise to competing theoretical approaches; each purporting to provide the best solution to overcome the problems that cross-border insolvencies pose. With the globalisation drive, the competing theories have been a subject of intense debate, leading to the consideration of some form of alternative approaches, mainly drawn from the dominant competing theories developed and addressed from the perspective of developed countries. This chapter provides a perspective that has been hitherto lacking in the cross-border insolvency literature. It examines the theoretical approaches to cross-border insolvency in relation to the general theories underlying the objectives of an effective insolvency law system from a perspective of Sub-Saharan Africa (SSA). Salient features of the theories and emerging aspects within the theoretical debate on cross-border insolvency approaches are considered with particular reference to the SSA context and issues that arise between the needs of such jurisdictions and the approaches outlined in the literature that has emerged in developed countries, in particular from the US and Europe are identified. This chapter begins by outlining the basic issues of insolvency and cross-border insolvency. Attention will then turn briefly to theories of insolvency law in general and this discussion will be used as a springboard for a discussion of the theories of cross border insolvencies, as developed in the literature, before a view from a sub-Saharan perspective is offered and the issues that emerge in the quest for crafting a workable and appropriate cross-border insolvency framework for SSA are outlined.

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to the cash flow test, but also advises against the use of a balance sheet standard as a single test on account of its inherent weaknesses of relying on information in the control of the debtor to prove insolvency. Such a test would present significant difficulties for creditors seeking to prove that the debtor is insolvent.6

Cross-border insolvency describes a situation where an insolvent debtor has assets and or creditors in more than one jurisdiction.7 As most routine business dealings are becoming global, it is increasingly becoming impossible to avoid the international effect of insolvency. This is attributed to the increased interconnectedness and interdependence between national economies,8 improvements in technology, particularly in transport and communication, and the resulting reduction in the cost of moving goods, funds and information around the world which has paved the way for growth of larger corporate entities.9 However, SSA is relatively less integrated to the world economy given that it is characterised by the United Nations as a least developed economy.10 As such, the potential effect of cross-border insolvency is relatively much less than in advanced and emerging economies.11

AG 2006) 18-20 which observe that even countries whose legislation provides only for a cash flow test have tended in practice to make use of balance sheet test in providing a complete picture of a debtor’s present and prospective financial situation. Australia and recently the Cayman Islands offer good examples.

6 UNCITRAL Legislative Guide on Insolvency Law 2005 (n 4). See also International Monetary Fund (“IMF”), Orderly and Effective Insolvency Procedures: Key Issues (Legal Department, IMF, Washington 1999) <http://www.imf.org/external/pubs/ft/orderly/index.htm> accessed 4/6/2009; and World Bank’s Principles for Effective Insolvency and Creditor Rights Systems 2005 <http://www.worldbank.org/ifa/IPG%20-

%20Revised%20Pples%20FINAL%20%5B21%20Dec%202005%5D.pdf > accessed 23/6/2009

7Other terms that are used interchangeably to describe the same situation include; interstate insolvency, international insolvency, transnational insolvency, multi-state insolvency, multijurisdictional insolvency, multinational insolvency and multinational default.

8This includes interaction between economic entities located in different countries.

9This is partly a result of modern features of business consisting of mergers and takeovers. See IMF (n 6); and PR Wood, Principles of International Insolvency (2nd edn, Maxwell London 2007)

10Text to n 21 in chapter 1

11It has been noted that SSA countries are among the countries that were not immediately and directly affected by the current economic recession. This is largely by reason of being less integrated to the world financial system. Accordingly, the only effects that these countries experienced were a reduction in financial aids from developed countries, a fall in the demand for SSA exports, thereby a drop in commodity price and decline in the inflow of foreign direct investment which accounted significantly to the GDP of such countries. See IMF, Regional Economic Outlook: Sub-Saharan Africa (IMF, Washington, D.C. 2009); and World Bank, The World Development Indicator 2009 (Washington 2009)

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