Project to Strengthen Singapore as an International Centre for Debt Restructuring and Related Proposals including Asian Regional Insolvency Convention

Project to Strengthen Singapore as an International Centre for Debt Restructuring and Related Proposals including Asian Regional Insolvency Convention

Dr Shinjiro Takagi, Of Counsel, Morgan Lewis & Bockius, Tokyo, Japan


1. Singapore is striving to be the legal and judicial centre in Asia to add to its financial centre status
It has been estimated that Asia already accounts for 30 percent of the world trade in 2010, and this figure will reach 35 percent by 2020. The Asian Development Bank suggests that by 2050, Asia could account for half of the global GDP, trade and investment. These numbers, however, may not come to fruition without a coherent legal system that has been developed to promote such investment into Asia. In 2015, the ASEAN Economic Community ('AEC') was created to facilitate unified economic cooperation similar to the European Union. Singapore, which is located at the centre of the Asian region geographically, has aspirations to be the centre for legal infrastructure in addition to its recognised financial centre status in the region.
The Singapore International Arbitration Centre ('SIAC') was created in 1991 and has resolved many disputes regarding cross-border business transactions. In addition to the SIAC, the Singapore International Mediation Centre ('SIMC') was established in 2014 to mediate resolution of cross-border business-related disputes.
Furthermore, the Singapore International Commercial Court ('SICC') was established to resolve business-related disputes by way of litigation in January 2015 appointing foreign judges from the United States, England, Australia, Austria, Hong Kong and Japan in addition to Singaporean judges. It may be too early to evaluate the results or achievements of the SICC.
At the initiative taken by the Singapore Academy of Law and other organisations, an Inauguration Conference of Asia Business Law Institute (ABLI) was held in January 2016. The purpose of the ABLI is to facilitate convergence and harmonisation of business laws and practices in the Asian region. I myself joined the Inauguration Conference as one of the panelists. The ABLI was modeled on the American Law Institute ('ALI') which consists of respected and experienced scholars, judges and practical lawyers. The ALI has been editing and updating the restatements based on accumulated past judgements, legal theories and legal opinions. Referencing the ALI’s work, the ABLI will edit Asian versions of the restatements which will combine civil and common law principles. Through referencing Asian versions of the restatements, the ABLI appears to aim at convergence of laws, schemes and legal practices in the Asian region.

2. Singapore aims to establish itself as an Asian centre for debt restructuring
The Committee Report on Strengthening Singapore as an International Centre for Debt Restructuring ('Committee Report') was released in April 2016. The Committee was organised by the Ministry of Law of Singapore. As the title of the Report shows, the purpose of Singaporean Government is not to develop Singapore as an international centre but to ‘strengthen’ Singapore’s position as an international hub, because Singapore has already been an international hub for international debt restructuring. No one doubts that New York and London are established international centres in the world and Singapore would like to be recognised as another established international hub for debt restructuring and reorganisation on a par with New York and London. The intended target is debt restructuring of multinational enterprises operating businesses globally and owing excessive debts to multinational creditors. Singapore has dealt with the Garuda Indonesia Airlines and other international cases already and wants to deal with more such cases. Chapter 11 of the United States and English Scheme of Arrangement (SOA) are very convenient and useful tools for debt restructuring. Singapore is now aiming to be the third international hub by refining its insolvency and reorganisation laws, schemes and practices.
Turning to Japan, bankruptcy cases have been historically low for many years due to the legacy effects of the expired Financial Moratorium Law despite its expiration (even the aftermath of the real estate bubble in late 1980s did not last for more than several years). In addition to the generous attitude of the financial institutions, small and medium-sized zombie enterprises survive with no or little profit losing their viability thanks to ultra-low interest rates.

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