Harmonizing Laws at Sea: The Complexities of Cross Border Maritime Insolvency

Cross-border maritime insolvency typically arises in an event whereby shipping companies with both assets and creditors in many jurisdictions incur a complex cross-section of admiralty law and insolvency law. With the continued cross-border flows of ships and with companies owning assets and creditors located across borders, “it becomes hard to deal with insolvency. Some of the legal frameworks that oversee maritime insolvencies and are explored in this article include the UNCITRAL Model Law on Cross-border Insolvency, regional laws such as the European Insolvency Regulation, International Maritime Conventions, and Domestic laws such as those of the United States, China, India and the United Kingdom. Even though these legal frameworks are in place, there are still major hurdles, including the tensions between territorialism and universalism, confusion over where the Centre of Main Interests (COMI) is, a lack of legal provisions, and limitations in the recognition of foreign procedures. It is complicated by marine oriented issues such as ship arrest and maritime liens, such that individual creditors may take action that conflicts with the objectives of collective insolvency. Hanjin Shipping bankruptcy provides a classic example of the real-life consequences of such problems, including stopping international trade and discrimination between creditors. To ensure effectiveness, equity and legal predictability in international maritime trade, the conclusion of this article brings to the fore the need to have a common international framework, better judicial cooperation and reforms of marine-specific insolvency.