The Uncitral Model Law on cross-border insolvency: Its efficacy and suitability as a basis for a SADC Convention

JurisdictionSouth Africa
Pages215-225
Date30 May 2019
Citation(2000) 11 Stell LR 215
AuthorDavid A Ailola
Published date30 May 2019
The Uncitral Model Law on cross-border insolvency: Its
efficacy and suitability as a basis for a sadc convention*
2000 Stell LR 215
David A Ailola
LLB LLM LLM Phd
Professor of Law University of South Africa
1. Introduction
Save for a pending 1 draft bill on the adoption of the UNCITRAL Model Law on Cross-
border Insolvencies there i s nothing on South Africa’s statute books to guide its
courts on the resolution of cross-bord er insolvency cases. A draft bill, as is well
known, is a draft bill. It is not a binding statute. At present therefore, South African
law remains largely characterised by uncertainty on bankruptcies of a cross-border
nature. No provision exists to outline the proce dures or rules to b e followed in cases
of multiple applications for liquidation or sequestration orders involving the same
debtor i n two or more jurisdictions. Also missing are rules on the status of foreign
orders on the appointment or recognition of foreign trustees in insolvency, as well
as on the realisation and distribution of cross-border assets to creditors of various
nationalities. Equally, there are no rules on the status of foreign preferent claims,
reservations of ownership in purchased assets and uncompleted foreign contracts.
The authority of our courts to respond to claims against local assets (whether
secured or unsecured) arising from foreign sequestration orders i s also uncertain.
2. The South African common law
Admittedly, South African courts have, save for occasional vacillations, 2 used the
common law to assi st parties in resolving cross-border insolvency matters. In Ex
Parte Steyn, 3 for instance, Flemming J stated
* This paper was presented to a conference on UNCITRAL Instruments in Southern Africa, organised by
The Rand Afrikaans University, University of Stellenbosch and the University of Potchefstroom for CHE in
conjunction with the United Nations Commission on International Trade Law (UNCITRAL), Rand Afrikaans
University Johannesburg, 6 and 7 May 1999.
2000 Stell LR 216
that “reported decisions confirm the exi stence in the common law of a power to
recognise a foreign trustee. . . .”
A number of problems, however, b edevil the value of th e common law as a tool
for resolving cross-bo rder insolvency matt ers. The first is the principle of un fettered
discretion which judges enjoy under that system 4 Certain applications have been
resolved favourably while others have not. The other problem ha s been the absence
of clear and precise criteria f or dealing with cross-border insolvency matters. A “l aw
of shifting sands” has been prevailing in this sphere for a number of years. Thus,
whereas in the said case of Ex parte Steyn 5 the basis for recognising a forei gn
trustee was stated to be “comity”, a few years later in the cases of Moolman v
Builders and Developers (Pty) Ltd (in provisional liquidation): Jooste Intervening 6
1 See Annexure B to the letter and contents thereof issued by Mr T Cronje (Secretary Insolvency Project
Committee) addressed to Professor A Boraine and Ms K van der Linde dated 9 November 1998,
concerning UNCITRAL Model Law on Cross-border Insolvency adapted for enactment in South Africa,
South African Law Commission, Pretoria.
2 Eg in R v Etberg 1932 AD 1429, Ex Parte Francis NO 1933 SWA 11 and Re African Farms Ltd 1906 TS
33.
4 De la Rey Mars The Law of Insolvency in South Africa 8 ed (1988) 177.
5 Supra.
(2000) 11 Stell LR 215
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