New Mauritian rules facilitating cross-border insolvency proceedings

In Mauritius, there are two main sources of law regarding cross border insolvency, pursuant to which the Mauritius court may recognise and give assistance to a foreign insolvency proceeding. The first is Part VI of the Insolvency Act 2009 of Mauritius (the Insolvency Act 2009) (effective as from the 25 July 2019) by presidential proclamation on 11 October 2019. Part VI of the Insolvency Act 2009 is based on the 1997 United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency and regulates cross-border insolvency proceedings (the “Model Law”). The second is the common law.

These rules provide the legal framework for determining which country’s insolvency law should apply and how the insolvency laws of different interested jurisdictions should interrelate. They do not contain substantive insolvency laws, as these are left to the local jurisdiction (in Mauritius, principally the Insolvency Act 2009). The Model Law was designed to provide a template of uniform legislative provisions to assist acceding States to equip their insolvency laws with a modern, harmonised and fair framework for dealing with cross border insolvency matters and to provide effective mechanisms for dealing with cases of cross-border insolvency so as to promote:

• Co-operation between courts and other competent authorities of Mauritius and foreign states involved in cases of cross-border insolvency;
• Greater legal certainty for trade and investment;
• The fair and efficient administration of cross-border insolvencies that protects the interests of all creditors and other interested persons, including the debtor;
• Providing protection and maximisation of the value of the debtor’s assets; and,
• Facilitating the rescue of financially troubled businesses, thereby protecting investment and preserving employment.

It should be noted that the Model Law does not apply to a financial institution or bank licensed under the Banking Act 2004 that is subject to appointment of a statutory conservator under that Insolvency Act.

It is important to note that the Model Law applies without the need for reciprocity (which means, for example, that Mauritius will recognise Cayman or Bermuda insolvency proceedings even if Cayman or Bermuda has not itself enacted the Model Law). As of 1st March 2017, the Model Law has been adopted in 74 countries.

Under the Model Law, where there are multiple insolvencies in different countries: (a) Insolvency proceedings opened in the jurisdiction where the debtor has its centre of main interests will be the ‘foreign main proceeding’ (b) Insolvency proceedings opened in a jurisdiction where the debtor has an establishment but not its centre of main interests are ‘foreign non-main proceedings’.

In order for foreign proceedings to be recognised under the Model Law, the debtor must have a principle place of business or assets situated in Mauritius, or the Court must otherwise consider recognition appropriate; and certain formalities must be complied with. Foreign insolvency proceedings for which recognition may be sought must be collective insolvency proceedings which are subject to the supervision and control of a foreign court. On effective recognition of foreign main proceedings in Mauritius, there is an automatic stay of certain types of creditor action, covering (a) Commencement or continuation of individual actions or proceedings concerning the debtor’s assets, rights, obligations or liabilities; (b) Execution against the debtor’s assets; and (c) Suspension of the right to transfer, encumber or otherwise dispose of any assets of the debtor.

Nevertheless, the automatic stay does not affect any rights to take steps to enforce security over the debtor’s property, to repossess hire-purchase goods or to exercise a right of set-off. The Court can, however, modify and expand the terms of the automatic stay and there have been cases in the UK where the Court has ordered a stay similar to the moratorium found in an English administration – preventing the enforcement of security amongst other things – following recognition of foreign main proceedings¹. Where a foreign non-main proceeding is recognised, the Court has discretion to grant a stay or other relief, but this is not automatic. The scope of the discretionary relief is wide and is expressed as ‘any appropriate relief ’.

On effective recognition, the Model Law gives the foreign representative certain rights, for example to be heard in the courts of Mauritius and in some cases to commence proceedings relying on the provisions of the Mauritius Insolvency Act. The Model Law does not expressly permit the foreign representative to apply foreign insolvency law directly in Mauritius. Although it may be argued that a Mauritius court could apply foreign insolvency law under its general powers to grant additional relief or to cooperate with foreign courts, but this argument may be a stretch too far.

The common law

The common law sits alongside the Model Law and they are often seen pleaded as alternative grounds of relief. There is debate about whether the common law also sits alongside Model Law. The main principle of the common law on cross border insolvency is the principle that there should be a uniform insolvency proceeding in the court of the insolvent entity’s domicile, which receives world wide recognition and should apply uniformly to all the insolvent entity’s assets.

¹English law precedents will be relevant (given that the ultimate court of appeal in Mauritius is the Supreme Court of England and Wales).