The insolvency of a party has considerable effects on all its legal relationships. The restriction imposed by the national insolvency law naturally also affect the ability to pursue claims in arbitration. The entry discusses in its first parts the various types of restrictions contained in the national insolvency laws and their effect on the arbitration agreements, the arbitral tribunals jurisdiction, the arbitration proceedings and the parties involved as well as the underlying policies. In presenting the various approaches adopted, which often differ considerably, exemplary provisions and cases for each approach are presented without focusing on specific jurisdictions. The second part is devoted to the important conflict of laws questions in international cases where the place of arbitration and the place of the insolvency are located in different jurisdictions. They are adressed both from the perspective of the state courts as well as from the perspective of the arbitral tribunal.

This chapter explores the legal framework governing security interests over personal property, which is a major aspect of business finance. The focus will be on the Personal Property Securities Act 2009 (Cth) (PPSA). The chapter will explain how its concepts and registration system (PPSR) apply to priority disputes between security interests in personal property. It will also examine the impact of the PPSA on insolvency.

The company form of business structure is one of the most common in the world today. As discussed in the previous chapter, there are a variety of benefits that make the corporate form the most appealing for many business operators, and also for investors and other stakeholders. This chapter examines this dominant business structure in detail, and explains the regulations in place around it. It identifies the legislation and other regulatory tools that enable the formation of companies in Australia, the process of incorporation and its legal consequences, what it means to be a member of a company, how companies are managed and the duties that are owed by the persons in control, companies financial reporting obligations, and the processes involved when a company becomes insolvent or otherwise needs to be wound up. You will follow a practical example across the course of this chapter, identifying how the company business structure would affect this startup business, and the impact that the legal regulation in this area will have on the individuals within and associated with this business.

Chapter 21 covers the effect of bankruptcy and insovency laws on IP licensing transactions. It covers the automatic stay of proceedings (US v. Inslaw), what is included in the bankruptcy estate, the effect of bankruptcy on executory contracts, including Lubrizol and Section 365(n) of the Bankruptcy Code (Prize Frize), the assignment by the bankruptcy estate (Pioneer Ford), the ban on ipso facto clauses and the use of technology escrow agreements to avoid some of these issues.

Godwin’s chapter considers the experience to date of convergence in the area of financial law and, specifically, the UNCITRAL Model Law on Cross-Border Insolvency (‘Model Law’). In particular, the chapter examines the factors that prevent convergence in the area of financial law or, to put it differently, the factors behind divergence. It is suggested that through an examination of these factors, it is possible to assess the practicalities – and the relative merits - of convergence. Such an examination also offers insights into the appropriateness of mechanisms that might be used to achieve convergence and the extent to which the mechanisms need to be tailored to the particular circumstances or legal terrain. The experience of the Model Law shows that full convergence in law (in terms of absolute uniformity) is neither realistic nor practicable and that there is a need to accept a degree of divergence in law between jurisdictions. It also suggests that divergence in law is not a negative as it often leads to convergence in outcomes. Further, divergence – or diversity - is positive if it achieves convergence in outcomes that could not otherwise be achieved as a result of fundamental differences between national legal systems.

This chapter compares the U.K. and U.S. approaches to fiduciary duty and clawback as they relate to transactions when the firm is in the vicinity of insolvency. Historically the U.S. and the U.K. have balanced directors’ duties and trustee’s avoidance powers in opposite ways. In the U.K., officers and directors have a duty of fairness to creditors in the vicinity of insolvency; in Delaware no such duty to creditors arises. The U.S. takes a strict approach to avoidance of preferential and fraudulent transfers; the U.K. requires culpability. This chapter suggests that, on both sides of the pond, the duty and clawback regimes are under stress due to their failure to appreciate the importance of equitable treatment in the vicinity of insolvency and that the current emphasis on insolvency and pre-insolvency regimes oriented toward “rescue” highlights this shortcoming. The chapter concludes, that both jurisdictions fail to appreciate that duty and clawback serve complementary functions in the vicinity of insolvency—equitable treatment of creditors; and that a more balanced approach would be better than either of the lopsided approaches taken by the U.S. and the U.K.

Financial markets litigants may, for different reasons, seek to bypass the legal landscape discussed thus far. Where parties have agreed to contracts expressly selecting English law and, in some version of a jurisdiction clause, the English courts, this may give rise to a preliminary dispute about the effects of the parties’ contractual choices. If so, the result is a classic example of what Robert Wai refers to as ‘“touchdown” points’ between a private regime and state law. The concern of the current and the following chapter is how the English courts navigate challenges to the choice of jurisdiction and governing law provided for in derivatives contracts, and the related legal issues that arise as a result of the global reach of the modern OTC markets. The principal focus here is claims arising out of or connected to the parties’ contract; where allegations relate to a broader, fraudulent scheme, the tort of conspiracy or deceit different principles will apply to determine governing law and jurisdiction.

This chapter is the first of two chapters that examine what can happen when a company cannot pay all or some of its debts. This chapter discusses the types of action that can be taken other than winding a company up, focusing upon receivership, schemes of arrangement and voluntary administration. This chapter commences with a consideration of the state of insolvency, and how it may be determined. This is a complex question, relying on an array of information specific to each company, beyond that company’s demonstrated assets and liabilities according to a balance sheet. Each of the actions the chapter considers are also demonstrative of different aspects of insolvency law, with different motivations and consequently vastly different outcomes.

During liquidation the business of the company ceases, its assets are collected and sold, and the proceeds applied in accordance with the priorities set out in the Corporations Act. First, the proceeds are applied to creditors and any balance is paid to shareholders. Thereafter, the company is deregistered and ceases to exist. Winding up may be either compulsory (court-ordered) or voluntary. The most common reason for winding up or liquidation is insolvency.

Insolvencies are a consequence of capitalist economies and the market factors that underpin and drive them, including competitive behaviours, and the appetite for and bias towards risk, limited social and material resources (among them, credit), and the asymmetrical relationship of expectation to capacity. Insolvency always has some – and may have vast – private, public, institutional and systemic consequences. The distinction between insolvency as it relates to corporations, and bankruptcy in relation to persons, is made in the Australian Constitution. Insolvency and bankruptcy occur when corporations, businesses or persons are unable to pay their debts when and as they fall due. The term 'bankruptcy' is applicable to personal insolvency, while insolvent corporations or businesses go into liquidation. Bankruptcy laws provide the framework within and procedures by which the failure of debtors to pay their debts can be handled in an organised and efficient manner, making similar provisions for corporations, businesses and persons, while at the same time recognising the differences between the subjects of the processes.

The arguments presented in Chapter 9 continue to hold for this chapter on environmental criminal law. But we also join the models from Law and Economics on criminal law, as we noted with Becker’s and Stigler’s analysis. Fundamentally, the key issues here are the ability to deal in non-monetary sanctions, the need to improve the reliability of the environmental criminal law system to actually result in full adjudication from discovery of the crime to sentencing and punishment, as well as the effective determination of the sanction given the known rate of prosecution likelihood. The ability to address environmental aggressors with something beyond financial punishment is a strong tool offered by environmental criminal law. As there is always extra gravitas in the loss of freedom; thus, the potential risk of incarceration provides a strong incentive when the financial tools fail. While environmental law has made great progress in the last fifty years, environmental criminal law remains less often implemented around the globe. It is clear from the Law and Economics literature that sound theoretical models support the use of environmental criminal law alongside other public law efforts.