CROSS-BORDER INSOLVENCY: CHOICE OF LAW AND JURISDICTIONAL CONFLICT

CONTRIBUTOR: Abiola Johnson

Introduction

In today’s globalized economy, insolvency proceedings rarely remain confined to one jurisdiction. As part of expansion efforts, companies are breaking into foreign markets, earning the status of ‘Multinational Corporations (MNCs). Recently, news outlets were abuzz with the groundbreaking listing of Guaranty Trust Corporation (GTCO) Ltd. on the London Stock Exchange, becoming the first Nigerian (and West African) financial institution to do so.^[1] These cross-border expansions, whilst increasing market share and business profitability, complicate the insolvency landscape. Critical questions arise, such as what law and jurisdiction will govern cross-border insolvency proceedings. This article succinctly answers these questions.

Meaning of Cross-border Insolvency

Cross-border insolvency refers to situations where an insolvent debtor, be it a company or an individual, has assets, creditors, or business operations spread across more than one country.^[2] Unlike domestic insolvency, cross-border insolvency involves the interaction of multiple legal systems, each potentially claiming jurisdiction and applying different substantive insolvency laws.^[3] These proceedings become especially complex when courts must decide where to initiate insolvency proceedings and which law governs matters such as asset distribution, creditor hierarchy, or debt restructuring.

In essence, cross-border insolvency raises two fundamental legal challenges: choice of law (which country’s insolvency law should apply) and jurisdictional competence (which court has the authority to adjudicate the insolvency).^[4] The global nature of commerce means that insolvency practitioners, creditors, and courts must navigate treaties,^[5] bilateral agreements,^[6] or soft-law instruments like the UNCITRAL Model Law to resolve these conflicts.^[7] In practice, the lack of uniformity often leads to forum shopping, delays in the recognition of foreign proceedings, and inconsistent treatment of creditors. As a result, cross-border insolvency requires robust international cooperation and harmonization efforts to promote legal certainty, efficiency, and equitable outcomes across jurisdictions.

Legal Framework for Cross-border Insolvency in Nigeria

Nigeria’s legal framework for insolvency is still evolving and remains largely domestic in character, with limited provisions for cross-border insolvency.^[8] The main legislation governing insolvency proceedings is the Companies and Allied Matters Act 2020,^[9] alongside the Bankruptcy Act for personal insolvency.^[10] However, neither of these statutes comprehensively addresses cross-border insolvency, particularly in terms of recognition of foreign proceedings, cooperation among courts, or assistance to foreign representatives.

While CAMA 2020 introduced some modernization to corporate governance and insolvency, it lacks explicit mechanisms for the recognition of foreign insolvency judgments or proceedings. Nigeria has not yet adopted the UNCITRAL Model Law on Cross-border Insolvency, nor is it a party to any international insolvency cooperation treaties. As a result, Nigerian courts rely on general principles of private international law to determine jurisdiction and choice of law in cross-border insolvency cases.

Under Nigerian conflict of laws rules, a foreign insolvency judgment may be recognized only if it satisfies common law conditions: it must be final and conclusive, issued by a court of competent jurisdiction, and not contrary to public policy. The lack of a codified regime for cross-border cooperation results in legal uncertainty and inconsistent rulings.

Moreover, challenges persist regarding the enforcement of foreign liquidation orders and the treatment of foreign creditors. Nigerian courts have generally been reluctant to defer to foreign insolvency proceedings, especially where local creditors or public policy considerations are involved. In the absence of legislative reform, Nigerian liquidators and creditors must navigate these gaps on an ad hoc basis, often to the detriment of efficient and predictable outcomes.

This legal vacuum underscores the urgent need for Nigeria to adopt a comprehensive cross-border insolvency regime that aligns with international best practices.

UNCITRAL Model Law on Cross-border Insolvency

The UNCITRAL Model Law on Cross-border Insolvency provides a flexible, harmonized legal framework for managing insolvency cases that span multiple jurisdictions.^[11] Its core aim is to promote cooperation between local and foreign courts and insolvency representatives, encourage legal certainty, and protect the value of the debtor’s assets.

Chapter III of the Model Law, particularly Article 15, addresses the recognition of foreign proceedings. It states:

“A foreign representative may apply to the court for recognition of the foreign proceeding in which he or she has been appointed. An application for recognition shall be accompanied by: (a) a certified copy of the decision commencing the foreign proceeding; (b) a certificate from the foreign court affirming the existence of the proceeding; and (c) a statement identifying all foreign proceedings concerning the debtor known to the foreign representative.”^[12]

Once recognition is granted, the foreign proceeding may be treated as either a main proceeding (where the debtor has its center of main interests) or a non-main proceeding (where the debtor has an establishment). Recognition of a main proceeding typically triggers an automatic stay on local proceedings and grants the foreign representative powers similar to those of a local administrator. The Model Law thus fosters predictability and judicial cooperation.

Comparative Analysis: Cross-border Insolvency in the UK and the US

The UK and US adopt distinct approaches to cross-border insolvency, especially in determining the debtor’s center of main interests (COMI), a central concept under the UNCITRAL Model Law.

The United Kingdom, before Brexit, was subject to the EU Insolvency Regulation.^[13] Post-Brexit, it relies primarily on the Cross-Border Insolvency Regulations 2006,^[14] which implement the UNCITRAL Model Law. UK courts focus on the location of the debtor’s principal place of administration to determine COMI.^[15] Courts are generally open to recognising foreign proceedings and cooperating with foreign representatives, provided recognition does not conflict with UK public policy.^[16]

In contrast, the United States applies Chapter 15 of the US Bankruptcy Code,^[17] which also incorporates the UNCITRAL Model Law. However, US courts adopt a more fact-sensitive, litigation-prone approach to determining COMI. In In re Bear Stearns,^[18] for instance, US courts refused to recognize a Cayman proceeding as a main proceeding, finding that the debtor’s actual operations were in the US.

Conclusion

Cross-border insolvency presents a formidable legal challenge in a world where business operations transcend national boundaries. Jurisdictional conflicts and inconsistent choice of law rules threaten the efficiency and fairness of insolvency outcomes. While international instruments like the UNCITRAL Model Law offer a harmonized framework, countries like Nigeria still lag in their adoption and implementation. A coordinated response involving liquidators, creditors, MNCs, and the Nigerian government is essential. Legal reform, professional capacity-building, and international cooperation will not only reduce forum shopping and legal uncertainty but also strengthen Nigeria’s standing in the global economic landscape.

REFERENCE

1. Ronald Adamolekun, ‘UPDATED: GTCO becomes Nigeria’s first banking institution to list on London Stock Exchange’ Premium Times (9 July 2025). Available at: https://www.premiumtimesng.com/news/headlines/806062-updated-gtco-becomes-nigerias-first-banking-institution-to-list-on-london-stock-exchange.html accessed 25 July 2025. ↑
2. Peter Otaigbe, ‘Navigating Cross-Border Insolvency in Nigeria: A Case for Reform and International Alignment in Nigeria’s Insolvency Laws’ (2025) 13 Nottingham Insolvency and Business Law Electronic Journal 1–21. ↑
3. Ibid. ↑
4. Yetunder Olasope and Temitope Akosile, ‘Cross-Border insolvency: An Analysis under Nigerian Law’ Mondaq (28 March 2025). Available at: https://www.mondaq.com/nigeria/insolvencybankruptcy/1603514/cross-border-insolvency-an-analysis-under-nigerian-law accessed 27 July 2025. ↑
5. For example, egulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast) [2015] OJ L141/19. ↑
6. For example, US Bankruptcy Code, 11 USC § 1501 et seq (Chapter 15). ↑
7. UNCITRAL, Model Law on Cross-Border Insolvency (1997) UN Doc A/52/17, Annex I, art 15. ↑
8. Olasope and Akosile (n4). ↑
9. CAMA 2020 ↑
10. Cap. B2, LFN 2004. There are also a spate of subsidiary legislations such as the Insolvency Regulations, 2022, the Federal High Court Asset Management Corporation of Nigeria Rules 2018, Federal High Court (Civil Procedure) Rules 2019, the Companies Proceedings Rules, 1992, and the Companies Winding-up Rules, 2001. Other relevant legislations include the Constitution of the Federal Republic of Nigeria, 1999, the Banks and Other Financial Institutions Act (BOFIA), 2020, etc. See Abubakar Anafi and Others, ‘Insolvency Litigation: Nigeria’ In Suzzanne Uhland (eds), Insolvency Litigation (Lexology2023). ↑
11. UNCITRAL, Model Law on Cross-Border Insolvency (1997) UN Doc A/52/17, Annex I, art 15. ↑
12. Ibid, Ch. III, Art. 15. ↑
13. EU Insolvency Regulation (Regulation (EU) 2015/848). ↑
14. Cross-Border Insolvency Regulations 2006, SI 2006/1030 (UK). ↑
15. Bryan Rochelle, ‘Cross-Border Insolvency in the U.S. and U.K.: Conflicting Approaches to Defining the Locus of a Debtor’s Center of Main Interests’ (2017) 50(2) International Lawyer, 391–399. ↑
16. Ibid. ↑
17. U.S. Bankruptcy Code, 11 USC § 1501 et seq (Chapter 15). ↑
18. 374 B.R. 122, 129 (Bankr. S.D.N.Y. 2007), affd, 389 B.R. 325 (S.D.N.Y. 2008). ↑