To Be or Not to Be (Solvent) - A Comparative Analysis of Singapore, UK, US, and Australia on Recognising Foreign Proceedings under the UNCITRAL Model Law

The recent case of Ascentra Holdings, Inc v. SPGK Pte Ltd [2023] SGCA 32 (Ascentra) has drawn a line in the sand in the Singapore court's interpretation of the UNCITRAL Model Law on Cross-Border Insolvency (UNCITRAL Model Law), as incorporated in the Third Schedule of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA) to create the Singapore Model Law.

Following Ascentra, Singapore has taken the definitive position that the reference to "a law relating to insolvency or adjustment of debt", as used in Article 2(h) of the Singapore Model Law, should be widely construed, and that insolvency of the foreign debtor is not required for recognition of a foreign proceeding within the meaning of Article 2(h).

While the Ascentra decision provides new and welcome clarity in Singapore, the question of whether a proceeding is brought pursuant to "a law relating to insolvency" (and thereby falling within the meaning of 'foreign proceeding' capable of being recognised under the UNCITRAL Model Law) is not new. This has been discussed at length in multiple jurisdictions, where there are differing views.

In Ascentra, the Singapore Court of Appeal (SGCA) considered the issue to a different conclusion from the initial judgment of the Singapore High Court (SGHC), the latter hewing more closely with the prevailing view in the United Kingdom, where a solvent entity could not claim recognition of its overseas proceeding as a foreign proceeding.

The SGCA decision in Ascentra brings implementation of the Singapore Model Law in line with other popular UNCITRAL Model Law jurisdictions like the United States. From a jurisprudential perspective, this case is particularly helpful because it gave the SGCA opportunity to consider the issue and contrary view taken by the SGHC at first instance.

In reaching its decision, the SGCA considered that "a light threshold should be imposed for recognition". This is a clear directional marker that will assist applicants seeking recognition of their foreign proceedings in Singapore.

The opposite is also true; in that the Ascentra case suggests that resisting the recognition of 'foreign proceedings' in Singapore will likely be challenging in the face of clear jurisprudential and public policy considerations in favour of recognition.

In this Legal Update, we examine Singapore's newly settled position on what constitutes a 'foreign proceeding' in light of Ascentra – and compare this with equivalent provisions in the UK, US and Australia.