Recent Developments in Singapore’s Quest to Become Asia’s International Debt Restructuring Hub | Hogan Lovells

Judge Sontchi was appointed as a Judge of the United States Bankruptcy Court, District of Delaware in 2006. When he retires from the bench on June 30, 2022, he will assume a new role handling insolvency cases alongside Singaporean judges who have insolvency experience and also sit on the SICC.

The move is part of a carefully orchestrated plan to make Singapore the jurisdiction of choice to hear complex cross-border corporate insolvency and restructuring cases in the region. When Singapore revised its insolvency laws in 2017, it drew inspiration from various international insolvency regimes and a number of the restructuring tools adopted since have their roots in US bankruptcy law.

Singapore as an Arbitration, Mediation and Legal Center

“We hope to attract international insolvencies primarily in the Southeast Asia and South Asia region,” he said. “There are a lot of interconnections with Singapore in the region due to the amount of funding coming from Singapore, the size of Singapore’s economy and Singapore’s long legal tradition.” In addition to working for the SICC, Judge Sontchi will also engage in a private capacity, among other things, in the conduct of mediations and arbitrations which are becoming increasingly popular in the region.

Insolvency mediation as a restructuring tool

Singapore has sought to promote insolvency mediation as a restructuring tool but, to the knowledge of the authors, it has yet to be ordered in any restructuring overseen by Singapore courts. While courts in Singapore have in recent times strongly encouraged mediation by parties involved in insolvency-related cases, courts have not required parties to restructuring proceedings to use mediation on the basis principle that out-of-court dispute resolution should be voluntary. However, Asian companies have been the subject of mediation orders in US bankruptcy cases with positive results.

China Fishing, mediation or liquidation

In China Fishery Group, a company listed on the Singapore Exchange Mainboard and currently subject to United States Chapter 11 proceedings, Judge Garrity ordered certain parties to participate in mediation and appointed his colleague, Judge Robert Drain (who has since announced his own intention to retire), to deal with disputes that represented an impasse in reaching agreement on a plan. After more than five years in bankruptcy, a restructuring plan was finally confirmed in June 2021 where Judge Garrity paid tribute to Judge Drain’s efforts and the successful mediation of various disputes that had “helped smooth the way” to confirm the plan.

Thai to take away?

Another example of Asian companies successfully using mediation is Thai food retailer, Dean & Deluca, which filed for Chapter 11 in 2020. After the official committee of unsecured creditors opposed the restructuring plan proposed by the company, the court approved the company’s motion to appoint Judge Carey as mediator. Mediation succeeded in breaking the deadlock and the company subsequently had its revised restructuring plan approved and confirmed.

Insolvency tourism

Although forum shopping is not new, Singapore’s efforts to modernize its insolvency framework to make it easier for foreign companies to use its restructuring laws are to be applauded. Further improvements by bringing in judicial heavyweights such as Justice Sontchi no doubt bodes well for Singapore’s restructuring ecosystem.

In the meantime, there’s likely some reading for Judge Sontchi, because just as the laws evolve, so does the rogue debtors’ playbook. Following the tactics employed by some emerging market debtors in the region is sure to make this role an interesting new chapter in Judge Sontchi’s insolvency career.

The podcast is available on Spotify (soon on Apple and Google Play) and at this link.

Terri S. Tomasini