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University of Pennsylvania Asian Law Review

Abstract

As the world’s second-largest economy, China has become a critical venue for high-profile cross-border insolvency proceedings in recent years. The evolution of China’s insolvency law and the pertinent judicial practice, especially its cross-border aspects, remains in infancy. This development underscores the significance of the 2021 Arrangement between Mainland China and the Hong Kong Special Administrative Region (“Hong Kong SAR”) on crossborder insolvency cooperation (the “2021 Arrangement”). The Arrangement not only caters to the unique demands under the “One Country, Two Systems” policy but also incorporates legal advancements and institutional features from the 1997 United Nations Commission on International Trade Law (“UNCITRAL”) Model Law on Cross-Border Insolvency (“MLCBI”) and the 2015 Recast of European Union (“EU”) Regulation on Insolvency Proceedings. Therefore, the 2021 Arrangement signifies a crucial step forward in legal cooperation between Mainland China and Hong Kong SAR, highlighting the expanding legal interconnections between China, Hong Kong SAR, and the international community in the field of cross-border insolvency.

However, the judicial practice under the 2021 Arrangement since its enactment, especially its sparse utilization by Mainland judges, suggests that it has not achieved its intended objectives. A variety of factors contribute to the lack of effective and meaningful cooperation. Against this backdrop, the article begins by detailing the Arrangement’s foundational principles and key features. It proceeds to analyze the reasons for the Arrangement's failure to significantly improve cooperation between Mainland China and the Hong Kong SAR, including a review of judicial practices to pinpoint inefficiencies and gaps. Furthermore, the article outlines potential strategies to enhance the Arrangement’s effectiveness, aiming to remedy its current deficiencies. It explores ways to refine the 2021 Arrangement, emphasizing the need for greater alignment with the UNCITRAL MLCBI, enhancing communication, and technical modifications, among others.

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