In brief
On 18 January 2024, the Singapore International Commercial Court (SICC) issued its decision in Re PT Garuda Indonesia (Persero) Tbk [2024] SGHC(I) (“Re Garuda Indonesia“), which was the SICC’s first decision on an application under the UNCITRAL Model Law on Cross-Border Insolvency (as enacted in Singapore in the Third Schedule of the Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed) (“Singapore Model Law“)).
In a landmark judgment, the SICC granted recognition and enforcement of Garuda Indonesia’s restructuring proceedings and restructuring plan (“Composition Plan“) despite allegations by two related creditors (the “Greylag Entities”) that doing so would be contrary to the public policy of Singapore. The judgment is also jurisprudentially significant as the SICC had the opportunity to consider and clarify a host of issues in cross-border insolvency law, which we will elaborate on below.
We acted for the successful applicants in this matter.
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Background
Some seven years since undertaking a root-and-branch reform of its restructuring and insolvency laws, Singapore has made huge strides in entrenching itself as a key nodal jurisdiction for cross-border restructuring and insolvency in the Asia-Pacific (and beyond).
In 2022, amendments to the Supreme Court of Judicature Act 1969 were made to vest the SICC with jurisdiction to hear insolvency related matters. This sought to further increase the attractiveness of Singapore as a jurisdiction of choice for cross-border matters by (amongst other things) allowing parties to benefit from the expertise of a distinguished panel of local and foreign judges, and directly address the SICC on matters of foreign law and procedure through foreign counsel.
These features were on full display in the present case. The panel comprised International Judge Christopher Sontchi (Chief Judge of the Delaware Bankruptcy Court for the District of Delaware in 2018 to 2021), Judge of the Appellate Division Kannan Ramesh, and International Judge Anselmo Reyes (High Court Judge in Hong Kong from 2003 to 2012). Parties made submissions on the applicable principles around recognition and public policy, leveraging case authority from the Commonwealth (including significant citation of US jurisprudence). The Indonesian law experts addressed the Court directly on key matters relating to Indonesian law, including the permissibility of third-party releases in an Indonesian restructuring plan, and the classification of creditors in Indonesian restructuring proceedings.
Another groundbreaking facet of this matter was the preparation of a protocol to facilitate the court-to-court communications between the SICC, and the Bankruptcy Court of the Southern District of New York (SDNY),[1] based on the “Guidelines for Communication and Cooperation between Courts in Cross-Border Insolvency Matters” (otherwise known as the “JIN Guidelines”) published by the Judicial Insolvency Network.
The Court’s findings
The judgment in Re Garuda Indonesia provides important guidance on how applications for inbound recognition and public policy-related arguments may be received in Singapore going forward.
At the outset, the judgment clarifies and confirms that the public policy exception in Article 6 of the Singapore Model Law should be interpreted restrictively. The SICC found that notwithstanding the omission of the word “manifestly” in Article 6 of the Singapore Model Law, a restrictive interpretation would be consistent with: (a) the intent of the Model Law; (b) the goal of modified universalism (which seeks to ensure that assets are distributed under a single system of distribution through the cooperation of ancillary courts in other jurisdictions); and (c) considerations of comity.
Accordingly, any challenge on such grounds will only succeed if the grant of relief is contrary to the fundamental public policy of Singapore. This could occur where creditors participating in the foreign insolvency proceeding are not accorded due process, or where there is an unfair or inequitable treatment of creditors. The focus of the inquiry will be on procedural fairness rather than substantive law, in particular whether affected creditors had a full and fair opportunity to vote, were given adequate disclosure of information to assist in arriving at an informed vote, and had a full and fair opportunity to be heard in the foreign proceedings in a manner consistent with the standards of due process under Singapore law. It would be incumbent upon the party alleging the breaches to clearly articulate how their rights to fair and equitable treatment had been violated.
Applying these principles, the SICC rejected the Greylag Entities’ public policy objections, holding that they were in substance directed at the content of substantive Indonesian insolvency laws and the merits of the Indonesian Court’s decision to homologate the Composition Plan.
The SICC also rejected the Greylag Entities’ separate objection on the prematurity of the recognition application. It agreed with Garuda Indonesia’s submission that the Singapore Model Law did not require that a foreign proceeding is concluded, let alone that all avenues of appeal and review must be exhausted before a recognition application can be made.
Pertinently, the SICC also confirmed that foreign insolvency orders and judgments can be recognised and enforced under the Singapore Model Law. The SICC disagreed with the UK Supreme Court’s position in Re Rubin v Eurofinance SA that the Model Law is not designed to provide for the reciprocal enforcement of judgments,[2] preferring the position under US Bankruptcy law as previously endorsed by the Singapore High Court in the seminal decision of Re Tantleff, Alan [2023].
Finally, the Court took the opportunity to clarify that the correct approach is for recognition and enforcement of foreign insolvency judgments to be granted under the chapeau of Article 21(1) of the Singapore Model Law which permits the Court to grant “any appropriate relief”.
Further comments
The recent law reforms, the breadth of tools available to facilitate a successful restructure, and the development of a vibrant restructuring ecosystem with the requisite know-how and experience, have made Singapore an increasingly attractive and conducive forum for cross-border restructuring and insolvency activity. This is increasingly important as businesses transcend geographical boundaries, particularly in the Asia Pacific,[3] where distressed entities – in particular those with a regional/international footprint and access to overseas money markets – are often unable to effectively restructure its debts and obligations within a single jurisdiction. The decision in Re Garuda Indonesia is a welcome and important decision that provides welcome clarity to users seeking to recognize and enforce (or challenge, for that matter) foreign restructuring proceedings and orders in Singapore, and further cements Singapore as a key nodal jurisdiction.
[1] At the time, there were pending proceedings before the SDNY for recognition under Chapter 15 of the US Bankruptcy Code of the PKPU plan.
[2] Rubin v Eurofinance SA [2012] 3 WLR 1019.
[3] A relatively recent article from The Business Times in May 2023 suggests that more than 80% of businesses in Asia are looking to expand internationally in the next three years: see The Business Times, “four in five businesses in Asia want to expand overseas but face challenges: UOB study” (9 May 2023), https://www.businesstimes.com.sg/singapore/4-5-businesses-asia-want-expand-overseas-face-challenges-uob-study.
