The “Debtor Rehabilitation and Bankruptcy Act” (“DRBA”) of Korea, which came into force on April 1, 2006, follows the modified universality principle by receiving the “Model Law on Cross-Border Insolvency” (“MLCBI”) adopted in 1997 by UNCITRAL. However, as for the effect of recognition, the DRBA was greatly influenced by the so-called Recognition Assistance Act of Japan, which went into effect in April 2001. The MLCBI regulates the recognition of foreign insolvency proceedings, but not the recognition and enforcement of insolvency-related judgments (“IJ”) issued after the decision commencing the insolvency proceedings. As a result, legal uncertainty had arisen over the recognition and enforcement of IJs. Accordingly, UNCITRAL adopted the “Model Law on Recognition and Enforcement of Insolvency-Related Judgments” (“MLIJ”) in July 2018, which purports to facilitate international cooperation by providing a straight-forward and harmonized procedure for the recognition and enforcement of IJs. Therefore, Koreans now ought to consider whether and how to receive the MLIJ.
In this article, the contents of the MLIJ are reviewed, and the concrete order of discussion is as follows: First, IJs which are the subject of recognition (Chapter II), second, requirements for recognition of IJs (Chapter III), third, procedures of recognition of IJs (Chapter IV), fourth, effect of recognition of IJs (Chapter Ⅴ), fifth, enforcement of IJs (Chapter VI) and sixth, meaning of Article X of the MLIJ (Chapter VII). According to the MLIJ, if certain requirements are met, the courts of the recognizing State must recognize and enforce IJs of foreign courts where there are no grounds for refusal. Procedurally, according to the MLIJ, a court of a recognizing State can make a decision on recognition after receiving an application for recognition of a foreign IJ (this decision is binding upon other courts of the receiving State), but if the issue of recognition of an IJ is raised as an incidental question, the court dealing with the principal question can recognize the IJ without a separate decision to recognize the IJ.
As for the MLIJ, Korea has three options. The first option is to follow the logic of the Supreme Court of Korea of 2010 which held that the rehabilitation plan of a debtor confirmed by the Federal Bankruptcy Court of the United States can be recognized in Korea pursuant to Article 217 of the Civil Procedure Act, and the second option is to follow the recognition of insolvency proceedings under the MLCBI and the assistance based thereon (the practice of the federal bankruptcy courts of the US and the view the author supports). The third option is to receive the MLIJ. According to the first and second options, there is no need to receive the MLIJ. Under the third option, there are the following alternatives: first, a plan to allow the selective application of the second option (by introducing Article X), and second, a plan to exclude the second option and allowing only the third option (by excluding Article X). When Korea receives the MLIJ, it will be necessary to clarify the relationship between the MLIJ (excluding Article X) and Article X.