Cross-Border Insolvency In Brazil: The UNCITRAL Model Law Dances to A Samba Beat

The basic framework of the UNCITRAL Model Law familiar to insolvency practitioners has been road-tested in 48 countries prior to Brazil's recent legislative change. The Model Law seeks to identify the jurisdiction where the debtor's center of main interests (COMI) is located, and deems the insolvency proceeding filed in that jurisdiction the "foreign main proceeding." Under Brazil's version of the Model Law, an insolvency proceeding filed in a jurisdiction other than the debtor's COMI and where the debtor engages in non-transitory economic activities or holds property is a "foreign non-main proceeding." The Model Law's vision is that a troubled multi-national business will be able to break through the disparate and sometimes contradictory insolvency regimes in different nations. The Model Law promotes cooperation across borders in order to accomplish laudable objectives, such as the rescue of financially troubled businesses.

Where Brazil is the debtor's COMI, the new law is, in many ways, simply a codification of the existing practice. For many years, in cases where Brazil is the debtor's COMI, Brazilian insolvencies have sought recognition and cooperation through ancillary proceedings abroad. A prominent example is the liquidation of the Brazilian bank Banco Santos, where the Brazilian trustee was able to recover and sell over 90 pieces of valuable artwork with the cooperation of foreign courts and use the repatriated proceeds to pay creditors.