This Part traces the development of China’s cross-border insolvency regime under the 2006 Enterprise Bankruptcy Law. It examines how a principle-based provision gradually evolved through judicial guidance, pilot cooperation mechanisms, and early recognition cases, setting the stage for the more structured framework proposed in the Draft EBL Amendment.
1. Article 5 of the 2006 EBL: A Principle-Based Starting Point
When the 2006 EBL was enacted, China’s market-oriented economic system was still in an early stage of development, and the design and implementation of the statute were shaped by a range of social and institutional constraints. In particular, legislative caution reflected the fiscal and social costs associated with state-owned enterprise reform, the limited societal capacity at the time to absorb large-scale corporate failures, and structural limitations in judicial resources and professional insolvency expertise.[1] Within this context, lawmakers adopted a deliberately cautious and minimalist approach to cross-border insolvency, the 2006 EBL addressed cross-border insolvency in only a single provision—Article 5—which articulated general principles rather than a comprehensive legal framework.
Article 5 provides, first, that insolvency proceedings commenced in accordance with the 2006 EBL have extraterritorial effect with respect to the debtor’s assets located outside the territory of China.[2] It further provides that judgments or rulings rendered by foreign courts in legally effective insolvency cases, insofar as they concern a debtor’s assets located within China, may be recognized and enforced by Chinese courts upon application. Such recognition and enforcement are to be conducted in accordance with international treaties concluded or acceded to by China, or, in the absence of such treaties, on the basis of reciprocity. Even then, recognition is permitted only where it does not violate China’s basic legal principles, impair state sovereignty, security, or social public interests, or prejudice the lawful rights and interests of creditors within China.[3]
Notably, Article 5 establishes no procedural mechanism for recognition or judicial assistance, provides no jurisdictional allocation rules, and introduces no concepts analogous to “foreign proceedings” or “foreign representatives.” As a result, while the 2006 EBL affirms the possibility of cross-border insolvency recognition in principle, it leaves the practical operation of such recognition largely undefined.
As China’s economy rapidly internationalized in the late 2000s and 2010s—marked by offshore bond issuances, outbound investment, and increasingly complex multinational corporate structures—the skeletal cross-border framework embedded in the 2006 EBL became increasingly misaligned with commercial reality.
2. Judicial Policy Guidance: The 2018 SPC Minutes
In response to these emerging pressures, the Supreme People’s Court (“SPC”) issued the Minutes of the National Court Bankruptcy Adjudication Work Conference in 2018 (“2018 SPC Minutes”). The 2018 SPC Minutes provided important policy guidance for lower courts confronting cross-border insolvency issues. They encouraged a flexible application of the reciprocity principle, emphasized the need to balance the interests of domestic and foreign creditors, reaffirmed protection for priority claims—such as employee wages, social insurance contributions, and taxes—and urged courts to explore mechanisms of international cooperation.[4]
Despite their significance, the 2018 SPC Minutes functioned primarily as a quasi–judicial interpretation rather than a comprehensive procedural framework. They did not establish concrete rules governing recognition, jurisdiction, or coordination under the 2006 EBL. As a result, China’s cross-border insolvency regime remained largely principle-based, and lower courts continued to exercise considerable caution. Indeed, based on publicly available information, no Chinese court had recognized a foreign proceeding under the 2006 EBL prior to 2021.[5]
3. The 2021 Hong Kong Pilot Program: A Controlled Experiment
A pivotal shift occurred in May 2021, when the SPC issued the Opinions on Launching the Pilot Program of Recognition of and Assistance to Bankruptcy Proceedings in the Hong Kong Special Administrative Region (“2021 SPC Pilot Opinions”).[6] The 2021 SPC Pilot Opinions apply only to courts in Shanghai, Shenzhen, and Xiamen,[7] and only to Hong Kong insolvency proceedings. Where a debtor’s principal assets are located, or it maintains a place of business or representative office, within one of these pilot regions, a Hong Kong insolvency administrator may seek recognition and assistance. Recognition further depends on the debtor establishing that its center of main interests (COMI) has been located in Hong Kong continuously for more than six months.[8] This geographically limited and experimental design reflects China’s cautious, pilot-based approach to legal reform. Nevertheless, the 2021 SPC Pilot Opinions marked a meaningful step toward aligning Chinese practice with international cross-border insolvency standards.
Substantively, the 2021 SPC Pilot Opinions incorporate several core elements of United Nations Commission on International Trade Law (“UNCITRAL”) Model Law on Cross-Border Insolvency (“Model Law”),[9] including recognition of collective insolvency proceedings, adoption of the COMI standard, and the availability of relief such as stays and asset preservation measures.[10] Although expressly framed as experimental, the 2021 SPC Pilot Opinions signal a clear institutional move toward more structured, rule-based, and transparent mechanisms for cross-border insolvency cooperation—particularly significant given the sparse and principle-level guidance of Article 5 of the 2006 EBL.
4. Recognition in Practice: Judicial Applications of Article 5 of the 2006 EBL
Building on this expanding judicial openness, 2021 marked a turning point when Chinese courts began to grant recognition to foreign proceedings directly under Article 5 of the 2006 EBL. Although still limited in number, these decisions have begun to delineate the practical boundaries of recognition and assistance under the existing statute.
An early and influential decision emerged in 2021, when the Xiamen Maritime Court issued the first reported ruling to apply Article 5 of the 2006 EBL in the recognition of a foreign insolvency ruling.[11] The case arose from a ship-repair dispute pending before the court involving a debtor that had entered judicial management proceedings in Singapore. Following the commencement of the Singapore proceeding and the appointment of a judicial administrator, an application was submitted in China seeking recognition of the legal standing of the foreign-appointed administrator.
Treating the request as an application for recognition of a foreign insolvency judgment under Article 5 of the 2006 EBL, the court conducted a reciprocity analysis between China and Singapore. It found that reciprocal practice had been established not only with respect to the recognition of civil and commercial judgments, but also in the insolvency context, and further concluded that recognition would not violate Chinese public interests or prejudice the lawful rights of domestic creditors. On this basis, the court granted recognition of the Singapore judicial administrator.
A more procedurally elaborate case arose in 2023, when the Beijing No. 1 Intermediate People’s Court recognized a German insolvency proceeding.[12] The foreign administrator sought recognition in China in order to manage and dispose of the debtor’s sole onshore asset. Applying Article 5 of the 2006 EBL, the court examined jurisdiction, the debtor’s COMI, and the existence of reciprocity between China and Germany. Although no treaty governed mutual recognition, the court relied on German insolvency law and practice to find reciprocal recognition in principle. Concluding that recognition would not contravene China’s basic legal principles, public interests, or the rights of domestic creditors, the court granted recognition, confirmed the administrator’s status, and permitted the exercise of insolvency powers in China with respect to the debtor’s local assets.
The most recent and arguably most complex case arose in September 2023, when the Shanghai Third Intermediate People’s Court recognized a Japanese civil rehabilitation proceeding.[13] Although the debtor was headquartered in Tokyo, it maintained substantial assets and multiple subsidiaries in China. Following the commencement of the rehabilitation proceeding by the Tokyo District Court and the appointment of a supervisor, recognition was sought in China to facilitate coordinated administration of the debtor’s onshore assets and to protect the interests of both domestic and foreign creditors.
In granting recognition, the court held that the Japanese proceeding was collective in nature, had been commenced at the debtor’s COMI, and was functionally comparable to China’s self-administration model. With respect to reciprocity, the court relied on guidance from the SPC, which confirmed the existence of reciprocity between China and Japan in the recognition and enforcement of insolvency-related judgments. The SPC noted that, although prior China–Japan recognition cases in the civil and commercial context had produced mixed outcomes, there was no precedent denying recognition in the insolvency context and no prohibition under Japanese law against recognizing Chinese bankruptcy proceedings.[14] Recognition was therefore granted, with the court confirming the supervisor’s authority in China while requiring separate approval for any major onshore asset dispositions that could materially affect creditor interests.
These cases constitute the first coherent body of Chinese jurisprudence on cross-border insolvency developed under the 2006 EBL. They reflect a gradual but discernible judicial shift toward recognizing foreign proceedings and providing judicial assistance consistent with international cooperation norms.
[1] Wang Weiguo, Xin Pochan Fa: Yi Bu Yu Shi Ju Jin de Lifa [The New Bankruptcy Law: Legislation Keeping Pace with the Times], http://www.npc.gov.cn/npc/c2/c189/c221/201905/t20190522_33190.html (Feb. 28, 2007, 00:00 AM).
[2] 2006 EBL art. 5, para. 1.
[3] Id. art. 5, para. 2.
[4] Quanguo Fayuan Pochan Shenpan Gongzuo Huiyi Jiyao, Fa [2018] Wushisan Hao（全国法院破产审判工作会议纪要，法【2018】53号）[Minutes of the National Court Bankruptcy Adjudication Work Conference, Judicial No. 53 [2018]] (promulgated by the Sup. People’s Ct., Mar. 4, 2018) [hereinafter 2018 SPC Minutes], arts. 49–50, available at https://www.court.gov.cn/zixun-xiangqing-100771.html.
In China, such “minutes” issued by the Supreme People’s Court do not constitute formal judicial interpretations under the Legislation Law, but they are routinely treated as authoritative guidance by lower courts and exert substantial practical influence in insolvency adjudication.
[5] Xia Xianpeng & Yu Yixuan, Shenqing Chengren Waiguo Pochan Caipan Zhong de Huhui Shencha, [Reciprocity Review in Applications for Recognition of Foreign Insolvency Judgments], People’s Judicature (Cases), no. 23, at 78, 78–82 (2022) (observing that, prior to a 2021 ruling by the Xiamen Maritime Court, Article 5 of the 2006 EBL had not been applied by Chinese courts as a basis for reviewing applications seeking recognition of foreign insolvency judgments).
But Chinese courts can engage in judicial cooperation on cross-border insolvency issues based on the bilateral treaties on civil and commercial judicial assistance that China has concluded with over 30 countries; see Gao Xiaoli (Member of the Adjudication Committee of the Supreme People’s Court & Chief Judge, Second Civil Division), China’s Practice of Judicial Cooperation in Cross-Border Insolvency, China Int’l Commercial Court (Dec. 04, 2024), https://cicc.court.gov.cn/html/1/219/208/203/12545.html.
[6] Guanyu Kaizhan Renke he Xiezhu Xianggang Tebie Xingzhengqu Pochan Chengxu Shidian Gongzuo de Yijian (关于开展认可和协助香港特别行政区破产程序试点工作的意见) [Opinions on Launching the Pilot Program of Recognition of and Assistance to Bankruptcy Proceedings in the Hong Kong Special Administrative Region] (promulgated by the Sup. People’s Ct., May 14, 2021) [hereinafter 2021 SPC Pilot Opinions], https://www.court.gov.cn/zixun-xiangqing-297221.html. In May 2021, the Supreme People’s Court and the Government of the Hong Kong Special Administrative Region held consultations concerning mutual recognition and assistance in bankruptcy proceedings between Mainland and Hong Kong courts. As a result, they signed the Record of Meeting of the Supreme People’s Court and the Government of the Hong Kong Special Administrative Region on Mutual Recognition of and Assistance to Bankruptcy (Insolvency) Proceedings between the Courts of the Mainland and of the Hong Kong Special Administrative Region (“Record of Meeting”). Based on the principles established in the Record of Meeting, the Supreme People’s Court formulated the 2021 SPC Pilot Opinions.
[7] Id. art. 1.
[8] Id. art. 4.
[9] United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency, adopted May 30, 1997, U.N. Comm’n on Int’l Trade Law) [hereinafter UNCITRAL Model Law] available at https://uncitral.un.org/en/texts/insolvency/modellaw/cross-border_insolvency.
[10] 2021 SPC Pilot Opinions arts. 9-11.
[11] Fujian Huadong Chuanchang Youxian Gongsi yu Xinjiapo Xihe Konggu Youxian Gongsi deng Chuanbo Xiuli Hetong Jiufen （福建华东船厂有限公司与新加坡海洋油船公司等船舶修理合同纠纷）[Fujian Huadong Shipyard Co. v. Xihe Holdings (Pte) Ltd.], (2021) Min 72 Ren Cheng No. 1 (Xiamen Mar. Ct. Aug. 13, 2021).
[12] DAR Shenqing Chengren Waiguo Fayuan Pochan Caiding An （DAR申请承认外国法院破产裁定案） [DAR Application for Recognition of Foreign Bankruptcy Ruling], (2022) Jing 01 Po Shen No. 786 (Beijing No. 1 Interm. People’s Ct. Jan. 16, 2023).
[13] Shanghai Guoji Zhushihuishe Shenqing Chengren he Zhixing Waiguo Fayuan Minshi Caiding An （上海国际株式会社申请承认和执行外国法院民事裁定案）[Application for Recognition and Enforcement of Foreign Civil Ruling], (2021) Hu 03 Xie Wai Ren No. 1 (Shanghai No. 3 Interm. People’s Ct. Sept. 26, 2023).
[14] Zuigao Renmin Fayuan Guanyu Shanghai Mou Zhushihuishe Shenqing Chengren he Zhixing Riben Minshi Zaisheng Chengxu Qingshian de Fuhan, (2023) Zuigaofa Min Ta San Hao（最高人民法院关于上海某株式会社申请承认和执行日本民事再生程序请示案的复函, (2023）最高法民他3号）[Reply Concerning an Application by a Certain Japanese Corporation in Shanghai for Recognition and Enforcement of a Japanese Civil Rehabilitation Proceeding, (2023) Sup. People’s Ct. Min Ta No. 3] (June 27, 2023).