Notwithstanding its symbolic and institutional significance, the cross-border insolvency regime in the Draft EBL Amendment falls short of establishing a fully functional and predictable framework for cross-border insolvency. The regime adopts a cautious, control-oriented design that imposes layered substantive conditions, preserves broad judicial discretion, and leaves key operational issues unresolved.
A. Eligibility Constraints on Recognition: COMI-Exclusive and Asset-Based
A central limitation of the Draft EBL Amendment lies in the restrictive conditions governing eligibility for the recognition of foreign proceedings. Draft Article 204 conditions recognition on two cumulative requirements: the commencement of the foreign proceeding in the debtor’s COMI and the presence of the debtor’s principal assets within China.[1] These threshold requirements significantly narrow the circumstances in which foreign representatives may seek recognition and relief in cross-border insolvency cases.
First, eligibility for recognition under the Draft EBL Amendment is constrained by its COMI-exclusive design. Draft Article 204 provides that only a foreign proceeding commenced in the debtor’s COMI may be recognized, leaving no statutory basis for recognizing foreign proceedings opened in jurisdictions where the debtor maintains an establishment but not its COMI. This unitary approach excludes the possibility of recognizing foreign non-main proceedings and forecloses access to ancillary relief tailored to proceedings with a legitimate, but non-central, connection to the debtor. In this respect, the Draft EBL Amendment departs from the Model Law, which expressly distinguishes between foreign main and foreign non-main proceedings and authorizes courts to grant differentiated relief calibrated to their respective roles within a multinational insolvency.[2]
Second, the Draft EBL Amendment further conditions eligibility for recognition on the presence of the debtor’s principal assets within China. Draft Article 204 requires that an application for recognition be filed with the intermediate people’s court at the place where the debtor’s principal assets within China are located, indicating that the existence of onshore assets operates as a threshold condition for seeking recognition. This asset-contingent approach carries forward the logic of Article 5 of the 2006 EBL, which similarly linked recognition of foreign insolvency judgments to assets situated within Chinese territory.
By comparison, Chapter 15 permits the commencement of a recognition proceeding even where the debtor has no assets located in the United States.[3] Eligibility under Chapter 15 is not asset-based; rather, the framework is designed to facilitate recognition of foreign insolvency proceedings and to enable cooperation and assistance whenever such relief is appropriate.
This asset-based eligibility threshold is increasingly difficult to justify in light of contemporary economic realities. In modern cross-border insolvency practice, the assistance sought from Chinese courts may not relate to debtor assets located in China at all. A foreign representative, for example, may seek access to data or records held by third-party service providers subject to Chinese jurisdiction, even where such information does not constitute part of the bankruptcy estate. Likewise, where a debtor’s contractual obligations are governed by Chinese law, recognition of a foreign restructuring proceeding may be necessary to bind creditors in China despite the absence of onshore assets. As a result, the Draft EBL Amendment risks transforming recognition from a mechanism of procedural coordination into one conditioned narrowly on asset location, thereby limiting its effectiveness in addressing the realities of modern cross-border insolvency.
B. Strict and Cumulative Recognition Standards
While the Draft EBL Amendment introduces a long-awaited statutory mechanism for the recognition of foreign proceedings, the standards it prescribes for recognition are substantially more restrictive than those adopted under the Model Law. Rather than establishing a rule-based recognition framework, Draft Article 204 conditions recognition on the cumulative satisfaction of multiple substantive requirements, thereby granting courts broad discretion to deny recognition.[4]
Under Draft Article 204, a foreign proceeding may be recognized only if it does not violate Chinese laws or administrative regulations, does not contravene public policy, does not impair national sovereignty, security, or social public interests, and does not prejudice the lawful rights and interests of domestic creditors. Taken together, these overlapping standards create a high and indeterminate threshold for recognition, transforming what is intended to be a gateway mechanism into a multi-factor merits inquiry.
By contrast, the Model Law adopts a deliberately minimalist approach to recognition. Recognition turns primarily on formal and objective criteria—whether the applicant qualifies as a foreign representative, whether the application is supported by the required documentation, and whether the foreign proceeding is collective and judicial in nature. Substantive refusal is permitted only where recognition would be “manifestly contrary to public policy,” a standard that leading jurisdictions have consistently interpreted narrowly.[5] Chapter 15 follows the same structure. Once the statutory prerequisites are satisfied, recognition of a foreign proceeding is effectively mandatory, subject only to the narrow public policy exception.[6]
The requirement that recognition must not prejudice the rights of domestic creditors further amplifies this strictness. Unlike the Model Law and Chapter 15, which address creditor protection primarily at the relief and distribution stages,[7]the Draft EBL Amendment embeds creditor-protection considerations directly into the recognition threshold. This approach invites courts to engage in premature substantive assessments of foreign insolvency regimes, including distribution priorities and stay effects, before recognition has even been granted.
While the Draft EBL Amendment represents a significant step toward formalizing a cross-border insolvency framework, its sovereignty-protective approach departs from the Model Law’s narrow public policy exception and more streamlined recognition regime. This divergence, though protective of domestic interests, comes at the expense of legal certainty and frames the practical challenges examined in Part IV.
C. Limited Statutory Guidance on Post-Recognition and Interim Relief
A more fundamental limitation of the Draft EBL Amendment lies in its treatment of relief following the recognition of a foreign proceeding. In cross-border insolvency practice, recognition is not an end in itself but a procedural mechanism through which effective judicial assistance may be obtained. Absent meaningful relief, recognition has limited practical value: it neither enables foreign representatives to perform core insolvency functions nor facilitates coordination among parallel proceedings.
To protect the debtor’s assets and the collective interests of creditors, the Model Law establishes a structured and differentiated system of relief following an application for recognition. It distinguishes between the automatic effects of recognition and judicially granted relief, as well as between interim and post-recognition measures. Article 20 provides for the automatic consequences of recognizing a foreign main proceeding, including a stay of individual actions and a suspension of the debtor’s right to dispose of assets. [8]In parallel, Articles 19 and 21 empower courts to grant discretionary relief: Article 19 authorizes provisional measures on an emergency basis after a recognition application is filed but before recognition is determined,[9] while Article 21 permits courts, following recognition, to order additional relief necessary to support the foreign proceeding, subject to appropriate safeguards.[10]
By contrast, Draft Article 204 provides only that Chinese courts may, on a discretionary basis, grant “assistance” to a recognized foreign proceeding, without specifying the scope, content, or legal consequences of such assistance. The Draft EBL Amendment does not clarify whether recognition should give rise to an automatic stay of individual actions or executions, nor does it specify the scope of post-recognition relief available to a foreign representative, such as examination powers, access to books and records, information-gathering from third parties, or measures to preserve or secure local assets. These tools are not ancillary conveniences; they constitute the basic operational mechanisms through which cross-border insolvency proceedings are administered and coordinated. Absent greater clarity, recognition risks functioning as a largely formal acknowledgment rather than as an effective instrument of cooperation.
The Draft EBL Amendment is also silent on interim relief. Without provisional measures during the period between filing and recognition, creditors may continue enforcement actions and debtors may transfer or dissipate assets even where recognition is ultimately granted. In cross-border restructurings, such exposure—often arising over a relatively short timeframe—can result in irreversible value loss and undermine the collective nature of the foreign proceeding.
Viewed cumulatively, the Draft EBL Amendment’s COMI-exclusive and asset-based eligibility thresholds, its cumulative recognition standards, and the absence of a defined framework for post-recognition and interim relief significantly limit the functional operation of its cross-border insolvency regime. While the Draft Amendment establishes a formal pathway for seeking recognition of foreign proceedings, it leaves unresolved how recognition is to be implemented in practice and how judicial assistance is to be delivered in a timely and predictable manner. These structural features shift the burden of coordination from statute to practice, giving rise to a range of procedural, strategic, and timing-related challenges for foreign representatives and creditors alike.
[1] Draft EBL Amendment art. 204, para. 1.
[2] UNCITRAL Model Law, arts. 2(c), 17(2).
[3] See 11 U.S.C. §1504. Section 1504 provides that “[a] case under chapter 15 is commenced by the filing of a petition for recognition of a foreign proceeding,” without requiring the presence of debtor assets in the United States. See also In re Toft, 453 B.R. 186, 190–92 (Bankr. S.D.N.Y. 2011) (recognizing that Chapter 15 permits U.S. courts to consider requests for recognition and relief even where the debtor has no assets in the United States, while ultimately denying specific relief on public policy grounds).
[4] Draft EBL Amendment art. 204, para. 2.
[5] UNCITRAL Model Law, arts. 15–17; see also id. art. 6 (permitting refusal of recognition only where it would be “manifestly contrary to the public policy” of the enacting State). UNCITRAL, Guide to Enactment of the UNCITRAL Model Law on Cross-Border Insolvency ¶ 104, U.N. Doc. A/CN.9/442 (1997) (explaining that the qualifier “manifestly” is intended to ensure that the public policy exception is interpreted restrictively and invoked only in exceptional circumstances involving matters of fundamental importance).
[6] See 11 U.S.C. §§ 1515–1517 (setting forth the requirements for recognition of a foreign proceeding); id. § 1517(a) (providing that a court “shall” enter an order recognizing a foreign proceeding if the statutory requirements are met); id. § 1506 (authorizing refusal of recognition only where it would be “manifestly contrary to the public policy of the United States”).
[7] See 11 U.S.C. § 1522(a) (providing that a court may grant discretionary relief in a Chapter 15 case “only if the interests of the creditors and other interested entities, including the debtor, are sufficiently protected”); see also 11 U.S.C. § 1521(b) (authorizing entrustment of U.S. assets to a foreign representative for administration in the foreign proceeding only where “the interests of creditors in the United States are sufficiently protected”).
[8] UNCITRAL Model Law, art. 20.
[9] See id. art. 19.
[10] See id. art. 21.