As the Draft EBL Amendment remains subject to further rounds of deliberation prior to adoption, its final content may continue to evolve. Nevertheless, the current draft provides a sufficient basis for identifying likely implementation challenges. Foreign representatives are likely to operate in an environment marked by procedural gaps, interpretive uncertainty, and limited judicial experience with cross-border insolvency matters. These constraints are not merely theoretical; they shape how international practitioners assess recognition prospects, advise clients on asset-protection strategies, coordinate parallel proceedings, and evaluate the risks associated with engaging Chinese courts in multinational restructurings. The following subsections examine the principal challenges that practitioners are likely to encounter when seeking recognition or relief in Chinese courts, assuming that the core structure of the Draft EBL Amendment is carried forward in the final legislation.
A. Procedural Uncertainty and Limited Statutory Implementation Guidance
A central practical challenge for international practitioners arises from the Draft EBL Amendment’s lack of detailed statutory procedures governing applications for recognition. Although the Draft EBL Amendment articulates substantive standards for recognition, it offers little guidance on procedural matters, including filing requirements, evidentiary standards, document authentication, and applicable timelines.
This procedural silence reflects a broader feature of Chinese legislative practice, under which statutes typically articulate high-level principles while leaving operational detail to be developed through subsequent judicial interpretations issued by the SPC. The 2006 EBL illustrates this approach: enacted with only 136 articles and effective in June 2007, it was progressively elaborated through SPC interpretations issued in 2011, 2013, and 2019, which collectively clarified core issues ranging from eligibility for insolvency proceedings to administrator powers, the identification and scope of the bankruptcy estate, and the exercise of creditors’ avoidance rights.[1]
It is therefore likely that, following promulgation of the revised bankruptcy law, the SPC will again issue judicial interpretations addressing procedural aspects of cross-border insolvency. However, the issuance of such interpretations may entail a time lag, potentially giving rise to a transitional period in which the statutory framework is formally in place but the practical mechanics of implementation remain uncertain.
During this interim, practitioners are likely to look to existing judicial practice and pilot mechanisms for guidance. In particular, the 2021 SPC Pilot Opinions—though geographically limited to Hong Kong–related proceedings—provide useful insight into the types of procedural materials and information Chinese courts may require in recognition applications.
Under the 2021 SPC Pilot Opinions, a Hong Kong insolvency representative applying for recognition and assistance must submit an application accompanied by specified supporting materials. These include a request letter issued by the Hong Kong High Court; documents initiating the Hong Kong insolvency proceeding and appointing the representative; the judgment or ruling for which recognition is sought; evidence establishing that the debtor’s COMI is located in Hong Kong, with foreign-origin documents authenticated in accordance with applicable Mainland China regulations; and the representative’s identification documents. The applicant must also provide evidence that the debtor has property, a place of business, or a representative office within one of the designated pilot areas in Mainland China. In addition, the application must set out information concerning the debtor and the representative, the status of the Hong Kong proceeding, the specific relief requested, the debtor’s assets and business activities in Mainland China, any related litigation or enforcement measures, and the existence of other foreign insolvency proceedings.[2]
Although these procedural requirements do not formally apply outside the Hong Kong pilot program, they nonetheless illustrate the degree of procedural specificity Chinese courts may expect in future recognition cases under the new cross-border insolvency regime. In light of the Draft EBL Amendment’s limited procedural guidance, international practitioners would be well advised to approach recognition applications conservatively, preparing extensive advance documentation, ensuring careful authentication of materials, and closely tracking the development of judicial practice.
B. Practical Difficulties Arising from Cumulative Recognition Requirements
Draft Article 204 conditions recognition on the satisfaction of multiple cumulative requirements. This design introduces a heightened degree of uncertainty for foreign representatives, increases the cost of preparing recognition applications, and may delay the timing of recognition, particularly in complex cross-border insolvency cases.
1. Chinese Laws, Administrative Regulations, and Public Policy
For international practitioners, the requirement that recognition must not violate Chinese laws, administrative regulations, or public policy presents a significant source of uncertainty at the planning and filing stages. Draft Article 204 does not specify which categories of laws or regulations are relevant to the recognition inquiry, nor does it indicate how potential conflicts should be evaluated.
In practice, this uncertainty increases both the cost and complexity of cross-border insolvency coordination. Foreign representatives may need to retain Chinese counsel to conduct extensive legal analyses covering corporate law, insolvency law, foreign exchange controls, data and cybersecurity regulations, and industry-specific administrative rules, even where the relief sought is limited in scope. Because the boundaries of “public policy” are not clearly delineated in the cross-border insolvency context, practitioners may also feel compelled to address potential public policy concerns proactively, resulting in longer submissions and more extensive supporting documentation.
2. National Sovereignty, Security, and Social Public Interests
The requirement that recognition must not impair national sovereignty, security, or social public interests introduces an additional layer of uncertainty for international practitioners. These concepts are inherently context-dependent, leaving foreign representatives with limited guidance on how they may be applied in individual cases. As a result, case strategy and risk assessment are complicated, particularly where factors such as the debtor’s industry, the involvement of state-owned or state-affiliated creditors, workforce considerations, or the presence of regulated assets may invite heightened judicial scrutiny. In response, practitioners are likely to adopt a cautious approach, devoting increased attention to explanatory submissions that anticipate and address potential sovereignty or public-interest concerns.
3. Lawful Rights and Interests of Domestic Creditors
Because the Draft EBL Amendment embeds the protection of domestic creditors directly into the recognition threshold, rather than addressing creditor interests at the relief or distribution stages, international practitioners face a distinct set of practical challenges at the outset of a recognition application.
Foreign representatives may be required to anticipate how Chinese courts will evaluate issues such as distribution priorities, procedural safeguards, and the scope of any stay under the foreign proceeding, even though these matters would ordinarily be assessed only after recognition in jurisdictions following the Model Law. The absence of clear benchmarks makes it difficult to determine in advance whether a foreign insolvency regime will be viewed as sufficiently protective of domestic creditor interests.
Accordingly, practitioners may consider approaching recognition applications with heightened sensitivity to domestic creditor outcomes. This may include clearly explaining how domestic creditors are classified and treated under the foreign proceeding, identifying procedural mechanisms that protect creditor participation and due process, and, where appropriate, highlighting functional safeguards that mitigate disparities in distribution or enforcement. Early attention to these issues may help reduce the risk that recognition is delayed or denied based on perceived prejudice to domestic creditors.
4. Reciprocity
Chinese courts assess reciprocity on a case-specific basis, typically by examining whether the foreign jurisdiction has previously recognized, or would recognize in principle, insolvency judgments or rulings rendered by Chinese courts.[3]This reciprocity inquiry places substantial evidentiary and financial burdens on foreign representatives, who are often required to commission expert legal opinions, analyze foreign insolvency legislation, and submit detailed comparative materials demonstrating the foreign jurisdiction’s recognition regime.
The recognition of the Japanese civil rehabilitation proceeding illustrates the scope of this evidentiary burden. In that case, the foreign representative submitted, among other materials, a legal opinion from a Japanese attorney explaining the statutory framework under which Chinese insolvency proceedings could be recognized in Japan, as well as an expert opinion issued by a Chinese legal research institution addressing the relevant provisions of Japanese insolvency law.[4]
Collectively, these uncertainties limit the ability of international practitioners to evaluate the likelihood of recognition, and the recognition process will likely remain resource-intensive. Moreover, these uncertainties in meeting Draft Article 204’s cumulative requirements are compounded by the intrinsically time-sensitive nature of cross-border insolvency practice. Even when foreign representatives can assemble the substantial evidentiary materials required by Draft Article 204, the recognition process may still unfold too slowly to prevent asset dissipation or creditor races in China. The following subsection examines how timing pressures and procedural delays create additional practical risks for practitioners.
C. Time Sensitivity and the Risk of Value Dissipation
Time is a critical factor in cross-border insolvency practice. Effective coordination requires that foreign representatives be able to act quickly to preserve assets, prevent unilateral creditor enforcement, and maintain the integrity of the global proceeding. However, the recognition process in China can be lengthy and procedurally complex, creating significant risks for foreign representatives who must operate within time-sensitive restructuring frameworks.
In the Japanese civil rehabilitation recognition case discussed above, the Shanghai Third Intermediate People’s Court formally accepted the application for recognition in September 2021 but did not issue its ruling until September 2023.[5]A substantial portion of this delay resulted from the need to determine whether reciprocity existed between China and Japan in the cross-border insolvency context. In 2022, the Shanghai Third Intermediate People’s Court sought guidance from the Shanghai High People’s Court, which in turn requested instructions from the SPC. It was not until June 2023 that the SPC issued an official reply confirming the existence of reciprocity between China and Japan with respect to the recognition and enforcement of insolvency-related judgments.[6]
This experience highlights a structural challenge for international practitioners. Even where a foreign proceeding is orderly and recognition is ultimately available under Chinese law, the procedural steps required to resolve threshold issues—such as reciprocity—may extend well beyond the timeframes typically contemplated in cross-border restructurings. During such extended pendency periods, local creditors may continue enforcement actions, and debtors may transfer, encumber, or dissipate assets located in China.
When viewed together with the Draft EBL Amendment’s silence on interim relief, these timing risks take on heightened practical significance. In the absence of provisional measures during the period between filing and recognition, foreign representatives have limited tools to prevent value leakage while the recognition application is under review. In light of this exposure, practitioners may find it prudent to factor recognition-related delays into restructuring strategy at an early stage, to explore parallel protective measures where available, and to prioritize transparency and engagement with domestic stakeholders to mitigate enforcement and asset-dissipation risks during the pendency of recognition proceedings.
D. Bridging the Relief Sought with Relief Available Under Chinese Law
Although the Draft EBL Amendment does not expressly articulate the relief available following recognition of a foreign proceeding, existing precedent and the 2021 SPC Pilot Opinions suggest that certain effects of a domestic insolvency proceeding—and certain powers ordinarily exercised by a domestically appointed administrator—may, in appropriate circumstances, be extended to a recognized foreign representative.
This approach is illustrated by prior recognition cases. In the German insolvency proceeding recognition case, the Chinese court authorized the foreign representative to take control of the debtor’s assets, corporate seals, accounting books, records, and related documents; determine the debtor’s daily operating expenses and other necessary expenditures; and manage and dispose of the debtor’s property.[7]
In the Japanese civil rehabilitation recognition case, the Chinese court reasoned that judicial assistance to a foreign administrator must be limited to those functions that overlap between foreign law and Chinese law. Although the 2006 EBL does not contain an identical term or definition corresponding to the role of a Japanese supervisor, the Chinese court found that the substantive functions performed by the Japanese supervisor fell within the scope of the supervisory duties of an administrator under Article 73 of the 2006 EBL.[8] On that basis, the Chinese court permitted the Japanese supervisor to exercise supervisory authority over the debtor and authorized the supervisor to oversee the debtor’s self-management of its assets and business operations within China.[9]
The 2021 SPC Pilot Opinions further clarify the scope of relief that may be granted following recognition of a Hong Kong insolvency proceeding. They confirm that Chinese courts may impose effects functionally analogous to those available in domestic proceedings, including the suspension of pending litigation or enforcement measures. Upon application, Chinese courts may also authorize a Hong Kong administrator to exercise certain administrative powers within Mainland China, such as taking control of the debtor’s assets and records, managing or disposing of property, and representing the debtor in legal proceedings. At the same time, the 2021 SPC Pilot Opinions make clear that the scope of such relief remains subject to judicial authorization and must operate within the confines of China’s existing insolvency framework.[10]
The foregoing analysis underscores that the authority of a recognized foreign representative is constrained by the limits of China’s existing insolvency framework, creating a central practical challenge for international practitioners in bridging the relief typically sought in foreign proceedings with the forms of relief that Chinese courts are prepared to grant. In cross-border insolvency practice, relief commonly available in jurisdictions that have adopted the Model Law does not always align neatly with the remedial framework recognized under Chinese law. For example, under Chapter 15, a court may, upon recognition, authorize the examination of witnesses concerning the debtor’s assets, affairs, rights, obligations, and liabilities.[11] By contrast, although the 2006 EBL empowers administrators in domestic proceedings to investigate the debtor’s assets and liabilities and to require cooperation from relevant individuals—primarily senior management—it does not recognize a formal mechanism for witness examination in insolvency proceedings.
Even where comparable relief might be sought by analogy, foreign representatives must consider whether its exercise would be supported by compulsory judicial measures and whether requests directed at the debtor, insiders, or third parties would be viewed as consistent with the statutory framework of Chinese bankruptcy law. Accordingly, requests for relief must be framed in terms intelligible within the Chinese insolvency system and calibrated to established domestic practice, and the exercise of such authority must be approached with particular caution in the cross-border context.
[1] See 2006 EBL (136 articles); Zuigao Renmin Fayuan Guanyu Shiyong Zhonghua Renmin Gongheguo Qiye Pochan Fa Ruogan Wenti de Guiding (Yi) (最高人民法院关于适用《中华人民共和国企业破产法》若干问题的规定（一）)[Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Enterprise Bankruptcy Law (I)] (promulgated by the Sup. People’s Ct., Sept. 9, 2011, effective Sept. 26, 2011) (9 articles); Zuigao Renmin Fayuan Guanyu Shiyong Zhonghua Renmin Gongheguo Qiye Pochan Fa Ruogan Wenti de Guiding (Er) (最高人民法院关于适用《中华人民共和国企业破产法》若干问题的规定（二）) [Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Enterprise Bankruptcy Law (II)] (promulgated by the Sup. People’s Ct., Sept. 16, 2013, effective Sept. 16, 2013) (48 articles); Zuigao Renmin Fayuan Guanyu Shiyong Zhonghua Renmin Gongheguo Qiye Pochan Fa Ruogan Wenti de Guiding (San) (最高人民法院关于适用《中华人民共和国企业破产法》若干问题的规定（三）) [Provisions of the Supreme People’s Court on Several Issues Concerning the Application of the Enterprise Bankruptcy Law (III)] (promulgated by the Sup. People’s Ct., Feb. 25, 2019, effective Mar. 28, 2019) (16 articles).
[2] 2021 SPC Pilot Opinions arts. 6–7.
[3] Quanguo Fayuan Shewai Shangshi Haishi Shenpan Gongzuo Zuotanhui Huiyi Jiyao（全国法院涉外商事海事审判工作座谈会会议纪要）[Minutes of the National Courts Symposium on Foreign-Related Commercial and Maritime Adjudication] (promulgated by the Sup. People’s Ct. Dec. 31, 2021), ¶ 44 (“Determination of Reciprocity”). The Minutes provide that, in proceedings concerning applications for recognition and enforcement of foreign judgments or rulings, a people’s court may find reciprocity to exist where: (1) under the law of the foreign court’s home jurisdiction, civil or commercial judgments rendered by Chinese courts may be recognized and enforced by courts of that jurisdiction; (2) China and the foreign jurisdiction have reached a mutual understanding or consensus regarding reciprocity; or (3) reciprocity commitments have been made through diplomatic channels by either China or the foreign jurisdiction, provided there is no evidence that the foreign jurisdiction has previously refused recognition or enforcement of Chinese judgments on the ground of lack of reciprocity. The Minutes further provide that the existence of reciprocity shall be determined on a case-by-case basis.
[4] Shanghai Guoji Zhushihuishe Shenqing Chengren he Zhixing Waiguo Fayuan Minshi Caiding An, supra note 28. In assessing reciprocity, the court relied in part on (i) a legal opinion issued by Japanese counsel explaining the recognition of foreign insolvency proceedings under Japan’s Act on Recognition of and Assistance for Foreign Insolvency Proceedings and Civil Rehabilitation Act, and (ii) an expert opinion issued by the East China Univ. of Political Sci. & Law Foreign Law Ascertainment Research Ctr. analyzing the relevant Japanese statutory framework.
[5] Id.
[6] Supreme People’s Court Reply, supra note 29.
[7] DAR, supra note 27.
[8] 2006 EBL art. 73, (providing that where the debtor continues to manage its property and business affairs, the administrator shall exercise supervisory functions, including oversight of the debtor’s conduct and protection of creditor interests).
[9] Shanghai Guoji Zhushihuishe Shenqing Chengren he Zhixing Waiguo Fayuan Minshi Caiding An, supra note 28.
[10] 2021 SPC Pilot Opinions arts. 12–14.
[11] 11 U.S.C. §1521(a)(4) (authorizing, upon recognition of a foreign proceeding, relief including “the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor’s assets, affairs, rights, obligations, or liabilities”).