Publications
Detailed Information
The Hotchpot Rule in Korean Insolvency Proceedings
Cited 0 time in
Web of Science
Cited 0 time in Scopus
- Authors
- Issue Date
- 2007
- Publisher
- BK 21 law
- Citation
- Journal of Korean Law, Vol.7 No.2, pp. 445-484
- Keywords
- Debtor Rehabilitation and Bankruptcy Law ; UNCITRAL Model Law on Cross-Border Insolvency ; principle of territoriality ; principle of universality ; bankruptcy proceeding ; rehabilitation proceeding ; rule of payment in concurrent proceedings ; hotchpot rule ; rule of payment in concurrent proceedings
- Abstract
- A new consolidated insolvency law called the Debtor Rehabilitation and Bankruptcy Law
(DRBL), which became effective in the Republic of Korea on April 1, 2006, has discarded the
principle of territoriality under the previous insolvency laws and adopted the so-called modified
principle of universality. At least for the purpose of Korean laws and Korean insolvency
proceedings, therefore, the effect of an insolvency proceeding which has commenced in Korea
would have effect on the debtors assets situated in a foreign country. However, whether and to
what extent a Korean insolvency proceeding would be recognized and enforced in a foreign
country, in which the debtors assets are situated, depends upon the laws of that foreign country.
If the recognition or enforcement of a Korean insolvency proceeding is wholly or partially denied
by that foreign country, what measures could be taken in a Korean insolvency proceeding in
order to achieve, as much as possible, the equality of payments between a creditor who received
payment outside of Korea and other creditors who receive payments in a Korean insolvency
proceeding? One such measure would be to apply the rule of payment adjustment newly
established under Article 642 of the DRBL, which is similar to the hotchpot rule embodied in
Article 32 of the Model Law. Article 642 of the DRBL primarily addresses payment made to a
creditor out of a concurrent foreign proceeding and attempts to adjust payment to be made to
such creditor in a Korean insolvency proceeding after taking into account the amount of such
payment made abroad to the same creditor. As the hotchpot rule incorporated in Article 642 of the
DRBL is rather new in Korea, there are not yet any court cases or established court practices at
this juncture. Scholarly discussions are just beginning. Thus, this article attempts to identify
issues which will likely arise in connection with the application of Article 642 of the DRBL and
presents the authors analyses and observations. One of the most notable observations of the
author in this article is that despite the lack of a clear statutory provision, payment recovered
from collateral situated outside of Korea, particularly in the case of Chapter 2 rehabilitation
proceedings of the DRBL which are similar to Chapter 11 proceedings of the U.S. Bankruptcy
Journal of Korean Law | Vol. 7, 445-484, June 2008
* This Article has been prepared based on the authors existing article written in Korean, International
Finance and Cross-Border Insolvency (2) - Concerning the Hotchpot Rule, 28 BFL (Center for Financial Law of
Seoul National University, March 2008). This Article, however, has added certain new sections and
reorganized and refined the discussions in said article while the existing observations and views of the
author are maintained.
** The Author is a partner at Kim & Chang. He received an LL.B. in 1981 from Seoul National
University College of Law and an LL.M. in 1992 from Cornell Law School. He is a member of the Korean
and New York bars.
Code, should not be prejudiced by Article 642 of the DRBL. In addition, in the authors view, as
Article 642 of the DRBL does not address payment made out of the debtors overseas assets where
there is no concurrent foreign insolvency proceeding, it is necessary to establish and apply
another rule based on the theory of unjust enrichment —i.e., disgorgement of such payment back
to the insolvency estate of the Korean insolvency proceeding —in order to achieve equality of
payments within a Korean insolvency proceeding vis-a-vis other creditors of the same class and
ranking in the Korean insolvency proceeding.
- ISSN
- 1598-1681
- Language
- English
- Files in This Item:
Item View & Download Count
Items in S-Space are protected by copyright, with all rights reserved, unless otherwise indicated.