Judge Sontchi was appointed Judge of the United States Bankruptcy Court, District of Delaware in 2006.  When he retires from the bench on 30 June 30 2022, he will take on a new role handling insolvency cases alongside Singaporean judges who have insolvency experience and also sit on the SICC.

The move is all part of a carefully orchestrated plan to develop Singapore into the jurisdiction of choice to hear complex, cross-border insolvency and restructuring matters for corporates in the region.  When Singapore revised its insolvency laws in 2017, it looked at various international insolvency regimes for inspiration and a number of the restructuring tools since adopted have their roots in US bankruptcy law.

Singapore as an arbitration, mediation and legal centre

“We’re hoping to attract international insolvencies primarily in the Southeast Asia and South Asia region,” he said. “There’s a lot of interconnection with Singapore in the region because of the amount of financing that comes out of Singapore, because of the size of the Singapore economy and because of the long-standing legal tradition of Singapore.”  In addition to working for the SICC, Judge Sontchi will also be privately engaging in, among other things, conducting mediations and arbitrations which are becoming increasingly popular in the region.

Insolvency mediation as a restructuring tool

Singapore has sought to promote insolvency mediation as a restructuring tool but as far as the authors are aware, it has yet to be ordered in any restructuring being overseen by the Singapore courts.  While in recent times the Singapore courts have strongly encouraged mediation by parties involved in insolvency-related matters, the courts have not compelled parties in restructuring proceedings to mediate based on the principle that alternative dispute resolution should be voluntary.  However Asian companies have been the subject of mediation orders in U.S. bankruptcy matters with positive outcomes. 

China Fishery, mediate or liquidate

In China Fishery Group, a company listed on the Singapore Exchange Mainboard and currently subject to U.S. Chapter 11 proceedings, Judge Garrity ordered certain parties to participate in mediation and appointed his colleague, Judge Robert Drain (who has since announced his own intention to retire), to deal with disputes which represented a logjam in getting a plan agreed.  After more than five years in bankruptcy, a restructuring plan was finally confirmed in June 2021 where Judge Garrity paid tribute to the efforts of Judge Drain and the successful mediation of various disputes which had “helped smooth the path” to confirming the plan.

Thai take-away?

Another example of Asian companies successfully using mediation is that of Thai-owned gourmet retailer, Dean & Deluca which filed for Chapter 11 in 2020.  After the official committee of unsecured creditors objected to the company’s proposed restructuring plan, the court approved the company’s motion to appoint Judge Carey as the mediator.  The mediation was successful in unlocking the impasse and the company went on to have its revised restructuring plan approved and confirmed.

Insolvency tourism

Whilst forum shopping isn’t new, Singapore’s efforts to modernise its insolvency framework to facilitate foreign companies using its restructuring laws is to be applauded.  Further enhancements by bringing in judicial heavyweights such as Judge Sontchi undoubtedly bodes well for Singapore’s restructuring ecosystem. 

In the interim, there’s presumably some reading-in to be done for Judge Sontchi because just as laws evolve, so does the rogue debtors’ playbook.  Keeping up with the tactics employed by certain emerging-market debtors in the region is sure to make this role an interesting new chapter in Judge Sontchi’s insolvency career.

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Authored by Jonathan Leitch, Nick Williams, Carol Hartopp Hall, Kevin Carey.