South African creditors may wield the Gibbs rule to confront an Italian pre-insolvency statutory restructuring composition

Abstract

This article summarises the judgment in Cooperativa Muratori & Cementisti & others v Companies and Intellectual Property Commission & others, in which the Supreme Court of Appeal confirmed the statutory denial of business rescue to external companies and refused to recognise and apply the Italian restructuring process in South Africa. The article then discusses the private international law (conflict of laws) on the discharge of a contract by a foreign sequestration or liquidation, and the statutory novation of the contract by a foreign pre-insolvency composition or restructuring. Central to the debate over characterisation and choice of law (between contract or insolvency) is the effect of the Gibbs rule, a long-standing feature of the law of the United Kingdom, South Africa, and several other countries, but increasingly controversial because of contemporary ideas of cross-border insolvency law. The article argues for an approach based on contract and company law rather than insolvency law, because pre-insolvency proceedings, by definition, do not involve a winding-up order or a liquidation process, and, if timely and successful, prevent both. The South African private international law on the recognition of a foreign pre-insolvency statutory composition or restructuring as a foreign judgment may thus need to be reconsidered.