2.4.4. Position of Creditors

The Model Law expressly provides tor a principle of non-discrimination between

creditors. Foreign creditors are to enjoy the same rights as local creditors in respect

of t he commencement of, and participation in, local proceedings.' As the Guide to

Enactment rather cynically states: 'foreign creditors ( . . . ) should not be treated worse

than local creditors'.1 1"'

However, the principle of non-discrimination is subject to a significant exception. It

does not affect the ranking of claims under local law. According to the Guide the

Model Law therefore leaves intact any national distributional rules which accord a

special' (i.e. lower) ranking to claims of foreign c r e d i t o r s . ; < l The only restriction is

that such claims may not be ranked lower than general, non-preferential claims, except

if an equivalent local claim receives a lower ranking. Admittedly, such discriminatory

policies arc the exception rather than the rule, but it constitutes a marked breach with the Model Law's objectives. Not only with respect to a non-discrimination principle,

but also because non-equal treatment of creditors may have substantial repercussions

on the willingness of states to co-operate.

The principle of non-discrimination applies to public claims in a qualified manner.

With respect to foreign tax and social security claims, states are left with a choice.

They may decide to treat those claims on the same footing as private claims. This

would imply that such claims must at least be recognised, although it does not

guarantee any priority. Alternatively, states may exclude foreign tax and social security

claims from their distributional scheme all together. ^

Ensuring that foreign creditors enjoy the same rights as local creditors regarding

commencement and participation will not take away practical barriers, which frequently

result in a Ac facto disadvantage for foreign creditors. Some of the moreobvious

of these obstacles are addressed by the Model Law. first, whenever under local

law notification is to be given to local creditors, the notification shall also be given to

known creditors who do not have an address in the enacting state. As to the method

of notification, the Model Law stipulates that the notification is in principle to be made

to foreign creditors individually. Reliance on local methods of notification, such as

newspapers or official gazettes, would be inappropriate as foreign creditors normally

have no direct access to such publications. The court is lett a degree of discretion to

order a different method of notification, for instance where individual notification

would involve excessive c o s t s . ""

Equal treatment, not only in law but also in fact, of foreign creditors is further

promoted by the provision for rules regarding the contents of the notification of

commencement of proceedings to foreign creditors. The notification must, in addition

to the information required by local law, indicate a 'reasonable time period' for the

filing of claims and the place of filing. Although the Guide to Enactment is silent, the

requirement of a 'reasonable period of time' suggests that foreign creditors must be

allowed a period of time which is reasonable in the circumstances, which is not

necessarily the time allowed to local creditors, or even prescribed by local insolvency

law."1 Furthermore, the notification should indicate whether secured claims need to

be filed. As the Guide to Enactment observes, the effect of filing or, conversely, the

failure to file, may result in a waiver or forfeiture of certain rights and privileges for

the secured creditor. Where such consequences are envisaged under national law, the

Guide notes, it would be appropriate for the enacting state to require the notification to include information regarding the effects of filing.1"' Finally, the court may order

other additional information to be included.

Article 14 does not address the not inconsiderable linguistic barriers. In the absence

of a specific provision, it must be assumed that the linguistic burden lies in principle

(save when a court orders otherwise) with the foreign creditor, who will receive notice

and must file in a foreign language.