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The Gibbs Principle – A Tether on the Feet of Good Forum Shopping

The Honourable Judicial Commissioner Kannan Ramesh

(2017) 29 SAcLJ 42

There is a pressing need to reopen debate on whether the principle articulated in Antony Gibbs & Sons v Société Industrielle et Commerciale des Métaux remains relevant or useful in modern cross-border insolvency law. Criticism has been levied against the Gibbs principle both judicially and in academia, primarily on the ground that it cleaves to the outmoded philosophy of territorialism in cross-border insolvency and should finally be discarded in the light of the modern thrust toward modified universalism. This article will examine the arguments against the Gibbs principle and the tension between the principle and the growing acceptance of good forum shopping in cross-border insolvency. Significant benefits for both debtors and creditors are generated if they are allowed to engage in bona fide forum shopping for insolvency proceedings in order to avail themselves of juridical advantages available in foreign jurisdictions. Yet the Gibbs principle poses an impediment to good forum shopping by preventing recognition of debt discharge where the debt is governed by a law other than that of the insolvency jurisdiction. This is an urgent problem for corporations that borrow internationally and in multiple jurisdictions, and therefore incur debts under a plethora of national laws. The Gibbs principle is a relic of a different legal and economic era that ought to be consigned to the annals of history. In its place, a new approach will be proposed.