agree to a standstill on payment and collection for a period of collective negotiation. Participation in the scheme is voluntary, though banks in the UK did commit to the scheme, and a significant practice has evolved since the 1970s and through various financial crises through the 1990s.<sup>lxxii</sup> Other forms can include government sponsored negotiations or negotiations facilitated by third parties (both of which will be discussed below).

# **The London Approach works best for debtors that have multiple institutional lenders (primarily**

**banks) at a senior level** . Creditors must believe that negotiating will produce a better result than an insolvency filing, in order to motivate them to negotiate.  It is also more effective when the debtor does not need relief from trade debts, or the benefits of formal insolvency.<sup>lxxiii</sup> In order to support such a system, the legal and business regime should allow debt-for-equity swaps, and tax laws should not penalize debt restructuring or debt forgiveness. Additionally, the stronger the country‟s overall creditors‟ rights and insolvency regime , the more incentive the debtor will have to come to the table to negotiate. The parties will be more motivated when the legal system provides the credible threat of debt collection by creditors, or referral to liquidation, if there is not a collective resolution.<sup>lxxiv</sup>

# **In response to the Asian financial crisis in the 1990s, Indonesia, Korea, Malaysia and Thailand**

**promulgated out-of-court workout frameworks, with variations such as the “Bangkok Rules” and the “Jakarta Initiative”.**<sup>**lxxv**</sup> One major difference between these initiatives and the London Approach is that  in these countries, the government/authorities took a more active role in the workout process than the London Approach<sup>lxxvi</sup> . All four countries created central bodies that had the authority to identify companies in distress and monitor and encourage restructuring. All provided some form mediation and arbitration of disputes that arose during the negotiation procedure. The London Approach is much more hands-off; any alternative dispute resolution employed will be undertaken at the initiative of the private parties, not the government. Moreover, in these Asian countries, unanimous consent of creditors was not required for a restructuring plan, a 75% vote was enough.<sup>lxxvii</sup> The authors of a recent study of corporate debt restructuring during financial crises found that all countries had mixed success with restructuring. lxxviii After reviewing the experience in current systems, including the four born of the Asian crisis, the authors concluded that approaches that involved government support, and the establishment of public entities to facilitate and/or mediate the corporate restructuring process, were the most likely to produce results.<sup>lxxix</sup>

**Use of out of court restructuring is not widespread in MENA, though the most recent financial crisis has led to high-profile restructurings of large firms** _._ The economic context in some of the MENA countries renders the process too complex for ordinary companies. As an example, in Saudi Arabia, a significant number of companies have one major financial institution as a credit source, rather than multiple institutional creditors.<sup>lxxx</sup> Moreover, there does not seem to be a cultural practice of admitting looming financial disaster for a company, in order to initiate negotiations with its creditors. Therefore, in some MENA countries, informal negotiations between debtors and creditors are not the norm.<sup>lxxxi</sup> Kuwait has recently bucked the norm and begun to encourage multi-creditor workouts in response to the global financial crisis.

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