The Iran war will generate a global tide of multi-jurisdictional restructurings and insolvencies: What are the challenges for businesses and advisors worldwide?

Unfortunately, the global and many local economies have already suffered significant damage, especially in Asia and parts of Africa. The longer a final agreement and implementation of agreed solutions are delayed, the worse the repercussions for businesses worldwide will be. Even then, can companies rely on peace holding in the Middle East, that most volatile of world regions?

Headline issues for UK businesses

The major issues to be taken into account by the global business community include:

• More cross border distress. Volatile commodity prices, logistics disruption, and sanctions compliance costs can rapidly undermine liquidity and covenant headroom.
• Group structures will matter. Many businesses have assets, employees, intellectual property, bank accounts, joint ventures, and creditors spread across different jurisdictions. This makes single country solutions to business problems unrealistic.
• Cross border insolvency recognition is harder post-Brexit if there are UK/EU issues. UK insolvency proceedings are no longer automatically recognised across the European Union, increasing the risk of parallel proceedings, enforcement races, and value leakage.
• Early and decisive action is vital. The sooner a contingency plan can be put together to deal with sanctions, cash squeezes, contract disputes, funding, and communications, the more likely it is that disruptive and expensive multi-forum legal disputes and insolvency processes can be avoided.

Why the Middle East crisis has driven up restructuring risk 

For many businesses, the immediate issue is not the impact on direct operations in the conflict zone, rather it’s the way geopolitical conflict impacts their balance sheets. War conditions can create a compound shock: higher and more volatile energy inputs, disrupted transport routes and insurance markets, wider bid ask spreads in foreign exchange and commodities, and tighter credit conditions. The result is a familiar restructuring pattern: it starts with a liquidity squeeze, moves on to create covenant pressure, and then becomes an often undignified scramble for waivers, additional collateral, and emergency funding.

Sectors with high energy needs (manufacturing, chemicals, transport), long supply chains (retail, automotive, electronics), and exposure to shipping choke points are particularly vulnerable. Even businesses that stay profitable on paper can get caught up in real world working capital death spirals: longer transit times, the need for greater inventory buffers, higher letter of credit requirements, and customers demanding extended terms. Against that backdrop, corporate groups will increasingly look for coordinated solutions that bind creditors across borders. These are often the defining features of a successful, modern multi jurisdictional restructuring.

Why will there be more multi jurisdictional restructurings?

This is not just the preserve of multinational groups. Mid market and even smaller businesses can easily become “international” in insolvency terms. They may have overseas subsidiaries that hold trading contracts, intellectual property licensed through a foreign institution, cash swept into a treasury company in another jurisdiction, inventory held in third party warehouses abroad, or lenders and bondholders located globally. In a distress scenario, each of those circumstances can pull the restructuring into different forums, sometimes one or more of which have conflicting objectives and timelines.

Two practical realities drive multi jurisdictional execution. Firstly, creditors will enforce where value is easiest to capture. Typically, this will be where key assets, bank accounts, receivables, or pledged shares sit. Secondly, modern capital structures mix governing laws (for example, English law and New York law) and creditor types (banks, funds, trade creditors, lessors, counterparties). Where different courts must be persuaded to recognise or give effect to a single deal, businesses can face parallel proceedings, duplicated costs, and strategic hold outs. There is a range of possible solutions:

Single lead forum plus recognition elsewhere. This involves one main process (e.g. a UK Restructuring Plan) supported by recognition, or parallel steps in other jurisdictions.

Parallel “main” and “secondary” proceedings. This is when insolvency processes are opened where the group has its centre of main interests (COMI), and where it has establishments or critical assets. Secondary procedures are commenced in other jurisdictions as appropriate.

Interlocking processes. An example might be where a UK Restructuring Plan is combined with Chapter 15 recognition in the US and one or more EU restructuring tools.

Understanding the “plumbing” of cross border insolvency is essential post Brexit where UK/EU issues are involved

The UK’s core statutory framework for recognising and assisting foreign insolvency proceedings is the Cross Border Insolvency Regulations 2006 (CBIR), which implement the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross Border Insolvency. 

The Model Law is designed to promote court to court cooperation and coordination through a recognition process that distinguishes between foreign main proceedings (typically where the debtor’s COMI is located) and foreign non main proceedings (where the debtor has an establishment). Recognition can unlock relief such as stays on creditor actions, and the ability for a foreign insolvency office holder to deal with UK located assets, or vice versa.

Unfortunately, Brexit changed the recognition map for UK EU cases. Proceedings opened in the UK after the end of the transition period on 31 December 2020 are no longer automatically recognised across EU member states under the EU Insolvency Regulation. Instead, UK insolvency office holders and companies must rely on each individual EU member state’s domestic rules; however, only a small sub-set of EU states have adopted the Model Law. 

The UK government’s own guidance highlights that this change inevitably increases court scrutiny, time, and uncertainty for cross border enforcement between the UK and an EU state, and that approaches vary widely between different EU jurisdictions.

For purely contractual cross-border restructurings, UK Schemes of Arrangement and Part 26A Restructuring Plans can still be highly effective, especially where the relevant finance documents are governed by English law. But cross border execution of judgments hinges on recognition and enforceability in the jurisdictions where creditors might sue or enforce. A recurring challenge is the so called rule in Gibbs. This established that a debt governed by English law is generally not discharged by a foreign insolvency process unless the creditor submits to the process. In practice, that can push multi-national groups toward an English-law insolvency solution if a significant portion of their liabilities are governed by English law.

Where are cross border insolvency issues most likely to bite hardest under the current conflict with Iran and similar future scenarios?

1) Sanctions, export controls, and “illegality” risk

When sanctions regimes expand quickly, companies can find themselves unable to perform contracts, receive payments, ship goods, or access bank facilities, even when the underlying transaction remains economically sound. That may trigger cross defaults under finance documents, termination rights under supply and trading contracts, and disputes over whether performance is excused. In a restructuring, this creates a multi jurisdictional puzzle. What is lawful in one jurisdiction may be prohibited in another, and banks’ risk appetites can differ by location. From a practical point of view, groups will often need to obtain parallel advice and, in some cases, use separate processes to ring fence sanctioned exposures while stabilising the wider business.

2) Shipping, insurance and supply chain disruption

War risk premiums can change the economics of trade overnight. Vessels need to be rerouted, lead times extended, demurrage and detention costs rise, and insurers can impose exclusions or higher deductibles. For businesses using inventory financing, letters of credit, or receivables facilities, these events can reduce their borrowing base and force margin calls on borrowing facilities. Insolvency issues then become cross border because goods are in transit, while bonded warehouses and third party logistics hubs are governed by different laws, each with their own security, lien, and retention of title rules. A restructuring must map where the assets are physically – not just where they appear in a particular group company’s balance sheet.

3) Energy and commodity volatility: hedges, margining, and close out

Spikes in energy and commodity prices can create an immediate liquidity squeeze through margin calls on hedging and trading positions. These exposures are often documented under standardised master agreements with close out netting and set off provisions. In a distress scenario, the timing of a filing, the scope of any moratorium it creates, and the recognition of netting rights can vary across jurisdictions. This creates the risk that a counterparty closes out in one jurisdiction while the group seeks protection in another. Boards and treasury teams must treat hedging collateral and margining as a core restructuring workstream, not a footnote that turns out to have been an expensive afterthought when it goes wrong.

4) Dispute escalation: arbitration, judgments, and enforcement races

Distress often turns commercial tension into formal disputes. Where contracts specify arbitration or foreign courts, an insolvency or restructuring process in one jurisdiction may not automatically prevent proceedings elsewhere. This creates a risk of “grab and run” enforcement against overseas assets. While some jurisdictions such as the UK have well developed tools for managing the interaction between insolvency and arbitration, businesses should assume cross border fights will need active case management, including agreed standstills, recognition applications, and, where appropriate, coordinated orders between different courts.

What does a real-world cross-border workout strategy look like for management boards and finance teams?

• Map the group and the enforcement hotspots. List entities, assets, bank accounts, key contracts, and security packages by jurisdiction. Identify where a hostile creditor could most quickly seize value.
• Stress test liquidity under disruption scenarios. Model fuel/energy inputs, transport delays, inventory buffers, FX volatility, and sanctions related payment friction. Track covenants and availability headroom daily in crisis mode.
• Carry out a rapid audit of relevant sanctions and export controls. Identify counterparties, intermediaries, and goods/technology that could become restricted. Establish escalation paths and documentary evidence for banks and insurers.
• Identify which liabilities need to be compromised, and under which law. Separate out debt and key contracts by governing law (English, New York, EU member state, etc.), and by creditor location. Flag English law governed liabilities that could be vulnerable to the rule in Gibbs if restructured abroad.
• Settle on a lead restructuring route early. Decide at the outset where the best centre of gravity is to achieve the overall restructuring objectives, and what ancillary routes may be necessary. Unless there is a dramatic change of circumstances, switching strategies in the middle of a cross-border restructuring rarely ends well.
• Plan recognition and parallel steps. For each “must win” jurisdiction, confirm the recognition pathway, estimated timeline, and likely objections. Budget for filings that may be needed to stabilise assets.
• Engage critical stakeholders as early as possible. Lenders, key suppliers, landlords, trade credit insurers, employee representatives, and regulators can all derail or help to de risk a strategy; sequencing matters.
• Effective communication is vital. Multi jurisdictional cases move fast – ensure consistent messaging for employees, customers, counterparties, and external media, and document board decisions and rationale.

Conclusion

The war with Iran is already accelerating the next cycle of business distress both in the UK and globally by increasing volatility and operational friction while creating cash crises. For businesses worldwide, the restructuring challenge will often be less about finding a rescue tool and more about executing it across borders in a situation where recognition is uncertain, enforcement is opportunistic, and legal constraints differ by jurisdiction. 

The organisations that will manage these challenges best will be those that make working out the cross border insolvency “plumbing” a strategic priority. They will map assets and liabilities, plan recognition routes, and coordinate stakeholders before liquidity pressure turns into a multi forum scramble. They will also be those businesses that reach out for expert professional advice from the start. 

Dealing with cross-border restructuring is not a game for enthusiastic amateurs, however well-meaning they might be. Existing advisors, however trusted they are, may not have the necessary knowledge, experience, or expertise. 

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Nick Hood is Senior Adviser to the Opus Business Advisory Group. He was a Chartered Accountant for over fifty years and a licensed insolvency practitioner between 1992 and 2010, specialising in mid-market and SME business problems. He is a committed internationalist, having previously created and run the largest international association of specialist business rescue firms.