International Bankruptcy: In Defense of Universalism
The globalization of business activity is rightfully celebrated as one of the triumphs of the second half of the twentieth century. The benefits stemming from the globalization of commerce are substantial, but international transactions also bring with them important challenges for the world’s legal systems. Traditionally, national governments could focus on their domestic economies without undue attention to international issues. Today, however, a country’s policymakers must respond to the growth in international business activity with appropriate legal changes. Failure to do so will cause their legal regimes to fall further and further out of step with the needs of the global marketplace. The exact content of the changes to be made, however, remains uncertain. This Article attempts to address one of the many international business issues that is forcing us to change the way we think about regulating cross-border activity – the treatment of transnational bankruptcy. It is a fact of economic life that businesses fail. The growth of international business, therefore, has brought with it a growth in the number of international business failures. In recent years, the increased number of international insolvencies has brought attention to the question of how to deal with transnational bankruptcies. That said, it must be noted that cross-border business failures are new to neither the business world nor academia. Nor has there been a great shift in the perspective of legal academics over the years. In an article published in the Harvard Law Review in 1888, John Lowell wrote: “It is obvious that . . . it would be better in nine cases out of ten that all settlements of insolvent debtors with their creditors should be made in a single proceeding, and generally at a single place.” One hundred years later, the call for “universalism” continues: “[A]ll questions of importance to the distribution of the debtor’s assets should be governed by the law of the debtor’s principal place of business.” Legislators and judges, however, have resisted these academic proposals out of concern for the welfare of domestic creditors. This Article seeks to address that concern directly.