The Case for Cooperative Territoriality in International Bankruptcy

Universalism – the idea that a multinational debtor’s “home country” should have worldwide jurisdiction over its bankruptcy – has long had tremendous appeal to bankruptcy professionals. Yet, the international community repeatedly has refused to adopt conventions that would make universalism a reality. In an article published last year, I proposed an explanation. Universalism can work only in a world with essentially uniform laws governing bankruptcy �nd priority among creditors – a world that does not yet exist. Because it is impossible to fix the location of a multinational company in a global economy, the introduction of universalism in current world circumstances would give each multinational company a choice of countries in which to file. By its choice, the company could choose not only the procedure for its bankruptcy, but also the substantive rights its creditors would have. Universalism would require other nations to recognize the effects of that strategic choice. Given the huge amounts of money potentially at stake, governments rightly fear that opportunism would run rampant.