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Recognition and enforcement in cross-border insolvency law: a proposal for judicial gap-filling.

3. In Re Metcalfe (124)

This case concerned Metcalfe and Mansfield, which were investment vehicles designed to participate in the Canadian asset-backed commercial paper market. Following the financial crisis, amid concerns about transparency and liquidity, a petition was filed on behalf of Metcalfe in a court in Ontario for the restructuring of all outstanding non-bank sponsored asset-backed commercial paper obligations totaling about $32 billion. (125) A creditor-backed plan was voted on and approved, and the Ontario court entered an order implementing it. (126) The plan became effective in 2009 after the Canadian Supreme Court denied a review petition. (127) The disputed issue concerned releases and injunctions granted to third parties.

Thereafter, a Chapter 15 petition was filed by the court appointed Monitor seeking recognition and enforcement of the global releases and injunctions. (128) The bankruptcy court noted that it was being asked to provide "additional assistance" under [section] 1507 and make an order enforcing the Canadian releases in the United States. (129) It acknowledged that the release and injunction provisions treated all claimants in the Canadian Proceedings similarly. The court cited Bear Stearns for the proposition that "relief [post-recognition] is largely discretionary and turns on subjective factors that embody principles of comity." (130) It then went on to consider the contours of the public policy exception in respect of the enforcement of relief. (131) Crucially, the court held that:

   relief granted in the foreign proceeding and the relief available
   in a U.S. proceeding need not be identical. A U.S. bankruptcy court
   is not required to make an independent determination about the
   propriety of individual acts of a foreign court. The key
   determination required by this Court is whether the procedures used
   in Canada meet our fundamental standards of fairness. (132)
   (emphasis added)

In coming to this conclusion, the court was conscious of the limited meaning attributable to public policy given the inclusion of the word "manifestly" in the statute. (133) The court also considered enforcement under comity principles and opined that "[t]he [United States] and Canada share the same common law traditions and fundamental principles of law. Moreover, Canadian courts afford creditors a full and fair opportunity to be heard in a manner consistent with standards of U.S. due process. U.S. federal courts have repeatedly granted comity to Canadian proceedings." (134) It concluded that:

   Principles of comity in chapter 15 cases support enforcement of the
   Canadian Orders in the United States whether or not the same relief
   could be ordered in a plenary case under chapter 11. Therefore, the
   Court will enter an order recognizing this case as a foreign main
   proceeding and enforcing the Canadian Orders. (135)

4. In re Qimonda (136)

The case concerned a German company that manufactured semiconductor chips that underwent insolvency proceedings in Germany. (137) The German liquidator filed a Chapter 15 petition in Virginia and, upon determination that the German proceeding was the foreign main proceeding, sought to terminate the use of 4,000 U.S. patent licenses, which was a substantial portion of the main assets of the company. (138) License holders objected to this, and the bankruptcy court held that [section] 365(n) would apply and that "deferring to German law, to the extent it allows cancellation of the U.S. patent licenses, would be manifestly contrary to U.S. public policy." (139)

The decision was appealed to the Fourth Circuit. One of the key grounds concerned the test to be applied under [section] 1522. The court relied upon the Model Law's Guide to Enactment and stated "the Model Law makes '[t]he 'turnover' of assets to the foreign representative discretionary,' adding that 'the Model Law contains several safeguards designed to ensure the protection of local interests before assets are turned over to the foreign representative.'" (140) Chief among those "safeguards" is Article 22 of the Model Law, which is largely codified as [section] 1522." (141) Further, the court noted that "the Guide states, "[i]n addition to [Article 22's] specific provisions," Article 6 of the Model Law "in a general way provides that the court may refuse to take an action governed by the Model Law if the action would be manifestly contrary to the public policy of the enacting State." (142)

Having summarized the legislative history, the court concluded that "Chapter 15 does not require a U.S. bankruptcy court, in considering a foreign representative's request for discretionary relief under [section] 1521, to blind itself to the costs that awarding such relief would impose on others under the rule provided by the substantive law of the State where the foreign insolvency proceeding is pending." (143) In addition, it clarified the limits of cooperation envisaged by the Model Law:

   [Chapter 15] represents a full commitment of the United States to
   cooperate with foreign insolvency proceedings, as called for by the
   U.N.'s Model Law on Cross-Border Insolvency. And at bottom, such
   cooperation will provide greater legal certainty for trade and
   business to the benefit of the global economy. But the United
   States' commitment is not untempered, as is manifested in both
   Chapter 15 and the Model Law. (144)

The court went on to consider the public policy exception and affirmed the decision of the bankruptcy court ruling that it had correctly conducted a balancing test under section 1522(a). The court recognized that in affirming, it too would "further the public policy inherent in and manifested by [section] 365(n)." (145) The Qimonda decision has been criticized as an expansive interpretation of the public policy exception. (146)

5. In re Vitro (147)

Vitro and its subsidiaries were the largest glass manufacturers in Mexico. (148) During a period from 2003-2007, it borrowed a sum of about $1.2 billion from various U.S. lenders by way of three series of unsecured notes. The unsecured loan was guaranteed by virtually all of the subsidiaries and contained a provision that the guarantors would not be released, discharged, or affected in any way by any settlement or release by virtue of the insolvency of Vitro. The guarantees were governed by New York law and provided that privileges under Mexican law were not applicable.

In 2009, Vitro entered into various restructuring transactions with the objective of restructuring obligations under the above notes. The effect was that Vitro now had obligations to its subsidiaries amounting to about $1.5 billion.

At the end of 2010, Vitro commenced a concurso (149) proceeding in Mexico under the Mexican Business Reorganisation Act. In 2011, a foreign representative filed a Chapter 15 petition in the United States seeking recognition of the concurso as a foreign proceeding. (150) In December 2011, a proposed restructuring plan was submitted to the concurso whereby the original notes would be extinguished, obligations of the guarantors would be discharged, new notes with a principal amount of $814,650,000 payable in 2019 would be issued to the creditors, etc. (151)

Under Mexican law, the plan could be approved with the votes of 50 percent of the total principal amount of unsecured debt. Relying solely upon the votes of its subsidiaries, which owned $1.5 billion of debt, the concurso plan was approved by the creditors and subsequently affirmed by the Mexican court. (152) It went into effect in February 2013. Thereafter, Vitro sought recognition and enforcement of the plan in the United States. The bankruptcy court refused enforcement, and the matter was appealed to the Fifth Circuit. The appellate court noted that Chapter 15 embodies that notion of comity and reflects the principle that "the interests of the United States, the interests of the foreign state or states involved, and the mutual interests of the family of nations in just and efficiently functioning rules of international law," (153) and that "it is not necessary, nor to be expected, that the relief requested by a foreign representative be identical to, or available under, United States law." (154)

In order to determine if a foreign order is to be enforced, the court engages in a three-step process: (1) a court should consider the specific relief set forth in Bankruptcy Code [section][section] 1521(a) and (b); [155] (2) if the relief is not explicitly provided for in the statute, the court should consider whether the relief is otherwise "appropriate relief' under [section] 1521(a); (156) and (3) if the relief is otherwise unavailable under Bankruptcy Code [section] 1521, a court may consider whether the relief is suitable as additional assistance under [section] 150 7. (157) In this case, the court found that the concurso order was not within the types of relief provided by [section][section] 1521(a) and (b). Under the second limb, the court ruled that the standard was whether the concurso order was "appropriate relief' under [section] 304 of the Bankruptcy Code or relief that was otherwise available in the United States. It ruled that non-debtor discharges were generally unavailable and did not reflect an appropriate balance between the interests of Vitro, its creditors, and its guarantors. Therefore, it was not "appropriate relief." (158) The court also found that enforcement was not possible under the third limb because Vitro's arguments did not show that nonconsensual third-party discharges were available in nonexceptional circumstances. Vitro had not shown what the exceptional circumstances were, and the court indicated that it had to meet the U.S. standard for extraordinary circumstances in order for the foreign order to be enforced. This conclusion is seemingly contrary to previous statements about the need for the foreign relief to be similar to relief available in the United States.


The United Kingdom is a leading jurisdiction for cross-border insolvencies both due to the influence its law has on the development of legal principles in other common law countries and due to the popularity of London as a major commercial litigation hub.

The United Kingdom has six potential legal regimes that operate in cross-border insolvency situations. The first is the common law, which enables courts to provide assistance to foreign insolvency proceedings. English courts are authorized to act as they would in domestic insolvency proceedings. (159) The second regime is provided by the previously referred to [section] 426 of the Insolvency Act 1986, which authorizes the courts to provide assistance to designated countries in respect of proceedings commenced in those jurisdictions. (160) Designated countries include Anguilla, Australia, the Bahamas, Bermuda, Botswana, Canada, the Cayman Islands, the Falkland Islands, Gibraltar, Hong Kong, Ireland, Montserrat, Malaysia, New Zealand, South Africa, Saint Helena, Turks and Caicos Islands, Tuvalu, and the Virgin Islands. (161) The third regime is offered by the Cross Border Insolvency Regulations, 2006 (UK). This legislation enacted the UNCITRAL Model Law and enables the recognition of foreign proceedings. (162) Fourth, the Foreign Judgments (Reciprocal Enforcement) Act, 1933 (163) applies to the enforcement of foreign money judgments from seventeen designated countries. (164) Fifth, the European Council Regulation (EC) 1346/2000 on insolvency proceedings (Insolvency Regulation) applies when the debtor's center of main interests is in the European Union and trumps other regimes when its scope of application is triggered. (165) Finally, there is the European Economic Area Directives on the winding-up and reorganization of credit institutions and insurers. (166)

A. Judicial Interpretation

Recent years have witnessed a number of controversial developments in the UK courts. We analyze the key cases below.

1. Cambridge Gas

The Privy Council decision in Cambridge Gas Transport Corp u. Official Committee of Unsecured Creditors of Navigator Holdings, PLC heralded a trend driven by Lord Hoffman that has continued to spark controversy to this day. (167) The case concerned the insolvency of a shipping company whose individual ships were owned by a group of separate Isle of Man companies that were subsidiaries of a management company. The shares in the management company were owned by Navigator Holdings. In turn, 70 percent of the issued share capital of Navigator was owned by Cambridge, which was a Cayman company. The company experienced financial difficulties and approached the court for relief under Chapter 11. The bankruptcy court in New York rejected the proposal of the shipping company for the sale of its assets and approved a creditor's proposal to take over the company's assets. (168) Thereafter, it sent a request to the High Court in the Isle of Man for assistance, and the creditors petitioned for an order vesting the shares of Navigator Holdings in their representative. This was resisted by Cambridge which asked that the plan not be recognized or enforced on the grounds that it had not submitted to the jurisdiction of the New York court. (169) The High Court agreed. Upon appeal, the English Court of Appeal held that since Navigator, the parent of Cambridge, had submitted to the jurisdiction of the New York court, the order giving effect to the creditors' plan was enforceable. (170) Cambridge argued before the Privy Council that since the Court of Appeal had held that the New York order was a judgment in personam, it could not be enforced against it because it was separate from Navigator, which was the persona that had submitted to the jurisdiction of the New York court.

Lord Hoffman wrote the opinion of the Privy Council in what has become perhaps the most frequently quoted paragraphs in cross-border insolvency law:

   [B]ankruptcy proceedings do not fall into either category [in rem
   or in personam]. Judgments in rem and in personam are judicial
   determinations of the existence of rights: in the one case, rights
   over property and in the other, rights against a person. When a
   judgment in rem or in personam is recognised by a foreign court, it
   is accepted as establishing the right which it purports to have
   determined, without further inquiry into the grounds upon which it
   did so. The judgment itself is treated as the source of the right.

   The purpose of bankruptcy proceedings, on the other hand, is not to
   determine or establish the existence of rights, but to provide a
   mechanism of collective execution against the property of the
   debtor by creditors whose rights are admitted or established....

   The important point is that bankruptcy, whether personal or
   corporate, is a collective proceeding to enforce rights and not to
   establish them ... [I]t may incidentally be necessary in the course
   of bankruptcy proceedings to establish rights which are challenged:
   proofs of debt may be rejected; or there may be a dispute over
   whether or not a particular item of property belonged to the debtor
   and is available for distribution ... But these again are
   incidental procedural matters and not central to the purpose of the
   proceedings. (171)

He went on to describe the applicable law in universalist terms:

   English common law has traditionally taken the view that fairness
   between creditors requires that, ideally, bankruptcy proceedings
   should have universal application. There should be a single
   bankruptcy in which all creditors are entitled and required to
   prove. No one should have an advantage because he happens to live
   in a jurisdiction where more of the assets or fewer of the
   creditors are situated. (172)

Further, Lord Hoffman observed that "universality of bankruptcy has long been an aspiration, if not always fully achieved, of United Kingdom law. And with increasing world trade and globalisation, many other countries have come round to the same view." (173)

The judge also explored the limits of assistance that may be offered to the foreign court, stating that although it was not permissible to apply foreign legal principles that do not form part of domestic law, the local court ought to be "able to provide assistance by doing whatever it could have done in the case of a domestic insolvency." (174) He explained that the objective of recognition is to eliminate the need for creditors "to start parallel insolvency proceedings and to give them the remedies to which they would have been entitled if the equivalent proceedings had taken place in the domestic forum." (175)

Lord Hoffman concluded that even though "Cambridge did not technically submit to the jurisdiction in New York, it had no economic interest in the proceedings and ample opportunity to participate if it wished to do so. It would therefore not be unfair for the plan to be carried into effect." (176)

2. In re HIH

Lord Hoffman's path-breaking approach received further elucidation in re HIH. The case concerned the collective insolvency of four Australian insurance companies, which entered winding-up proceedings in Australia. (177) Some part of HIH's assets was located in England. In order to ensure that those assets were protected, provisional liquidators were appointed in the United Kingdom. The Australian court made a request to the English court under [section] 426(4) of the Insolvency Act that the English provisional liquidators be directed to remit assets to the Australian liquidators for distribution. (178) Notably, the Australian order of priority for disbursement of assets was different to that under English law, although both systems were committed to the pari passu distribution of assets among ordinary creditors. The House of Lords had to decide whether the assets could be remitted for distribution in Australia given this difference. Lord Hoffmann issued his oft-quoted speech:

   The primary rule of private international law ... applicable to
   this case is the principle of (modified) universalism, which has
   been the golden thread running through English cross-border
   insolvency law since the eighteenth century. That principle
   requires that English courts should, so far as is consistent with
   justice and UK public policy, co-operate with the courts in the
   country of the principal liquidation to ensure that all the
   company's assets are distributed to its creditors under a single
   system of distribution. That is the purpose of the power to direct
   remittal.... the application of Australian law to the distribution
   of all the assets is more likely to give effect to the expectations
   of creditors as a whole than the distribution of some of the assets
   according to English law. (179)

In coming to this conclusion, Lord Hoffman was conscious of the commercial expectations of the parties. He wrote:

   [P]olicy holders and other creditors dealing with an Australian
   insurance company are likely, so far as they think about the matter
   at all to expect that in the event of insolvency their rights will
   be determined by Australian law. Indeed, the preference given to
   insurance creditors may have been seen as an advantage of a policy
   with an Australian company. (180)

3. Rubin and New Cap Re

The United Kingdom's universalist trend elucidated above was brought to a halt by the UK Supreme Court in the recent appeals of Rubin and New Cap. (181) This development has sent shock waves in international insolvency circles. The facts in Rubin are as follows: Eurofinance established an entity known as The Consumers Trust (TCT), which appears to have been part of a scam. The entity's modus operandi was to offer customers in the United States vouchers that promised a 100 percent rebate of the purchase price of various goods upon the meeting of certain conditions. (182) The company designed the scheme on the premise that these conditions were impossible to satisfy, calculated to ensure that most consumers would not meet them. The sellers of the vouchers paid TCT 15 percent of the moneys received, and TCT retained 40 percent of that amount to cover the possibility of the vouchers being redeemed. Obviously, this was a trivial amount and was unlikely to cover a situation where many customers presented vouchers for redemption. While this money was held in the United States, the rest was distributed to Eurofinance and others.

The state attorney general of Missouri sued TCT for breach of consumer protection legislation. The trustees settled the action by paying $1.65 million and $200,000 in costs. Thereafter, with the prospect of further suits by other states, TCT filed a petition under Chapter 11 in New York.

In December 2007, Eurofinance and the other respondent were hit with "adversary proceedings" in order to avoid and recover payments made to them. Although they were served personally with the complaint commencing the adversary proceedings, Eurofinance did not submit to the jurisdiction of the New York court and did not participate in the proceedings. In 2008, judgments were entered against them, and the appellants sought both recognition of the Chapter 11 case in England, under the Cross-Border Insolvency Regulations of 2006, and enforcement of the judgments. (183) The lower court granted recognition but refused enforcement of the judgments against the respondents. (184) The England and Wales Court of Appeal reversed the denial of enforcement by relying upon Lord Hoffmann's opinions in Cambridge Gas and HIH. (185)

In New Cap, the case concerned the recognition and enforcement of a judgment of the New South Wales Supreme Court for $8 million for unfair preferences under Australian law. The question was whether the judgment could be enforced under the CBIR or [section] 426 of the Insolvency Act. (186) New Cap was an Australian insurance company that conducted insurance business solely in that country. There were reinsurance contracts between New Cap and Lloyd's Syndicate in respect of losses, and commutation payments had been made by the former from a Sydney bank. When the company went into winding up, the liquidator alleged that these commutation payments were voidable transactions under Australian law. (187) The Lloyd's Syndicate did not submit to the Australian court's jurisdiction and did not enter an appearance.

On appeal, Lord Collins wrote the majority opinion for the UK Supreme Court. He affirmed that "[t]here is no international unanimity or significant harmonisation on the details of insolvency law." (188) In his judgment, he gave a detailed history and background of the common law, statutory, and other methods of resolving cross-border insolvencies that have developed in the United Kingdom since around 1764. (189) He opined that there are now "four main methods under English law for assisting insolvency proceedings in other jurisdictions, two of which are part of regionally or internationally agreed schemes": (190) (1) [section] 426 of the Insolvency Act 1986 (UK); (2) European Union Regulation 1346/2000 on cross-border insolvencies (Regulation 1346/2000); (3) the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency (Model Law); and (4) the common law.

With regard to the enforcement of foreign insolvency judgments, Lord Collins wrote:

   [T]he CBIR (and the Model Law) say nothing about the enforcement of
   foreign judgments against third parties. As Lord Mance pointed out
   in argument, recognition and enforcement are fundamental in
   international cases. Recognition and enforcement of judgments in
   civil and commercial matters (but not in insolvency matters) have
   been the subject of intense international negotiations at the Hague
   Conference on Private International Law, which ultimately failed
   because of inability to agree on recognised international bases of

   It would be surprising if the Model Law was intended to deal with
   judgments in insolvency matters by implication. Articles 21, 25 and
   27 are concerned with procedural matters. No doubt they should be
   given a purposive interpretation and should be widely construed in
   the light of the objects of the Model Law, but there is nothing to
   suggest that they apply to the recognition and enforcement of
   foreign judgments against third parties. (191)

Notably, although the issue was not raised in argument before the court, Lord Collins opined that Cambridge Gas was wrongly decided. (192) He went on to write that there was to be no special treatment for insolvency judgments and the normal Dicey rule on enforcement was applicable. Further, in the judge's opinion, it was up to the legislature to make provision for the universal operation of insolvency law if it wanted to. (193) Lord Collins also pointed out that it would be disadvantageous to English parties if default judgments were to be enforced in the United Kingdom. (194)

There was a crucial difference in the facts of New Cap that resulted in a different outcome from Rubin. In that case, the Lloyd's Syndicate had submitted proofs of unpaid debt at the initial stages of the winding up with respect to matters unrelated to the reinsurance contracts at issue in the avoidance proceedings. (195) They had also participated in creditors' meetings and voted in favor of a scheme of arrangement. (196) On the basis of these facts, Lord Collins came to the conclusion that the Syndicate had submitted to the jurisdiction of the Australian court, and therefore the default judgment was enforceable in England. (197)


A. The Model Law is Insufficient

As is clear from the preceding paragraphs, the Model Law in its various manifestations in the three countries has not succeeded in delivering on the goal of certainty and predictability for creditors or debtors in relation to the enforcement of insolvency judgments. Creditors remain uncertain about how to protect their investments, and debtors are unsure about the consequences of participating in foreign proceedings or abstaining from them. Interestingly, in several of the cases, debtors chose to not participate based upon legal advice only to be confronted with surprising consequences. In one case--New Cap--even the Australian judge was surprised that the UK court had found that the party had submitted to his jurisdiction. He was of the view that there had been no submission, only to read later that in the view of the UK Supreme Court, the party had submitted to the Australian court's jurisdiction by lodging proofs of debt. In such circumstances, parties are effectively taking a lottery in making serious decisions.

B. Universalism is the Solution

The substantial literature about cross-border insolvency in the last twenty years has examined the benefits and detriments of the competing ideas of universalism and territoriality. (198) Under universalism, the liquidation of an insolvent debtor with assets in multiple countries is carried out in the country where the debtor has its center of main interests (COMI). The court in the COMI would have global reach to cover the debtor's assets worldwide. The law that would apply would also be the law of that country. Conversely, under territoriality, creditors in each country where the debtor's assets are located commence proceedings within their own jurisdiction using their own laws. This is often called the "grab rule" because local creditors race to grab the assets that are situated in the local jurisdiction (often to the detriment of other creditors in other parts of the world) before international liquidation proceedings can reach the far-flung assets. Under territoriality, not only is it likely that creditors as a whole receive less in the winding up than under a universalist structure, but the inconsistent application of multiple laws across the world arguably also results in excessive costs and impinges on the willingness of creditors to extend credit to those companies exposed to potential cross-border insolvency. (199) This has the flow-on effect of limiting investment and restricting international trade to the detriment of global welfare. (200)

During the 1980s and 1990s, various international bodies worked on developing methods to resolve this perceived problem. (201) The methods were often piecemeal and reliant upon negotiations between nation states to develop hard and soft laws that operated between them. Among these international bodies, the United Nations Commission on International Trade Law (UNCITRAL) charged its Working Group V with developing a global solution. The debate between universalism and territoriality resulted in a partial victory when, on May 30, 1997, UNCITRAL promulgated its Model Law, which substantially subscribes to the universalist doctrine. However, only forty countries (including Australia) (202) have adopted the Model Law. It is interesting to note that very few developing countries (203) have done so although the position has improved in September 2015 with the adoption by seventeen OHADA member states. In a global context, this relative lack of participation leaves the world in only a slightly more certain position than before the Model Law was proposed. Companies whose business is conducted in those countries that did not adopt such a universalist structure are often subject to insolvency laws as they applied before the Model Law was developed--usually using a territorialist approach. The Model Law then, instead of creating a global law based on universalism, has become merely another tool in the armory of insolvency practitioners around the world--one that can only be used in countries that have adopted its text.

The debate on this topic appears to have settled for now. The universalists have "won" the debate in that many parts of the economically powerful world have now adopted a modified universalist approach. It seems that those that would be convinced have been. However, the universalism/territoriality debate, while it has captivated the literature in the field of cross-border insolvency, seems to have had marginal effect in many regions. The bulk of the world (vast tracts of Asia, South America, and Russia included) has remained unconvinced and uncommitted to the tenets of a global universalist approach for various reasons. Even though it is an UNCITRAL model law, the instrument has been seen as an initiative of the United States. (204)

While Japan was one of the first countries to adopt the Model Law in 2000 and the Republic of Korea followed in 2006, other parts of Asia have not done so. There are, no doubt, many different reasons for this, and those reasons must, for brevity's sake, remain outside the scope of this Article. Nonetheless, Chung argues that "universalism can only work if countries relax their exercise of national sovereignty." (205) He contends that "at its heart, universalism is about the displacement of national law in favor of foreign law." (206) This great leap of faith might be a leap too far for developing and emerging countries. However, one can also surmise that countries that continue to develop in the hope of matching the economic might of the United States might not be so quick to adopt a law that would see them, again, according to Bebchuk and Guzman at least, at a competitive disadvantage in world trade by adopting a universalist approach. Despite the attractiveness of the efficiency argument, perhaps the role of adverse interest groups or a distrust of the worldview of the United States underlies a more conservative approach by these nations toward adopting universalism. Tung argues that insolvency laws should reflect an "optimal blend of competition and cooperation across international borders [and] must take account of local custom, culture, and history. Likewise, universalism must give way to more nuanced and more textured approaches" (207) if it is to succeed in developing and emerging countries.

Retaining a territorialist approach is certainly a strategic choice for some states. Bebchuk and Guzman conducted an economic analysis of cross-border insolvency regimes and concluded that universalism is more efficient than territoriality to resolve cross-border insolvencies, but a country that maintains a territorialist approach to insolvency is in a superior economic position to one that subscribes to a universalist approach. (208) Tung also conducted a comparative study using game theory and predicted (presciently) in 2001 that most states would remain territorial. (209) Those forty countries that have adopted the Model Law then appear to have left themselves open to an economic disadvantage. This is being done largely on the hope that the Model Law is but the first step in a globalization of insolvency laws based on a universalist model. The argument is that these countries are taking a "leadership role" to encourage others on the cusp of implementing the Model Law to do so and that the short-term losses are outweighed by longer term benefits from cooperation. (210)

While the arguments about the benefits of universalism and territoriality appear, for the time being, to have settled, the academic focus has shifted recently to the element of the control of cross-border insolvency. Rasmussen urges the next generation of cross-border insolvency scholars to "focus less on the relations between nations and more on the dynamics of control" (211) because, he argues, creditors have increasing input into the decisions made by companies in financial distress. A study of the control mechanisms of cross-border insolvency laws might transcend the focus on international relations, as Rasmussen urges.

C. Harmonization of Cross-Border Insolvency Law: Why a Model Law?

An examination of the design architecture and features of the Model Law could shed light on state behavior, subsequent implementation, and judicial interpretation. The choice of form is a critical element in designing a regime for international cooperation. It is widely assumed that international conventions are the preferred vehicle for harmonization of conflicting national laws because they are binding. (212) This can be misleading in the private law area because conventions are typically dispositive and allow parties to contract out of their application. The choice of non-convention instruments becomes relevant when the sponsoring organization does not intend the instrument to be binding directly, either because nation-states might be unwilling to commit support for such harmonization or because the subject matter does not require nation-states to enact implementing legislation in order to achieve the objectives of the sponsor. (213) Equally, sponsoring organizations elect non-convention vehicles when there are substantial divergences between national laws, and there is little prospect of reaching agreement on resolving these differences. In such situations, the sponsoring organization seeks to pursue a more modest goal and embarks on the pursuit of harmonization by adopting a gradual and incremental approach. Moreover, if harmonized texts are adopted in a non-convention form, they offer greater flexibility and adaptability, reduce contracting costs for nation states, consume fewer resources for drafting and adoption, and are more easy to amend. (214) These forms are often labeled as "soft law." Abbott and Snidal write that when the subject matter of the harmonization effort poses challenges to state sovereignty, the soft law option may be chosen as a "way station" to hard law. (215) They posit that hard law would result where the benefits of cooperation are great but the potential for opportunism and its costs are high, where noncompliance is not easy to detect, where states want to form clubs of very committed states, and where executive agencies within a state want to commit other domestic actors such as the legislature to the international agreement. (216) The laws that govern cross-border insolvency are largely procedural. However, this does not mean that they lack a normative foundation. That normative foundation reflects the mix of "social exigency, moral conflict[,] and political compromise" (217) that molds each society's insolvency laws. While Jackson, (218) Baird, (219) Bebchuk, (220) and others have sought to analyze and justify insolvency law on an economics and law basis, others such as Carlson, (221) Korobkin, (222) and Warren (223) have mined the deeper, philosophical normative foundations of bankruptcy law. Those that have pursued a purely law and economics argument have been criticized for too narrow a view of what is a complicated and often deeply personal legal and social area. (224) Despite the almost scientific approach of some law and economics scholars to insolvency laws, (225) there is a general consensus that favors a common pool approach. Jackson's hypothetical "creditors' bargain" modelled bankruptcy law as a system under which creditors negotiate among themselves ex ante, the position they would take in the event of bankruptcy. (226) Jackson proposed that if bankruptcy laws mirrored the creditors' bargain to pool the assets of the debtor and distribute them equally upon liquidation, then this would result in a "reduction of strategic costs; increased aggregate pool of assets; and administrative efficiencies." (227)

To be sure, the diversity in national insolvency laws evidences the fact that each state has designed its laws to suit its unique circumstances and policy preferences. (228) For example, Australia and other countries have structured their insolvency laws to give some protection to the blameless in insolvency matters. (229) Warren argues that Chapter 11 of the U.S. Bankruptcy Code is designed (albeit in a "derivative" and "limited" way) to protect as many noncreditors as possible. (230) Regardless of these differences, there might be a commonality in the design of insolvency laws around the world sufficient to be able to derive a more general theory and to underpin an argument for cooperation. Certainly, each country's insolvency law seeks to maximize the return to interested parties from the assets of insolvent debtors. To meet these legislated requirements of the insolvency process, there needs to be a system that aggregates the greatest pool of assets from which to distribute. If that pool is reduced, then each interested party will receive less on a distribution.

Virtually all the literature discussing cross-border insolvencies contains some assertion about the increasing magnitude of cross-border insolvency claims in recent years. This assertion is usually tied to an increase in global trade and recent financial crises. (231) The data shows that global commerce has increased. (232) However, compared to the 40,075 business bankruptcy filings in the United States in 2012, (233) only 121 cases were filed that year under Chapter 15, (234) the Chapter of the U.S. Bankruptcy Code dealing with cross-border insolvencies. It is interesting to note that of the 577 filings reported by Westbrook under Chapter 15 between 2005 and 2011, by far the biggest proportion of cases come from Canada (282 cases, or 48 percent). (235) In the same period, there have only been twenty claims from Australia. (236) A Case-Base search for cases involving the equivalent Australian legislation, the Cross-Border Insolvency Act 2008 (Cth), lists only fifteen cases resolved in Australia since its inception. (237)

From the above, it is clear that risks arise because of the divergences in national insolvency laws, the different bargains they strike between the protection of creditors and debtors, and the varying degrees of protectionism afforded to domestic creditors. Creditors remain uncertain about how to price risk in these circumstances, and therefore it is logical that borrowing costs are at suboptimal levels. It is also likely that many companies are unable to borrow from foreign lenders because creditors are unwilling to assume risks posed by the local insolvency regime.

Although the evidence is clear and there is recognition that cooperation in the form of a binding cross-border insolvency regime would be optimal, the reality is that states continue to be noncommittal to the tenets of a global universalist approach for various reasons. (238) In Canada, according to Ziegel, there was widespread apathy to adopting the Model Law. (239) Not only had the working relationship between the United States and Canada been successful and there was a perception that it did not need to be changed, but also:

   The United States is a global power and has many world-class
   companies that operate in many overseas jurisdictions. The United
   States therefore has strong economic and legal incentives to ensure
   that U.S. insolvency orders are recognized and enforced in other
   jurisdictions. In contrast, Canada has a very small number of
   world-class business enterprises and, up to now, most of its
   cross-border insolvency relations have been with the United States.
   This scenario is unlikely to change in the foreseeable future. What
   matters most, therefore, to Canadian insolvency practitioners is
   the treatment that Canadian bankruptcies and business
   reorganizations receive in the United States. (240)

Why then have the forty countries that have adopted the Model Law put themselves into, according to Bebchuk and Guzman, a position of economic disadvantage as against other countries that have maintained a territorialist approach? The real concern about cross-border insolvencies is not the number of them each year but the loss suffered by creditors in inefficiencies in time and cost and the flow-on effects to business confidence. The refusal of states to adopt the Model Law might be owed to path dependence and powerful interest groups; as Westbrook and LoPucki claim have shown, insolvency work is lucrative for law firms in the United States, (241) and control of large multinational cross-border insolvencies is a high stakes affair. Therefore, interest groups such as lawyers and other insolvency professionals might be engaging in rent-seeking behavior. The incentives for such behavior are clear: the professional services employed to control insolvencies alone can cost insolvent companies (or more accurately, their creditors) a lot of money. A study of 102 of the largest public company bankruptcies in the United States between 1998 and 2007 found that bankruptcy professional fees and expenses alone cost $5.5 billion. (242) Another study estimated the direct costs of bankruptcy were on average "3.1% of the book value of the debt plus the market value of equity" of the company in the year before insolvency. (243) By way of example, in the five years since Lehman Brothers entered bankruptcy, it had paid its lawyers, accountants, and other insolvency professionals around $2.2 billion. (244) It is a complicated multiparty proceeding, and the Modified Third Amended Joint Chapter 11 Plan Of Lehman Brothers Holdings Inc. filed in the U.S. Bankruptcy Court for the Southern District of New York alone runs to some 390 pages. (245) Lehman Brothers' creditors are expected to receive eighteen cents on the dollar by 2016--eight years after the firm entered bankruptcy. (246) As a further example, in the Canadian Nortel Chapter 11 proceedings, which involve actions in the United States, Canada, and Europe, professional fees reached $1.3 billion (or around 14 percent of Nortel's global estate). (247)

D. The Role of the Courts

Despite the clear benefits of cooperation, legislative apathy and contrary pressures from interest groups obstruct the immediate prospects of an optimal binding legal regime. As such, is the cause of an efficient cross-border insolvency regime doomed? The answer lies in understanding the theoretical underpinnings of the Model Law form and the significant role assigned to the courts as agents of harmonization under its architecture.

International relations theories provide a framework for analyzing the choice of form and substance in harmonizing cross-border insolvency law. Liberal international relations theorists posit that international agreements affect state behavior in a multitude of ways unrelated to the narrow conception of agreements as binding contracts. Under this view, agreements influence the behavior of influential domestic actors who leverage state commitments in those agreements, reduce transaction costs, provide opportunities for monitoring, and create focal points. (248) States have to make decisions about which form they wish to commit to: hard law such as binding treaties, or soft forms such as the Model Law. Raustiala distinguishes between the former and latter by characterizing them as contracts and pledges, respectively. He notes that states choose pledges when (1) the subject matter is preliminary, (2) the states negotiating the agreements desire flexibility, (3) non-diplomatic entities are involved in the negotiations, and (4) ratification and legislation are not required following the adoption of the agreement. (249) Other authors have also noted that pledge-type agreements are more flexible and take less time to conclude. (250)

On the other side, states prefer to embody their agreements as contracts when they wish to ensure the credibility of their commitments. Abbott and Snidal develop a legalization framework to analyze agreements between states along a spectrum and write that states are likely to enter into agreements embodied in hard law with precise commitments evidencing higher forms of obligation when they intend those commitments to be credible. (251) Unsurprisingly, states are reluctant to commit to these sorts of agreements, and the drafting and negotiation of such agreements are likely to be protracted, resulting in higher ex ante transaction costs. (252) Equally, while states might be willing to enter into agreements that are largely hortatory and embody weak forms of obligation, they will be more apprehensive about concluding agreements that contain higher levels of obligation embodied in more precise legal language. One of the ways in which states factor in these initial transaction costs is by reducing the costs subsequent to the adoption of the agreement: precise agreements will reduce the possibility of opportunistic auto-interpretation by other states. In addition, such agreements typically contain provisions establishing monitoring and enforcement mechanisms such as independent tribunals. Abbott and Snidal also point to sovereignty costs (by which they mean incursions on state sovereignty in the subject area) as being a factor that can militate against hard legalization. (253)

It is useful to subject agreements in the commercial law area to analysis based on international relations frameworks. One of the immediate difficulties is that the choice of a convention form on the basis that it is a harder form of legalization might not have as much salience as in the public international law context because conventions in the private law area are largely dispositive. (254) Dispositive conventions authorize parties to render a convention nonbinding in the context of their specific transaction. Parties are typically conferred with specific authority by a provision in the convention to exclude the text entirely or in part by the inclusion of a clause to that effect in their contractual documents. Therefore, although a convention is chosen by states in the above framework because it would enhance the "normative strength of the agreement and ... a state's sense of obligation," the practical reality may be different because of the subsequent actions of private parties. (255) For instance, the UN Convention on Contracts for the International Sale of Goods, 1980, was ratified by the United States in 1986. (256) The convention was designed to minimize divergences between the national sales laws of states applicable to international sales transactions and promote international trade. It has had very little effect in the United States because most contracts contain exclusionary clauses making the CISG inapplicable to the transaction. (257) In contrast, the Hague Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary ("Hague Convention") (258) creates a hard law agreement in an area with significant uncertainty for the global financial system. (259) The law was drafted based on a proposal by Australia, the United Kingdom, and the United States for the creation of a harmonized law on rules for securities held through intermediaries because of the inadequacy of the legal regime. (260) The convention was required because of the growth in transactions involving intermediaries who operate between the issuer and the holder of securities; under such an intermediary system the latter's interest is only recorded by the intermediary on its books with opacity as regards the issuer of the securities. (261) Empirical research showed that the national legal systems of many states needed to be modernized to accommodate these sorts of indirect holding systems. (262) The commercial practice demonstrated a high level of technical complexity and serious legal risks, requiring states to embody the law in the form of a binding convention.

Against this background, why did UNCITRAL choose the Model Law form for harmonizing cross-border insolvency law? As previously discussed, the choice of a non-binding instrument such as the Model Law is in recognition of the unwillingness of states to give up their deeply held policy preferences underpinning their national insolvency laws. In addition, states believed that they would lose by transferring domestic assets to foreign creditors without commensurate gain and were unlikely to commit to a binding regime. In such circumstances, the drafters of the Model Law believed that the flexibility afforded by the choice of a soft law form was desirable in order to give states the ability to move toward harmonization in a gradual way. In addition, there was recognition that many states may not have adequate legal regimes and that a model law would help to modernize domestic laws in developing nations. (263)

As the theory suggests, in subject areas where the divergences are significant and states cannot overcome them to agree on an acceptable text, non-binding instruments result in provisions that contain broader language. In addition, many of the gaps are assigned to the courts to fill in based upon the broadly expressed contours of the text. This is also the case where the subject matter of the instrument is capable of a high degree of uncertainty. If the Model Law and its enactments into domestic law are read in this light, it becomes apparent that the courts have a significant role to play in giving effect to the letter and spirit of the harmonized instrument. (264) This is especially so in the context of recognition and enforcement of foreign judgments. Indeed, UNCITRAL recognized that the Model Law would be beneficial even in states with a history of recognizing foreign orders, where the need to expend resources on drafting and adopting a non-binding instrument might be questioned: "To the extent that cross-border judicial cooperation in the enacting State is based on principles of comity among nations, the enactment of articles 25-27 offers an opportunity for making this principle more concrete and adapting it to the particular circumstances of cross-border insolvencies." (265)

Following this analysis, we argue that decisions such as Rubin, Qimonda, and Vitro run contrary to the theoretical underpinnings of the Model Law form and do not reflect well on the expectations placed on the courts by the drafters. Specifically, Article 21 states that following recognition of a foreign proceeding, the court may "grant any appropriate relief' as long as it is "necessary to protect the assets of the debtor or the interests of the creditors." The Model Law conditions this relief in Article 22 by requiring that the court be "satisfied that the interests of the creditors and other interested persons, including the debtor, are adequately protected." Moreover, Article 25 mandates the court to cooperate to the "maximum extent possible with foreign courts or foreign representatives." (266)

It is useful to make reference to an UNCITRAL document produced by eminent judges in 2012 that reiterated:

   Post-recognition relief under article 21 is discretionary. The
   types of relief listed in article 21, paragraph 1, are those most
   frequently used in insolvency proceedings; however, the list is not
   exhaustive. It is not intended to restrict the receiving court
   unnecessarily in its ability to grant any type of relief that is
   available and necessary under the law of the enacting State to meet
   the circumstances of a particular case. (267)

Moreover, in the Australian case of Tucker v. Aero Inventory (UK) Ltd (No 2), (268) Justice Lindgren of the Federal Court of Australia elaborated on the provision of relief under Article 21:

   Art 21(1) empowers the court to "grant any appropriate relief'--a
   power not confined to the forms of relief described in the lettered
   paras (a)-(g) of Art 21(1). Paragraphs (a), (b) and (c) of 0 4 made
   on 30 November 2009 reflect [section][section] 440B (charge
   unenforceable), 440BA (liens and pledges) and 440C (owner or lessor
   unable to recover property used by company) of the Corporations
   Act. (269)

The judge opined that it would be:

   [Appropriate to grant the plaintiffs the same protections with
   respect to charges, liens and pledges and leased property as the
   voluntary administrator of an Australian company would enjoy as a
   matter of course. This approach promotes consistency and gives
   effect to the objectives set out in the preamble to the Model Law.

In this regard, we propose that the national courts of states enacting the Model Law read the "grant any appropriate relief' language broadly to enforce foreign insolvency judgments in appropriate circumstances. To be sure, the due process rights of affected parties have to be protected, and there has to be some check on expansive interpretations of jurisdiction by foreign courts. However, it is no longer appropriate, as the Rubin court seems to imply, that the requirement to defend in foreign proceedings is necessarily always unfair or impermissibly onerous than participating in domestic proceedings. (271) We argue that the Canadian test of real and substantial connection might provide further reassurance. The Currie case is instructive: this was a class action litigation in Ontario and the United States against McDonald's in respect of a promotional campaign after a manager of the company conducting the promotion embezzled money set aside for prizes. (272) A settlement was entered into in the United States and included a release extending to Canadian residents. (273) Despite the objections of Canadian claimants, the U.S. court approved the settlement. (274) A Canadian class action was filed and the defendants moved to dismiss or stay based on the U.S. settlement order. The judge dismissed one of the actions on the basis that a party had participated in the U.S. proceeding but declined to stay the main litigation. The court of appeal concluded that the U.S. order should not be enforced against the Canadian residents who did not intervene in the U.S. litigation:

   [I]n my view, provided (a) there is a real and substantial
   connection linking the cause of action to the foreign jurisdiction,
   (b) the rights of non-resident class members are adequately
   represented, and (c) non-resident class members are accorded
   procedural fairness including adequate notice, it may be
   appropriate to attach jurisdictional consequences to an unnamed
   plaintiffs failure to opt out. In those circumstances, failure to
   opt out may be regarded as a form of passive attornment sufficient
   to support the jurisdiction of the foreign court. I would add two
   qualifications: First, ... 'the exact limits of what constitutes a
   reasonable assumption of jurisdiction' cannot be rigidly defined
   and 'no test can perhaps ever be rigidly applied' as 'no court has
   ever been able to anticipate' all possibilities. Second, it may be
   easier to justify the assumption of jurisdiction in interprovincial
   cases than in international cases. (275)

The case of Cavell provides further guidance. It concerns a reinsurance company with operations in the United Kingdom, Canada, and Australia. (276) Although the company had ceased to write new contracts in the 1990s, it carried on making payments and administering older policies. In 2004, it decided to enter into a scheme of arrangement whereby it would undertake a valuation of all present, future, and contingent claims and pay those to its policyholders in exchange for a surrender of their policies. (277) This scheme was organized under the UK Companies Act 1985 and required approval of creditors representing 75 percent of the value of the claims. (278) The process was to be supervised by the High Court. Cavell did not provide notice to Canadian policyholders about the meeting with the required papers. (279) Shortly before the meeting to consider the scheme of arrangement, Cavell did write a letter to inform them of their intention to make an application. (280) None of the Canadian policyholders participated in the UK proceedings. (281) Cavell obtained the order of the UK court and sought enforcement in Ontario. (282) Recognition was awarded subject to the ability of Canadian insurers to come back to amend or modify the order. Accordingly, Canadian parties sought to set aside the order. The court ruled that the notice issued in the UK proceedings was "not insufficient" and held that enforcement was proper. (283) The Court of Appeal affirmed. It held that the Canadian parties were aware of the UK proceedings and had chosen to do nothing after receiving the letter. It also held that the process was fair with regard to the Canadian parties. (284)

This pragmatic approach adopted by the Canadian courts is perfectly consistent with the exigencies of modern commercial practice and frees this area of the law from a dogmatic approach typified in cases such as Rubin. To recollect, in that case and in Cambridge Gas, the defendants were aware of the U.S. proceedings, had conducted business in that country, and had deliberately chosen to stay away from legal proceedings. In these circumstances, there was nothing unfair in recognizing and enforcing the U.S. judgment considering the actual relationships between the various corporate entities.


Cross-border insolvencies are growing in economic significance, and the law is in a state of flux. Recent decisions in the Rubin, Metcalfe, and Qimonda cases exacerbate the current lack of certainty and predictability by introducing fresh complexity. Although the UNCITRAL Model Law has been enacted into law by the United States, United Kingdom, Australia, and other countries, the inherent weaknesses in that form of harmonization have been highlighted by the case law in these jurisdictions. As we acknowledge, given the deeply held divergences between the insolvency laws of nation-states, it is highly unlikely that there will he agreement over a binding mandatory instrument to harmonize cross-border insolvency law. In such circumstances, rather than fall back to a position of doom and gloom, this Article subjects the Model Law to analysis based upon insights from international relations theories and comparative case law. In this light, this Article shows that given the divergences between national insolvency laws, the different public policy choices embedded in those laws, and the uncertainties inherent in particular insolvency settings, the drafters embodied their agreement in a nonlegal form for transmission into legality by way of subsequent state action. In making this choice, the drafters preserved freedom for states to make changes while exhorting them to adhere closely to the agreed text in order to preserve uniformity. They recognized that the uncertainties and divergences would mean that the text would require a degree of supplementation.

Therefore, this Article argues that the gaps created by the form and substance ought to be filled by national courts acting within the mandate of the UNCITRAL Model Law to deliver outcomes within the letter and spirit of that instrument. Specifically, by recognizing and enforcing foreign insolvency judgments by reading the "any appropriate relief' and "maximum cooperation" language broadly, courts will be able to deliver much needed certainty to creditors and debtors. We propose that any mishaps from such a broad reading could be mitigated by the fairness and real and substantial connection tests, as articulated by Canadian courts, in the context of enforcing default foreign judgments in other circumstances. If these tests prevent injustice in other contexts as demonstrated by ample case law, there is no reason why they would not deliver justice in cross-border insolvency cases such as Rubin. Our proposal only requires courts to recognize the reasons for the design of the Model Law and grasp the mandate conferred upon them to fill in the gaps. Courts would then not be able to default to the position that enforcement of judgments is not possible because it is not specifically mentioned in the Model Law. Applying the appropriate test and enabling enforcement will facilitate the achievement of core goals of insolvency laws everywhere: maximization of the pool for recovery, procedural efficiency, and fairness and predictability in the disbursal of assets upon insolvency.

Professor Sandeep Gopalan * and Michael Guihot **

* Dean and Professor of Law, Deakin University. We would like to express our

** Senior Lecturer in Law, Queensland University of Technology.

(1). See Cross-Border Insolvency Bill 2007 (Cth) outline (Austl.) (recognizing that insolvency laws are some of the most important laws governing market operations), memo_0.html [] (archived Sept. 19, 2015); see also IAN F. FLETCHER, INSOLVENCY IN PRIVATE INTERNATIONAL LAW 5-6 (2nd ed. 2005) ("Many different factors are capable, either singly or in combination, of imparting a cross-border dimension to a case of insolvency. The debtor may have had dealings with one or more parties from other countries, or may own or have interests in property not all of which is exclusively within the jurisdiction of a single state. Liabilities may be owed to parties whose forensic connections are predominantly with a different country to that with which the debtor is associated; or the relevant obligations may be governed by foreign law, may have been incurred outside the debtor's home country, or may be due to be performed abroad."); ROY GOODE, PRINCIPLES OF CORPORATE INSOLVENCY LAW 780 (4th ed. 2011) ("An international insolvency is typically characterised by one or more of the following features: the debtor's business is conducted in different countries; the assets are located in different countries; there are parallel proceedings in different countries.").

(2.) ALVAREZ & MARSAL, LEHMAN BROTHERS HOLDINGS INC., INTERNATIONAL PROTOCOL PROPOSAL (Feb. 11, 2009), GetDocument/1131024 [] (archived Sept. 17, 2015).

(3.) Hannah L. Buxbaum, Rethinking International Insolvency: The Neglected Role of Choice-of-Law Rules and Theory, 36 STAN. J. INT'L L. 23, 23 (2000).

(4.) The Legislative Guide to the UNCITRAL Model Law notes that, "national insolvency laws by and large have not kept pace with the trend, and they are often ill-equipped to deal with cases of a cross-border nature. This frequently results in inadequate and inharmonious legal approaches, which hamper the rescue of financially troubled businesses, are not conducive to a fair and efficient administration of cross-border insolvencies, impede the protection of the assets of the insolvent debtor against dissipation and hinder maximization of the value of those assets." U.N. COMM'N ON INT'L TRADE LAW (UNCITRAL), LEGISLATIVE GUIDE ON INSOLVENCY LAW (2005) [hereinafter LEGISLATIVE GUIDE], 05-80722_Ebook.pdf [] (archived Sept. 19, 2015) (recommending common features for effective and efficient insolvency law).

(5.) "To the extent that there is a lack of communication and coordination among courts and administrators ... it is more likely that assets would be dissipated, fraudulently concealed, or possibly liquidated ... not only is the ability of creditors to receive payment diminished, but so is the possibility of rescuing financially viable businesses and saving jobs." Id. at 21.

(6.) The Legislative Guide notes that "the absence of predictability in the handling of cross-border insolvency cases can impede capital flow and be a disincentive to cross-border investment." Id.

(7.) See Jay Lawrence Westbrook, A Global Solution to Multinational Default, 98 MICH. L. REV. 2276, 2292-98 (2000) (discussing what is necessary for a universalist approach to international bankruptcy).

(8.) See Samuel L. Bufford, Global Venue Controls Are Coming: A Reply to Professor LoPucki, 79 AM. BANKR. L.J. 105, 108 (2005) (noting that through the territorialism approach "the courts in each national jurisdiction seize the property physically within their control and distribute it according to local rules").

(9.) Jay Lawrence Westbrook, Theory and Pragmatism in Global Insolvencies: A Choice of Law and Forum, 65 Am. BANKR. L.J. 457, 460 (1991) (stating that a territorialism approach adds to the cost of every international transaction because of the unpredictability of the results of a default). It is arguable that territorialism actually reflects the expectations of creditors and debtors because the lender is able to factor in the risks better within the local insolvency law where the assets are located. See Kent Anderson, The Cross-Border Insolvency Paradigm: A Defense of the Modified Universal Approach Considering the Japanese Experience, 21 U. PA. J. INT'L ECON. L. 679, 698 (2000) ("[C]reditors extend credit based on the assets available in, and the insolvency laws of, the local jurisdiction ...."). Anderson notes that "the territorial approach arguably better reflects the fact that global businesses are largely organized by independent incorporation in each country where the debtor is doing business." In other words, companies are already opting for the territorial approach on a de facto basis by limiting corporate entities to political regions. Id.

(10.) See infra Part II.

(11.) See FLETCHER, supra note 1, at chapters 5-8 (outlining various international attempts to moderate cross-border insolvencies).

(12.) On the efforts of the World Bank and International Monetary Fund, see Rosalind Foote Mason, Insolvency and Private International Law: Principal Interests in the Resolution of Multistate Insolvency Issues chapter 1 (n. 35), chapter 8 (2003) (unpublished Ph.D. Thesis, University of Queensland) (on file with the T.C. Beirne School of Law, The University of Queensland). Both of these bodies have now effectively endorsed the UNCITRAL Model Law as the means by which countries should facilitate cross-border insolvencies. UNCITRAL, MODEL LAW ON CROSS-BORDER INSOLVENCY WITH GUIDE TO ENACTMENT AND INTERPRETATION (2014), [] (archived Sept. 19, 2015); see also WORLD BANK, PRINCIPLES AND GUIDELINES FOR EFFECTIVE INSOLVENCY AND CREDITOR RIGHTS Systems 52, Principle 24 (2001), [] (archived Sept. 19, 2015); Int'l Monetary Fund (IMF), Report on Orderly & Effective Insolvency Procedures (1999), external/pubs/ft/orderly/ [] (archived Sept. 19, 2015).

(13.) UNCITRAL, supra note 12; see also Jenny Clift, The UNCITRAL Model Law on Cross-Border Insolvency--A Legislative Framework to Facilitate Coordination and Cooperation in Cross-Border Insolvency, 12 TUL. J. INT'L & COMP. L. 307 (2004).

(14.) Cross-Border Insolvency Bill 2008 (Cth) outline (Austl.), -85ad26c42619/upload_pdf/0801720em.pdf;fileType=application%2Fpdf [] (archived Sept. 19, 2015).

(15.) The Legislative Guide notes that "inadequate and inharmonious legal approaches, which hamper the rescue of financially troubled businesses, are not conducive to a fair and efficient administration of cross-border insolvencies, impede the protection of the assets of the insolvent debtor against dissipation and hinder maximization of the value of those assets. Moreover, the absence of predictability in the handling of cross-border insolvency cases impedes capital flow and is a disincentive to cross-border investment. Fraud by insolvent debtors, in particular by concealing assets or transferring them to foreign jurisdictions, is an increasing problem, in terms of both its frequency and its magnitude." LEGISLATIVE GUIDE, supra note 4, at 310.

(16.) UNCITRAL, supra note 12.

(17.) See Steven T. Kargman, Emerging Economies and Cross-Border Insolvency Regimes: Missing BRICs in the International Insolvency Architecture, 6 INSOLVENCY & RESTURCTURING INT'L, no. 2, Sept. 2012, at 8,'12).pdf [] (archived Sept. 19, 2015) ("[V]ery few of the major emerging economies--and none of the BRIC countries ... have adopted the UNCITRAL Model Law on Cross-Border Insolvency....").

(18.) Those countries are: Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Comoros, Republic of the Congo, Cote d'Ivoire, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Mali, Niger, Senegal, Togo, and Democratic Republic of the Congo.

(19.) See UNCITRAL, Status, Model Law on Cross-Border Insolvency (1997), [] (archived Nov. 12, 2015); Timothy Lemay, OHADA Enacts Legislation Based on UNCITRAL Model Law on Cross-Border Insolvency (Sept. 28, 2015), [] (archived Nov. 12, 2015).

(20.) See Westbrook, supra note 7, at 2302 ("[M]odified universalism permits the court to view the default and its resolution ... from a worldwide perspective and to cooperate with other courts to produce results as close to those that would arise from a single proceeding as local law will permit."); see also In re Maxwell Communication Corp., 170 B.R. 800 (Bankr. S.D.N.Y. 1994) (opining that "[T]he United States in ancillary bankruptcy cases has embraced an approach to international insolvency which is a modified form of universalism accepting the central premise of universalism, that is, that assets should be collected and distributed on a worldwide basis, but reserving to local courts discretion to evaluate the fairness of home country procedures and to protect the interests of local creditors."); Anderson, supra note 9, at 690 ("Under a modified universal regime, a country does not try to coordinate its legislation with another country but rather creates a system that is open to cooperation while seeking the broadest impact possible for its own laws.... it allows for the possibility of full foreign enforcement."); Anne Nielsen et al., The Cross-Border Insolvency Concordat: Principles to Facilitate the Resolution of International Insolvencies, 70 Am. BANKR. L.J. 533, 534 (1996) ("'Modified universality recognizes the difficulty, given strong national interests in the preservation of sovereignty and the absence of treaties, in creating truly unified proceedings.' The result under the modified universality theory is a central administrative forum located in one country, supplemented by ancillary, or secondary, proceedings located in other countries. The modified universality theory represents a realistic solution to the conflict inherent in the principles of universality and territoriality. It combines both principles, maximizing the advantages and minimizing the disadvantages of both.").

(21.) See Anderson, supra note 9, at 691 (stating that modified universalism allows for flexibility and accommodates those who are concerned about losing national sovereignty: "modified regime does not achieve the administrative efficiencies of pure universality, but it limits duplicative administrative expenses while allowing for coordinated liquidation and reorganization. In addition, the modified regime also accommodates those who are concerned about relinquishing national sovereignty, since ancillary courts retain the power to refuse to subvert those aspects of the insolvency over which they have direct control.").

(22.) See Lynn M. LoPucki, Cooperation in International Bankruptcy: A Post-Universalist Approach, 84 CORNELL L. REV. 696, 696 (1999).

(23.) See Rosalind Mason, Cross-border Insolvency and Legal Transnationalisation, 21 INT'L INSOLVENCY REV. 105, 107-8 (2012) ("[D]ebtors, creditors, financiers and others through their professional advisers are utilising cross-border insolvency agreements."); see also UNCITRAL, PRACTICE GUIDE ON CROSSBORDER INSOLVENCY COOPERATION (2010) Ch. Ill, texts/insolven/Practice_Guide_Ebook_eng.pdf [] (archived Sept. 19, 2015) (stating that insolvency agreements facilitate cooperation and coordination of insolvency proceedings in different states).

(24.) See Alan Schwartz, A Contract Theory Approach to Business Bankruptcy, 107 YALE L.J. 1807, 1811 (1998); ALAN SCHWARTZ, A NORMATIVE THEORY OF BUSINESS BANKRUPTCY 36-50 (American Law & Economics Association Annual Meetings, Paper 32) (2004) [hereinafter SCHWARTZ, NORMATIVE THEORY] (discussing the benefits of ex ante contracting).

(25.) For the proponents' view, see Robert K. Rasmussen, A New Approach to Transnational Insolvencies, 19 MICH. J. INT'L L. 1, 4 (1998) [hereinafter Rasmussen, Approach], and Robert K. Rasmussen, Resolving Transnational Insolvencies Through Private Ordering, 98 MICH. L. REV. 2252, 2255 (2000). For a counter view, see Elizabeth Warren, Bankruptcy Policymaking in an Imperfect World, 92 MICH. L. REV. 336, 385-86 (1994).

(26.) UNCITRAL, supra note 12, at 21.

(27.) See the discussions on the subject by Lord Hoffmann in Cambridge Gas Transport Corp. v. Official Committee of Unsecured Creditors (of Navigator Holdings Pic) [2006] B.C.C. 962 (PC), and Lord Collins in Rubin v. Eurofinance SA [2012] UKSC 46.

(28.) HAGUE CONFERENCE ON PRIVATE INT'L LAW, CONVENTION ON CHOICE OF COURT AGREEMENTS (June, 30 2005), txt37en.pdf [] (archived Sept. 18, 2015). Article 2, subparagraph 2(e) provides that it does not apply to "insolvency, composition and analogous matters." Id.

(29.) This was because there is "some uncertainty concerning the ability of some courts, in the context of recognition proceedings under the UNCITRAL Model Law on Cross-Border Insolvency (the UNCITRAL Model Law), to recognize and enforce judgments given in the course of foreign insolvency proceedings, such as judgments in transaction avoidance proceedings, on the basis that neither article 7 nor 21 of the Model Law explicitly provides the necessary authority." UNCITRAL, INSOLVENCY LAW: RECOGNITION AND ENFORCEMENT OF FOREIGN INSOLVENCY-DERIVED JUDGMENTS 2 A/CN.9/WG.V/WP.126, 2 (Oct. 6, 2014).

(30.) UNCITRAL, supra note 29, at 9.

(31.) OLIVER WENDELL HOLMES, THE COMMON LAW 1-2 (Little, Brown, and Company, 1881).

(32.) Bankruptcy Act 1966 (Cth) s 7 (Austl.).

(33.) Corporations Act 2001 (Cth) pt 5.4 (Austl.), https://www. /C2015C00336/HtmWolume_2 [] (archived Sept. 19, 2015).

(34.) That section was substantially re-enacted as s 118 of the Bankruptcy Act 1883 and again as s 122 of the Bankruptcy Act 1914. See M.D. CHALMERS, M.A. & E. HOUGH, THE BANKRUPTCY ACT 1883 84 (1883); Bankruptcy Act 1914, 4 & 5 Geo. 5 C. 59, [section] 122 (Eng.), 19140059_en.pdf [] (archived Sept. 20, 2015).

(35.) See Rosalind Mason, Insolvency Law in Australia, in INSOLVENCY LAW IN EAST ASIA 464--65 (Roman Tomasic ed. 2006). However, the relevant section requiring courts to act in aid of and be auxiliary to each other was not included in the Bankruptcy Act 1887 (NSW) (Austl.), [] (archived Sept. 20, 2015).

(36.) Commonwealth Constitution s 51(xvii) (Austl.), http://[] (archived Sept. 19, 2015).

(37.) Bankruptcy Act 1966 (Cth) s 29 (Austl.).

(38.) Id. It was not until the enactment of the Australia Act 1986 (Cth) that the power of Parliament of United Kingdom to legislate for Australia was terminated. Australia Act 1986, [section]1 (UK).

(39.) Bankruptcy Amendment Act 1980 (Cth) s 18 ss (2)--(5) (Austl.).

(40.) MINISTER FOR BUS. & CONSUMER AFFAIRS, BANKRUPTCY AMENDMENT BILL 1979 EXPLANATORY MEMORANDUM (Nov. li, 1979) (UK), pic/law/explanmem/1978a [] (archived Sept. 18, 2015); see also CORPORATE LAW ECONOMIC REFORM PROGRAM (CLERP), CROSS-BORDER INSOLVENCY: PROMOTING INTERNATIONAL COOPERATION AND COORDINATION (2002), [] (archived Sept. 18, 2015) (Austl.) ("Countries are prescribed where analogous provisions are a feature of their own laws."); see, e.g., 11 U.S.C. [section] 304 (repealed 2005) (covering the procedures for foreign representatives to utilize United States' Bankruptcy Courts); Insolvency Act 1986, [section] 426 (UK) (relating to company and individual insolvency).

(41.) Mason, supra note 35, at 465.

(42.) Commonwealth Constitution s 51(xx) (Austl.), http:// .html [] (archived Sept. 19, 2015).

(43.) See Companies Act 1981 (Cth) s 3 (Austl.), [] (archived Sept. 19, 2015).

(44.) Corporations Act 2001 (Cth) [section] 581(l)-(4) (Austl.), [] (archived Sept. 19, 2015).

(45.) Id. [section] 580.

(46.) Insolvency Act 1986, [section] 426(4) (UK).

(47.) Rubin v. Eurofinance SA [2012] UKSC 46; see also Insolvency Act 1986, [section] 426(11) (UK) (stating a "relevant country or territory" means "any country or territory designated for the purposes of this section by the Secretary of State by order made by statutory instrument"). Those countries include Australia under the Co-operation of Insolvency Courts (Designation of Relevant Countries and Territories) Order 1986.

(48.) Cross-Border Insolvency Act 2008 (Cth) s 6 (Austl.). For example, South Africa and Mexico have adopted the Model Law but will apply only if other countries reciprocate. In the United States, the alteration of one word from "proof' to "evidence" has caused large debates about the interpretation of a company's "centre of main interests." Even Australia, which adopted the Model Law in its entirety, has excluded banks and the insurance industry from its operation.

(49.) [2013] FCA 738 (30 July 2013) (Austl.). This decision was subject to an unsuccessful appeal by Akers to the Full Federal Court and an application for special leave to appeal to the High Court was refused on October 17, 2014.

(50.) See id. [paragraph] 16.

(51.) Cross-Border Insolvency Bill 2008 (Cth) outline (Austl.), 85ad26c42619/upload_pdf/0801720em.pdf;fileType=application%2Fpdf [] (archived Sept. 19, 2015).

(52.) See Ackers [2013] FCA 738 [paragraph] 16. Due to a misspelling of the applicant's name in the first proceeding in 2010, the 2010 proceedings are referred to as Ackers v. Saad while subsequent proceedings and appeal proceedings refer to the applicant as Akers v. Saad.

(53.) Id. [paragraph] 1; see UNCITRAL, supra note 12, art. 2(b) (defining "[foreign main proceeding" as "a foreign proceeding taking place in the State where the debtor has the centre of its main interests").

(54.) UNCITRAL, supra note 12, art. 20.

(55.) Id. art. 21.

(56.) Id.

(57.) Id. art. 22.

(58.) Ackers, [2013] FCA 738 [paragraph][paragraph] 25-30 (citing In re HIH Insurance Ltd [2008] 1 WLR 852, 861-62 [paragraph] 30 for the proposition that foreign courts should cooperate with the local courts of the insolvent company so that its assets may be distributed to creditors under a single system).

(59.) Id. [paragraph] 38 (emphasis added).

(60). Id. [paragraph] 40.

(61.) Id. [paragraph] 42.

(62.) Id. [paragraph] 53.

(63.) [2013] FCA 680 [paragraph] 23 (Austl.).

(64.) See id. [paragraph] 29 (providing the text of the foreign representative's order).

(65.) Id. [paragraph] 30.

(66.) See UNCITRAL, supra note 12, s 16 (explaining that the scope and modification or termination of stay or suspension of international insolvency proceedings mentioned in Article 1 of the Model Law are still subject to Chapter 5 (other than Parts 5.2 and 5.4A) of the Corporations Act 2001).

(67.) Yu, (NSW) [2013] FCA 680 [paragraph] 40.

(68.) Id. [paragraph] 41.

(69.) Id. [paragraph] 33.

(70.) Id.

(71.) [2012] FCA 1002 (Austl.).

(72.) Id. [paragraph][paragraph] 13-14.

(73.) 11 U.S.C.A. [section] 1501(a) (West 2015).

(74.) See id. [section] 101(23) (defining a foreign proceeding as a "collective judicial or administrative proceeding in a foreign country, including an interim proceeding, under a law relating to insolvency or adjustment of debt in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganization or liquidation.").

(75.) Id. [section] 1501(b).

(76.) Id. [section] 1504.

(77.) Id. [section] 1502(4).

(78.) Id. [section] 1502(5).

(79.) See id. [section] 1517(c).

(80.) Id. [section] 1507(b)(1)-(5).

(81.) Id. [section] 1509(a).

(82.) See id. [section] 1509(b)(1)-(2) (describing the jurisdictional rights and consequences of the foreign representative under 11 U.S.C. [section] 1507).

(83.) Id. [section] 1509(b)(3).

(84.) See id. [section] 1509(c).

(85.) See id. [section] 1509(d) (stating the consequences if recognition is denied).

(86.) Id. [section] 1509(e).

(87.) Id. [section] 1509(f).

(88.) Id. [section] 1510.

(89.) See id. [section] 1511(b).

(90.) Id. [section] 1513(a).

(91.) Id. [section] 1513(2)(A)-(B).

(92.) Id. [section] 1515(b)-(d).

(93.) See id. [section] 1520(a)(1) (citing sections 361 and 362, which cover automatic protection and automatic stay); see also LEGISLATIVE GUIDE, supra note 4, at 314 ("The stay of actions or of enforcement proceedings is necessary to provide 'breathing space' until appropriate measures are taken for reorganization or liquidation of the assets of the debtor.").

(94.) 11 U.S.C. [section] 1520(2)-(4).

(95.) See LEGISLATIVE GUIDE, supra note 4, at 314 ("The suspension of transfers is necessary because in a modern, globalized economic system it is possible for a multinational debtor to move money and property across boundaries quickly. The mandatory moratorium triggered by the recognition of the foreign main proceeding provides a rapid "freeze" essential to prevent fraud and to protect the legitimate interests of the parties involved until the court has an opportunity to notify all concerned and to assess the situation.").

(96.) 11 U.S.C.A [section] 1521(a) (West 2012).

(97.) Id. [section] 1521(b).

(98.) Id. [section] 1521(c).

(99.) Id. [section] 1519(a).

(100.) Id. [section] 1519(e).

(101.) In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 374 B.R. 122, 128 (Bankr. S.D.N.Y. 2007).

(102.) 11 U.S.C.A. [section] 1506 (West 2012).

(103.) Id. [section] 1508.

(104.) In re Betcorp, Ltd., 400 B.R. 266 (Bankr. D. Nev. 2009).

(105.) Id. at 275.

(106.) Id.

(107.) Id. at 276-77.

(108.) Id. at 277.

(109.) Id. at 278.

(110.) Id. at 280.

(111.) Id. at 282.

(112.) Id.

(113.) Id. at 282-83.

(114.) Id. at 283.

(115.) Look Chan Ho, Recognising an Australian Solvent Liquidation Under the UNCITRAL Model Law: In re Betcorp, 24 J. INT'L BANKING L. & REG. 418, 421 (2009) (quoting Corporate Law Economic Reform Program, Proposals for Reform: Paper No. 8 2002 (Cth) p. 23 (Austl.)).

(116.) Id. at 423.

(117.) UNCITRAL, supra note 12, at 33.

(118.) In re ABC Learning Ctr., Ltd., 728 F.3d 301 (B.A.P. 3d Cir. 2013), cert, denied, 134 S. Ct. 1283 (2014).

(119.) Id. at 306 (alterations in original) (citations omitted) (quoting H.R. REP. NO. 109-31(1), at 109 (2005)).

(120.) Id. at 308.

(121.) Id. at 308-09.

(122.) Id. at 310 (citations omitted).

(123.) Id. at 311.

(124.) In re Metcalfe & Mansfield Alt. Inv., 421 B.R. 685 (Bankr. S.D.N.Y. 2010).

(125.) See id. at 687.

(126.) See id.

(127.) See id. at 687, 692.

(128.) See id.

(129.) See id. at 696

(130.) Id. at 697 (quoting In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 389 B.R. 325, 333 (Bankr. S.D.N.Y. 2008)).

(131.) See id. at 697 (finding that the public policy exception limited recognition "if [recognition] is manifestly contrary to U.S. public policy" and should be narrowly construed because it applies only where the most fundamental policies of the United States are implicated).

(132.) See id. (citations omitted); see also In re Ephedra Prods. Liability Litig., 349 B.R. 333 (S.D.N.Y. 2006); In re Grant Forest Prod., Inc., 440 B.R. 616, 622 (Bankr. D. Del. 2010).

(133.) In re Metcalfe & Mansfield Alt. Inv., 421 B.R. 685, 697 (Bankr. S.D.N.Y. 2010).

(134.) Id. at 698.

(135.) Id. at 700.

(136.) See Jaffe v. Samsung Elec. Co., 737 F.3d 14 (4th Cir. 2013) (discussing the district court decisions regarding Qimonda's bankruptcy proceedings on appeal, for which Jaffe served as the bankruptcy trustee).

(137.) See Elizabeth Buckel, Curbing Comity: The Increasingly Expansive Public Policy Exception of Chapter 15, 44 GEO. J. INT'LL. 1281, 1301 (2013).

(138.) See Jaffe, 737 F.3d at 17.

(139.) Id. at 23 (quoting In re Qimonda AG, 462 B.R. 165, 185 (Bankr. E.D. Va. 2011)).

(140.) Id. at 28 (quoting GUIDE TO ENACTMENT AND INTERPRETATION, supra note 12, at 88).

(141.) Id. The court quoted from the UNCITRAL Legislative Guide: "The idea underlying [A]rticle 22 is that there should be a balance between relief that may be granted to the foreign representative and the interests of the persons that may be affected by such relief. This balance is essential to achieve the objectives of cross-border insolvency legislation." LEGISLATIVE GUIDE, supra note 4.

(142.) Id.

(143.) Id. at 29.

(144.) Id. at 32.

(145.) Id. The Bankruptcy court had ruled that if the rights holders were denied protection under section 365(n) it would "slow the pace of innovation" in the United States and cause detriment to the U.S. economy.

(146.) See Buckel, supra note 137, at 1306. ("If each nation claims that their patent law best reflects their policy of technological innovation, and thus claims that their law would be applicable, each patent licensed by Qimonda will be treated in different ways, and will result in 'different and inconsistent results throughout the world.'")

(147.) In re Vitro S.A.B. de C.V. v. Ad Hoc Group of Vitro Noteholders, 701 F.3d 1031, 1037 (5th Cir. 2012).

(148.) See id. at 1036.

(149.) A concurso proceeding is the first stage of a bankruptcy proceeding for the purpose of restructuring similar to a Chapter 11 proceeding.

(150.) See id. at 1041.

(151.) Id. at 1039.

(152.) See id.

(153.) Id.

(154.) Id.

(155.) See id. at 1054 (outlining the three-step process the court takes when determining if a foreign order is to be enforced).

(156.) Id.

(157.) Id.

(158.) Id. at 1059-60.

(159.) Rubin v. Eurofinance SA [2012] UKSC 46, [29] (elaborating on the authority of English courts to recognize and grant assistance to foreign insolvency proceedings).

(160.) Insolvency Act 1986 [section] 426 (UK).

(161.) Designation of Relevant Countries and Territories Order 1986 SI 1986/2123.

(162.) Cross-Border Insolvency Regulations 2006, 2.

(163.) Foreign Judgments (Reciprocal Enforcement) Act, 1933 (UK).

(164.) The countries are France, Belgium, Pakistan, India, Germany, Norway, Austria, the Netherlands, Israel, Guernsey, Isle of Man, Jersey, Italy, Tonga, Suriname, Canada, and Australia.

(165.) McGrath v. Riddell (In re HIH Cas. & Gen. Ins. Ltd.), [2008] UKHL 21, [36],

(166.) See id. (mentioning the European Economic Directive).

(167.) [2006] 3 All ER 829; [2006] UKPC 26.

(168.) Id. at [4].

(169.) Lord Hoffman described the argument in these words: "This submission bore little relation to economic reality. The New York proceedings had been conducted on the basis that the contest was between rival plans put forward by the shareholders and the creditors. Vela, the parent company of Cambridge, participated in the Chapter 11 proceedings and arranged the finance which was to have been the cornerstone of the shareholders' plan. It is therefore not surprising that the New York court did not trouble to ask whether the voluntary petition presented by Navigator had the formal consent of its own stockholder company when that company was the creature of the real parties in interest who were actively participating in the proceedings. For Cambridge, which was no doubt administered by lawyers in Cayman on the instructions of Mr Mahler, the claim that it had not submitted to the jurisdiction was technical in the highest degree." Id. at [8].

(170.) Id. at [42],

(171.) Id. at [13]-[15].

(172.) Id.

(173.) Id.

(174.) Id. at [22],

(175.) Id.

(176.) Id. at [26],

(177.) McGrath v. Riddell (In re HIH Cas. & Gen. Ins. Ltd.), [2008] UKHL 21, [36],

(178.) Id. at [3],

(179.) Id.

(180.) Id. at [33].

(181.) Rubin v. Eurofinance SA [2012] UKSC 46.

(182.) Id. at [56],

(183.) Id. at [65]-[67].

(184.) Id. at [66],

(185.) Rubin v Eurofinance SA [2010] EWCA Civ 895 at [62],

(186.) See id. at [44]-[45] (explaining the court's decision to rely on section 426(4) of the Insolvency Act).

(187.) Id. at [74],

(188.) Id. at [15].

(189.) Id. at [532]-[37].

(190.) Id. at [25].

(191.) Id. at [142]-[143].

(192.) According to Lord Collins, "It follows that, in my judgment, Cambridge Gas was wrongly decided. The Privy Council accepted (in view of the conclusion that there had been no submission to the jurisdiction of the court in New York) that Cambridge Gas was not subject to the personal jurisdiction of the US Bankruptcy Court. The property in question, namely the shares in Navigator, was situate in the Isle of Man, and therefore also not subject to the in rem jurisdiction of the US Bankruptcy Court. There was therefore no basis for the recognition of the order of the US Bankruptcy Court in the Isle of Man." Id. at [132]. In a separate concurring judgment, Lord Mance opined that Cambridge Gas was distinguishable. Id. at [178], Lord Clarke's dissenting opinion noted that the case was both correctly decided and distinguishable. Id. at [192],

(193.) Lord Collins stated, "A change in the settled law of the recognition and enforcement of judgments, and in particular the formulation of a rule for the identification of those courts which are to be regarded as courts of competent jurisdiction (such as the country where the insolvent entity has its centre of interests and the country with which the judgment debtor has a sufficient or substantial connection), has all the hallmarks of legislation, and is a matter for the legislature and not for judicial innovation. The law relating to the enforcement of foreign judgments and the law relating to international insolvency are not areas of law which have in recent times been left to be developed by judge-made law." Id. [129].

(194.) Lord Collins continued, "[T]he introduction of judge-made law extending the recognition and enforcement of foreign judgments would be only to the detriment of United Kingdom businesses without any corresponding benefit. I accept the appellants' point that if recognition and enforcement were simply left to the discretion of the court, based on a factor like "sufficient connection," a person in England who might have connections with a foreign territory which were only arguably "sufficient" would have to actively defend foreign proceedings which could result in an in personam judgment against him, only because the proceedings are incidental to bankruptcy proceedings in the courts of that territory." Id. at [130].

(195.) See id. at [158] (stating relevant facts that distinguished Lloyd Syndicate's case).

(196.) Id.

(197.) See id. at [167] (holding that the Syndicate cannot benefit from the proceeding without the burden of also complying with the orders given at the proceeding).

(198.) See, e.g., Rasmussen, Approach, supra note 25; see also Edward S. Adams & Jason K. Fincke, Coordinating Cross-Border Bankruptcy: How Territorialism Saves Universalism, 15 COLUM. J. EUR. L. 43 (2008) (examining the territorialist and universalist aspects of the Model Law); Lucian Arye Bebchuk & Andrew T. Guzman, An Economic Analysis of Transnational Bankruptcies, 42 J.L. & ECON. 7759 (1999) (comparing the effect of territoriality with universality on international bankruptcies); Nigel John Howcroft, Universal vs Territorial Models for Cross-Border Insolvency: The Theory, the Practice, and the Reality that Universalism Prevails, 8 U.C. DAVIS Bus. L.J. 366 (2007) (arguing that the universal approach is more preferable under existing law than territorial approach); LoPucki, supra note 22 (concluding a cooperative form of territoriality works best); Robert K. Rasmussen, Where Are All the Transnational Bankruptcies? The Puzzling Case for Universalism, 32 BROOK. J. INT'L L. 983 (2006) (comparing the paradigms of international bankruptcy); Frederick Tung, Is International Bankruptcy Possible?, 23 MICH. J. INT'L L. 31 (2001) (arguing that universalism is impossible in practice).

(199.) See Bebchuk & Guzman, supra note 198, at 802-04.

(200.) See id.; John Armour, The Law and Economics of Corporate Insolvency: A Review (ESRC Ctr. for Bus. Research, Univ. of Cambridge, Paper No. 197, 2001); Tung, supra note 198; see also Hon. J. J. Spigelman, Chief Justice of New South Wales, Cross-border Insolvency: Co-operation or Conflict? (2009) (discussing the transaction costs of cross-border insolvency).

(201.) See FLETCHER, supra note 1 (outlining in chapters 5-8 various international attempts to moderate cross-border insolvencies); Mason, supra note 12.

(202.) See UNCITRAL, supra note 12, s 6 (adopting the Model Law in full).

(203.) See Kargman, supra note 17, at 8.

(204.) See Jacob Ziegel, Canada-United States Cross-Border Insolvency Relations and the UNCITRAL Model Law, 32 BROOK. J. INT'L L. 1041, 1062 (2007) (noting that the United States has a stronger incentive than Canada in adopting the Model Law).

(205.) John J. Chung, The New Chapter 15 of the Bankruptcy Code: A Step Toward Erosion of National Sovereignty, 27 Nw. J. INT'L L. & BUS. 89, 90 (2007).

(206.) Id. at 90.

(207.) Tung, supra note 198, at 101.

(208.) Bebchuck & Guzman, supra note 198, at 802-05. This analysis used a simple model with a limited range of options and multiple assumptions to prove an economic outcome. It may be criticized on the basis that it lacked a real-world practical view.

(209.) Tung, supra note 198, at 102. Again, game theory relies on assumptions being made, including about humans being rational actors who will choose the most efficient option open to them despite other competing normative claims. This does not necessarily reflect reality and is therefore a limitation of the approach.

(210.) See CORPORATE LAW ECONOMIC REFORM PROGRAM, supra note 40, at 13-14 (observing that New Zealand would only adopt the Model Law if Australia did so first).

(211.) Rasmussen, supra note 198, at 986.

(212.) Vienna Convention on the Law of Treaties, art. 26, May 23, 1969, 1155 U.N.T.S. 331 ("Every treaty in force is binding upon the parties to it and must be performed by them in good faith.").

(213.) See generally INT'L INST. FOR THE UNIFICATION OF PRIVATE LAW, UNIDROIT PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS (2004). See M.J. Bonnell, Do We Need a Global Commercial Code?, 106 DICK. L. REV. 87-100 (2001), for scholarly commentary on the Principles.

(214.) The Model Law's drafters were aware of the pitfalls of choosing a non-convention form: "In the case of a convention, the possibility of changes being made to the uniform text by the States parties is much more restricted.... The flexibility inherent in a model law is particularly desirable in those cases when it is likely that the State would wish to make various modifications to the uniform text before it would be ready to enact it as a national law.... This, however, also means that the degree of, and certainty about, harmonization achieved through a model law is likely to he lower than in the case of a convention." LEGISLATIVE GUIDE, supra note 4, at 309.

(215.) See Kenneth Abbott & Duncan Snidal, Hard and Soft Law in International Governance, 54 INT'LORG. 421, 423 (2000).

(216.) See id. at 429-30.

(217.) Donald R. Korobkin, Contractarianism and the Normative Foundations of Bankruptcy Law, 71 TEX. L. REV. 541, 543 (1993).

(218.) See generally Thomas H. Jackson, Bankruptcy, Non-Bankruptcy Entitlements, and the Creditors' Bargain, 91 YALEL.J. 857 (1982) (exploring the role of bankruptcy in shaping distributional rules among creditors).

(219.) See generally Douglas G. Baird & Thomas H. Jackson, Corporate Reorganizations and the Treatment of Diverse Ownership Interests: A Comment on Adequeate Protection of Secured Creditors in Bankruptcy, 51 U. CHI. L. REV. 97 (1984) (analysing the legal protections afforded to secured creditors).

(220.) Bebchuk & Guzman, supra note 198.

(221.) See David Gray Carlson, Philosophy in Bankruptcy, 85 MICH. L. Rev. 1341 (1987) (reviewing THOMAS JACKSON, THE LOGIC AND LIMITS OF BANKRUPTCY LAW (1986)) (arguing that any book attempting to find a coherent philosophical structure in the Bankruptcy Code is doomed).

(222.) See Korobkin, supra note 217 (arguing that scholars can arrive at a normative foundation of bankruptcy law); see also Donald R. Korobkin, The Role of Normative Theory in Bankruptcy Debates, 82 IOWAL. REV. 75 (1996).

(223.) See generally Warren, supra note 25 (articulating a comprehensive explanation about competing goals in the bankruptcy system).

(224.) See, e.g., Carlson, supra note 218; Korobkin, supra note 217; Warren, supra note 25; see also Duncan Kennedy, Cost-Benefit Analysis of Entitlement Problems: A Critique, 33 STAN. L. REV. 387 (1981) (arguing that using an "efficiency" analysis is of limited use in law).

(225.) See, e.g., SCHWARTZ, NORMATIVE THEORY, supra note 24, at 2.

(226.) Jackson, supra note 218, at 860.

(227.) Id. at 860-61.

(228.) As Professor Fletcher observed: "Since, by definition, insolvency impacts upon the entire patrimony of the debtor, the range of legal interests which are in some way affected is very extensive. This ensures that there is a profound and intimate correlation between insolvency--whether individual or corporate--and the very wellsprings of policy and social order from which national law ultimately draws its inspiration. For this reason, despite numerous general resemblances, national insolvency laws differ from one another almost infinitely in ways both great and small." FLETCHER, supra note 1, at 4.

(229.) See, e.g., Corporations Act 2001 (Cth) s 556 (Austl.) (protecting employee entitlements over other unsecured creditors by making it a priority payment).

(230.) Warren, supra note 25, at 355.

(231.) See, e.g., Jay Lawrence Westbrook, An Empirical Study of the Implementation in the United States of the Model Law on Cross Border Insolvency, 87 AM. BANKR. L.J. 247, 248 (2013) ("The number of insolvency cases involving a multinational debtor has risen with increasing globalisation. The flow has been a torrent since the near collapse of financial markets in 2008, developments which have stirred interest in the management of these cases.").

(232.) See WTO, INT'L TRADE STATS. 2012, at 204, [] (archived Sept. 20, 2015) (including figures on the increased volume of world merchandise exports and gross domestic product, from 1950-2011, which shows consistent growth from 1950-2011 except for a sharp decline in 2009).

(233.) The twenty-year average for business bankruptcies in the United States is 43,794 per year. The number of bankruptcies increased in 2009 (60,837) and 2010 (56,282) but had returned to slightly above average in 2011 (47,806) and below average in 2012 (40,075). THE 2013 BANKRUPTCY YEARBOOK & ALMANAC 4 (Kerry A. Mastroianni ed., 23rd ed. 2013).

(234.) In the seven years from 2006 to 2012 there were 632 filings under Chapter 15 of the US Bankruptcy Code. In the seven years before Chapter 15 was enacted (1999 to 2005), there were 456 filings under Section 304 of the U.S. Bankruptcy Code, the previous section dealing with Cross-border insolvency. In 2004-2005 there were 173 filings under Section 304. In 2011-2012 there were 179 filings under Chapter 15. Id. at 19.

(235.) Westbrook, supra note 231, at 253 (noting further that the figure rises to 65% when the United Kingdom claims are included).

(236.) Id. at 254.

(237.) For a discussion of the way that the Model Law has been applied in the Australian context, see also Rosalind Mason et al., The Emerging Framework of Cross-Border Insolvency in and Around Australia: Saad Investments, Japan Airlines and Lehman Brothers--Part One, 8 INT'L CORP. RESCUE 262 (2011), and Rosalind Mason et al., The Emerging Framework of Cross-Border Insolvency in and Around Australia: Saad Investments, Japan Airlines and Lehman Brothers--Part Two, 8 INT'L CORP. Rescue 329 (2011).

(238.) See the concerns raised by Professor Ian Fletcher in FLETCHER, supra note 1, at 486-89.

(239.) See Ziegel, supra note 204, at 1061-62 (noting a general "lack of enthusiasm").

(240.) Id. at 1062.

(241.) See LoPucki, supra note 22, at 713 ("[T]he liquidation or reorganization of a large company can generate hundreds of millions of dollars in professional fees."); Westbrook, supra note 7, at 2305.


(243.) Lawrence A. Weiss, Bankruptcy Resolution: Direct Costs and Violation of Priority Claims, 27 J. FIN. ECON. 285, 299 (1990).

(244.) Erik Larson, Lehman Recovery Seen as Justifying $2 Billion Bankruptcy, BLOOMBERG BUS. (Sept. 11,2013, 11:00 PM), [] (archived Sept. 20, 2015).

(245.) See generally Lehman Brothers Holdings Inc. (Chapter 11), EPIQ SYSTEMS, [ 5TZ2-LZHH] (archived Sept. 20, 2015).

(246.) Larson, supra note 244.

(247.) See Jim Christie, Slim Odds for Clawback of Attorneys' Fees in Nortel Bankruptcy, REUTERS (May 28, 2015, 7:10 AM), 05/28/bankruptcy-nortel-idUSLlN0YJ0J120150528 [] (archived Sept. 19, 2015); see also Barry Critchley, Will Nortel Professional Fees Finally Get Some Examination?, FINANCIAL POST (November 27, 2013, 4:05 PM), [] (archived Sept. 19, 2015) (quoting "independent financial analyst" Diane Urquhart as saying, "Had this [then] $1 billion been used for restructuring, Nortel would likely still be operating effectively and creating jobs for Canadian scientists and engineers").

(248.) See Anne-Marie Slaughter Burley, International Law and International Relations Theory: A Dual Agenda, 87 AM. J. INT'L L. 205, 220 (1993); Sandeep Gopalan, Demandeur-Centric Approach to Regime Design in Transnational Commercial Law, 39 GEO. J. INT'L L. 327, 345 (2008).

(249.) Kal Raustiala, Form and Substance in International Agreements, 99 AM. J. INT'L L. 581, 591 (2005).

(250.) See, e.g., Abbott & Snidal, supra note 215, at 445 ("[Soft law] provides for flexibility in implementation, helping states deal with the domestic political and economic consequences of an agreement and thus increasing the efficiency with which it is carried out.") (alteration in original).

(251.) See id. at 443.

(252.) See id. at 434 ("Legal specialists must be consulted; bureaucratic reviews are often lengthy. Different legal traditions across states complicate the exercise. Approval and ratification processes, typically involving legislative authorization, are more complex than for purely political agreements.").

(253.) Id. at 436.

(254.) See United Nations Convention on Contracts for the International Sale of Goods art. 6, April 11, 1980, 1489 U.N.T.S. 3 ("The parties may exclude the application of this Convention or, subject to article 12, derogate from or vary the effect of any of its provisions.").

(255.) Michael W. Gordon, Some Thoughts on the Receptiveness of Contract Rules in the CISG and UNIDROIT Principles as Reflected in One State's (Florida) Experience of (1) Law School Faculty, (2) Members of the Bar with an In ternational Practice, (3) and Judges, 46 Am. J. COMP. L. 361, 374 (1998).

(256.) Status: United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980), UNITED NATIONS COMM'N ON INT'L TRADE LAW, [] (archived Sept. 20, 2015).

(257.) See MICHAEL BRIDGE, THE INTERNATIONAL SALE OF GOODS: LAW AND PRACTICE, appendix (1999); John Coyle, Rethinking the Commercial Law Treaty, 45 Ga. L. REV. 343, 365 (2011); see also Jan Smits, Law Making in the European Union: On Globalization and Contract Law in Divergent Legal Cultures, 67 LA. L. REV. 1181, 1187 (2007) ("[M]any general conditions set by ... Federation of Oils, Seeds, and Fats ('FOSFA') and the Grain and Feed Trade Association ('GAFTA') [exclude the CISG]. A survey among some large Dutch companies showed that most of them exclude the applicability of the CISG.... Smaller Dutch companies often do not exclude the CISG, unless legal advice was sought by one of the companies involved."); Grain and Feed Trade Ass'n, Gafta No. 100: Contract for Shipment of Feedingstuffs in Bulk: Tale Quale--CIF Terms, [paragraph] 28 (2006), [] (archived Sept. 20, 2015) ("International Conventions]:] The following shall not apply to this contract ... (a) the Uniform Law on Sales and the Uniform Law on Formation to which effect is given by the Uniform Laws on International Sales Act 1967; (b) the United Nations Convention on Contracts for the International Sale of Goods of 1980; and (c) the United Nations Convention on Prescription (Limitation) in the International Sale of Goods of 1974 and the amending Protocol of 1980.").

(258.) Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary, July 5, 2006, conventions/txt36en.pdf [] (archived Sept. 20, 2015).

(259.) See id. ("The States ... [a] ware of the urgent practical need in a large and growing global financial market to provide legal certainty and predictability ... [h]ave resolved to conclude a Convention ... and have agreed upon the following provisions.").

(260.) Conclusions of the Special Commission of May 2000 on General Affairs and Policy of the Conference, Hague Conference on Private International Law, Preliminary Document No. 10 of June 2000 for the Attention of the Nineteenth Session, at 30 (2000), [] (archived Sept. 20, 2015).

(261.) See Proposal by the Delegations of Australia, the United Kingdom, and the United States, Hague Conference on Private International Law, Work Doc. No. 1 E, at 1 (May 8, 2000), [https://] (archived Sept. 20, 2015) (arguing that "[t]he need for a Convention is urgent because of the systemic risk implications and because the existing legal uncertainty in the area has the potential to impede the growth internationally of financial services industry arrangements for the transfer of securities through multiple tiers of intermediaries"); Philippe Dupont et al., Regulatory Aspects of the Hague Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary, INT'L MONETARY FUND 4 (2002), http://[] (archived Sept. 20, 2015) ("At present, it is very common to find a scenario where a collateral provider in country A provides to a bank, as collateral taker, in country B a pledge over securities issued by issuers of three different nationalities and booked to one account with a central securities depositary (CSD) in country C and held physically in the vaults of a local depositary or by nominee registration for this CSD in different countries."); ESF Securitisation Data Report: European Securitisation Issuance Surges to a New Record in 2003, at 1 (2004), [] (archived Sept. 20, 2015) ("New issuance in the European securitised debt set a new record in 2003 of 217.2 billion [euro], up from the 157.7 billion [euro] issued in 2002."). See generally Klaus Lober, The Harmonisation of the Legal Framework for Rights Evidenced by Book Entries: A Report by the European Financial Markets Lawyers Group, 18 J. INT'L BANKING L. & REG. 413 (2003) (describing the absence of harmonization in the EU legal regime controlling securities).

(262.) See generally Christophe Bernasconi, The Law Applicable to Dispositions of Securities Held Through Indirect Holding Systems, Hague Conference on Private International Law, Preliminary Document No. 1 of Nov. 2000 for the Attention of Working Group of Jan. 2001, at 11 (2000), [] (archived Sept. 20, 2015).

(263.) See United Nations Comm'n on Int'l Trade Law, UNCITRAL Practice Guide on Cross-Border Insolvency Cooperation, at 13, U.N. Sales No. E.10.V.6 (2010), [] (archived Sept. 15, 2015) (noting the UN General Assembly "made clear its conviction that fair and internationally harmonized legislation on cross-border insolvency that respected the national procedural and judicial systems and was acceptable to States with different legal, social and economic systems would not only contribute to the development of international trade and investment, but would also assist States in modernizing their legislation on cross-border insolvency.").

(264.) For instance, Article 27 lists the following forms of cooperation: "(a) Appointment of a person or body to act at the direction of the court; (b) Communication of information by any means considered appropriate by the court; (c) Coordination of the administration and supervision of the debtor's assets and affairs; (d) Approval or implementation by courts of agreements concerning the coordination of proceedings; (e) Coordination of concurrent proceedings regarding the same debtor." Id. at 17.

(265.) UNCITRAL, supra note 12, at 96.

(266.) Id. at 13.

(267.) United Nations Comm'n on Int'l Trade Law, UNCITRAL Model Law on Cross-Border Insolvency: The Judicial Perspective 58 (2014), [ YHK2-MQXQ] (archived Sept. 20, 2015),

(268.) [2009] 181 FCR 374 (Austl.).

(269.) Id. at 378.

(270.) Id.

(271.) See, e.g., in the non-insolvency context, Chevron Corp. v. Yaiguaje, 2015 SCC 42, [paragraph]55 where the Canadian Supreme court said: "no unfairness results to judgment debtors from having to defend against recognition and enforcement proceedings. In essence, through their own behaviour and legal non-compliance, the debtors have made themselves the subject of outstanding obligations. It is for this reason that they may be called upon to answer for their debts in various jurisdictions. Of course, principles of order and fairness are also protected by providing a foreign judgment debtor with the opportunity to convince the enforcing court that there is another reason why recognition and enforcement should not be granted." The court also opined that "Cross-border transactions and interactions continue to multiply. As they do, comity requires an increasing willingness on the part of courts to recognize the acts of other states. This is essential to allow individuals and companies to conduct international business without worrying that their participation in such relationships will jeopardize or negate their legal rights." Id. [paragraph]75.

(272.) Currie v. McDonald's Restaurants of Canada Ltd. (2005), 74 O.R. 3d 321, 325 (Can. Ont. C.A.)

(273.) Id. at 325-26.

(274.) Id. at 326.

(275.) Id. at 334-35.

(276.) Re Cavell Insurance Co. (2006), 80 O.R. 3d 500, [paragraph] 5 (Can. Ont. C.A.)

(277.) Id. [paragraph]9.

(278.) Id. [paragraph]10.

(279.) Id. [paragraph]12.

(280.) Id.

(281.) Id.

(282.) Id. [paragraph]14.

(283.) Id. [paragraph] 19.

(284.) Id. [paragraph] 57.
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Title Annotation:III. Cross-Border Insolvency Law in the United States A. Judicial Interpretation of the Model Law 3. In Re Metcalfe through VI. Conclusion, with footnotes, p. 1254-1284
Author:Gopalan, Sandeep; Guihot, Michael
Publication:Vanderbilt Journal of Transnational Law
Date:Nov 1, 2015
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