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Abstract:
At the time that Enron filed for bankruptcy, it had substantial assets, thousands of creditors, an opaque capital structure, and more than a whiff of fraud. By the traditional account, Enron is a prototypical example of a firm with problems that a law of corporate reorganizations is designed to solve. Like the 19th century receiverships of the great railroads, the reorganization of Enron could have allowed creditors and others to negotiate with each other and find a way to preserve the value of the firm as a going concern at the same time misdeeds are uncovered and losses are allocated among the different players.

Negotiations aimed at preserving Enron's value as a going concern never took place, however. As is increasingly the case in large Chapter 11s, Enron's assets were sold quickly, most within a few weeks or months of the filing. The decision as to how to deploy Enron's assets lay not in the court but in the new owners. After selling the assets, the bankruptcy court quickly turned to what courts do best - sorting out complex and perhaps conflicting legal entitlements. This pattern of a prompt sale followed by litigation over the distribution of the proceeds reflects a dramatic change in large firm bankruptcy practice. It suggests that we should no longer think of Chapter 11 as a collective forum in which the interested parties gather to bargain over the fate of the firm.

Abstract:
The law of corporate reorganizations is conventionally justified as a way to preserve a firm's going-concern value: Specialized assets in a particular firm are worth more together in that firm than anywhere else. This paper shows that this notion is mistaken. Its flaw is that it lacks a well-developed understanding of the nature of a firm. Initially, it is easy to confuse size with specialization and overstate the extent to which assets are dedicated to a particular enterprise. Even when such dedicated assets exist, they often do not need to stay in the same firm. As Coase taught us, as the costs of contracting go down, so too does the value of keeping assets in a particular firm.

But even when specialized assets must be kept inside a firm, two other forces limit the need for a traditional law of corporate reorganizations. Capital structures are increasingly designed with financial distress in mind. For these firms, control rights shift from one set of investors to another as the firm encounters difficulty. Such firms either never file for bankruptcy, or, if they do, it is only to vindicate the pre-determined allocation of control rights. Even where control rights are not sensibly allocated, a quick sale of the firm restores order. When firms can be sold as going concerns, the need for the traditional negotiated plan of reorganization disappears.

The vast majority of firms in financial distress never enter bankruptcy. Today the Chapter 11 of a large firm is an auction of the assets, followed by litigation over the proceeds. To the extent we understand the law of corporate reorganizations as providing a collective forum in which creditors and their common debtor fashion a future for a firm that would otherwise be torn apart by financial distress, we may safely conclude that its era has come to an end.

corporate reorganization, firm valuation, Chapter 11

Abstract:
Modern Chapter 11 places control decisions in the hands of the bankruptcy judge and insists on rigid adherence to absolute priority in all cases. In both respects, modern Chapter 11 departs sharply from the equity receivership. The equity receivership governed the reorganization of railroads and other large firms in the 19th Century, and it was fashioned in a way that strongly suggests that it vindicated the creditors' bargain. This paper suggests that, when a speedy auction of the firm is not possible, these twin principles of the equity receivership continue to make sense. When the managers and shareholders cannot be easily separated, control rights should lie in the hands of someone whose loyalties are aligned with the creditors, but the reorganization itself should not affect the value of the managers' equity interest. To use the language of the equity receivership, the "relative priority" of their interests should be preserved.

The focus of modern scholarship on the absolute priority rule neglects the question of who controls the assets during the reorganization. It also fails to take account of the role that existing manager/shareholders will play in firms that possess going concern value and cannot be resold in the market. In this environment, the absolute priority rule triggers costly renegotiations that may yield no off-setting advantages over the relative priority rule.

Chapter 11, bankruptcy, equity receivership, reorganization

Abstract:
Modern Chapter 11 places control decisions in the hands of the bankruptcy judge and insists on rigid adherence to absolute priority in all cases. In both respects, modern Chapter 11 departs sharply from the equity receivership. The equity receivership governed the reorganization of railroads and other large firms in the 19th Century, and it was fashioned in a way that strongly suggests that it vindicated the creditors' bargain. This paper suggests that, when a speedy auction of the firm is not possible, these twin principles of the equity receivership continue to make sense. When the managers and shareholders cannot be easily separated, control rights should lie in the hands of someone whose loyalties are aligned with the creditors, but the reorganization itself should not affect the value of the managers' equity interest. To use the language of the equity receivership, the "relative priority" of their interests should be preserved.

The focus of modern scholarship on the absolute priority rule neglects the question of who controls the assets during the reorganization. It also fails to take account of the role that existing manager/shareholders will play in firms that possess going concern value and cannot be resold in the market. In this environment, the absolute priority rule triggers costly renegotiations that may yield no off-setting advantages over the relative priority rule.

Chapter 11, bankruptcy, equity receivership, reorganization

Abstract:
Traditional approaches to corporate governance focus exclusively on shareholders and neglect the large and growing role of creditors. Today's creditors craft elaborate covenants that give them a large role in the affairs of the corporation. While they do not exercise their rights in sunny times when things are going well, these are not the times that matter most. When a business stumbles, creditors typically enjoy powers that public shareholders never have, such as the ability to replace the managers and install those more to their liking. Creditors exercise these powers even when the business is far from being insolvent and continues to pay its debts. Bankruptcy provides no sanctuary as senior lenders ensure that their powers either go unchecked or are enhanced. The powers that modern lenders wield rival in importance the hostile takeover in disciplining poor or underperforming managers. This essay explores these powers and begins the task of integrating this lever of corporate governance into the modern account of corporate law.

Abstract:
In The End of Bankruptcy we detailed the forces that have rendered obsolete traditional conceptions of corporate reorganization. In a response to our article, Lynn LoPucki asserts that our paper lacked empirical foundation. In this response, we draw on LoPucki's data set of the reorganization of large, publicly held entities to show the robustness of our claims, both empirical and theoretical.

Looking in detail at the firms whose Chapter 11 cases ended in 2002, most of which concluded after we completed our original piece, we find that in over 80% of the cases the assets of the firm were either sold or the bankruptcy proceeding put in place a restructuring plan agreed to before bankruptcy was filed. The remaining firms evince little in the way of going-concern value. Moreover, equityholders are nearly always wiped out, and the board of directors is usually replaced.

Today's bankruptcy practice reveals creditors, particularly the senior lenders, in control. They use their powers to remove managers in whom they have lost confidence, replace the board of directors, put the corporation on the auction block and terminate the interest of equityholders. This paper provides further evidence that issues of control rather than priority dominate modern reorganization practice.

Chapter 11, corporate reorganization

Abstract:
This paper begins the project of enriching the economic analysis of bankruptcy law through behavioral economics. Empirical research has consistently identified deviations from rationality in the subjects studied. One cannot mechanically attribute these to firms. Rather, firms may well be set up to counteract some, but not necessarily all, of the tendencies that researchers have discovered. For example, the internal divisions and practices of banks can be explained as an attempt to repair cognitive bias. Thus, banks may be more rational in their lending and workout decisions than a single individual would be.

Abstract:
Section 1129(b) of the Bankruptcy Code gives each class of unsecured claims the right to insist that a reorganization plan be "fair and equitable" and to prevent those junior to them from receiving "property" on account of their old interests. The Bankruptcy Code is often said to embrace a rule of absolute priority, but if it does so, it is only through these restrictions. Hence, the meaning of the words "fair and equitable" and "property" is the terrain on which priority battles are contested. One must choose among different methods of statutory interpretation. One can derive priority rules by examining the judicial evolution of the words "fair and equitable" before they were incorporated into the 1978 Bankruptcy Reform Act. Alternatively, one can look to the word "property," and derive priority rules by trying to define this word. Opinions in the most recent Supreme Court case on this issue, 203 N. LaSalle, exemplify these competing approaches. Using these opinions as its starting point, this paper explores the way in which priority rules in bankruptcy have evolved over time and shows how the absolute priority rule is harder to derive from the statute and hence more contingent, positively and normatively, than commonly supposed.

Abstract:
Empirical legal scholarship endeavors to resolve disputes that are indeterminate at the level of theory. The nature of empirical claims, however, requires that consumers of this work bring a healthy dose of skepticism to any of these projects. Three recent works in the area of corporate reorganizations illustrate how a project that appears on its face to settle scholarly debate can rest on choices that the researcher made rather than on the data itself. One of these works seeks to discredit proposals to make bankruptcy law a default rule rather than a mandatory rule, but it draws its data from a sample half of which is made up of individuals, who by definition are outside the reach of the proposed reform. Moreover, the entire sample omits publicly held corporations, the main target of the reform being examined. The second article discredits prior reorganization practice, but only by establishing a standard that no bankruptcy system has ever satisfied. The third piece concludes that competition for large Chapter 11 cases has corrupted our bankruptcy system, but the empirical basis for this conclusion rests on combining fundamentally different types of bankruptcy cases. For empirical work to be credited, at a minimum, it has to look in the right place, ask the right question and draw the right inferences. When empirical work fails to cross this threshold, it conclusions must be rejected.

Abstract:
In large Chapter 11 cases, the prototypical creditor is no longer a small player holding a claim much like everyone else’s, but rather a distressed debt professional advancing her own agenda. Secured creditors are more pervasive and enjoy much more control than they had even a decade ago. Moreover, financial innovation has dramatically increased the complexity of each investor's position. As a result of these and other changes, the legal system faces today a challenge that is much like assembling a city block that has been broken up into many parcels. There exists an anti-commons problem, a world in which ownership interests are fragmented and conflicting. This is quite at odds with the standard account of Chapter 11 - that it solves a tragedy of the commons, the collective action problem that exists when general creditors share numerous dispersed, but otherwise similar, interests. This paper draws on the lessons of cooperative game theory to show how in combination these recent changes are toxic. They undermine the coalition formation process that is a foundational assumption of Chapter 11.

Abstract:
Significant recent empirical research in commercial law involves interviewing participants in commercial transactions. This comment posits that, in evaluating the findings of these studies, we should pay attention to whether those interviewed were lawyers or nonlawyers. Most people have a tendency to overstate their importance to the work that they do. Thus, one would expect that lawyers would overstate the importance of law (or at least the need for them to manage the law) whereas nonlawyers would have a bias toward understating law's significance. This suggests that lawyers are more likely to view expenditures on negotiating contract terms than are nonlawyers. Professor Dan Keating's recent work on the "battle of the forms" is consistent with these conclusions.

Abstract:
Agency costs dominate academic thinking about corporate governance. The central challenge is to devise legal rules to align the interests of the managers (the agents) with those of the shareholders (the principals). This preoccupation is misplaced. Whether it is finding a baby-sitter or a dean, the challenge of hiring the right person dwarfs the challenge of aligning that person's incentives. The central task for corporate governance - its Prime Directive - is to ensure that the right person is running the business. In this essay, we suggest that the challenge of aligning the managers' incentives has been drastically overstated and the way in which legal rules affect hiring (and firing) decisions has been too often ignored.

Putting the emphasis on agency costs may lead to rules that slight what matters most. The current preoccupation with executive compensation runs the risk of inducing the board to worry more about the details of the employment contract rather than selecting the best person in the first instance. More important, the law can play an important role ensuring bad managers are fired. Once hired, all managers need to be mentored, monitored and, when necessary, replaced. There is little to suggest that a single entity is well-situated to perform all three. There is tension between the roles of confidant and policeman. Here, debt contracts play a crucial and largely neglected role. Covenants in debt contracts can insure that underperforming managers are called to task. Private debt holders' role in monitoring a business and ensuring that underperforming managers are replaced may be as important as the market for corporate control.

Abstract:
Most commentators decry forum shopping. This general hostility extends to forum shopping by firms filing for bankruptcy. Indeed, Congress is considering legislation designed to reduce forum shopping by companies filing for bankruptcy. This article makes two contributions to this debate. First, we show that the current debate is driven almost exclusively by attorneys trying to protect fees rather than by any principled objection to forum shopping. Second, on the merits, we argue that the hostility to forum shopping is misplaced. The near universal condemnation of forum shopping rests on the premise that, at the time the plaintiff selects a forum, there is a zero-sum game between the plaintiff and defendant - every advantage that a plaintiff secures comes at a cost to the defendant. We demonstrate that, in the bankruptcy context, this zero-sum game disappears if one forces a firm to commit to a specific venue before its seeks funds in the capital markets. Drawing on the "race to the top" literature in corporate law, we show that markets will discipline managers who act opportunistically. The threat of this discipline will lead managers to commit to the venue most likely to maximize firm value. Moreover, our proposal will create incentives for judges to exercise the vast discretion that the Bankruptcy Code gives them in a way which promotes efficiency.

Abstract:
Changes in bankruptcy practice require a reexamination of the incentives of secured lenders. Traditionally, such lenders were viewed as favoring liquidating distressed businesses, even when such liquidation would be inefficient. Through devices such as revolving credit facilities, senior lenders have extensive control over the operations of financially troubled companies before a bankruptcy petition is filed. This control provides the lender with two options. One is a real option on the continued operation of the business. The lender can exercise this option to sell the enterprise in whole or in part or to revamp operations. A second is a financial option. Through the use of a prearranged bankruptcy, the secured lender can effectively convert its debt into equity while extinguishing the interests of equity holders. The secured lender can exercise both options, changing the course of the firm's operations and converting its debt claim into an equity interest. When the rights of the senior lender are viewed as a set of options, one cannot conclude on an a priori basis that the senior is overly favorable toward liquidation.

Bankruptcy, secured lenders

Abstract:
Agency costs dominate academic thinking about corporate governance. The central challenge is to devise legal rules to align the interests of the managers (the agents) with those of the shareholders (the principals). This preoccupation is misplaced. Whether it is finding a babysitter or a dean, the challenge of hiring the right person dwarfs the challenge of aligning that person's incentives. The central task for corporate governance - its Prime Directive - is to ensure that the right person is running the business. In this essay, we suggest that the challenge of aligning the managers' incentives has been drastically overstated and the way in which legal rules affect hiring (and firing) decisions has been too often ignored.

The current preoccupation with executive compensation runs the risk of inducing the board to worry more about the details of the employment contract rather than selecting the best person in the first instance. More important, the law can play an important role ensuring bad managers are fired. The market for corporate control does this, but debt contracts also play a crucial role, one that has been largely neglected. Covenants in debt contracts can insure that underperforming managers are called to task. Indeed, they may be as important as the market for corporate control.

corporate law, corporate governance, separation of ownership and control, management incentives, executive compensation, corporate control

Abstract:
A theory of the state should motivate any system of sovereign debt restructuring. Governments should borrow funds in order to promote the long-term welfare of their citizens. This borrowing, however, increases the possibility of later financial distress, which can decrease the welfare of the nation's citizens. This essay draws on recent scholarship in the corporate and individual bankruptcy realms and argues that a sovereign debt restructuring system premised on a theory of the state would further three goals - encourage efficient investment, protect citizens against the extreme consequences of the nation's financial distress, and promote the adoption of responsible fiscal policies. A right on the part of the state to discharge some of its debt could further the first two of these goals. This discharge right could reduce the agency costs that often exist between the country's leaders and its citizens by encouraging lenders to better monitor the planned use of borrowed funds in the first instance. Such a right also provides a form of mandatory insurance for the country's citizens against extreme distress. As to the goal of prompting better fiscal policies, a sovereign debt restructuring system can achieve this by predicating relief on the adoption of such policies. Perhaps the biggest impediment to implementing a sovereign debt restructuring system along the lines sketched here is that few of the current players in the sovereign debt system have an incentive to advocate such a regime.

Sovereign, debt, restructuring

Abstract:
Recent empirical work has demonstrated that large, publicly held firms tend to file for bankruptcy in Delaware. In our previous work, we have documented this trend, and argued that it may be efficient for prepackaged bankruptcies, while it unclear if it is efficient for traditional Chapter 11 cases. In this piece, we respond to LoPucki and Kalin's assertion that Delaware bankruptcy court performs worse than others. They base this claim on the observation that firms that file for bankruptcy in Delaware are more likely to file for bankruptcy a second time than are firms that file in another jurisdiction.

We demonstrate a number of problems with their analysis. These include that: they have failed to offer a robust definition of what constitutes a successful reorganization; they do not adequately justify focusing narrowly on refiling rates; and that a substantial number of firms drop out of their sample which may adversely affect their results. Moreover, contrary to their assumption, we also show that there may be an optimal refiling rate that is above zero. In any given case, there may be a trade off between resolving the case quickly and the risk of a subsequent filing. We conclude that, while their results are provocative, there remains much more work to be done before strong implications can be drawn from them.

Abstract:
This essay argues that transactional insolvencies should not be governed by a rigid commitment to either a universalist or territorial approach. Rather, firms should be allowed, before the onset of financial distress, to select which country's or countries' bankruptcy law would apply should the firm become insolvent. Firms would sort themselves depending on whether it would be more efficient to handle financial distress in one proceeding or in several proceedings. This approach has the additional benefit that it would create a regulatory competition among nations to provide more efficient bankruptcy laws. Bankruptcy attorneys would have the incentive to lobby their country to enact laws that more efficiently handled the financial distress of transnational firms. Contrary to some critics, this proposal would not induce debtors to select jurisdictions simply for the purpose of depriving involuntary creditors protection that they would otherwise receive.

Abstract:
Case v. Los Angeles Lumber occupies a central role in the development of the American law of corporate reorganizations. Justice Douglas's opinion for the Supreme Court adopted the absolute priority rule as the touchstone against which all plans of reorganization would be measured. Even with overwhelming support by the bond holders - the only creditors whose interests were being lessened by the proposed plan in Los Angeles Lumber, the former shareholders could not participate in the reorganized company without making a fresh capital contribution. While the conditions necessary to invoke the absolute priority rule have evolved over time, the rule itself forms the bedrock of modern Chapter 11.

The holding of Los Angeles Lumber thus remains relatively intact. But the subsequent history of the business of Los Angeles Lumber calls into question many of the assumptions on which modern reorganization law rests. Chapter 11 is designed as a forum where the owners of a company can reach an agreement so as to preserve a corporation's going-concern value. Los Angeles Lumber confirmed a plan of reorganization on remand from the Supreme Court. The plan adhered to the newly announced absolute priority rule. The company, however, did not flourish. In the end, it simply lacked going concern value. Despite a boom in the ship building business, Los Angeles Lumber could not operate effectively and was taken over by the federal government. The judicially supervised reorganization in the end brought no benefit to the investors in Los Angeles Lumber.

bankruptcy, corporate reorganization, absolute privity

Abstract:
"Odious debt" is more of a literature rather than a doctrine. One can find numerous arguments dating back decades arguing that new regimes should be entitled to relief from "odious debts." The actual cases of relief, however, are few. Countries with obligations that could easily be classified as odious debt eschew reliance on the doctrine. The recent interest in the odious debt doctrine was precipitated by the ouster of Saddam Hussein. The new government of Iraq was able to pare down its debt without resting on the odious debt doctrine. Indeed, this resolution may portend that discussions of odious debt will recede from policy circles.

There is a lesson here that should not be missed. Odious debt is a politically motivated concept. By tying debt relief to the character of the old regime, the doctrine seeks to achieve desired political results in two ways. While a disfavored regime is in place, it attempts to erode that regime by constricting available funds. After the regime falls, it encourages certain political outcomes by offering financial relief to acceptable regimes. What is too often overlooked is that odious debt is not unique on this score. All sovereign debt relief is political. Turkey is not treated as Honduras. The literature on sovereign debt restructuring exhibits unease with this situation. One can view the recent spate of proposed Sovereign Debt Restructuring Mechanisms as attempts to lessen the political nature of the process in much the way that American corporate reorganization law removes political considerations from restructuring activities.

Rather than ignoring the tension between politics and law here, future work needs to embrace it. An optimal sovereign debt restructuring regime may be one that provides a minimum of relief available to all countries, but allows room for countries to use political levers to extract additional relief.

bankruptcy, corporate reorganization, absolute privacy

Abstract:
In Paying for Performance in Bankruptcy, 155 U. Pa. L. Rev. 777 (2007), Yair Listokin argues that one option for compensating managers of a company in Chapter 11 should be to give them a debt interest in the company. This response argues that the assumptions motivating this proposal do not hold in many situations. Current trends in bankruptcy reorganization practice, such as the increase in creditor control and the development of the turnaround profession have already limited the agency costs at which Listokin's proposal is aimed. Debt holders no longer need worry that managers will use bankruptcy as a vehicle to extract value for shareholders. If anything, the challenge in the current environment is ensuring that the managers do not decrease the value of the company through actions designed to benefit the senior creditors.

bankruptcy, corporate reorgannization, executive compensation

Abstract:
Debates about transnational insolvencies rest on the assumption that the increasing global reach of companies will lead to more cases where more than one country assets jurisdiction over a debtor's assets. The challenge in this discussion is to delineate which set of rules countries should adopt so that value is not destroyed. The so-called "universalists" worry about inefficient liquidations and stress the need for countries to cooperate with each other. Territorialists, on the other hand, worry about a race to the bottom where the debtor chooses a friendly country to handle its insolvency and the rest of the countries where the debtor has assets reflexively cooperate. Yet both camps agree that as businesses expand across borders, multiple insolvency proceedings are inevitable. The only open question is the extent to which the involved jurisdictions should cooperate with each other.

This paper challenges this accepted wisdom. It demonstrates that there are relatively few reorganization cases that involve multiple proceedings. The explanation for this puzzle is that debtors can control the number of proceedings that are opened in any given case. There are multiple proceedings only when it suits the debtor's interest. This control that debtors have over the process requires a reorientation in the literature. Rather than focusing on the rules that countries adopt, we have to examine the actions that debtors take and assess the welfare concerns.

corporation reorganization, transnational insolvency

Abstract:
This essay is part of a symposium where the contributors were asked to identify their "favorite" commercial calamity. It takes a lot to create a calamity in the commercial arena. Transactional attorneys spend a good deal of their time drafting around the calamities of the past. The Supreme Court's decision in Till v. SCS Credit Corp., 541 U.S. 465 (2004), nevertheless deserves the label. The issue before the Court was straight-forward - how should bankruptcy courts ascertain the appropriate interest rate in a Chapter 13 plan. At one level the case is a calamity in that the Court failed to produce a majority opinion. This issue simply called for a clear rule. While some rules may be better than others, the overriding concern should have been to provide definitive guidance on this oft recurring issue. Here, the Court simply failed.

Till bids for calamity status on a second score as well. The opinions show little regard for commercial law. To be sure, Justice Scalia's opinion demonstrates that he at least understood the basic functioning of bankruptcy law and credit practices. The same cannot be said for the remaining opinions. Justice Thomas, accusing all of textual infidelity, authored an opinion which adopted a measure that no court of appeals had endorsed. He argued that, though virtually unnoticed, the Bankruptcy Code mandated that Chapter 13 debtors pay the same rate of interest as the country's most solvent financial institutions. Justice Stevens did little better. His opinion suggests that, for those in Chapter 13 who are seeking to repay their secured debts over time, one should start with the prime rate, and then add 1% to 3%. To be sure, one could articulate a rational for this formula approach that comports with the dynamics of Chapter 13. (We need an easy-to-implement rule; we know that collateral tends to be valued too high, so a rule that sets interest too low may achieve a rough balance.) Unfortunately, this is not the tact that Justice Stevens took. His opinion rests on the assertion that Chapter 13 provides sufficient safeguards so that a modest increase in the prime rate represents the true risk to creditors. This reasoning cannot be squared with what we know about Chapter 13 practice. Moreover, by suggesting that courts can provide a more accurate assessment of default risk than markets, Justice Stevens's opinion creates the possibility for mischief across the Bankruptcy Code.

Abstract:
This article analyzes the current controversy over whether a company's state of incorporation should remain an appropriate venue for firms filing for corporate reorganization under Chapter 11 of the Bankruptcy Code. The article examines the recent developments involving the Delaware bankruptcy court, and concludes that the state of incorporation should remain as an acceptable venue in bankruptcy cases. The article then, drawing on the general corporate law literature, argues that firms should be required to precommit to filing in a particular venue well before the onset of financial distress. The firms managers will then have the incentive to choose the venue which promises to maximize firm value. Bankruptcy courts, which compete amongst themselves for Chapter 11 cases, will then have the incentive to interpret and implement the Bankruptcy Code so as to maximize firm value.

The article makes three substantial contributions to the extant bankruptcy literature. First, it details the rise in importance of Delaware as a venue for Chapter 11 cases, shows how this is related to Delaware?s handling of prepackaged bankruptcies, and demonstrates that there should be a single forum for such bankruptcies and that Delaware is the logical choice. Second, the article draws on the ?race to the top? literature to show how a change in the Bankruptcy Code?s venue provisions can lead to more efficient interpretations and applications of the Bankruptcy Code. Finally, the article takes issue with the suggestion that all of corporate bankruptcy law should be returned to the states. It does this by undertaking a comparative analysis of the political economy of state and federal lawmaking.

Abstract:
This paper looks at the problems caused by the insolvencies of a multinational firm. It suggests that the current academic consensus that a single proceeding is optimal for all such insolvencies may not withstand scrutiny. It proposes that, as a first order solution, multinational firms should be allowed to select their own insolvency rules from a menu of options. A second best solution would be to allow multinational corporations to select, via a forum selection clause in the corporate charter, which country's or countries' bankruptcy regime will apply in the case of financial distress.