International Academy of Commercial and Consumer Law Changing Law for Changing Times, 13th Biennial Meeting: Avoidance of Pre-Bankruptcy Transactions in Multinational Bankruptcy Cases

Abstract:     
From the perspective of planning commercial transactions, the application of the avoiding powers may be the single most important aspect of multinational insolvency/bankruptcy cases. The French case is a Court of Appeals case that applies United States law to avoid a pre-bankruptcy transfer of real estate in Bermuda. Being reluctant to litigate the question of the debtor's status as a trader, the trustee wanted to use Cayman avoidance law which applied whether the debtor was a trader or not. Thus in Al Sabah, if the Cayman Islands settlement-avoidance law was not part of its bankruptcy law, and if the Cayman courts had interpreted their law to permit its use by a trustee in bankruptcy, a United States trustee could avoid the settlement under Cayman law and distribute the proceeds in the United States proceeding without the policy anomalies I have asserted above. The analysis is different from the earlier one because the Cayman nonbankruptcy avoidance law would be intended to benefit any creditor, not to protect the creditors specified in a bankruptcy distribution scheme. As things stand, a creditor or other transferee of a cross-border transfer faces a risk of action under a law with seemingly little contact with the transaction or the debtor.

Keywords: Bankruptcy, International Law, Choice of Law, Conflict of Law

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