Recognition of Foreign Bankruptcies: An Analysis and Critique of the Inconsistent Approaches of United States Courts
The American Bankruptcy Law Journal, Vol. 66, No. 1, p. 135, 1992
98 Pages Posted: 7 Jan 2010 Last revised: 12 Feb 2010
Date Written: 1992
One of the glaring omissions in private international law has been the failure of nations to reach accord about transnational insolvency. Historically, there has been little formal cooperation among bankruptcy courts worldwide. Most have long responded to the problem of what effect to give to foreign bankruptcies by protecting domestic interests and local creditors, and at times even discriminating against foreign creditors. This nationalistic approach to bankruptcy laws has often resulted in full liquidation proceedings in every country in which the assets of a debtor are located. It has also caused duplication of expenses and litigation, inequitable distributions to creditors worldwide, and instability in the climate for international trade. This article discusses US law regarding the recognition of foreign bankruptcy proceedings. The article provides an overview of the historical development of that law. It then examines the the statutory regime in the US Bankruptcy Code involving sections 303(b)(4), 304, and 305, with a focus on section 304. The article highlights the inconsistent approaches taken by the US courts in determining whether to recognize and assist foreign bankruptcies and proposes criteria to guide US courts in making those decisions.
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