Recognition and Enforcement in Cross-Border Insolvency Law: A Proposal for Judicial Gap-Filling
66 Pages Posted: 27 Oct 2015
Date Written: 2015
The globalization of business activity necessarily entails contacts with a diverse array of national laws and legal systems. It is no accident then that when businesses become insolvent, such insolvencies often have transnational consequences and cross the boundaries of domestic jurisdictions. A recent illustration of the scale, complexity, and financial significance of the issues involved is provided by the insolvency of Lehman Brothers, a firm that conducted business in over forty countries through the instrumentality of about 650 legal entities outside the United States. In such situations, there is a clash of competing national laws on weighty questions including the recognition of security interests, processes related to the disbursal of assets, and different policy preferences underlying the protection of different kinds of creditors.
This Article is organized as follows: Part 2 provides an overview of cross-border insolvency law in Australia and outlines the key provisions following the enactment of the Model Law. It also discusses some issues presented by the implementation and interpretation of the Model Law by courts, and illustrates potential problems. Parts 3 and 4 discuss the position in the United States and United Kingdom, respectively, illustrating the confusion created by conflicting decisions on recognition and enforcement in cross-border settings. In Part 5, an argument is set forth for courts to harmonize the recognition and enforcement of cross-border insolvency judgments in order to effectuate the normative foundations of the Model Law and provide certainty for international business. Part 6 concludes.
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