Reaching to Restructure Across Borders (Without Over-Reaching), Even after Brexit
Forthcoming, American Bankruptcy L.J. (2018)
53 Pages Posted: 20 Nov 2017 Last revised: 5 Dec 2017
Date Written: November 16, 2017
Is there such a thing as “good” forum shopping? Courts and commentators have begun to articulate the “virtues” of at least some forum shopping, including forum shopping to resolve corporate insolvency or financial distress whether on a domestic or global basis. Especially within the European Union (EU), acceptance has grown of debtors’ efforts to qualify as eligible to access the forum best able to resolve their financial difficulties, even where the efforts involve substantial “fact shifting,” so long as these efforts occurred transparently and were neither abusive nor in bad faith. Growing acceptance of such efforts is partly the result of jurisprudence of the European Union Court of Justice (CJEU) identifying a “freedom of corporate migration” as included among the EU’s foundational principles. This forum shopping debate within Europe has extended beyond proceedings subject to the EU Insolvency Regulation to address “pre-insolvency” initiatives, such as schemes of arrangement under English law, a statutory measure through which dissenting creditors may be bound to a company’s financial restructuring by court order. Although schemes of arrangement sit outside the EU Insolvency Reg, and only uneasily inside the scope of the EU’s Brussels and Rome Regulations, which together govern recognition and enforcement of judgments and choice of law clauses, corporate migrations to enable financial restructuring through schemes of arrangement have been viewed positively by British courts and generally have not been upset by continental European courts.
Debate on whether and when forum shopping to facilitate corporate rescue and restructuring should be viewed as “good” has shifted, recently, from courts and commentators to a broader, more political setting. The diplomats responsible for re-negotiating and revising the EU Insolvency Reg, which entered into force late June 2017, in the main accepted the contention that recognition of foreign schemes of arrangement ought to continue, but this resolution has in turn been upended by the recent referendum in the United Kingdom to exit the EU (Brexit). This article aims to do two things: First, it considers the case for and against recognition of foreign schemes of arrangement, in the end proposing a broader test for assessing forum shopping, one that considers the larger forum shopping system involving, not just litigants and courts, but also legislators and, in international settings, diplomats and global (or at least transnational) lawmakers. Second, the article argues that a systems approach provides a superior basis for examining the merits of forum shopping given recent context. What courts and litigants view as “good” forum shopping may well consider a narrower set of issues than those policymakers should view as relevant. The article claims that the Revised EU Insolvency Regulation and the eventual implications of Brexit provide one case study for application of a broad forum shopping system analysis; more extensive analysis of this approach is left for later research.
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