Comity and Choice of Law in Global Insolvencies

Texas International Law Journal, 54, 2019

University of Texas Public Law and Legal Theory Research Paper Series Number 700

15 Pages Posted: 10 Jul 2019

See all articles by Jay Lawrence Westbrook

Jay Lawrence Westbrook

University of Texas at Austin School of Law

Date Written: July 7, 2019

Abstract

Two recent decisions, one on each side of the Atlantic, threaten fragmentation and incoherence in the management of the financial distress of multinational enterprises. At the heart of both decisions lie two confusions: confusion between choice of bankruptcy law and choice of contract law; and confusion of choice of law with comity (choosing to defer to a foreign forum). This article works through an analysis of each of the two cases, combining fundamental bankruptcy concepts with recent scholarship. Choice of bankruptcy law controls choice of contract law because bankruptcy is inherently a unitary mechanism and because it is a central function of bankruptcy law to modify contracts. The choice of bankruptcy law is governed by systemic rules arising from the nature of bankruptcy. By contrast, comity in deferring to foreign proceedings and rulings is necessarily discretionary and case-specific, although in bankruptcy cases we have an overall system of cooperation that guides the results. Modified universalism is an extended evolution of comity specific to bankruptcy.

One of the cases discussed permits the identification of the next frontier in multinational insolvency: the choice of bankruptcy law to be applied where the two parties to a single contract are International Double Debtors, each in a “main” bankruptcy proceeding in different countries under different bankruptcy laws. This article provides an approach to identifying key issues in such cases.

In Manhattan and London, two decisions have recently taken us backwards in the management of global insolvency cases. To analyze them, I propose here a new distinction between comity and choice of law doctrines, following the recent work of Judge Alan Gropper.

Keywords: Comity, Choice of Law, Model law cross-border, bankruptcy, insolvency, bankruptcy contracts

Suggested Citation

Westbrook, Jay L., Comity and Choice of Law in Global Insolvencies (July 7, 2019). Texas International Law Journal, 54, 2019, University of Texas Public Law and Legal Theory Research Paper Series Number 700, Available at SSRN: https://ssrn.com/abstract=3417407

Jay L. Westbrook (Contact Author)

University of Texas at Austin School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States
(512) 232-1303 (Phone)

HOME PAGE: http://www.law.utexas.edu/webra/faculty/jwestbrook

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