27 Pages Posted: 31 May 2005
Universalism is the term used to describe an international bankruptcy system in which a court of a multinational debtor's home country would apply home country law to control the company's bankruptcy worldwide. For decades, prominent bankruptcy scholars, judges, and practitioners have pressed for the adoption of treaties, conventions, and laws that would make the universalist concept the foundation of the international bankruptcy system. They won major victories with the promulgation of the UNCITRAL Model Law in 1997, the adoption of the European Insolvency Regulation in 2002 and the adoption of the UNCITRAL Model Law by the United States in April 2005.
This essay argues that universalism is an unworkable concept because multinational debtors do not have home countries in any meaningful sense. To the extent the universalist concept is adopted, it will lead to rampant forum shopping and competition among nations and courts for large multinational cases. That competition will shift power from the nations and courts to the multinationals' managers and professionals, render the international bankruptcy system unpredictable, and threaten the world's economic progress.
The essay will be published in the American Bankruptcy Law Journal, as part of a commentary on the author's recently published book, Courting Failure: How Competition for Big Cases Is Corrupting the Bankruptcy Courts. The essay will be published with, and comments on, proposals by United States Bankruptcy Judge Samuel L. Bufford intended to repair defects in the universalist concept identified in Courting Failure.
Keywords: bankruptcy, universalism, territoriality, international bankruptcy, UNCITRAL Model Law, insolvency, European Union, DaisyTek, Eurofoods, forum shopping, venue, court competition
JEL Classification: F02, G33, K22, K40, K29, K19
Suggested Citation: Suggested Citation