Modified universality : the best model in regulating cross-border insolvency
University of British Columbia
Master of Laws - LLM
Insolvency is an economic fact of life. Some businesses thrive and some businesses fail. The bankruptcies of corporate debtors with assets and liabilities worldwide pose special challenges to governments and insolvency practitioners. In any given case, two questions must be answered. First, where shall the proceeding begin? Second, what law shall be applicable to the proceeding? In addressing these two issues, four approaches have been proposed by the research community: universality, modified universality, territoriality and cooperative territoriality. For the past few decades, universality is often perceived as the best theory of all in regulating cross-border insolvency. It fits in perfectly with the ex ante and ex post goals possessed by an ideal insolvency system. However, in recent years, the utility inherent to the theory is being questioned. It is doubtful that states will be willing to sacrifice their sovereignty for the general interests of creditors and debtors. This doubt is substantiated by the invariable failures of international bankruptcy instruments that embraced universality as the theoretical justification. In contrast, modified universality, the watered-down version of universality, has quietly made its way onto the international scene. Its nature and benefits have received high regard among nations. A general consensus in the international community that modified universality provides the best model for regulating cross-border bankruptcy has been cultivated. The purpose of this paper is to confirm this consensus through a combination of theoretical and practical analysis. The theory will also be feed into the discussion on cross-border bankruptcy between Canada and the United States in predicting the future mode of cooperation between the two countries.
Law, Peter A. Allard School of