Cross-Border Insolvencies

AuthorRoderick J. Wood
Cross-border insolvencies, also known as transnational or internation-
al insolvencies, involve a foreign element. The debtor may be located
in another country, some or all of the assets may b e located in another
country, or some or all of the creditors may be foreigners. This book
has been structured around the various insolvency regi mes that have
been legislatively created. Thi s structure, together with the fact that the
BIA contain s a separate Part on cross-border insolvencies, may lead the
reader to think that this chapter is about an intern ational insolvency
regime that governs such in solvencies. Such is not the case. Although
many believe that the be st solution to the problem of cross-border insol-
vencies is the creation of an international convention that would create
a single, universal body of substa ntive insolvency law principles for
transnational businesses, this is currently a hope rather than a reality.1
The 2009 amendments to Canadian insolvency statutes have imple-
mented many features of the UNCITR AL Model Law on Cross-Border
Insolvency. Several other countries, including the United States, the
United Kingdom, and New Zealand, have done so as well. The Model
Law does not create a separate in solvency regime for international insol-
vencies. It does not purport to create substantive insolvency law at all.
Instead, it provides a mechanism to facilitate cooperation and coordin-
ation of international insolvencies by providing for the recognition of
1 See JL Westbrook, “A Global Solution to Multin ational Default” (2000) 98 Michi-
gan Law Revie w 2276.
Cross-Border Insolvencies 599
foreign insolvency proceedings. Although these provisions can by no
stretch of the imaginat ion be regarded as a transnat ional insolvency
regime, it is possible that they may be the f‌irst stage in a process t hat
will eventually re alize the universalist ideal. Only time will tell.
1) The Rival Principles of Universalism and
There are differing views on the most appropriate way to deal with
cross-border insolvencies. At its most basic level, the debate is about
the relative merits of the pri nciple of universalism over its rival, the
principle of territorialism. Universalism contemplates an in solvency
proceeding that deal s with all of the debtor’s assets regardless of where
in the world they may be located. Territoriali sm envisages insolvency
proceedings that are li mited to the assets located in a particular coun-
try. This dichotomy gives rise to two f urther opposing principles: unity
and pluralism. The principle of unity gives carriage of the proceedings
to a single court in the location of the debtor’s home jurisdiction. The
principle of pluralism accepts that there will be concurrent insolvency
proceedings in different jurisdictions.
A territorialist approach to international insolvencies must by ne-
cessity also adopt a plurali st approach. Because the proceedings are
territorially limited, an international insolvency must involve concur-
rent proceedings in each juri sdiction where assets are located.2 For the
territorialist, the solution to cross-border insolvencies is to foster greater
cooperation and coordination among the courts and administrators
in the parallel in solvency proceedings. This has been refer red to as
cooperat ive territ orialit y.
In its pure form, a universali st approach would involve a single
court administer ing the debtor’s assets on a worldwide basis. This
would most likely be achieved by the adoption of an international i n-
solvency law regime. As thi s requires the negotiation of an intern ation-
al multilateral convention, it is not regarded as a real istic possibility
in the short term. The interim solution for the universal ist is a system
of modif‌ied universali sm in which ancillary or parallel proceedings in
different jurisdictions are accepted as necessar y, but in which the insol-
vency courts and admin istrators in the various jur isdictions cooperate
2 See Orient Lea sing Co v “Kosei Maru” (1978), 94 DLR (3d) 658 (FCTD).

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