Cross-border insolvencies, also known as transnational or international insolvencies, involve a foreign element. The debtor may be located in another country, some or all of the assets may be located in another country, or some or all of the creditors may be foreigners. This book has been structured around the various insolvency regimes that have been legislatively created. This structure, together with the fact that the BIA contains a separate Part on cross-border insolvencies, may lead the reader to think that this chapter is about an international insolvency regime that governs such insolvencies. Such is not the case. Although many believe that the best solution to the problem of cross-border insolvencies is the creation of an international convention that would create a single, universal body of substantive insolvency law principles for trans-national businesses, this is currently a hope rather than a reality.1The 2007 amendments to Canadian insolvency statutes have implemented many features of the UNCITRAL 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 insolvency regime for international insolvencies. It does not purport to create substantive insolvency law at all. Instead, it provides a mechanism to facilitate cooperation and coordination of international insolvencies by providing for the recogni-
tion of foreign insolvency proceedings. Although these provisions can by no stretch of the imagination be regarded as a transnational insolvency regime, it is possible that they may be the first stage in a process that will eventually realize the universalist ideal. Only time will tell.
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 principle of universalism over its rival, the principle of territorialism. Universalism contemplates an insolvency proceeding that deals with all of the debtor’s assets regardless of where in the world they may be located. Territorialism envisages insolvency proceedings that are limited to the assets located in a particular country. This dichotomy gives rise to two further 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 necessity also adopt a pluralist approach. Because the proceedings are territorially limited, an international insolvency must involve concurrent proceedings in each jurisdiction where assets are located.2For the territorialist, the solution to cross-border insolvencies is to foster greater cooperation and coordination among the courts and administrators in the parallel insolvency proceedings. This has been referred to as cooperative territoriality.
In its pure form, a universalist approach would involve a single court administering the debtor’s assets on a worldwide basis. This would most likely be achieved by the adoption of an international insolvency law regime. As this requires the negotiation of an international multilateral convention, it is not regarded as a realistic possibility in the short term. The interim solution for the universalist is a system of modified universalism in which ancillary or parallel proceedings in different jurisdictions are accepted as necessary, but in which the insolvency courts and administrators in the various jurisdictions cooperate
with the mutual goal of achieving a worldwide collection and distribution of assets.
Although these approaches, modified versions of the pure forms of universalism and territorialism, clearly converge towards one another, they do not meet and therefore cannot be regarded as merely two different ways of expressing the desirability of...