Three Principles of Transnational Corporate Bankruptcy Law: A Review
After having discussed the weaknesses of the universalist and territorialist approaches to transnational corporate bankruptcy law, this article argues that a free-choice régime could combine the advantage of ex post value maximisation of the firm's assets with a comparatively higher degree of ex ante predictability to investors. In addition, it could lead to a better alignment between corporate ownership structures and corporate bankruptcy régimes. Moreover, a free-choice régime could potentially open the door for regulatory competition in corporate bankruptcy law. However, EC Regulation 1346/00 on insolvency proceedings implements a system of modified universalism, which allows for strategic ex post forum shopping by debtors while keeping the national legislatures’ monopoly in the field of corporate bankruptcy in place. It is suggested that even though it cannot be predicted that a free-choice régime will pressure state lawmakers to improve their corporate bankruptcy laws, a system of free choice could redirect the law-making agenda in the EU by focusing the coordination efforts of lawmakers on those issues—such as security interests in property and statutory priority rights—which could negatively affect the proper functioning of the Internal Market, while enabling Member States to customise corporate bankruptcy laws to local preferences and needs.
Document Type: Research Article
Publication date: 2005-03-01