Cross-border insolvency law scholars have devoted much attention to theoretical questions of international system design. There is a general consensus in the literature that the ideal system would be a universalist system in which cross-border insolvencies would be administered in a single forum under a single governing law, but scholars have paid less systematic attention to how a universalist system can be implemented in the real world by institutional actors, such as legislatures and judges. This article seeks to redress the balance by discussing the reception of the UNCITRAL Model Law on Cross-Border Insolvency in the United States and the United Kingdom and exploring the role that judges play in harmonizing cross-border insolvency law.
As the Model Law is choice-of-law neutral, domestic enactments typically contain no express choice-of-law rules. Universalists urge judges to take their cue from modified universalism and interpret Model Law enactments in a manner that approximates to universalism's ideal "one court, one law" approach. But comparative analysis of Anglo-American judicial practice reveals that the contours of modified universalism are contested. "Modified universalism," as it is understood in the United States, implies that judges should presumptively defer to the law of the foreign insolvency proceeding (lex concursus). American universalists tend, therefore, to favor a strong, centralizing version of modified universalism. In contrast, British modified universalism has a forum law (lex fori) choice-of-law orientation. British modified universalism supports effective coordination of insolvency proceedings with one court having a primary coordinating role, but it lacks any commitment to a centralizing lex concursus rule in the absence of statutory mandate.
Framed by reference to this account of the Model Law's Anglo-American reception, this article argues that modified universalism offers no convincing theory of how a universalist system is to be institutionalized in practice in the absence of more and harder law, the province of legislatures. Competing versions of modified universalism cannot support an interpretive methodology capable of yielding global judge-made rules of private international law that would address the Model Law's choice-of-law indeterminacy.
Cross-border insolvencies generate obvious coordination and governance difficulties. The basic problem--the presence of assets, claims, and creditors in more than one jurisdiction--is magnified by the prevalence of complex, multinational enterprises operating through multinational corporate group structures constituted according to the laws of numerous jurisdictions, onshore and offshore. Private international law unification instruments (1) and other soft harmonization initiatives designed to nurture convergence among national insolvency laws (2) and cooperation in cross-border insolvency cases have emerged to address these difficulties. (3) A leading private international law instrument--the UNCITRAL Model Law on Cross-Border Insolvency ("the Model Law" (4))--marked its twentieth anniversary in 2017. Supporters hail the Model Law as an embodiment of "modified universalism" that provides a foretaste of a fully universalist system for fair and efficient administration of cross-border insolvencies in a single forum under a single law. (5) On the theoretical plane, universalist scholars have claimed victory. (6) But despite universalisrns theoretically triumphant template for a market symmetric, welfare maximizing international insolvency system, universalists have no convincing account of how their system can be institutionalized in practice without a comprehensive insolvency convention or global courts and centralized enforcement mechanisms.
Universalism's ambitions are grand. Yet its methods are pragmatic and realistic. (7) Universalists recognize that global conventions are hard to accomplish (8) and that a world government will not be established any time soon. They accept that the vision of "one forum, one law" can only be realized in baby steps. Methodologically, they favor slow-burning techniques--at the international level, legislative incrementalism designed to create conditions for more intensive interstate cooperation over time; (9) at the domestic level, purpose-oriented judicial interpretive practice, embracing comity and fidelity to international system building, are favored. (10) They deploy modified universalism both as a theory to undergird a transitional system sensitive to the interests of sovereign states and local stakeholders, pending the establishment of a fully universalist system, and as a normatively laden method or principle that, applied correctly, will help bring about a fully universalist system. Modified universalism as method has an ideological and teleological quality--domestic courts should "cooperate to achieve a result as close to the ideal as circumstances and existing domestic law permit." (11) This approximation of the "real" to the "ideal", or the present state to the desirable end state, resembles how classical economists have historically justified government intervention in real markets using the concept of a perfect market, operating under conditions of perfect competition, as a guide to policy and practice. (12)
In their implicit commitment to global free markets, universalists naturally assume that the job of international commercial law is to create frictionless and transcendent international legal frameworks that facilitate efficient allocation of global capital by increasing predictability and reducing transaction costs ex ante (when credit is extended) and ex post (when debtors default). But as deglobalization takes hold in the post-2008 world, notably in the West, global markets and free trade are increasingly under attack. (13) And, thus, the prospects for universalistas constitutive agenda--the establishment of worldwide insolvency infrastructure in support of global trading and credit markets--now seem highly contingent. Indeed, in the current global economic and geopolitical context, the mismatch between the scale of universalism's theoretical ambitions and the gradualism of its practical working methods is striking.
A journey of a thousand miles begins with the first step (14) and the progress made to date in international insolvency cooperation cannot be underestimated. Meaningful and effective coordination involving courts and practitioners has led to successful multijurisdictional resolutions in large, complex cross-border insolvency cases such as Maxwell, (15) Lehman, (16) and Nortel. (17) International cooperation has proved possible notwithstanding feasibility constraints. But universalists have not convincingly demonstrated how progress will be made towards universalism other than in fits and starts. Go too fast and countries may push back. Go too incrementally and there is a risk of stasis--a system in a state of semi-permanent transition at best--akin to getting stuck part way up a hill. (18)
My starting assumption is that universalists are right that a universalist system would be the best (or least worst) system we could devise to address the social cost of problems that arise from cross-border insolvencies. My differences with leading universalists are methodological. Under the present state of affairs, modified universalism can only beget universalism through the agency of various state and non-state actors: legislatures (international and domestic), courts, practitioners, and professional bodies (through the influence they exert as non-state actors in legislative processes and as providers of continuing professional development and know-how to their members). The roles these actors play, the incentives they have, and the constraints they face, in actualizing universalism in practice in the real world, demand attention. To date, there has been little systematic discussion of institutional actors in the legal literature on international insolvency. (19) The "universalism versus territorialem" debate in the academic literature operates at a high, theoretical level of generality and focuses on "blue sky" questions about what is the normatively appropriate model or system for governing cross-border insolvencies. (20) The practitioner literature, often excellent at capturing case law developments and practice innovations, (21) serves the "street" or microlevel needs of its primary audience. What we lack is an abundance of mesolevel scholarship analyzing how the international insolvency system functions, with regard to the main actors in the system, and their interactions, processes, instrumentalities, methods, and frames of reference. We cannot hope to understand fully the dynamics of the system and the possible trajectories of its evolution without more comparative accounts of how the work of coordinating cross-border insolvency cases actually gets done iteratively on the ground over time.
To mark the twentieth anniversary of the Model Law, this article reviews experiences in two leading common law countries that were early adopters of the Model Law--the United States and the United Kingdom (22) to explore the Model Law's self-fulfilling limits as a coordinating instrument and the limits of modified universalism as a method for propelling the universalist agenda forward. I focus in particular on the frontline role domestic courts play in cross-border insolvency governance, in implementing international insolvency law, and in linking the international and domestic legal orders. While the Model Law has successfully promoted domestic recognition of foreign insolvency proceedings, results have been predictably less consistent when it acts as a guiding framework and leaves local legislatures wide discretion on the detail of implementation. This is especially so when foreign insolvency trustees--"foreign representatives" in Model Law...