Cross-Border Insolvency Law and Multinational Enterprise Groups: Judicial Innovation as an International Solution

Abstract

Multinational businesses by definition operate in multiple jurisdictions and therefore are subject to regulation under a diverse array of national laws. When such businesses become insolvent, their insolvencies are subject to domestic legal rules and a multitude of national courts. Domestic insolvency laws were designed by nation states in accordance with their own unique political compromises and social expectations. These domestic laws reflect bargains between creditor and debtor protection on the one hand and the achievement of wider social goals on the other. In the international insolvency context, creditors compete in order to maximize their private benefit to the exclusion of others. The result has been summed up by one author as triggering "diverse and uncoordinated legal proceedings in various countries connected to the affairs of [a multinational] enterprise." Inevitably, as private actors compete to secure their interests via a multiplicity of proceedings, net costs rise. The potential scale of such expenses is illustrated by the recent insolvency of Nortel Networks where the legal costs alone exceeded a billion dollars, depriving creditors and other stakeholders of recovering this amount.