Vol 6 (2009) - Issue 3

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McGrath v Riddell: Attrition in the Battle between Universalism and Territorialism and the Ongoing Harmonisation of International Insolvency Law

Introduction

The irrepressible force of globalisation has inevitably precipitated a worldwide integration of nations, markets, corporations and individuals driven by free-market capitalism. It has enabled corporations to expand unstoppably around and throughout the world, seemingly without obstacle. In such a borderless world, businesses operate across jurisdictions and scatter their assets and creditors geographically as if they were confetti dropped from the sun. But when multi-jurisdictional corporations collapse, they expose, time and again, the responsive inadequacy of existing legal systems and infrastructure.

Minds will differ as to whether this characterisation of the present state of cross-border insolvency law is fair or accurate. Indeed, it is arguable that the internationalisation of insolvency law is occurring at a level of sophistication and with an accelerated pace unmatched by few other truly global jurisprudential reform initiatives. What is less controversial, however, is the manifest reality that the doctrinal tension between ‘universality’ and ‘territoriality’ constitutes the paramount impediment to achieving substantive harmony in the law of cross-border insolvency.

Refreshingly, the House of Lords’ opinion in McGrath v Riddell heralds a renewed vigour for and commitment to the process of universalising and harmonising insolvency principles – at least in the United Kingdom. Rather than a shimmer, it is a shaft of light that provides a compelling argument to motivate the ongoing evolution of insolvency law into an enduring body of jurisprudence that has as its hallmark international co-operation, devoid of territorial bias or prejudice. This trend is consistent with the phenomenon that globalisation is producing enormous pressure for legal convergence and a demonstrable worldwide willingness to find international solutions to the problems of corporate collapse.

This paper analyses the prevailing doctrinal competition between the universalists, the territorialists and those in between. It analyses the decision of McGrath v Riddell and considers the implications arising from it and their impact upon prevailing global initiatives to unify the predominantly disparate patchwork that is the jurisprudential landscape of international insolvency law. Finally, it assesses the extent to which the parallel development of common law, coupled with statutory innovation and co-ordination between nation-States through internationally led law reform will achieve a substantive and systemic harmony in cross-border insolvency law.