Vol 4 (2007) - Issue 1

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A Proper Approach to Cooperation in Cross-border Insolvency

Introduction
The increased rate of economic integration throughout
the world has raised the question of how to find a proper approach to cooperation in cross-border insolvency.
The growth of the international economy raises the problem of the diversity in the insolvency laws of different states. This article attempts to determine the reasons for problems in cross-border insolvency, by outlining the different approaches that exist as well as the ways used to attempt to resolve problems in this field. Furthermore, given the potential importance of cooperation in cross-border insolvencies, it is useful to examine the background to the need to address this issue.
The improvements in the international economy are likely to have an important impact on this debate as changing international relations result in more problems and complexity between countries, such as, for example, in cross-border insolvency instances. Moreover, the situation of the potential application of the laws of more than one jurisdiction also results in a variety of difficulties in the international insolvency field.1
Therefore, there have been attempts to resolve the problems in cross-border insolvency in different ways, such as through projects and treaties related to jurisdiction over debtors and access for foreign interest. Additionally, a number of practitioner associations have focused on and studied cross-border insolvency, for instance, the American Law Institute (‘ALI’) and the International Bar Association (‘IBA’), and have produced model laws, rules and guidelines for use in this area through analysing the practical problems in this field.

The territoriality/universalist approaches

In order to determine the reasons for the complexity and problems in the matter of cross-border insolvency, it might be helpful to clarify the different approaches of countries to insolvency proceedings. It should be emphasised that different jurisdictions have adopted different approaches to their insolvency proceedings. Historically, the ‘territoriality’ and ‘universalist’ approaches are the main labels used to describe the approaches employed in dealing with cross-border insolvency.