Cross Border Insolvency and the Challenges of the Global Corporation Evaluating Globalization and Stakeholder Predictability Through the Uncitral Model Law on Cross Border Insolvency and the European Union Insolvency Regulation

While the intent of dominant cross border insolvency regimes such as the UNCITRAL Model Law and the European Union Insolvency Regulation on Cross Border Insolvency is to “universalize” the resolution of corporations operating across various jurisdictions, the ideal outcome of maximizing firm value and ensuring predictability for corporate creditors and shareholders may not in all cases operate effectively because of (a) the high degree of discretion assumed by national insolvency authorities, particularly in determining the firm’s center of main interests, and (b) the inability of existing regimes to effectively resolve multinational corporate groups. It is in this way that existing cross border insolvency regimes can be viewed as a hindrance to globalization by both increasing transaction costs and encouraging an attitutde of territoriality among corporate players and regulators. However, because of the recognized need for cooperation and coordination implicit in any effective cross border resolution, these regimes have succeeded in raising awareness of the need for effective cross border resolution and have pushed regulators to recognize not only the cross border effects of corporate resolutions, but also of the need to address lingering questions persisting in existing frameworks. It is in this zone of cooperation and coordination that these regimes serve as a potent counter-force against this attitude of territoriality spawned by lapses in existing regulations, thereby demonstrating the potential for enhancing both orderly resolution and promoting globalization in the corporate sphere