COMI, Corporate Groups and Forum Shopping: A Comparison of E.U. and U.S. Cross-Border Insolvency Law

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“[Globalization is] one of the most powerful and pervasive influences on nations, businesses, workplaces, communities, and lives at the end of the twentieth century.” (Rosabeth Moss Kanter, World Class: Thriving Locally in the Global Economy, New York: Touchstone, 1997)

When an insolvency of a multinational arises two legal issues come into play: 1) which jurisdiction will handle the proceeding, and 2) how can debtor assets, outside the jurisdiction of the insolvency proceeding, be brought into the estate for central management.1 As to the latter question, complications arise where a corporate group2 consists of a number of parent and subsidiaries across the globe, each of which may have operated relatively independent – or in contrast be closely related and dependent entities. The United States (“U.S.”) and the European Union (“E.U.”) are two major regulators with rules to facilitate coordination and cooperation of cross-border insolvency proceedings. Both, however, have failed to respond decisively to the dilemma posed by large corporate groups’ insolvencies. This increases the risk that abusive forum shopping will occur among corporate groups with an array of forum choices on the eve of insolvency. The discussion that follows considers three issues: 1) determining the centre of a debtor’s main interest for purposes of insolvency proceedings or ancillary proceedings, 2) managing corporate group insolvencies, and 3) recognizing that a choice of forum for a multinational is inherent for corporate groups.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Vanessa Cross | Attorney Advertising

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