Coordination of Insolvency Cases for International Enterprise Groups: A Proposal

Abstract

The most important unsolved problem for international insolvency law is the treatment of enterprise groups or groups of companies. The principal structures for the coordination of trans-border insolvency cases are the UNCITRAL Model Law on Cross-Border Insolvency (1996) and the European Union Council Regulation 1346/2000, Insolvency Proceedings, both are drafted on the assumption that international enterprises doing business or otherwise involved in more than one country are single legal entities, whereas virtually every such enterprise is a group of legal entities. Both UNCITRAL and the European Union are presently working on solutions to this problem. This article proposes a solution to this problem through the creation of an international insolvency case for the enterprise group, which would serve as an umbrella for the insolvency cases of each constituent. The umbrella case would be commenced in the country where the group’s ECOMI (enterprise center of main interests) is located: the ECOMI concept is built on the COMI (center of main interests) concept in the existing international insolvency regimes. The country where the ECOMI case is commenced would then have jurisdiction for the main insolvency proceedings for each of the insolvency cases of the constituent entities – in contrast to the existing regime that requires that the main proceeding for each entity be commenced in the country where its own COMI is located. The article proposes solutions to numerous theoretical difficulties with this proposal, including the extent to which the law of the registered office, instead of the default rule of the law of the forum) should apply to the insolvency cases for each of the entities; forum shopping; the appointment of common professionals (office holders); the expanded use of secondary proceedings in the countries where the respective COMIs are located; providing explicitly for expanded coordination and communication obligations with respect to all of the members of the enterprise group with pending insolvency cases. The article contrasts this proposal with substantive consolidation, which is controversial and should be restricted to limited circumstances. Finally, the article explores the impact of this proposal on the long-standing controversy between the universalism and territorialism approaches to international insolvency law.