A Global Solution to Multinational Default

Abstract

Universalism-administration of multinational insolvencies by a leading court applying a single bankruptcy law-is the correct long-term solution to the problem presented by the general default of a multinational company. Bankruptcy is one of those laws that cannot perform its function unless it is symmetrical to the market in which it operates. Virtually all theorists share this view and it is reflected in the nearly unanimous practice of nations, including the United States. The only substantive objection is that universalism would too greatly submerge national policies, but experience in the United States and elsewhere demonstrates that a national, market-symmetrical law can largely accommodate local policies. In the same way, an international system could permit considerable play to varying national policies and could enforce them more effectively against multinationals. Although it is argued that universalism is unlikely to be achieved in the foreseeable future, globalization is producing enormous pressures for legal convergence and those pressures are most likely to prevail as to laws that require market-symmetry to be successful. Many of the obstacles to universalism are also obstacles to coordination and harmonization in anti-trust, securities laws, and other business laws. Solutions in each area will feed solutions in the others, if globalization continues. Contractualism as an alternative to universalism is not workable domestically or internationally unless based on a system of dominant security interests. The theoretical benefits of such a system remain highly controversial and its prospects for international adoption are bleak. "Modified universalism" as proposed in the American Law Institute Transnational Insolvency Project is the best interim solution pending movement to true universalism, because its pragmatic flexibility provides the best fit with the current patchwork of laws in the global market and because it will foster the smoothest and fastest transition to true universalism.