Bankruptcy is a field of law that intersects diverse interests and disciplines. In the domestic context, bankruptcy law bridges litigation and corporate practices, state legislation and federal regulation, private distribution and public policy. The internationalization of a bankruptcy multiplies this complexity. National insolvency laws differ, as do the goals of bankruptcy legislation. International legal issues of comity and extraterritorialism must also be considered. The lacunas that bankruptcy law is called upon to fill gape wider in the international realm.
In spite of the difficulty of the task, the growing number of multinational insolvencies has increased the demand for a workable international insolvency system. Debate now revolves around the shape that such a system should take. The criteria that have been used to evaluate potential forms of such international insolvency cooperation have included pragmatism, efficiency, predictability, and comportment with bankruptcy policies.(1) This Article argues for the necessary consideration of another element: the structure of the international system itself.
Looking to international relations literature for insight into cross-border bankruptcy regulation, this Article argues that application of the international relations theories of Institutionalism and Liberalism helps both to explain the development of the current international insolvency regime and to evaluate which legal structures may be best suited for the evolution of further cooperation. These two strands of international relations theory are also employed to ground and develop existing international insolvency legal literature. Specifically, Institutionalism is shown to resonate well with the game-theory arguments for universalism made by Jay Westbrook.(2) Institutional explanations of cooperation in international insolvency are then sharpened by subjecting their hypotheses to questions suggested by Liberal international relations theory. Liberalism's emphasis on the relationship between state and society contributes to the international insolvency field by considering the bankruptcy priorities of domestic constituencies in explaining the development of rules regarding international legal cooperation. These different domestic bankruptcy priorities have created sometimes lackluster incentives for legislative reform to promote international insolvency cooperation.
Next, existing international insolvency legal cooperation is explained using the model of a transnational legal dialogue among society, executives, courts, and legislatures, developed by Anne-Marie Slaughter from premises based on international relations theory.(3) This Article argues that although a refined Institutionalist model of international insolvency might predict mixed incentives for bankruptcy cooperation, the mechanisms of a decentralized transnational legal process allow for the development of insolvency coordination through balancing and partial compromises of different state interests over time. This Article then begins to develop the implications of this model for substantive rules of choice of law and choice of forum in the international insolvency context.
Last, this Article asserts that the use of iteration, in combination with the insight of positing courts and legislatures as autonomous international actors, suggests that a decentralized network of courts may be better adapted than legislatures or executives for initiating cooperation in the international insolvency arena. This Article argues that courts possess the unique ability to achieve cooperation through their particular form of cross-national interaction and through their role within the transnational legal dialogue. This Article therefore makes the normative argument that a decentralized system of courts applying evolving legal standards on a case-by-case basis is the most workable system for developing legal international insolvency cooperation. …