Academic journal article Houston Journal of International Law

The Legal, Framework for Cross-Border Insolvency in Brazil

Academic journal article Houston Journal of International Law

The Legal, Framework for Cross-Border Insolvency in Brazil

Article excerpt

I.    INTRODUCTION
II.   THE GROWING IMPORTANCE OF CROSS-BORDER
      PROVISIONS
      A. Universalism and territoriality
      B. Theoretical models and the practice
III.  BRAZILIAN INSOLVENCY SYSTEM
      A. Consumer insolvency
      B. Corporate insolvency
IV.   THE RULES ON CROSS-BORDER INSOLVENCY IN BRAZIL.
      A. The early history of Brazilian cross-border
         insolvency rules
      B. The Havana Convention on Private International
         Law
      C. The 1939 Code of Civil Procedure
      D. The 1942 Act of Introduction to the Civil Code
      E. The 1945 Bankruptcy Act
      F. The 1973 Code of Civil Procedure
      G. The 2005 Bankruptcy Act
V.    BRAZIL, A TERRITORIAL COUNTRY
      A. Cooperation on a case-to-case basis
      B. Two examples of cooperation
VI.   THE NEED TO MOVE TOWARDS UNIVERSALISM

I. INTRODUCTION

Brazil is the fifth largest country in the world, in both population and territory. (1) As such, it should be no surprise that many of the world's largest multinational companies keep subsidiaries or assets in the country. (2) Brazil is also home to its own large, multi-billion, transnational companies. (3) Given the existence of several multinational companies operating in the country, legal problems of a cross-border nature are bound to exist. However, the country's legal institutions often fail to provide solutions to such issues. (4) The legal framework for cross-border insolvency is one of the most prominent examples of this malfunction.

The global initiative, promoted by institutions such as the World Bank, the International Monetary Fund (IMF), and the United Nations Commission on International Trade Law (UNCITRAL), to reform the insolvency laws was, in the beginning of the decade, one of the main influences on the modernization of Brazilian bankruptcy legislation. (5) This initiative praised the adoption of international bankruptcy legislation, and specifically the UNCITRAL Model Law on Cross-Border Insolvency. (6) However, this particular matter did not land on fertile soil in Brazil. As a result, the law reform failed to incorporate not only the Model Law, but it also completely overlooked any and all transnational aspects of bankruptcy.

Despite being the focus of worldwide attention, cross-border insolvency is still a neglected issue among Brazilian scholars and legal practitioners. (7) This inattention did not arise in recent times--the study of cross-border insolvencies was not a particular focus of interest by Brazilian scholars in the entire past century. (8) Additionally, the enactment of a new corporate bankruptcy act in 2005 was unable to provoke wider discussions on this matter. (9) Lawmakers and most legal scholars have, therefore, failed to notice that cross-border insolvency is a question of paramount significance for the Brazilian economy.

As a result of being neglected for decades, the Brazilian framework on cross-border insolvency is a very confusing one. In such circumstances, the transnational impact of an insolvency proceeding is affected by a tangled net of outdated and partly revoked statutes. In addition to this disorder, there are no consistent judicial precedents that may be used as trustworthy guidelines for a cross-border insolvency case. (10) As such, international aspects of insolvencies are dealt with on a case-by-case basis, thereby challenging the creativity of lawyers, judges and practitioners.

The purpose of this Article is to explore the Brazilian international insolvency framework and to identify its major shortcomings where reform may be welcome. After a very brief overview of cross-border insolvency theory and its international practice, I will provide a glance at Brazilian bankruptcy rules and then proceed to the examination of its international aspects. I will analyze the existing legislation in the country, and summarize two cases with relevant cross-border aspects, so that the general structure of Brazilian international insolvency law can be illustrated. …

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