Professor G. Ray Warner’s paper “Comparative Collectivity – EU and US Approaches” has been accepted for publication in the International Insolvency Review, the leading academic journal in the field.  The paper explores one of the problem areas in applying cross-border insolvency recognition schemes to modern corporate restructuring practices. Traditionally insolvency proceedings were “collective” in that they involved all creditors. Existing cross-border recognition schemes incorporate that restriction. However, modern restructuring cases often restructure only one class of bond debt and are not fully collective. Professor Warner’s paper compares the EU and US response to this challenge. The abstract to the paper reads:

Insolvency law has undergone a fundamental shift in recent decades from a liquidation process designed to address global default to a restructuring process designed to rescue the business by addressing financial distress. This challenges traditional insolvency law because restructuring proceedings often lack many attributes considered essential to the characterization of a proceeding as an insolvency proceeding. One feature thought to distinguish insolvency proceedings from other types of proceedings is that insolvency proceedings are collective and involve all creditors. Thus, collectivity was included in the definition of the types of foreign proceedings eligible for recognition under the two main cross-border insolvency instruments— the European Insolvency Regulation and the UNCITRAL Model Law on Cross Border Insolvency. Financial distress, however, might be addressed by adjusting the rights of only one class of creditors, often by modifying only the debts owed to financial creditors. Such single class restructurings have become a common feature of modern insolvency practice, but they are not collective. The collectivity requirement, strictly applied, would exclude most modern restructurings and render both cross-border regimes ineffective. This paper compares the EU and the US efforts to modify the collectivity requirement to accommodate modern restructuring practice.