3 . 2 . LAW O F D I S T R I B U T I ON

Also with regard to distribution, universality would appear to be appropriate and

necessary for the purpose of the freedoms. As to the question of e x t r a t e r r i t o r i a l i t y -

whether distribution should also embrace (the proceeds of) foreign assets or unity of

forum - it is generally accepted that as long as not all assets of the debtor's estate are

included in the process, insolvency law will generally fail to implement its distributional

scheme envisaged. In the absence of extraterritoriality, none of its distributional

rules - be it the paritas ereditorum or a priority - will be maintained in respect of

distribution out of assets beyond the forum's territorial reach. Furthermore, to the

extent that distributional rules aim to protect certain creditor groups, that protection

is most effective when the rule can be enforced against the entire estate rather than

merely a part of it.

This indicates that extraterritoriality must also be considered necessary, in the sense

that there is no equally suitable measure available which is less burdensome of trade.

Under national cross-border insolvency law most Member States do not accept the

extraterritorial effect of insolvency proceedings commenced in other Member States.

Universality is therefore rarely if ever achieved. Accordingly, the cross-border insolvency

laws of some Member States include compensatory measures for this lack of

international reach. For instance, national law may provide that creditors who have

obtained funds abroad are to surrender those to the estate and liquidator. '' Such

measures may compensate for the lack of control over foreign assets to some degree,

but in terms of suitability they are considerably less effective than having control o\ er

the entire estate in enforcing the distributional scheme.

Under universality, not only the entire debtor's estate is included in the distributional

process of the forum conatrsus, but distribution is also to take place according to the

distributional rules of the lex fori coucursits. This element of unity ot law has been one

of the principal reasons for the unacceptability of the principle of universality."" In

this respect, it should be recalled that the current question only regards whether a

Member State is allowed under Community law to claim universal effect of its lex fori

concursiis. Whether and, if so, to what extent there exists a need for sister Member

States to accord extraterritorial effect to a Member State's lex fori eoncursus and to

accept its distributional scheme is not at issue at this point. If the unitary application

of the lex fori eoiiettrsus is considered from the forum's point of view, it would appear

to be both appropriate and necessary. A choice of law for the distributional rules ot

another lexamcursus would require the forum to integrate foreign priorities in its own

distributional scheme.1 1 Alternatively, it could lead to the creation of sub-estates for

the purposes of distribution. As the example of the 1980 Draft EC Convention above

illustrates, this should not be considered equally suitable.