2.2.1. Territoriality and Collectivity

The fundamental effect of t he principle of territoriality is that it frustrates insolvency

law's ability to resolve the collective action dilemma presented by the situation ot

insolvency. The fact that assets and liabilities are spread over more than one jurisdiction

does not change the ' c o m m o n pool' nature of insolvency. However, whereas

domestically the law is capable of co-ordinating the process by enforcing collective

proceedings, internationally it can only do so if other jurisdictions are willing to recognise

that law and extend that collectivity. Under the principle of territoriality such

willingness is in principle lacking. Insolvency law's collective regime is therefore limited

to either a single jurisdiction or to those jurisdictions which have extended collectivity

- and remains incomplete. In effect, the principle of territoriality reintroduces 011 an

international level the same costs which insolvency law is designed to avoid or

minimise domestically: inefficiency and inequity of insolvency proceedings.

the Struggle over jurisdiction

Apart from the likelihood that the assets will yield less, plurality of insolvency also risks

an increase in administrative costs, further reducing the value that may be realised for

distribution. Each procedure will require its own liquidator, and each liquidator will

need to be paid. Each liquidator may have to investigate the debtor's affairs, notify the

same creditors and verify the same claims. Moreover, depending on the debt-asset ratio

in each jurisdiction it may well be necessary for creditors to submit their claim in

several proceedings. Pursuing a claim abroad under a different legal system in a foreign

court is a costly process. These costs are compounded by the fact that overlapping and

conflicting insolvency proceedings will provide their own potential source of litigation,

which could significantly prolong the procedure and further burden the estate's

resources."