3 . 3 . T H E O P E N - E N D E D N A T U R E O F C O - O P E R A T I O N AND C O N F L I C T S OF LAW

As has been stated, the paradigm's regulatory centre of gravity is the accommodation

of co-operation rather than the prescription of outcome. This is important as it highlights

one ot the more characteristic features of the paradigm: its open-ended, procedural

nature. It requires co-operation and co-ordination from the various actors, but

little is said about what (normative) principles are to inform the process. Normative

choices can, however, not be avoided in the course of co-operation. This becomes

particularly clear when viewing co-operation from a more traditional conflicts of law

perspective.

The relief or assistance granted to a foreign proceeding as part of co-operation de facto

determines the extra-territorial efiect of such a proceeding. Therefore, the granting

of relief essentially involves a conflicts process and decision. In ordering a stay of

proceedings, for instance, a court will have to decide which law governs the contours

and scope of that stay; in deciding whether or not to order assets to be turned - over,

a court implicitly decides on deference to the insolvency law of the foreign proceeding

for the purpose of deployment and/or distribution. In this regard the paradigm

constitutes a mirror-image of I.owenfeld's 'struggle over jurisdiction'. In his view

choice of law is the instrument whereby potential struggles can be avoided through

mediation between (the interests of) the various jurisdictions involved." In contrast,

in the paradigm ot co-operation, choice of law is to be the outcome of co-operation

between jurisdictions, rather than the means to prevent a struggle.

The paradigm's open-ended nature is both its weakness and its strength. The weakness

lies primarily in the fact that without sufficiently clear conflicts rules, a cross-border

insolvency regime will not enable parties to predict with any degree of certainty how

the co-operation is to proceed, and which choices of law affecting their entitlements

will be made in the process. > This uncertainty as to the effects of a possible insolvency

translates into higher risks and costs when entering into a particular transaction with

a debtor. Only with clear, predictable rules for choice of insolvency law can full

'transactional gain' be attained.-'11 While this is true, it should also be noted that the

S e c supni c h a p t e r 2, para. 3. paradigm does not produce any more uncertainty than currently exists. '' Moreover,

although parties will not be able to predict the effects of a possible insolvency, by

ensuring fair treatment, making participation in foreign proceedings worthwhile and

preventing unnecessary destruction of value, the paradigm already demonstrates

significant transactional gain (or reduction of insolvency risk) over the legal environment

in which cross-border insolvencies traditionally take place.

The paradigm's open-ended nature is also its strength. The need to agree on choice

of insolvency law rules for cross-border insolvency treaties has been one of the main

reasons for the failure of the conventional approach. In the absence of treaties, most

states have felt compelled to adopt approaches that tend strongly towards territoriality.

The paradigm breaks with this 'all or nothing' attitude. It allows states to retain their

territoriality in each particular case to the degree felt necessary for the protection ot

national interests, while allowing for co-operation and its benefits in other respects.: '"