CHAPTER FIVE COMMUNITY LAW AND UNIVERSALITY OF INSOLVENCY INTRODUCTION

The internal market demands the effective regulation of insolvency also and particularly

when a debtor's assets and liabilities are spread over more than one Member

State. After all, such a nuilti-jurisdictionar debtor is exactly what the Community is

aiming for with its freedoms and goal of optimal allocation of resources on a F.uropean

scale.1 The coniitas Europaca dictates a reformulation of cross-border insolvency law

according to these demands. Ultimately, and at the very least, this must lead to the

demise of the principle ol territoriality between the Member States. The principle of

territoriality is to be replaced by structures enabling Member States to act in conformity

with their collective responsibility to support the process of market-integration.

The negative and positive elements of the coniitas Europaca indicate how to proceed

with the current analysis. By virtue of the freedoms, Member States are not free to

apply their rules of (private international) law to cross-border relationships exercising

one of the freedoms. This allows for an analysis of the lawfulness ol the application

of insolvency law to cross-border transactions under the principle of universality. In

this regard it is of little consequence whether one regards the appl ication of the lex fori

concursus as a traditional choice of law rule or the application of insolvency law as

mandatory rules of law. In either case, the regulatory interest, intensity and jurisdiction

are subject to Community standards.

The question of whether Member States may in fact lawfully apply their insolvency

law universally, and if so, under what circumstances, says little in itself as to whether

other Member States are bound to accept that claim of universal effect. However,

Community law also instructs Member States in their response to foreign measures

of sister Member States which are necessary for the protection of mandatory requirements

of the public interest. It thus provides a framework for the examination

Though the question of (the lawfulness) of territoriality is in many ways the crucial

question, logically it is preceded by the examination of t he status of the principle of

universality under Community law. Only if and to the extent that, the insolvency laws

of Member States may in fact be applied universally in conformity with Community

law does the principle of territoriality become relevant. Accordingly, before dealing

with territoriality, the status of universality under Community law will first be addressed.