Bankruptcy Shopping: Domestic Venue Races and Global Forum Wars

Emory Bankruptcy Developments Journal (Forthcoming)

European Corporate Governance Institute - Law Working Paper No. 577/2021

43 Pages Posted: 23 Feb 2021 Last revised: 4 May 2021

See all articles by Anthony J. Casey

Anthony J. Casey

University of Chicago Law School; ECGI

Joshua Macey

University of Chicago Law School

Date Written: February 21, 2021

Abstract

This Article proposes reforms to bankruptcy law’s venue rules. These reforms would expand venue choice, reduce opportunistic venue shopping, and account for the rise of global forum shopping. To date, the leading proposals to reform venue selection rules for bankruptcy cases have ignored simpler alternatives that can reduce opportunistic misbehavior while preserving beneficial choice. Moreover, those proposals have focused exclusively on restricting a debtor’s choice among venues within the United States while ignoring the increasing availability and convenience of foreign courts as forums for distressed corporate debtors seeking to initiate insolvency proceedings. In this way, the proposals on the table run the risk of failing at their primary goal and at the same time exacerbating international forum shopping and escalating a global forum war.

To remedy this, we suggest alternative reforms that account for the availability of foreign forums, reduce opportunities for harmful venue shopping, and preserve the benefits of choice. Rather than restrict a debtor’s ability to select a domestic venue, reforms should (1) allow firms to make an ex ante commitment to a procedure for choosing a bankruptcy district, and (2) resolve inconsistencies in substantive bankruptcy law across venues and forums. These reforms would retain beneficial choice while reducing opportunistic shopping of both domestic venues and foreign forums. The precommitment mechanism we propose is preferable to existing proposals even for parties that cannot shop globally, but the availability of foreign forums makes the case even stronger.

Keywords: Insolvency Proceedings, Bankruptcy Proceedings, Cross-Border Insolvencies, Chapter 11, Chapter 15; Scheme of Arrangement

JEL Classification: G33, K22, K41

Suggested Citation

Casey, Anthony Joseph and Macey, Joshua, Bankruptcy Shopping: Domestic Venue Races and Global Forum Wars (February 21, 2021). Emory Bankruptcy Developments Journal (Forthcoming), European Corporate Governance Institute - Law Working Paper No. 577/2021, Available at SSRN: https://ssrn.com/abstract=3789994

Anthony Joseph Casey

University of Chicago Law School ( email )

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Chicago, IL 60637
United States
773.702.9578 (Phone)

HOME PAGE: http://www.law.uchicago.edu/faculty/casey

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Belgium

Joshua Macey (Contact Author)

University of Chicago Law School ( email )

1111 E 60th St
Chicago, IL 60637
United States

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