Greed and Pride in International Bankruptcy: The Problems and Proposed Solutions to 'Local Interests'

From just-enacted (2005) chapter 15 of the U.S. Bankruptcy Code to the U.K. Enterprise Act of 2002, legislative reforms to international bankruptcy are on the rise. One of the thorniest issues facing scholars and policymakers alike in these efforts is what to do with the nettlesome problem of local interests. What exactly are these local interests, and what is it that we are we trying to protect? Literature to date has been elusive in pinning this down and has offered, for the most part, only undifferentiated anxiety that an international bankruptcy regime may impinge undesirably upon local concerns. This article seeks to remedy that deficit by constructing a unified account of what we mean when we talk about local interests in multinational bankruptcies. It argues that the locus of concern is both at the individual creditor level and at the sovereign government level - areas of concern that correspond to the vices of greed and pride. The article further argues that the local interest concern has both content-dependent and content-neutral components regarding the substantive content of domestic bankruptcy law. It offers a theory of how these various actor- and law-dependent factors interact in the multi-state, multi-party bankruptcies that are leading today's business headlines. Armed with this richer theory of local bankruptcy interests, the article provides policy recommendations for how best to deal with them. It initially offers a first-best, theoretical approach that employs the concept of what are called bankruptcy meta-norms to deal with the seemingly different norms in substantive bankruptcy laws across jurisdictions. It then outlines a more pragmatically animated interim measure of a local law carve-out, maintaining that such a concession to territorialism represents the most viable chance for a universalist insolvency regime to move forward.