Phoebe Hathorn | Comment
Cross-border insolvencies may not have been familiar to the maritime industry a decade ago, but unfortunately for many international shipping companies, they have become increasingly commonplace in recent years. As a result of the worldwide decline in demand for goods, rising oil prices, and an oversupply of oceangoing vessels, marine transportation companies, such as Overseas Shipholding Group and Korea Line Corporation, have been forced to seek rehabilitation and reorganization through bankruptcy or other insolvency proceedings. The international scope of these companies and worldwide dispersal of their assets might implicate multiple jurisdictions in these proceedings– jurisdictions that may not utilize the same, or even compatible, insolvency regimes.
Imagine a shipping company that owns one hundred vessels that are transporting goods in international commerce. If this company begins defaulting on its obligations, which raises the threat of insolvency, creditors may arrest its vessels at any port where they happen to be located long enough for a judge to issue an arrest order against the vessel. After further financial deterioration, this now-insolvent company initiates bankruptcy proceedings in the jurisdiction where it is incorporated. The question then becomes how to address assets that have been arrested by creditors in other jurisdictions. Should the jurisdiction where the arrest took place transfer its authority over the assets to the jurisdiction where the debtor initiated bankruptcy proceedings, or should it retain the assets to satisfy domestic creditors’ potential claims against the debtor?
This Comment focuses on these controversial issues, specifically in the maritime context. Topics addressed include universalism and territorialism, the two primary cross-border insolvency theories, as well as the United Nations’ attempt to foster uniformity via the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency. Also explored are the statutory schemes of two countries–one that has enacted the UNCITRAL Model Law and one that has enacted its own cross-border insolvency scheme–and an analysis of the differences between proceedings conducted under these respective regimes.