Comparative Bankruptcy Law

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Tibor Tajti

Bankruptcy law is often unduly neglected irrespective of its crucial role in times of economic growth as well as crisis. Its importance was, for example, noted by UNCITRAL solely in the second half of the 1990s (1997 Model Law on Cross-Border Insolvency), though ever since heightened attention has been given to it (2004 – Legislative Guide on Insolvency Law and 2009 Practice Guide on Cross-Border Insolvency Cooperation). Yet it was not without a reason that France and Germany resorted to Chapter 11 on ‘reorganizations’ of the US Bankruptcy Code as a source of inspiration in their attempt to sharpen the competitive edge of their economies at the beginning of the 21st century. Or that a number of post-socialist countries have already introduced, or are debating the possibility of introducing, bankruptcy of individuals for the very first time. The Credit Crunch starting in 2007 and the consequent global crisis made then many countries take a fresh look at the mandate of this branch of law connected to the “too-big-to fail” problem.

The road map of the course is the following. The introductory part is devoted to such issues as bankruptcy and its alternatives (in particular bailouts), bankruptcy fraud and crimes, collection and other pre-bankruptcy remedies (herein also of the English Mareva Injunction and its US equivalent) as well as the role of the contempt of court rules in the bankruptcy context. Then, the central building blocks of US bankruptcy law will be scrutinized, including pre-bankruptcy collective insolvency remedies (e.g., debt-pooling, receiverships and assignment for the benefit of creditors) and the relationship of fraudulent transfers and bankruptcy law. This will include the history, features, policy choices and key concepts of US bankruptcy law (e.g., the Butner principle, automatic stay, the trustee’s strong arm powers, the concept of fresh start and discharge). Then liquidations (Chapter 7), reorganizations (Chapter 11) and individual bankruptcies (Chapter 13) will be focused upon as specific types of bankruptcy proceedings. The course will conclude with the policy choices, problems and solutions inherent to cross-border bankruptcies (UNCITRAL’s work, EU Regulation and Chapter 15 of the US Bankruptcy Act) given the importance of these in the 21st century in both, developed and emerging markets. Whenever the concrete topic allows, US law will be used as the benchmark to be compared to German and the laws of the countries of the students.

Students who want to take the comparative secured transactions course (or are interested in corporate law) are strongly encouraged to take this course as the quality of a secured transactions system is primarily tested in the context of bankruptcy proceedings and the bulk of secured transactions related court cases occur exactly in the context of bankruptcy.