Bankruptcy Tourism and the European Union’s Corporate Restructuring Quandary: The Cathedral in Another Light

By Samir D. Parikh (Lewis & Clark Law School)

Samir D. Parikh

For the last decade, the European Union has been reconceptualizing its corporate restructuring framework with the hope of bolstering capital markets and improving cross-border lending. Unfortunately, the system remains plagued by two intractable problems: divergent substantive law at the Member State level and jurists unaccustomed to guiding reorganization cases. The result is a system beset by uncertainty and disparate treatment. The EU is intent on addressing these problems, but progress has been elusive. The EU must work through recommendations and directives to encourage Member States to align substantive restructuring law with policy design. But Member States have been unresponsive to the EU’s recent efforts. The prospect of addressing these intractable problems in the foreseeable future is grim. Therefore, this Article breaks with current scholarship and urges the EU to adopt a radical alternative. The EU should consider making legal and structural changes that will facilitate bankruptcy tourism. I argue that affording corporations increased discretion as to the location of restructuring cases will aid in creating judicial hubs of optimal law and experienced jurists. The EU has the power to adopt my recommendations by simply modifying its own law and procedure, which should accelerate implementation timelines.

Ultimately, economists foresee an impending financial correction. The EU’s restructuring framework is unprepared to offer predictable and comprehensive reorganization outcomes for the next wave of distressed corporations. This Article proposes a novel vantage point from which to assess policy alignment.

For previous Roundtable posts on for bankruptcy tourism, see Wolf-Georg Ringe, “Bankruptcy Forum Shopping in Europe.”

The full article is available here. Forthcoming in the University of Pennsylvania Journal of International Law.

A New Fulcrum Point for City Survival

posted in: Municipal Bankruptcy | 0

By Samir D. Parikh, Lewis & Clark Law School

ParikhMunicipalities face daunting fiscal challenges that threaten debt repayment and undermine basic service delivery.  Policymakers and scholars have struggled to formulate meaningful restructuring options.  Up to this point, the literature has focused on federal bankruptcy law and the options available under Chapter 9.  But this resource-draining process is not the fulcrum point for any meaningful solution.  Indeed, for the vast majority of distressed municipalities, the lever of municipal recovery will not turn based on the solutions that have to date been offered.

In an article forthcoming in the 2015 William & Mary Law Review, I attempt to radically shift the municipal recovery debate by arguing that state law is the centralized point at which officials can exert the necessary amount of pressure to gain concessions from key creditor constituencies.  I propose a comprehensive system that (i) identifies pressured municipalities at a time where measured adjustments are sufficient to create sustainable viability, and (ii) shepherds distressed municipalities through a dynamic negotiation structure in an effort to capture Chapter 9’s primary benefits without the costs, inefficiencies, and constitutional quandaries.  Animating this proposal is a more nuanced understanding of the Contracts Clause that allows a municipality to explore unilateral contract modification in an effort to facilitate consensual agreements with creditor constituencies.

My proposal offers systemic rehabilitation at a time when a new approach is desperately needed.  The full version of the article is available here.

For previous posts on Municipal Bankruptcy see here and here.