Summary

The insolvency of a person may affect several states in which the assets of the person are located.
Within the European Union, a convention applicable to the EU Member States concerning insolvency was completed in 1995. Although the convention has not yet entered into force, it contains several effective rules on the choice of law which the author of this article also addresses.
The convention was prepared based on the universality principle allowing compromises over the territoriality principle. This means that a bankruptcy proceeding is initiated and conducted pursuant to the law of the state in which the person’s main interests are and such proceeding also affects the person’s assets located in other Member States. However, in particular cases, a bankruptcy proceeding may be initiated in a state in which the person is operating. In such case, the effect of the main proceeding is limited in the state where a secondary proceeding is conducted.
The legislation of another state is applicable to a bankruptcy proceeding affecting several states even if no secondary proceeding has been initiated in the other state. The main purpose of such deviation from the universality principle is the protection of creditors. The author brings examples of the right of security, set-off of claims, administration of bankruptcy estate, etc. and deals with special regulation of such issues.