Volume 42 | Number 3 Summer 2007
VII. Conclusion
The three cases discussed here present interesting factual settings for thinking about choice of law for the avoiding powers, although only French really provides a rule. It adopts the home-country rule, but without a general theory. Midland turns on a trustee’s concession and ignores the effect of substantive consolidation, while Al Sabah applies a very broad avoidance rule based on a statute that may not have been drafted with that result in mind. Thus we still await a case that will give us predictable results.
The power of avoidance actions and the importance of the policies they serve make it essential that we move toward a more predictable choice-of-law rule for such actions. As things stand, a creditor or other transferee of a cross-border transfer faces a risk of action under a law with seemingly little contact with the transaction or the debtor. It also faces the risk of liability for the transfer in multiple courts. On the other hand, the lack of effective actions to avoid cross-border transfers, including enforcement of avoidance judgments in other jurisdictions, offers an opportunity for parties to maneuver around the avoidance laws of all the interested jurisdictions, defeating their bankruptcy policy goals.
The home-country rule suggested here is far from perfect and only moderately predictable. Anything better must await international agreements that are likely to be a long time coming. In the meantime, this choice-of-law rule will bring some coherence and a greater possibility of coordination to multinational insolvencies. It is a pragmatic goal and an achievable one.
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Footnotes
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