Extraterritorial Effect Of Transnational Bankruptcy

Transnational Bankruptcy means the bankruptcy involving foreign elements or international elements. In such bankruptcy cases, the creditor, the debtor or the bankrupt properties are in two nations or up wards respectively. The extraterritorial effect means whether the bankruptcy declaration from a native country is enforceable to the properties abroad or whether the bankruptcy declaration from a foreign country is enforceable to the properties of a native country. Whether the bankruptcy procedures of a country have the extraterritorial effect becomes a prerequisite in handling transnational bankruptcy cases.As to transnational bankruptcy, the key problem argued among the global circles of laws can be summed up to the acceptation or rejection and utilization of the Principle of Territory and the Principle of Universalism.The Principle of Territory means the effect of a native bankruptcy declaration can only be limited to its own territory and its extraterritorial effect is absolutely denied. The principle holds that in the case of transnational bankruptcy there should be only a bankruptcy declaration and only a bankruptcy procedure could be implemented to deal with all claims of compensation aimed at the debtor's properties globally. The Principle of Universalism admits that the bankruptcy declaration from a country is valid not only in that country, but also in the other interested countries.In the light of the extraterritorial effect of a native bankruptcy, the USA maintains that American Bankruptcy Administrator should have the rights to manage and dispose of the properties and the creditor's rights which the bankrupt has in other countries. The Great Britain basicly keeps the Principle of Universalism. According to the Japanese law of Bankruptcy, it adopts the rigid Principle of Territory.The theories conflicts on the exraterritorial effect of bankruptcy in China includes the Principle of Territory, the Principle of Relative Territory, the Principle of Mutual Recognition and the Principle of Universalism. I believe that the comparatively realistic attitude is the Principle of Universalism with some limitationsand conditions.