Resolving Transnational Insolvencies through Private Ordering

Transnational insolvencies raise issues of efficient resolution of financial distress and fidelity to policy decisions made by various national legislatures and courts. The challenge for each country's domestic bankruptcy law is to select a choice of law rule that best promotes efficiency and respects national choices. A regime of bankruptcy selection clauses can harness the incentives of firms to maximize their value and, at the same time, can ensure that governmental decisions to protect favored groups are honored. As such, it provides the best means for resolving the insolvency problems raised by the increasingly transnational nature of firms.