Corporate Bankruptcy Tourists

Foreign corporations facing financial distress have a choice: restructure in their home jurisdiction or file for bankruptcy in the United States. And some number of foreign corporations do file bankruptcy petitions in the United States. But besides the occasional anecdotal account, how frequently this actually happens or what types of foreign firms are apt to file in the United States is almost completely unstudied. American firms that file under chapter 11 and foreign firms that file under chapter 15 are the frequent objects of study, but what of the foreign firms that file under chapters 7 or 11? This Article addresses this obvious gap in the literature by constructing a database of foreign corporate debtors. By analyzing this new dataset, this Article concludes that the United States Bankruptcy Code is used by foreign debtors in a way that is diametrically opposed to most of the extant thinking on transnational insolvency. In particular, foreign debtors use the American bankruptcy system to impose a global discharge on assets, without the cooperation of any jurisdiction beyond the United States, where the case is pending. This is in complete contrast with the efforts of UNCITRAL to facilitate cross-border cooperation among jurisdictions.