Avoid the Choice or Choose to Avoid? The European Framework for Choice of Avoidance Law and the Quest to Make it Sensible

Abstract

In this paper, I propose a novel interpretation of rules for choice of law respect to avoidance actions under EC Regulation on Insolvency Proceedings. Further to an outline of statutory framework and its interaction rules on jurisdiction I focus on safe harbor rule, which protects a from avoidance under law of main proceedings if law governing such does not enable avoidance. The traditional interpretation of the law governing transaction in this provision designates law chosen by parties or regular choice­ of­ law rules. Instead, I propose that it be interpreted as referring to law with closest connection to transaction. I argue for a similar analysis in allocating avoidance actions among main and secondary insolvency proceedings.The proposed interpretation leads to a proper framework for addressing choice of avoidance law; it is practicable and is not trivial. On this basis, I propose three new rules related to choice of avoidance law: a rule for choice of applicable fraudulent conveyance law out of insolvency proceedings, a rule giving trustee in main proceedings standing to bring non­-insolvency fraudulent conveyance actions, and a rule expanding safe harbor provision to laws of non­member states.