Bankruptcy-remote transactions and bankruptcy law—a comparative approach (part 2): can parties validly waive bankruptcy proceedings?

Abstract

Bankuptcy-remote transactions are sophisticated, but no longer a rarity, and should stop being considered as an oddity, or ‘marginal’ case. Rather, they challenge some of bankruptcy law’s most basic assumptions, on a practical, rather than theoretical, level.This article explores how bankruptcy-remote transactions are used as a waiver to bankruptcy proceedings. While academic debate has been discussing whether bankruptcy rules should be a matter of choice transaction parties have made that proposal a reality, by combining different mechanisms that effectively exclude the possibility that a vehicle enters bankruptcy proceedings . . . or so they try. The article analyses such mechanisms in light of existing bankruptcy law, corporate law and private law, using a comparative perspective that considers the law of common law jurisdictions, such as the United States and United Kingdom, but also examples from civil law countries, like France, Spain, Italy or Germany. This analysis shows a mixed picture, with cases where ‘contract’ or ‘mandatory policy’ perspectives alternate, but also where it is sometimes difficult to apply the law s underlying assumptions to the peculiarities of bankruptcy-remote entities. The conclusions are relevant if the techniques used in this specific type of transactions become more widespread in an effort to carve-out ever-larger pieces to statutory bankruptcy proceedings.