NOTICE: Comity =/= Committee. They are two different words with two different meanings. The dictionary is your friend.
International Bankruptcy Protocol
Regulation | Legal Reform
Abhorring the lack of international comity requirements for insolvent entities in a world increasingly reliant on globalized commerce;
Fearing that such a lack may permit debtors to evade creditors by shifting assets across international borders, both hindering commerce and increasing the transactional cost of commercial and consumer bargaining;
Believing that bankruptcy is a tool to both protect debtors from insolvency and permanent barriers to obtaining consumer credit and creditors from losing any opportunity for remuneration;
Asserting that no loss of sovereignty truly occurs by extending the courtesy of comity to fellow members of the World Assembly, as all states benefit equally from their extension;
The World Assembly enacts the following:
- “Bankruptcy” is a legal process overseen by a court or trustee that reorganizes or discharges debt meant to satisfy creditor claims while protecting debtors from extended insolvency and compounding debt.
- A “foreign representative” is a person or persons authorized to appear on behalf of a nongovernmental debtor or creditor to represent the debtor or creditor’s interests in a foreign bankruptcy proceeding.
- Member states must establish a judicial or administrative procedure to aid foreign representatives in recognizing and enforcing the applicable foreign bankruptcy laws over fiscal assets within the territorial jurisdiction of that member state.
- Member states may require a reasonable analysis of the debtor’s ties to the host jurisdiction and to the foreign jurisdiction to determine whether extending bankruptcy comity is appropriate.
- A reasonable analysis may inquire into:
- The proportion of assets within the host jurisdiction as compared to those in the foreign jurisdiction;
- The length of time those assets have been within the host jurisdiction; and
- Any other factor which the member state feels relevant and that facilitates fair and efficient bankruptcy procedures in conformity with the implicit goals of this resolution.
- Notwithstanding foreign bankruptcy law, member states must:
- Enforce a mandatory stay of any creditor claims against the debtor’s assets within member state jurisdiction pending conclusion of the bankruptcy process if member states have extended comity under Clause 3, except for government liens meant to collect unpaid taxes; and
- Supply court records pertaining to ongoing proceedings and past bankruptcies on request by a party or government involved in the instant bankruptcy proceeding.
- Member states may charge foreign representatives reasonable administrative or court fees, commensurate with domestic fees for similar work, when enforcing foreign bankruptcy comity claims.
- No member state may treat the failure to obtain bankruptcy comity as having a preclusive effect on later domestic claims by either creditors or debtors.
- Member states may enforce a time limit on the number of separate bankruptcy comity claims a court may enforce for a debtor.
- Nothing in this resolution mandates the extension of comity to non-member states.
Frequently Anticipated Questions
What the hell is bankruptcy?
Bankruptcy theory is simple, though practice is complicated. When a debtor cannot pay their creditors, most states permit them to file bankruptcy. During a bankruptcy proceeding, a court or agency will appoint an uninvolved, impartial Trustee to manage the debtor’s assets in conformity with the law. The Trustee will analyze the debtor’s property and compare it against the debts, and notify all possible creditors that bankruptcy has begun. At the same time, the court will issue a stay of action, or a broad pause on any lawsuits against the debtor until the bankruptcy is resolved. So, a creditor has to file as a creditor in the bankruptcy action to get its money rather than sue the debtor independently. Generally, every nation has a certain threshold of property that a creditor CANNOT take away from the debtor. This is where things are complicated, so suffice it to say that the trustee separates what creditors CAN reach from what the creditors CANNOT reach. The Trustee will also consider which creditor, if there are many, gets what share of the debtor’s assets.
Depending on the nature of the proceeding, the Trustee will either distribute what is available to the credits in full or in part and then dismiss the outstanding claims, will consolidate the debt to streamline repayment, or will find a mutually agreeable payment plan that lets the debtor pay the creditors over time rather than all at once. The theory, and general result, is that even if a debtor has very few assets, the creditors still get something, and the debtor isn’t forever under unpayable debt (though their credit may be ruined). Most bankruptcy laws have a strict time limit for how often a debtor can ask for bankruptcy.
Ideally, bankruptcy is meant to help everybody as best as the situation warrants by reducing the risk of business transactions and protecting both consumers and businesses.
How the hell is this an international issue?
Ordinarily, it isn’t. But in a globalized economy, people can have their assets stored in banks or investments all around the world and owe money in just as many places. Filing a lawsuit in any nation that might have a connection to that money is impractical and wasteful unless there is a good reason to deal with those assets separately.
So, what the hell does this do?
This proposal proposes that member states offer each other comity over bankruptcy laws. Comity is, taken very simply, a situation where one jurisdiction or nation extends and applies the law of a foreign jurisdiction or nation out of both respect and in the interest of simplifying a complicated issue.
For example, let’s say a Debtor has the majority of their money in Nation X, but a small account in Nation Y. Assuming that the Debtor files bankruptcy in Nation X, it makes more sense for Nation Y to treat the Debtor’s assets as part of Nation X’s bankruptcy proceeding, rather than making the Debtor file in Nation Y as well, since the Debtor is a resident of Nation X and also has most of their assets in Nation X. It also means that creditors don’t need to scour the world to get their money, and debtors don’t need to scour the world to protect themselves. Everybody has an easier time and spends less money, which helps everybody settle the issues more easily. It also prevents both creditors and debtors from shopping for ideal venues to protect themselves unfairly.
What the hell happens if most of your assets are somewhere else?
Most jurisdictions allow a party who sues you to do so where the defendant is a resident or where they do the bulk of their business, regardless of other considerations. It makes intuitive sense to sue somebody where they are based: it gives the suing party a back-up if no other venue is appropriate. This isn’t much different. There are always unusual situations, but this proposal allows member states to consider appropriate venue for bankruptcy proceedings. So, if a nation feels that bankruptcy more appropriately belongs in a different venue, it can say so. Similarly, if a nation feels that the business’ assets are so significant as to merit being dealt with under that nation’s law, they can refuse comity. This proposal lets nations weigh what is most efficient and just for their own system and act accordingly, while still streamlining most cases.
Do you just like swearing in your FAQ?
Hell yes, I do.
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