McGILL LAW JOURNAL
Montreal
1972
Volume 18
Number 2
The Need for a Rapprochement of the Bankruptcy Systems
of Canada and the United States
John Honsberger 1
In both Canada and the United States the power to establish
uniform laws of bankruptcy have been closely connected with the
regulation of trade and commerce. In Dupon v. La Cie de Moulin
& Bardeau Chanfrgng2 Mr. Justice Wurtele of the Superior Court
of the Province of Quebec quoted Mr. Wharton’s treatise on Private
International Law that bankruptcy is a species of national execution
against the estate of an insolvent and then went on to say:
It is… in the interest of the trade and commerce of the whole Dominion
that there should be one uniform law for all the provinces, regulating
proceedings in the case of insolvent debtors, unrestricted in its operation
by provincial boundaries; that it should be possible to obtain a national
execution, and not merely a limited provincial one, against the estate
of an insolvent debtor, who might hold property in several provinces,
or transfer it from one province into another.
‘Ed. Note: John Honsberger is a partner in the firm of Raymond and
Honsberger of Toronto. He was a member of the Canadian Study Committee
on Bankruptcy and Insolvency Legislation which made its Report
in
December, 1970 and to which some reference is made in this article. He is
also a member of the National Bankruptcy Conference and its committee
on Canada-United States Relations which in October of 1971 made its Report
which is also referred to in this article. It was the recommendation of the
latter committee that there should be more comparative study of the bank-
ruptcy legislation of Canada and the United States with the hope that it
would lead to the better co-ordination of the two systems that largely
prompted the writing of this article. The author would particularly like to
acknowledge the great assistance he obtained in the preparation of this
article from the many articles on international bankruptcies written by
Professor K. H. Nadelmann and from working with him in the National
Bankruptcy Conference.
2 (1888), 11 L.N. 225.
McGILL LAW JOURNAL
[Vol. 18
The draftsmen of the Constitution of the United States were
similarly aware of the connection between the inter-state trade and
a national bankruptcy system. Immediately following each other
in the Constitution are to be found the inter-state commerce clause
and the clause authorizing uniform bankruptcy laws. The Federalist
said, in commenting upon this:
The power of establishing uniform laws of bankruptcy is so intimately
connected with the regulation of commerce, and will prevent so many
frauds where the parties or their property may lie or be removed into
different States, that the expediency of it seems not likely to be drawn
into question. 3
While the bankruptcy systems of Canada and the United States
reflect a concern with the protection of inter-provincial and inter-
state trade, more and more has business developed along inter-
national lines. The development of bankruptcy law, however, has
not kept pace with the growth of international trade and com-
merce and it has been slow to eliminate inequities in international
bankruptcies. The concept of creditor equality which has been
said to be the ultimate aim of bankruptcy 4 and which perhaps
has best been expressed by the Code Napoleon r which declared
that the whole of the property of a debtor is a common pledge
for all of his creditors is not universally recognized in international
bankruptcies. Canada and the United States are each creditor
countries. Each is also the largest trading partner of the other.
Each is concerned to promote trade and should be concerned
in protecting its traders. In a large measure this could be achieved
if the bankruptcy laws of each country were so co-ordinated so
as to provide that the whole property of a debtor, where part of
it is in one country and part in the other, is, in fact, a common
pledge for all his creditors irrespective of which side of the border
they reside and where the property is located.
As the bankruptcy laws of each country have not always been
drafted having regard to rules of conflict of laws, concurrent bank-
ruptcies are often required to achieve a measure of equality where
the creditors and the property of the debtor are divided between
the two countries. In 1820 Mr. Chancellor Kent of New York made
the disadvantages of
his often repeated comment concerning
multiple bankruptcies:
3 The Federalist, on the New Constitution, vol. XLI,
(1788), per James
Madison.
4 Clarke v. Rogers, 228 U.S. 534 (1913), at p. 548.
5 Sections 2092, 2093.
No. 2]
BANKRUPTCY SYSTEMS OF CANADA AND THE U.S.
149
It would be in the power of the bankrupt to throw his property under
the distribution of either commission, at his pleasure; and it would put
creditors upon calculations of exclusive advantages, and of running
a race of diligence against each other, and of resorting to the one fund
or the other, as circumstances may dictate. The perplexities arising
from the concurrent operation of distinct commissions would be increased
if the commercial house had establishments in different countries, with
joint and separate debts belonging to each firm, to be distributed. Such
a state of things, and such conflicting systems, would lead to great
inconveniences and confusion, and be the source of fraud and injustice,
and disturb the equality and equity of any bankrupt system.0
Eight years later, Chief Justice Parker of Massachusetts ex-
plained how such results could be avoided:
It may be well at some future time when there shall be bankrupt laws
to
here, to accept the proffer of Great Britain, France, or Holland
reciprocate the benefit of such a system (of unity of bankruptcy), but
we are persuaded, if such a change shall take place, it must be under
the auspices of the national legislature or the national courts, or some
treaty with the commercial nations of Europe, and not by adjudications
of a court for one out of the numerous governments that compose the
United States.7
In 1905 when addressing the Universal Congress of Lawyers
and Jurists in St. Louis, Mr. Justice Nesbitt of the Supreme Court
of Canada said:
I think it is a very great pity that there should not be some legislation
law, at any
immediately regulating many questions on international
rate between Canada and the United States. The growing interchange
of business, owing to the geographical continuity, makes it very important
that there should be well-defined rules applicable to both countries
upon many questions which are constantly arising. Take, for instance,
bankruptcy, receiverships, administrations, etc.8
Professor Kurt H. Nadelmann, almost 40 years later and now
almost 30 years ago could only say:
In view of the developments in other parts of the world, the fact that
the United States and Canada, immediate neighbours with a similar
bankruptcy law, still are without any agreement on questions of bank-
ruptcy administrations involving both countries, must appear strange.9
The Report of the Study Committee on Bankruptcy and In-
in 1970 once again referred to the problem
solvency Legislation ‘0
OHolmes v. Remson, 4 Johns. Ch. 460 (N.Y., 1820), at p. 471.
7 Blake v. Williams, 6 Pick 286 (Mass., 1828), at p. 314, per Parker, C.J.
8 To What Extent Should Judicial Action by Courts of a Foreign Nation be
Recognized?, Universal Congress of Lawyers and Jurists, (St. Louis, U.S.A.,
1905), at p. 226.
9K. H. Nadelmann, International Bankruptcy Law; Its Present Status,
(1943), 5 U. of Toronto L.J. 324, at p. 351.
10 Information Canada, (Ottawa, 1970), at pp. 60-62.
McGILL LAW JOURNAL
[Vol. 18
of international bankruptcies and recommended that attempts be
made to negotiate international agreements on conflict rules with
countries that trade substantially with Canada.
While one swallow does not make the spring, it is not without
significance that last year the National Bankruptcy Conference of
the United States created a new committee on Canada-United States
Relations. In its report to the 1971 Annual Meeting of the Confer-
ence this committee stated,
This committee is… concerned with the particular aspects of the
international law of bankruptcy as they relate to the United States and
Canada and sees its special function:
1. to identify situations in international bankruptcies involving nationals
of both the United States and Canada
(a) that either discriminate or appear to discriminate against the
creditors of the one country in the courts of the other, and
(b) that make it unnecessarily difficult to resolve legal difficulties
which would prevent the most efficient and equitable distribution
of estates where the debtor, the creditors and the property of
the debtor are not all within the same jurisdiction;
2. to make recommendations
leading towards the better co-ordination
of the two systems, particularly in conflict situations; and
3. to encourage, thereby, the development of trade, commerce and mutual
understanding between the two countries.
This committee specifically recommended that it is both desir-
able and necessary that there be further study of the bankruptcy
legislation of both the United States and Canada. In the comment
to the recommendation it was said that “the primary concern of
the study would be to work on amendments leading towards the
better co-ordination of the two systems without any international
commitment”. In the long run, it was of the opinion that there
should be a joint group established to study the two systems in
depth from the point of view of a “rapprochement”. The committee
acknowledged that this could lead to a subsequent recommenda-
tion that there should be a bankruptcy treaty between the two
countries but any such recommendation could be made only after
the intensive comparative study of the two systems had been com-
pleted.
A bankruptcy convention between Canada and the United States
certainly would do much to promote trade between the two coun-
tries by giving greater protection to traders than now exists. It is
possible, however, that many of the inequities that now exist to
the detriment of Canadian and American traders and credit grant-
ors could be resolved, and perhaps more successfully, without a
convention.
No. 2]
BANKRUPTCY SYSTEMS OF CANADA AND THE U.S.
151
Over the years, in the absence of any bankruptcy convention
or statutory guidelines, the courts through practical necessity have
had to exercise a choice of law when a bankruptcy occurs and the
debtor, his creditors and his property are partly in the one and
partly in the other country. In some cases, the courts have applied
their own domestic law to situations arising in the other country.
In other cases, they have applied the law of the other country to
situations arising, at least, in part in their own country 1 To the
extent that courts mutually recognize the bankruptcy proceedings
in the other country and ensure that foreign creditors are treated
equally with domestic creditors and, in addition have a discretion
to refrain, in suitable circumstances, from exercising their juris-
diction, there is a substantial degree of co-ordination between the
two systems. Unfortunately, this is not now the case as the legis-
lation of each country has evolved differently and the conflict of
laws rules applied by the courts are not always similar. This has
led to discrimination and inequities to the detriment of the com-
mercial communities of the two countries.
Since Solomons v. Ross 1
2
the doctrine of ubiquity has been
held to be a part of the law of England. “The English courts … have
consistently applied the doctrine of universality, according to which
they hold that all movable property, no matter where it may be
situated at the time of the assignment by the foreign law, passes
to the trustee”.’ 3 The courts of the common law provinces in Canada
also follow this doctrine. As an example, they will, as a rule, order
movable property within their jurisdictions to be turned over to
a trustee in bankruptcy appointed by a competent foreign court
even if the property has been attached or garnished after the
bankruptcy adjudication. 4
It was suggested in Solomons v. Ross that the title of a foreign
trustee overrides encumbrances already acquired by third parties
over moveable property of the bankrupt situated in England.
However, the English courts have not accepted this suggestion. The
Canadian Courts would probably come to the same conclusion.
Thus, if a foreign creditor should attach, in Canada, moveable
“1 Dicey and Morris, Conflict of Laws, 8th. ed., (1967), at p. 6.
12 (1764), 1 Hy. B1. 131. See: K. H. Nadelmann, Solomons v. Ross and Inter-
national Bankruptcy Law, (1946), 9 Modem L. Rev. 154.
13 G. C. Cheshire, Private International Law, 8th. ed., (1970), at pp. 549-550.
14 Williams v. Rice, [19261 3 D.L.R. 225 (Man.); Bank of Nova Scotia v.
Booth, (1910), 19 Man. R. 471 (C.A.); Brand v. Green, (1900), 13 Man. R. 101
(C.A.). See also: Dicey and Morris, op. cit., n. 11, at p. 677; G. C. Cheshire,
op. cit., n. 13, at p. 550.
McGILL LAW JOURNAL
[Vol. 18
property of a debtor followed by an adjudication of bankruptcy
in the foreign country, the attachment ranks prior to the title of
the foreign trustee notwitstanding it is considered to be a pre-
ference under both the foreign and Canadian law. In such cir-
cumstances, equal distribution could be achieved only if a Canadian
bankruptcy adjudication could be obtained. If, however, there
was merely the presence of assets in Canada, the Canadian courts
would not have the jurisdiction to make a bankruptcy order and
equality of distribution could not be obtained.14a
The principle of universality does not apply to immovables. The
rule in the common law provinces of Canada is that the assign-
ment of a bankrupt’s property to the representative of his creditors
according to the bankruptcy law of any foreign country is not
and does not operate as an assignment of any immovables of the
bankrupt situated in those provinces.1 5 In proper cases, however,
a foreign trustee in bankruptcy may be authorized to act as a
receiver of immovable property situated in the common law prov-
inces and to sell it and to deal with the proceeds as trustee in
bankruptcy. 16
As the Canadian Bankruptcy Act does not provide for the
assumption of bankruptcy jurisdiction in the case of a non-resident
on the mere presence of assets in Canada 17 which would permit
a preference to be voided, the Canadian conflict rule in respect
to movables is only just. As Professor Nadelmann has observed
“the conflicts rule and the bankruptcy system available are not
without relation”. 8
In the province of Quebec, except for judgments from other
provinces, conclusive effect is denied to all foreign judgments as
a matter of law.” A foreign bankruptcy in the absence of a Cana-
14a Galbraith v. Grimshaw, [1910] A.C. 508; G.C. Cheshire, op. cit., at p. 550
which was considered in Re Universal Auto Bonders Ltd., 24 W.W.R. 600; 13
D.L.R. (2d) 459; 37 C.B.R. 52 (Alta.).
15 Cheshire, op. cit., n. 13, at p. 551; Dicey and Morris, op. cit., n. 11, at
p. 681; Macdonald v. Georgian Bay Lumber Co., (1878), 2 S.C.R. 364, holding
that an assignment under the United States Bankruptcy Act did not transfer
immovable property in Canada.
161n re Kooperman, (1928), 13 B. & C.R. 49; [1928] W.N. 101 (High Ct.).
17 Cf. section 2(1) of the United States Bankruptcy Act.
18K. H. Nadelmann, Bankruptcy in Canada: Assets in New York, (1962),
11. Am. J. Comp. L. 628, at p. 630. A note commenting on Bank of Buffalo v.
Vesterfelt, 232 N.Y.S. 2d 783 (Erie County Ct., 1962).
10 Civil Code, article 6(2); Code of Civil Procedure, articles 178-180; Johnson,
Foreign Judgments in Quebec, (1957), 35 Can. Bar. Rev. 911; K. H. Nadelmann,
Enforcement of Foreign Judgments in Canada, (1960), 38 Can. Bar. Rev. 68.
No. 2]
BANKRUPTCY SYSTEMS OF CANADA AND THE U.S.
153
dian bankruptcy adjudication has no effect in the province whether
or not the property of the debtor situated in Quebec is movables
or immovables or whether or not the debtor had appeared in the
foreign bankruptcy proceedings. In any new action brought within
the province to enforce a foreign judgment, the defendant in
the Quebec courts may plead to the action on the merits or set up
a defence which might have been pleaded in the original pro-
ceedings.20
In the Quebec case of Ryan v. Pardo, Mr. Justice Brossard said:
It is now well settled that, in view of article 210 [now article 178],
a foreign judgment… however final it may be [in the foreign juris-
diction] does not constitute [in Quebec] res judicata or chose jugge.
The “full faith and credit” doctrine, as known and applied in the United
States between states and as applied in another form in Canada between
provinces, does not apply between the province of Quebec, and the
State of New York under any text of our law, nor for that matter
is there, in this province, any text of law giving general and formal
recognition to the doctrine of ‘Comity of Nations’ or Comitas gentiuM.21
The Courts of the United States have not recognized the doctrine
of ubiquity first enunciated by Solomons v. Ross 22 which required
a bankruptcy declared in the domicile of the debtor to be recog-
nized everywhere2 3 Instead, the doctrine of territoriality is gener-
ally accepted. This provides that an assignment under the insolvency
law of one country operates only upon property within that coun-
try, so that title acquired by the trustee is of no avail against
creditors who attach property under the law of another country
where it is actually situated.24 In most of the states of the United
States the conflict rules will, for example, permit local creditors
to attach or garnish assets of a debtor notwithstanding the debtor
has been adjuged bankrupt in Canada.25 This denial of extra-ter-
ritorial effect to a foreign bankruptcy judgment is not unique. It
20Code of Civil Procedure, article 178 provides: “any defence which was
or might have been set up to the original action may be pleaded to an
action brought upon a judgment rendered out of Canada”.
21S.C.N. 299,676. Judgment of Nov. 27, 1953. The case was appealed but
settled before the filing of factums.
22 (1764), 1 Hy. B1. 131.
23Nadelmann, op. cit., n. 12.
24G. C. Cheshire, Private International Law, 7th. ed., (1965), at p. 448,
citing Security Trust Co. v. Dodd Mead & Co., 173 U.S. 624 (1899) and the
doubt at Professor Nadelmann whether this is true since the United States
Bankruptcy Act of 1898; K. H. Nadelmann, The National Bankruptcy Act
and the Conflict of Laws, (1946), 59 Harv. L. Rev. 1025, at p. 1027.
25 Nadelmann, op. cit., n. 18, at p. 628.
McGILL LAW JOURNAL
[Vol. 18
is the law of many other jurisdictions including the province of
Quebec.
The Supreme Court of the United States on several occasions
has held that it is not ultra vires for a state to refuse to recognize
the transfer of property within the state resulting from a foreign
bankruptcy adjudication which conflicts with the rights of local
creditors seeking to recover their debts against local property. 0
A state seemingly, could also provide for the payment to foreign
creditors be deferred until resident creditors were paid. In most
states, however, the courts have held or it has been specifically
provided by statute that both foreign and local creditors should
share equally. 7
The possible advantage that local creditors in the United States
might receive over Canadian creditors under the provision of state
laws is only applicable in any event to proceedings outside of
bankruptcy. The legislative grant of power over the subject of
bankruptcy is given by the United States constitution to Congress. 2
Whether or not local creditors are entitled in a bankruptcy to
priority to foreign creditors is governed by federal law exclusively.
The present United States Bankruptcy Act provides that “debts
have priority, in advance of the payment of dividends to creditors
that by the laws of the United States (are) entitled to priority”.29
Neither the Bankruptcy Act nor any other federal statute discri-
minates between local or foreign creditors. Thus, if a Canadian
creditor is faced by discrimatory state legislation or rulings by
state courts in attempting to attach or garnish property of the
debtor within the state, the creditor may circumvent such discri-
mination by petitioning for a bankruptcy order. Moreover, under
the American Act the court has jurisdiction in bankruptcy if there
is property of the debtor within the jurisdiction of the court whether
or not the debtor is a resident.3
0 Once a bankruptcy order is made
26Clark v. Williard, 292 U.S. 112 (1934), Cert. to Sup. Ct. Mont.; Clark v.
(1935) aff’d; United States v. Belmont, 301 U.S. 324
Williard, 294 U.S. 211
(1937) in which it was said, at p. 335 by Stone, J.:
But it is a recognized rule that a State may rightly refuse to give effect
to external transfers of property within its borders so far as they would
operate to exclude creditors suing in its courts.
27K. H. Nadelmann, Foreign and Domestic Creditors in Bankruptcy Proceed-
ings: Remnants of Discrimination, (1943), 91 U. of Pa. L. Rev. 601, at p. 606.
28 Art. 1, s. 8, cl. 4.
2 U.S. Bankruptcy Act (1968), s. 64a(5).
30 Section 2a(1).
No. 2]
BANKRUPTCY SYSTEMS OF CANADA AND THE U.S.
155
payments made to local creditors within four months prior to
bankruptcy are subject to being set aside as preferential payments.
In practice, however, a Canadian creditor could be under some
disadvantage in competing against local creditors in a state that
permits local creditors to be paid in priority to foreign creditors.
Under the United States Bankruptcy Act if there are more than
twelve creditors, a petition for a bankruptcy order can only be
brought if three creditors join in the petition.3 1 Where local credi-
tors have an advantage in attaching local assets, they may be
reluctant, being against their interest, to assist a foreign creditor
to obtain a bankruptcy order which would have the effect of
reducing their distributive share in the debtor’s property.f2
Some of the difficulty in reconciling the conflict of law rules
of the two countries arises out of different approaches towards
the enforcement and recognition of foreign judgments. Foreign judg-
ments were originally enforced in England because it was considered
that the law of nations required the courts of one country to assist
those of another. This theory is generally known as the doctrine
of comity.
Although there are many definitions of comity, a generally ac-
cepted definition is that of the Supreme Court of the United States
found in the case of Hilton v. Guyot 33 in which comity in its legal
sense was defined as “neither a matter of absolute obligation on
the one hand, nor of mere courtesy and goodwill, upon the other.
But it is the recognition which one nation allows within its ter-
ritory to the legislative, executive, or judicial acts of another nation,
having due regard both to international duty and convenience, and
to the rights of its own citizens or of other persons who are under
31 Section 59(b),(d).
32Where a claim is purchased to institute bankruptcy proceedings in the
United States, it should be noted that General Order 5(2) provides that
there shall be annexed “to each of the triplicate petitions a copy of all
instruments of assignment or transfer, and an affidavit setting forth the
true consideration paid for the assignment or transfer of such claims and
stating that the petitioners are the bona fide holders and legal and beneficial
owners thereof and whether or not they were purchased for the purpose
of instituting bankruptcy proceedings”. Proposed new bankruptcy Rule 104(d)
provides: “a person who has transferred or acquired a claim for the purpose
of commencing a bankruptcy case shall not be a qualified petitioner…
(similar language to the first part of General Order 5(2)).
33 159 U.S. 113 (1895), at pp. 163, 164.
McGILL LAW JOURNAL
[Vol. 18
the protection of its laws”. It is, however, at most, only a rule of
practice and not of law.3 4
As long ago as 1835, English courts disapproved the doctrine
that private rights and duties are recognized by reason of comity
between nations 35 although the recognition of these private rights
and duties, as distinguished from their enforcement, may still be
said to be conceded ex comitate.30 English and Canadian common
law courts when faced by a foreign bankruptcy order would, as a
rule, take the position that they were being asked to recognize and
enforce rights conferred by foreign law and duties that are thereby
imposed and might speak of the legal obligation of foreign judg-
ments. American courts, on the other hand, more often speak
in terms of comity. In a very recent case, for example, a federal
court judge in Hawaii said:
The mere fact of the foreign (Canadian) appointment of a receiver
in bankruptcy does not, standing alone, come into conflict with domestic
bankruptcy policies. Since application of our bankruptcy law is limited
to “proceedings under this title”, 11 U.S.C. s. 11(a), it is clear that this
court can look into controversies arising under bankruptcy laws of
foreign nations without defeating principles of uniformity enunciated
in our law (so long as jurisdiction is otherwise proper). Thus, in the
absence of international treaties on the subject, one must look to
principles of comity to discover whether foreign receivers may entertain
suits in local courts to recover debts for the bankrupt estate.3 7
As a general rule, an American trustee can reach assets in Canada,
other than the province of Quebec, more easily than assets in the
United States can be reached by a Canadian trustee. The different
conflict rules and the variation in their application causes un-
certainty, inconvenience and, in some cases, hardship. In order
to more nearly reach equality among creditors in international
bankruptcies concurrent bankruptcies are too frequently necessary.
This complicates the administration of the assets, increases the
costs of administration and reduces the assets available for distri-
bution among the creditors.
The failure of the present bankruptcy systems of Canada and
the United States to adequately protect international credit relations
between the two countries, to the extent it might, to the detriment
of the trader and credit grantor and to the embarassment of their
Dist. Ct., 1932).
34 Gillette Safety Razor Co. v. Hawley Hardware Co., 60 F. 2d 1019 (Conn.
35 Warrender v. Warrender, (1835), 2 Cl. & Fin. 488 (H.L.).
36See: In Re Askew, [1930] 2 Ch. 259, at pp. 264, 275.
37Waxman v. Kealoha, (1969), 296 F. Supp. 1190 (Hawaii Dist Ct., 1969),
at pp. 1193.
No. 2]
BANKRUPTCY SYSTEMS OF CANADA AND THE U.S.
157
professional advisers leads one to a consideration of the possibility
of negotiating a bankruptcy convention between Canada and the
United States.
At the outset, it should be recognized, and history more than
confirms it, that bankruptcy conventions are very difficult to
negotiate. Indeed, all efforts towards drafting a bankruptcy treaty
for universal application have so far failed. On the other hand,
it must be admitted that there have been several bi-lateral and
multi-lateral bankruptcy treaties negotiated, for the most part,
between adjoining States.3 These treaties have all provided for
a single bankruptcy administration governed by a special code of
rules.
It is of course more difficult to negotiate a treaty between
countries that have very different bankruptcy systems. Fortunately
Canada and the United States have reasonably similar systems in
that both have the same origins. The similarity, however, is often
more apparent than real. One need only mention the differences
between the two systems in respect to the suspect periods for
attacking settlements and for setting aside preferences, the treat-
ment of liens and tax claims, the status of bankruptcy, the right
to a discharge and the debts released on a discharge, to indicate
just some of the differences in substance between the legislation
of the two countries. More minor differences but which nevertheless
cause administrative difficulties in providing equality among credi-
tors are different orders of priority in payment of dividends and
different time limits during which rights accrue or proceedings are
barred.
An example of the magnitude of the problem of negotiating a
bankruptcy treaty may be seen in the Common Market draft conven-
38 France, for example, has negotiated a series of conventions with a number
of its neighbours which includes the Franco-Swiss Convention of June 15,
1869, the Franco-Belgium Convention of July 8, 1899,
the Franco-Italian
Convention of June 3, 1930, the French Saar Convention of March 3, 1950
and May 20, 1953 and the Franco-German treaty on the Saar of October 27,
1956. In 1928, the Sixth Pan-American Conference in Havana adopted the
Bustamante Code of Private International Law which contains a Part
relating to bankruptcies. Fifteen countries have adhered to this Code. In
1933, the Scandinavian countries of Denmark, Finland, Iceland, Norway and
Sweden entered into a bankruptcy convention. The Common Market countries
after several years of study have recently completed a draft of a convention
on bankruptcy, compositions and related proceedings. For a study of the
existing international treaties dealing with bankruptcy, see K. H. Nadelmann,
International Bankruptcy Law, Its Present Status, (1944), 5 U. of Toronto
LJ. 324.
McGILL LAW JOURNAL
[Vol. 18
tion designed to make a bankruptcy declared in one of the states
effective in the entire community. All of the states are civil law
countries and the draft convention does not deal with adjudications
in bankruptcy of nationals by courts of states that are not members
of the community. Nevertheless, the draft treaty is some 59 pages
in length including annexes. The actual treaty is 30 pages long and
contains some 82 articles.
Certainly before a bankruptcy convention can be negotiated
between Canada and the United States an intensive comparative
study of the two bankruptcy systems must be undertaken along
the lines suggested by the Canada-United States Relations Com-
mittee of the National Bankruptcy Conference. It may be, however,
that the best preparation for negotiating a treaty is to go as far
as one can in the unification of the substantive law of bankruptcy
by reciprocal legislation. Professor Nadelmann who has been a
leading advocate for this approach has recently written:
The failures of international endeavors to deal with the subject of
bankruptcy are well known. In the opinion of this writer, the best
approach to the problem is not necessarily work on a convention securing
a single administration in all cases. A more productive approach may
be revision of faulty local conflicts law. As in all areas of conflicts,
in bankruptcy the most serious difficulties come from statutory provisions
preventing courts from reaching reasonable and equitable results. Local
law reform can produce a more favourable general situation and reveal
as well more clearly what has to be done internationally.3 9
Through reciprocal legislation whereby Canada and the United
States would enact legislation similar to each other identical inter-
national results can be obtained without a treaty and very much
more quickly. The American observers to the eighth session of the
Hague Conference on Private International Law in 1956 suggested
to the Conference that it consider the use of uniform legislation
as well as conventions. 40 The proposal was not well received possibly
by reason of the fact that there had not been any previous wide
use of this method among European countries, although the German
states over 100 years ago had used legislation to unify the law of
39K. H. Nadelmann, Assumption of Bankruptcy Jurisdiction over Non-
Residents, (1966), 41 Tul. L. Rev. 75, at p. 81.
40 K. H. Nadelmann & W. L. M. Reese, The American Proposal at the Hague
Conference on Private International Law to Use the Method of Uniform Laws,
(1958), 7 Am. 3. Comp. L. 239; K. H. Nadelnann, Uniform Legislation Versus
International Conventions Revisited, (1968), 16 Am. 3. Comp. L. 28.
No. 2]
BANKRUPTCY SYSTEMS OF CANADA AND THE U.S.
159
bills of exchange 41 and the Scandinavian countries have had a long
history of co-operation in the field of legislation. 42
Canada and the United States have also had long and compara-
tively successful histories of working with uniform legislation at
the constituent level in each country. In the United States, there
is the National Conference of Commissioners on Uniform State
Laws and in Canada the Conference of Commissioners on Uniformity
of Legislation. The single most successful uniform statute has
been the Uniform Commercial Code of the United States which
has been adopted with only minor variations in 49 of the 50 States
and Article 9 of the Code has now been exported to Canada in the
form of the Ontario Personal Property Security Act.43
While there has been reasonable progress towards uniform
legislation within the two countries it is remarkable that on the
international level between Canada and the United States there
has not been greater co-operation in the joint drafting of legis-
lation. Professor Nadelman once said in reference to the Canadian
Uniform Enforcement of Foreign Judgments Act that:
Unilateral drafting, however, is not the best way to reach results …
Co-operation in drafting commends itself and the two Conferences of
Commissioners should join hands for that purpose. Many a student of
the close relations between the two “neighbours without a frontier” has
been wondering at the lack of co-operation on that level. It contrasts
with what has been done elsewhere for unification of law between
neighbours, and even for entire regions, generally and, in particular in
the matter of recognition and enforcement of judgments. 44
These comments are equally applicable to bankruptcy legislation
but as the constitutional grant of legislative power over the subject
matter of bankruptcy in both countries is at the federal level
co-operation in drafting should be a much simpler matter in that
it would involve only two governments.
As a first step towards co-operative drafting each country
should unilaterally attempt to achieve a greater degree of co-
ordination in its legislation so as to better ensure equality among
41K. H. Nadelmann, Uniform Legislation Versus International Conventions
Revisited, id., citing Hudson & Feller, The International Unification of Laws
Concerning Bills of Exchange, (1931), 44 Harv. L. Rev. 333, at p. 335.
42 K. H. Nadelmann, Uniform Legislation Versus International Conventions
Revisited, id. Ekeberg, The Scandinavian Co-operation in the Field of Legis-
lation, in Unification of Law, (International Institute For the Unification of
Private Law, Rome, 1948), at pp. 321, 329.
43R.S.O. 1970, c. 344.
44K. H. Nadelmann, Enforcement of Foreign Judgments in Canada, (1960),
38 Can. Bar. Rev. 68, at p. 88.
McGILL LAW JOURNAL
[Vol. 18
creditors and to avoid needless duplication of administrations.
Courts should be given the jurisdiction to achieve reasonable and
equitable results and jurisdictional competition between the courts
of the two countries should be discouraged. In this regard, much
could be accomplished if the laws of each country purported to
give the same effect to a bankruptcy declaration on property
situated outside the country of the adjudication and the courts of
each country had uniform discretionary powers where bankruptcy
jurisdiction is assumed over debtors who are not domiciled in the
country. At a later stage, through co-operative drafting, increasing
uniformity in the legislation could be progressively attained.
Already the provisions of the Canadian and American Bankruptcy
Acts are substantially the same in respect to the vesting of property
located outside of the country of the bankruptcy adjudication.
Under the Canadian Act, property is defined as being property
“whether situate in Canada or else-where ‘ 4; and the property
divisible among a debtor’s creditors “… shall comprise… all
property wherever situated of the bankrupt at the date of his
bankruptcy or that may be acquired by or devolve on him before
his discharge”.40 While based upon the English Act this language
is peculiar to the Canadian Act. Since 1952, the United States Act
declares that the trustee has title to the property of the bankrupt
“wherever located”.4 7 While such declarations in either statute in
respect to the title to foreign assets cannot bind the courts of
the other country at least trustees in both countries can rely on an
express declaration in their statute that their title extends
to
property wherever located. This cannot but help to strengthen
the position of the trustee in the courts of the other country in
situations where the courts might otherwise be hesitant in per-
mitting a foreign trustee to seize local assets. The similarity between
the vesting provisions in the legislation of the two countries is
an example of how the two systems hopefully could be co-ordinated
to the advantage of the commercial community of each country.
Since the United States Act of 1898, the presence of assets in
the United States has been a sufficient ground to the United States
courts for the assumption of bankruptcy jurisdiction.” Thus, a
non-resident debtor can be adjudged bankrupt in the United States
45 Section 2(o).
40 Section 47.
47 Section 70a as amended by P.L. No. 456, 66 Stat. 429-430 (1952), 82d Cong.,
2nd Sess. s. 23a.
48Section 2(1)(a).
No. 2]
BANKRUPTCY SYSTEMS OF CANADA AND THE U.S.
161
courts if he has assets in the United States. The Canadian courts,
on the other hand, do not have this jurisdiction. This can cause
difficulties particularly in the case of a United States debtor
owning immovable property in Canada. A United States bankruptcy
or turn over order would not be recognized in Quebec and would
probably not be recognized elsewhere in Canada unless on the
grounds of comity when the courts might co-operate in the liqui-
dation of the property for the benefit of the estate 4 9 If the Canadian
court refused to co-operate with the United States trustee, it would
not be possible to obtain a Canadian bankruptcy order and thereby
reach the immovables for the benefit of the American creditors
assuming the debtor did not reside or carry on business in Canada.
The United States trustee, however, could demand the bankrupt to
convey the Canadian immovables to him and thereby circumvent
the impossibility of obtaining a Canadian bankruptcy order and
the refusal of the Canadian courts to recognize an American judg-
ment in respect to immovables 0 The trustee, nevertheless, could
be embarassed by a recalcitrant bankrupt or a bankrupt who had
absconded. In this case, it would be a reasonable step towards
the co-ordination of the two bankruptcy systems if the Canadian
legislation also provided that the courts could assume bankruptcy
jurisdiction if there were assets of the debtor within the juris-
diction of the court. Such a provision would also be useful to
get around the difficulty created by Galbraith v. Grimshaw which,
in effect, requires a local bankruptcy (which may be difficult to
obtain if there was not jurisdiction to make such an order on
the mere presence of assets) in order for a foreign trustee to override
encumbrances already acquired over property of the bankrupt
situated in Canadaioa
A small matter, mentioned earlier,5 that sometimes discriminates
against a Canadian creditor wishing to petition for a bankruptcy
order in the United States easily could be rectified. The necessity
of three petitioning creditors for a bankruptcy order where there
49 See: In re Kooperman, op. cit., n. 16 where a Belgium trustee was
appointed, on an ex parte application, receiver in England with authority
to sell immovables and deal with the proceeds as trustee in the foreign
bankruptcy.
50 Section 7(a) (5) provides that “The bankrupt shall…
(5) execute and
deliver to his trustee transfers of all his property in foreign countries”.
Cf. s. 129(1) of the Canadian Act: “The bankrupt shall… execute such
powers of attorney, conveyances, deed and instruments as may be required”.
Soa See supra fn. 14A.
51 See supra, at p. 155.
McGILL LAW JOURNAL
[Vol. 18
are more than twelve creditors is believed peculiar to the United
States. The original purpose for such a provision probably was
to prevent frivilous petitions. The United States might consider
whether this provision still serves a useful purpose and if not,
whether in the interest of uniformity and to give both domestic
and foreign creditors the equal opportunity to appear before the
bankruptcy courts, it might be sufficient for a single petitioning
creditor as is the rule in Canada and all other countries.
Probably, one of the most important areas for co-ordination
of the two bankruptcy systems and which would not be difficult
to accomplish is for the courts of each country to be given a clear
discretion to refuse to exercise its bankruptcy jurisdiction in
appropriate cases so as to minimize the number of concurrent
bankruptcies. This is not to say, however, that it is always desirable
that there be a single administration in a bankruptcy involving
property or creditors in both countries. If, for example, an attaching
creditor will not voluntarily release the property of the debtor
that he has obtained and which would be considered to be prefer-
ential, concurrent bankruptcies are necessary. Concurrent bank-
ruptcies may also be desirable in certain circumstances to give
the court of the other country jurisdiction to impose criminal
sanctions against a fraudulent debtor who could not be reached
by the courts of the first country. Nevertheless, where a bankruptcy
order has already been made in one country and the court in
the other is of the opinion that the bankruptcy can be handled
as well as, or better, by the foreign administration, without any
detriment to local creditors, it should have the discretion to refuse
to exercise its bankruptcy jurisdiction.
This is, however, an area where the Bankruptcy Acts of each
country are either silent or not necessarily in conflict. There are
provisions in both statutes which permit courts to refuse to exercise
their bankruptcy jurisdiction and thereby prevent concurrent bank-
ruptcies. It would, however, be preferable if these provisions were
more closely similar and in respect of the Canadian statute, it
specifically authorized that which now can only be implied.
In the case of a petition for a receiving order, the Canadian
legislation permits the court to dismiss a petition if it is of the
opinion that for “sufficient cause no order ought to be made” 2
or for “sufficient reason” to stay “the proceedings under a petition,
either altogether or for a limited time, on such terms and subject
2 Section 25(7).
No. 2]
BANKRUPTCY SYSTEMS OF CANADA AND THE U.S.
163
to such conditions as the court may think just”.53 If a bankruptcy
order is made without knowledge that an earlier bankruptcy order
was made, for example, in the United States, a Canadian court
has the jurisdiction to annul bankruptcy if it is of the opinion
that “a receiving order ought not to have been made”.5 4 A Canadian
court may also “review, rescind or vary any order made by it
under its bankruptcy jurisdiction”.55
Since September 25, 1963, the United States courts have been
invested with jurisdiction to “exercise, withold or suspend the
exercise of jurisdiction, having regard to the rights or conveniences
of local creditors and to all other relevant circumstances, where
a bankrupt has been adjuged bankrupt by a court of competent
jurisdiction without the United States”. 6 The addition of this
sub-section was to ensure that jurisdiction over persons adjudged
bankrupt by a court of competent jurisdiction outside the United
States would not be considered compulsory. 7
Some years before this amendment was made in the United
States Act, Professor Nadelmann had written:
Needless duplication of administrations should of course be avoided.
Courts should have discretion to refuse adjudication where administration
abroad will suffice. It is submitted that laws making adjudication
mandatory upon a petition in due form should be amended accordingly.
After adjudication, the courts should likewise have power to dispense
with local administration in appropriate cases and to approve arrange-
ments between the administrations found to be beneficial or convenient
with due regard to the rights of the creditors who have proved their
claims.58
While there is a very wide discretion given to Canadian courts
to exercise or suspend the exercise of its bankruptcy jurisdiction,
it would be helpful if the Canadian courts were specifically given
the jurisdiction that the American courts are given by section
2(22) of the United States Act to withhold or suspend the exercise
of its bankruptcy jurisdiction where the debtor has been adjudged
bankrupt by a foreign court. Under the present Canadian Act,
courts might be under some doubt that such expressions as “suf-
ficient cause”, “sufficient reason” or “of the opinion a receiving
53 Section 25(11).
54 Section 151(1).
55 Section 157(5).
GG Section 2(22).
57 H. R. Rep. No. 1208, 87th. Cong., Sess. 1, 4 (1961).
58K. H. Nadelmann, Revision of Conflicts Provisions in the American
Bankruptcy Act, (1952) 1 Int’l. and Comp. L. Q. 484, at p. 490.
McGILL LAW JOURNAL
[Vol. 18
order ought not to have been made…” does, in fact, empower
them to exercise such a discretion. Moreover, if such a provision
was contained in the Canadian legislation, it might add very little
to the existing state of the law, but it would indicate to the courts
that it was the intention of Parliament that a court should not
exercise its bankruptcy jurisdiction where a foreign court previously
had adjudged the debtor bankrupt unless there was good reason
for a concurrent bankruptcy in Canada.
There is, however, a practical limitation on the extent to which
a discretion in a court to refuse to exercise its bankruptcy juris-
diction will help minimize the necessity for concurrent bankruptcies
and that is the general lack or less than full mutual recognition of
the rights of a trustee as conferred upon him by a foreign court.
A local court can hardly refuse to exercise its bankruptcy juris-
diction if the foreign trustee is prevented from taking possession
of local assets. To overcome this difficulty, the bankruptcy legis-
lation of each country could give jurisdiction to courts while exer-
cising their bankruptcy jurisdiction, the discretion to act in aid
of and be auxiliary to each other in all matters of bankruptcy.
A somewhat similar jurisdiction already exists in the Bankruptcy
Acts of the United States and Canada in respect to the jurisdiction
of other courts exercising jurisdiction in bankruptcy within the
country.
In the United States, for example, courts of bankruptcy are
invested, within their respective territorial limits, jurisdiction to:
exercise ancillary jurisdiction over persons or property within their
respective territorial limits in aid of a receiver or trustee appointed
in any bankruptcy proceedings pending in any other court of bankruptcy:
Provided, however, That the jurisdiction of the ancillary court over a
bankrupt’s property which it takes into its custody shall not extend
beyond preserving such property and, where necessary, conducting
the business of the bankrupt, and reducing the property to money, paying
therefrom such liens as the court shall find valid and the expenses of
ancillary administration, and transmitting the property or its proceeds
to the court of primary jurisdiction.59
In Canada,
All courts and the officers of all courts, respectively, shall severally act
in aid of and be auxiliary to each other in all matters of bankruptcy,
and an order of one court seeking aid, with a request to another court,
shall be deemed sufficient to enable the latter court to exercise, in
regard to the matters directed by the order, such jurisdiction as either
the court that made the request or the court to which the request is
5 Section 2(20) of the United States Act.
No. 2]
BANKRUPTCY SYSTEMS OF CANADA AND THE U.S.
165
made could exercise in regard to similar matters within its respective
jurisdiction. 0
The Canadian provision is based upon a similar provision found
the English Bankruptcy Act that provides that the courts of
in
England, Scotland, Ireland and “every British court elsewhere”
having jurisdiction in bankruptcy shall severally act in aid of and be
auxiliary to each other.61 The New Zealand Insolvency Act has a
comparable section requiring the New Zealand courts to act in aid
and be auxiliary to commonwealth courts with the discretion to act
in the aid and be auxiliary to the courts of any country, not a com-
monwealth country, upon the request of such a court. The section
reads:
1. The Supreme Court shall, in all matters of bankruptcy, act in aid
of and be auxiliary to any other Court of any Commonwealth country
other than New Zealand, being a Court having jurisdiction in bankruptcy,
and an order of that Court requesting aid shall be sufficient to enable
the Supreme Court to exercise in regard to the matter specified in the
order such powers as the Supreme Court might exercise in respect of
the matter if it had arisen within its own jurisdiction.
2. The Court may, if it thinks fit, exercise the powers specified in sub-
section (1) of this section at the request of a Court in any country not
a Commonwealth country.62
If Canada and the United States would incorporate a provision
in their bankruptcy legislation similar to that contained in the
New Zealand Act, much would be done to resolve the present
divergent conflict of laws rules.
The discretionary jurisdiction of the courts to come to the
aid of and be auxiliary to other courts would preserve the flexibility
in the procedure which is important in dealing with international
bankruptcies. This discretion would be presumably exercised having
the best interest of
regard to what the court considered was in
local creditors. In any event, once a decision was made to come
to the aid of another court, the court coming to this decision should
have, in addition, a discretion as to what assistance it ought to
give and the power to impose such conditions and require such
undertakings as it may think proper.0 3
0Section 158(2) of the Canadian Act.
61Section 122 of the Bankruptcy Act, 1914, 4-5 Geo. 5, c. 59 (Eng.), s. 122.
62Insolvency Act, 1967, 16 Eliz. II c. 54, s. 135 (Statutes of N.Z.).
63Where the Manx Bankruptcy Court asked the aid of an English court
for getting in movable and immovable property in England, the English
court held that it was bound to give assistance, but had a discretion as to
what assistance it ought to give, and could impose such conditions and
require such undertakings as it may think proper: Re Osborn, [1931-32]
B. & C.R. 189.
McGILL LAW JOURNAL
[Vol. 18
Another important area of the law where it is desirable that
there be uniformity is the marshalling of assets. This plays an
important function in maintaining equality among creditors when
the assets of a debtor in the one country cannot be included in
the bankruptcy in the other country either because the title of
the trustee is not recognized in the other country or the debtor
has been ajudged bankrupt in both countries. Individual creditors
may obtain dividends or payments from both sets of assets. The
problem is how to provide for equalization.
Canadian courts follow the hotchpot rule which requires that
a creditor who proves in the Canadian bankruptcy after having
obtained property of the bankrupt situated abroad must bring
into the common fund the property so acquired whether it rep-
resents the proceeds of movable or immovable property 4 The
inclusion of the words “movable and immovable” in the definition
of “property” in the Canadian Bankruptcy Act 0 5 has the effect
of forcing a creditor to bring the proceeds of immovable property
into account. In effect, a creditor who has received a payment
from property of the debtor located abroad and who wishes to
prove in the Canadian bankruptcy of the debtor is required to
have his share calculated on the basis of a fund in which the money
received abroad is included. The rule, which is based upon the
principle that he who asks for equity must do equity, has been
applied in England since at least 1762.66
The Bankruptcy Act of the United States is one of the few acts
that expressly provides that a creditor who proves a claim in a
domestic distribution must account for payments received abroad.
The act provides:
Wherever a person shall have been adjudged a bankrupt by a court
without the United States and also by a court of bankruptcy, all creditors
with claims allowed by the court of bankruptcy who have not had a
dividend paid or declared in their favour by a court without the United
States shall first be paid a dividend equal to that paid or declared in
such foreign court in favour of other creditors of the same class under
this Act, before creditors who have had a dividend paid or declared in
their favour by such foreign court shall be paid any amount in the
court of bankruptcy.07
64 Dicey & Morris, op. cit., n. 11, at p. 671.
65 Section 2(o).
66 Rickards v. Hudson as reported in Smith Appeals to the Privy Council
from the American Plantations 490 (1950).
67Section 65(d). See generally: K. H. Nadelmann, op. cit., n. 58, at pp.
487-488; K. H. Nadelmann, op. cit., n. 24, at pp. 1049-1051; Dicey, Conflict
of Laws, 7th. ed., (1958), at pp. 693-696.
No. 2]
BANKRUPTCY SYSTEMS OF CANADA AND THE U.S.
167
There is no reason why the Canadian Act should be silent in
respect of such an important principle as the hotchpot rule which
is so basic to the principle that there should be equality among
creditors. In the interest of making it clear to all foreign creditors
who might seek to prove a claim in a Canadian bankruptcy, it
would be useful if the Canadian Act clearly stated that the hotchpot
rule applied by adding to the Canadian Act a similar section to
that contained in the American Act. However, as well as possible
situations that might occur are not covered by the American section,
it would be useful to have specialists of each country to jointly
work on a new uniform text which would better insure equality
amongst creditors.
One final example of an aspect of international bankruptcy
law which Canada and the United States could co-operate in by
enacting similar legislation is the matter of the recovery of pre-
ferences acquired in the one country after a bankruptcy adjudication
in the other country. The recovery of preferences acquired abroad
has always caused difficulties. If the preference was within the
appropriate delay prior to bankruptcy, the case is covered by the
Bankruptcy Acts of both Canada and the United States. What is
not clear is the case of a preference acquired abroad after a bank-
ruptcy adjudication. Some countries, such as the Netherlands have
specific provisions in their statutes requiring creditors to refund
preferences acquired abroad after the bankruptcy declaration. The
section in the Netherlands Act, for example, provides:
Creditors who, after the bankruptcy declaration, obtain satisfaction, fully
or in part, by attaching assets of the bankrupt abroad on which they
had no priority right, shall refund to the estate what they have received.
Professor Nadelmann has suggested that rather than rely on analo-
gies, it might be advisable to include in the United States Bank-
ruptcy Act an express provision similar to that contained in the
Netherlands Act.0 8 Similarly, a comparable provision in the Canadian
Act would be helpful.
Conclusion
The growth in the mutual trade and commerce between Canada
and the United States has outpaced the development of the bank-
ruptcy conflict of laws rules of each country. Old inequities still
exist and it is often difficult for professional advisers to protect
creditors from discrimination. Bankruptcy still only provides for
08 K. H. Nadelmann, op. cit., n. 24, at p. 1055.
McGILL LAW JOURNAL
[Vol. 18
a national execution against an insolvent debtor with assets and
creditors on each side of the border. Creditors, as a body, are
often hurt while a minority of creditors, financiers, lawyers and
trustees may benefit from the complexity of the law and from
situations that amount more or less to a legal “no man’s land”.
“Raubsystem” is the German term for such a system. Others have
called it a system of legal robbery 0 It is in the national interest
of both countries to find a remedy for this situation.
In the long run, it may be desirable for Canada and the United
States to negotiate a bankruptcy convention. It is not necessary,
however, to look only towards a convention to obtain relief. More-
over, any convention designed to provide for only a single admin-
istration, in all cases, might not be desirable as it would not give
the degree of flexibility to cope with the variety of situations that
can arise. No one rule or code of rules can be expected to solve
all situations equally satisfactorily in this complex field of laws.
Much, however, can be done to provide reasonable remedies
through unilateral improvements in the conflict rules of the bank-
ruptcy legislation of the two countries. To obtain the greatest
benefit and to minimize future conflicts, it is desirable that the
conflict rules of each country be as similar as possible, if not
uniform, to each other. At the same time, a wide discretion should
be given to the courts not only to assure the equal distribution
of the debtor’s assets, but to promote the social and economic
rehabilitation of the debtor and commercial morality.
To achieve a desirable level of uniformity in the bankruptcy
legislation of Canada and the United States so as to co-ordinate
the two systems will require close co-operation between the bank-
ruptcy and conflicts specialists of the two countries. It will also
require a degree of commitment similar to that exhibited by the
European Economic Community in its efforts to simplify the
formalities of the recognition of all judgments of member states.
Article 220 of the Convention of March 25, 195770 provides, for
example, that:
69Qu’arrive-t-il maintenant? Le jugement pronongant la faillite n’est pas
exdcutoire dans un autre pays. Et quelle est la consequence? Que des crdanciers
sans foi ni honneur saisissent dans le dernier pays h leur profit les biens
de Ia faillite qui se trouvent dans ce pays. Et le syndic ou curateur n’y peut
rien. L’existence de cet dtat de chose a 6t6 qualifide de v6ritable scandale.
C’est un vol plus ou moins 16galement organis6. Rahusen, Report of the
Fourth Conference on Private International Lav at the Hague.
70 (1957), 51 Am. 1. Int’l. L. 865, at p. 930.
No. 2]
BANKRUPTCY SYSTEMS OF CANADA AND THE U.S.
169
Member States shall, so far as necessary, engage in negotiations with
each other with a view to ensuring for their nationals … the simplification
of the formalities governing the reciprocal recognition and execution of
judicial decisions and arbitral awards.
It is not too much to hope that Canada and the United States
would feel similarily conmmitted to improve the simplification of
the formalities governing the reciprocal recognition and execution
of bankruptcy adjudications.
Much intensive research involving a comparative study of the
bankruptcy systems of the two countries along the lines suggested
by the Canada – United States Relations Committee of the National
Bankruptcy Conference must be undertaken. If this is to be done,
some consideration should be given to the institution that should
be responsible for this research or at least, for its co-ordination.
This could be an existing institution, a partnership of existing
institutions or some new institution created for the purpose.
In the summer of 1970, a three day round table was held in
Milan to study the problems of international bankruptcies within
the Common Market. 71 A similar conference involving Canadian
and American specialists could provide a forum for a discussion
of the problems of international bankruptcies involving Canada
and the United States with the positive aim of attempting to arrive
at a “rapprochement’
between the bankruptcy systems of the
two countries. From such a beginning involving the exchange of
information and the discussion of different viewpoints, an orderly
system of research and study could be co-ordinated. As Professor
Nadelmann, who has devoted much of a working lifetime to the
study of international bankruptcies, once said, “after a full coverage
of the subject, the possibilities for greater uniformity will appear
automatically. ’72
71 The proceedings of this Conference have just appeared: Les probl~mes
internationaux de la faillite et le marchd Commun, (Edizioni Cedam: Padova,
1971).
72K. H. Nadelmann. Concurrent Bankruptcies and Creditor Equality in
the Americas, (1947), 96 U. of Pa. L. Rev. 171, at p. 187.
