COMI Debate continued from page 17 proponents of this proposal, suggesting its replacement with a private ordering mechanism known as ' The Commitment Rule.' According to this theory, the COMI rule generates significant legal uncertainty, increases litigation costs, and incentivizes opportunistic behavior in the period preceding insolvency proceedings. Scholars argue that the COMI rule“ hinders access to finance and destroys jobs and wealth, even if insolvency never occurs.” 4. By contrast, the Commitment Rule, as they propose, allows debtors to publicly and bindingly select their insolvency forum in advance by incorporating the choice into their company’ s constitution. Its primary advantage is its potential to benefit companies incorporated in jurisdictions with ineffective restructuring and insolvency frameworks, enabling them to choose a forum that better serves all stakeholders. In essence, the Commitment Rule seeks to create a win-win scenario by encouraging debtors to carefully consider and designate a forum that aligns with the interests of all constituencies before a financial crisis arises.
While their proposal has generated significant debate, eliminating the concept of COMI from
36 the MLCBI would undermine its objectives and the foundational principle of modified universalism. This stance is supported by several reasons, three of which are particularly relevant from the perspective of an emerging economy.
1. The Role of COMI in the MLCBI:
First, because COMI is not a concept that can be cut off without compromising the structure of the MLCBI. It serves as the foundation for identifying the main proceeding, which then determines the relief available upon recognizing a foreign proceeding. Moreover, recognition should not be regarded as a mere
4
CASEY, Anthony; GURREA-MARTÍNEZ, Aurelio; RASMUSSEN, Robert K.. A Commitment Rule for Insolvency Forum, p. 6. formality; it is a carefully designed mechanism to foster closer ties and sustained cooperation among countries. This may be less evident for Common Law countries, but for those rooted in the Civil Law tradition, existing international cooperation tools have proven inadequate for insolvency matters. Designed to execute specific stable judicial decisions or isolated procedural acts, these tools fall short in fostering the extensive, ongoing jurisdictional collaboration that cross-border insolvency requires. Even though cooperation among jurisdictions is not confined to the recognition procedure, it is challenging to envision judges in civil law and developing countries feeling comfortable dialoging directly with foreign authorities just because their countries have adopted a transnational model law or, worse, based on a private ordering mechanism. The understanding of a recognizing court functioning as an auxiliary court is relatively new for many countries, and delineating the limits of its jurisdiction poses significant challenges. However, the recognition process, along with the discretionary reliefs that might be granted, provides local courts with some degree of control over the adequacy of the requests in relation to their own laws. Despite its imperfections, COMI serves to distinguish between main and non-main insolvency proceedings, thereby identifying the central forum and its implications for the applicable bankruptcy rules 5. While it could be argued that the Commitment Rule would not impact the recognition process, this claim is only partially accurate. Various judgment recognition mechanisms are well-established in Private International Law; however, they have historically proven ineffective in the context of insolvency. What sets UNCITRAL ' s framework apart is the recognition of foreign proceedings based on their connection to either the debtor’ s center of administration or their economic
5
See Jay Lawrence Westbrook, Locating the Eye of the Financial Storm, 32 Brook. J. Int ' l L.( 2007).
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