Document Type

Article

Disciplines

International Law

Abstract

In 1983, the United States Bankruptcy Court of the Eastern District of Michigan dealt a blow to the generally cordial relations between the United States and Canada when it ignored a petition granted in the Supreme Court of Ontario in Bankruptcy.' In Toga, the U.S. Court denied a Canadian bankruptcy trustee's request for injunction against a U.S. creditor under 11 U.S.C. §304, holding that it was the court's duty to "protect United States citizens' claims against foreign judgments inconsistent with this country's well-defined and accepted policies."' While Toga is usually examined under the lens of §304 of U.S. Chapter 11,3 the case highlighted differences between the bankruptcy codes of Canada and the United States. The two neighbors, each the other's largest trading partner,' and sharing the longest unprotected border in the world,5 found themselves without a workable mechanism to settle cross-border insolvency disputes.

With increased trade between Canada and the United States, especially since the passage of the North American Free Trade Agreement ("NAFTA")in 1994 (trade between the two nations now amounts to U.S. $397 billion annually or about U.S. $1 million per minute), cross-border insolvencies have naturally become more common as well.7 Canada has been forced to change its bankruptcy and insolvency laws at least in part because of post-NAFTA economic realities. Where Canada did not change its bankruptcy and insolvency laws through legislation, common law alternatives have been crafted.

This paper will examine movements in Canadian bankruptcy and insolvency law since the Toga decision, with a focus on cross-border insolvency law, particularly in its relationship with U.S. debtors and creditors. Part II will examine the history of commercial bankruptcy law in Canada up to and including the sudden popularization of the half-century old Companies' Creditors Arrangement Act in the 1980's and the passage of the Bankruptcy and Insolvency Act (BIA) in 1992. Part III will analyze cross-border provisions of Canadian bankruptcy and insolvency law, both legislated and proposed, with a discussion of some of the most-publicized cross-border protocols involving Canada-U.S. cross-border insolvencies. In Part IV, I will conclude with some ideas concerning how Canada can further reform its corporate insolvency law to better reflect the reality of Canada's role in the global economy. Namely, I propose another look at a U.S.-Canada insolvency treaty.

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