This concept of COMI has been used to allow the more powerful creditor to choose the regime that best suits their needs to maximize their return on credit. The following discussion is going to examine the theory of Professor Jackson and then consider whether he is indeed correct with insolvency law in the UK in domestic cases and then in consideration of cross-border proceedings where the EU regulations apply.
In the US insolvency law seems to more geared towards the creditor regaining their money back, because in good faith they have lent it out. Jackson argues that the assets of the individual should be pooled together and divided amongst the creditors on the strict economic basis to maximize the return of credit to the creditor.1 This would mean that the laws that offer this maximization of credit should be applied, even if there are different jurisdictions because the debt crosses state or international borders.2 Therefore this will be illustrated as the approach taken by the EU in regard to the new trans-border insolvency regulations, rather than individual actions for each creditor in differing jurisdictions. The enforcement of individual creditors needs versus the individual debtors needs is the soft approach that the UK system of law takes and NOT in the best interests of creditors because they should be able to get the maximum return of credit because they are already a loss. Jackson argues this hard economic approach, rather than an approach that considers the interests of the debtor.3 This is fair because the creditor in good faith has lent this money to the debtor expecting its return; therefore in the case that this is not possible the maximization of this return should be available.4 Therefore the question that has to be asked is what would the creditors' agreed to take prior to the insolvency and divided the assets this way, in order to get some return on the money lent in good faith, which is known as the creditor's bargain:
The Creditor's Bargain Model was developed by Professor Jackson. The model in simplest terms was utilized to analyze almost any bankruptcy issue by asking the theoretical question: What would creditors agreed to if they had been asked in advance of insolvency Professor Jackson argued that normative bankruptcy principles should be viewed as resolving a limited common-pool problem caused by the execution and enforcement of individual creditor remedies when the debtor has insufficient assets to satisfy all claims.5
As one can see in the formula that Jackson uses the rights of the debtor are not considered, such as the right to a home and funds to live on. In the UK there is a lot softer system; however in light of the cross border insolvency regulations that the EU has introduced this will soon change for cases that transcend borders.
UK Insolvency Law:
The following discussion will consider the SSGR and UK insolvency proceedings; however with COMI being in force the protections provided to the consumer may be eroded in another jurisdiction where