Volume 2, Issue 2

Published July 1, 2021



Glenys P. Spence, J.D., LL.M.

Historically, bankruptcy law and admiralty/maritime law have been on a collision course. The nature of admiralty/maritime law is international for the obvious transnational transportation and movement of goods and people while bankruptcy law is a homeward bound scheme which seeks to protect debtors’ assets from the long arm of creditors. Modern commercial law principles have their genesis in the lex mercatoria (merchant law), and matters relating to the transportation of goods and the movement of people by sea are governed by the admiralty and maritime laws which originated from a long line of medieval maritime codes and the lex mercatoria. Today, these laws clothed in the garb of antiquity are fraught with tensions and are often difficult to reconcile and adapt to modern commercial transactions. In the area of maritime bankruptcy, this tension is sharply pronounced and often collides with the special admiralty rules of the United States. This jurisdictional chasm between these two bodies of law still exist because admiralty law is sui generis internationally. It is an embryonic creation, which came into being for the specific purpose of governing ocean-driven transnational transactions. The current attempts to sever this body of law from its federal moorings to promote uniformity through treaty law are fraught with legal uncertainties and threaten to disrupt a well-developed legal order. The tension today is uncannily reminiscent of the 400-year contest between the English admiralty and common law courts. Just as that matter was put to rest based on the inconvenience of geography, the current strife between admiralty and bankruptcy jurisdiction may well come to rest upon the same shore. 

Bankruptcy law on the other hand, is less embryonic than admiralty law. Although a creature of federal law, bankruptcy law is not exclusively federal nor does it derive from the Constitution, the well-spring of admiralty law. Moreover, bankruptcy law is significantly different between countries and is based upon moral and social mores of each country. Maritime and admiralty law on the other hand is international based upon shared international and transnational values as old as the oceans. Thus, bankruptcy law can be described as a creature of domestic origin while the roots of admiralty law are primordially international. The United States adoption and incorporation of the UNCITRAL model law on cross-border insolvency into the bankruptcy code is causing turmoil in the federal courts as demonstrated by recent cases concerning seafarer’s claims for wages and maintenance and cure. While the incorporation of the model law is positive for international business transactions or transnational transactions, extending Chapter 15 into the embryonic interstices of maritime law to disrupt the rights of “the wards of the admiralty” is an unwelcome intrusion into long-held principles of admiralty law.

This article will analyze the complications that arise in the maritime industry when the owner of a vessel declares bankruptcy. Of current importance is the rate of bankruptcy filing heralded by the global Covid-19 pandemic. One of the most pressing issues is the plight of seafarers such as crewmen who are struggling to receive wages for labor and also wages for maintenance and cure, which arose both pre-pandemic and have increased during the pandemic. This article will focus on the plight of these seafarers whose wages for labor and maintenance and cure are in danger of falling prey to the automatic stay provisions and lien priority when district courts cede jurisdiction to the bankruptcy code under Chapter 15 of the bankruptcy law. For cases in the admiralty, jurisdiction is proper under an independent source of subject-matter jurisdiction, which is separate from cases arising under the other two enumerated classes under the Article III power. The distinction begs the question of whether the bankruptcy power, which falls under the “laws of the United States,” should be imposed on cases arising under the admiralty and maritime jurisdiction.


Stephanie Ben-Ishai and Mandy Benford

In late 2019, an Indigenous man and his 12-year-old granddaughter were detained by Vancouver police after they attempted to open a bank account. This incident followed other reports of male-to-female transgender people who had been locked out of their online bank accounts due to their voices sounding too deep to correlate with the female name on their accounts. In some instances, the “solution” was for the bank to effectively “out” the individual as transgender on their file without their consent.

As shocking as these examples are, they illustrate how discrimination continues to persist in the consumer lending sphere in Canada. “Commercial racial profiling,” where a person of color is treated with more suspicion than other customers, remains common. Perhaps as a result of this mentality, businesses run by women are less than half as likely as male-owned businesses to seek financial support or loans from banks. Similar trends have been reported among other visible minority groups. While these attitudes have unfortunately persisted, the consumer lending industry has begun to adopt algorithms to guide its decisions. This has raised questions about what role these tools are playing in eradicating or perpetuating discrimination, particularly when it’s decision-making processes are unclear.

Recently, the Apple Card’s algorithm came under public scrutiny when users claimed the algorithm perpetuated gender discrimination. In early November 2019, a prominent web developer tweeted that his wife had received a credit limit of only $57 for the card – and a fraction of the credit limit that he had been granted. This was despite the fact that he and his wife file joint tax returns, live in a common property state, and she has the higher credit score. This thread promptly went viral, and was corroborated by other married couples, including, notably, Apple co-founder Steve Wozniak. The credit card’s decision-making processes were under investigation from the New York Department of Financial Services at the time of publication. In response to the situation, the developer said, “My belief isn’t there was some nefarious person wanting to discriminate. But that doesn’t matter. How do you know there isn’t an issue with the machine-learning algo[rithm] when no one can explain how this decision was made?”

While these examples may appear isolated, or the result of a glitch in the algorithm, or a well-intentioned mistake, poor access to consumer credit has significant consequences for economic advancement. Student loans are used to invest in skills that lead to better economic opportunities. Credit cards can be used to make large purchases and gain a financial benefit from those expenditures through cash-back or points programs. Lines of credit can help pay for major, unexpected expenses like a car repair, a leaky roof, or temporary medical expenses. Car loans can help people get to their jobs unconstrained from a bus route or schedule. Mortgages can provide families with the security of a home and a fixed address, as well as providing a potential source of funds in retirement. The availability and price of this credit will help determine how well-placed individuals are to handle life’s financial surprises and build a stable economic future.

Arguably, neither the Canadian or American system is adequately set up to address the problem of a lender or credit scoring agency using algorithms to discriminate against minority groups. Both suffer from regulatory fragmentation – in Canada across jurisdictions, and in the United States across agencies with similar and overlapping mandates. This state of affairs could be positive if the governments could tailor regulations to their jurisdictions and try novel policy ideas. However, that does not appear to be the case in either Canada or the United States. 

This article will first examine the role that algorithms are playing in the consumer lending process, and how existing inequalities can be ingrained and perpetuated by new uses of this technology, particularly by credit scoring agencies, which perform both the credit reporting and credit rating functions. It will then examine how credit scoring and discrimination in financial services are regulated in both Canada and the United States. Exploring the American experience is critical to understanding how the issue may manifest itself in Canada, which is at an earlier stage in using this technology and, as a result, has less in the way of data and regulatory experimentation. Finally, the paper will conclude with a call for data collection to determine the scope of the issue specific to Canada, and provide early recommendations for how the issue could be addressed, including by describing best practices for algorithms, regardless of sector.


Dr. Zhang Zinian

Financial company bankruptcies draw attention from policymakers and academics, particularly after the 2007-2008 global financial crisis. Arguably, the bankruptcy of financial companies, most of them banks, insurance firms, and securities or brokerage firms, is different from that of ordinary companies, since the former may trigger a systemic risk if handled inappropriately. Also, to protect clients/customers in financial company bankruptcies appears to be a priority, whereas the bankruptcy of ordinary companies tends to serve the best interests of creditors.

There is growing literature shedding light on the bankruptcy of financial firms in the USA and the UK, but little has been done to examine what happens in China, especially given the importance of the Chinese economy to the world. This article is to fill the gap and ventures to investigate the bankruptcy of one particular type of financial firms: securities companies. Securities companies mainly act as broker-dealers in stock markets to trade on behalf of clients, but their businesses usually expand to trading stocks as principals. Of course, these companies also frequently underwrite and sponsor stock issuances and provide investment advisory services. In the UK, these companies are generally called investment banks.

An empirical study looking at bankruptcy among China’s securities companies is now possible, because in the past twenty years there was a wave of securities company bankruptcies. Given that many securities firm bankruptcies have been concluded in recent years, the time seems to be ripe to do a thorough investigation. This article excludes the insolvency of banks and insurance companies, because their insolvency has not yet been tested before Chinese courts. Also, it is more or less the intention of the Chinese government to use the bankruptcy of securities companies to gain experience so as to prepare for a comprehensive bankruptcy solution for failed banks and insurance companies. Hence, the current bankruptcy of securities companies heralds how the bankruptcy of banks and insurance companies will be dealt with in China in the foreseeable future.

To investigate brokerage firm insolvencies in China, this article attempts to answer two questions: What are the main features of the Chinese way in solving securities company bankruptcies? And are customers adequately protected in these proceedings?

To this end, the rest of the paper proceeds in three parts. Part II considers the background of the Chinese securities industry and the legal framework dealing with securities company insolvencies. Part III reports the main characters of securities company bankruptcies. Part IV examines the effectiveness of China’s current securities customer protection regime. The summaries and policy recommendations are placed in the conclusion.




Priya Misra & Adam Feibelman

In April of 2019, the Indian airline firm Jet Airways suspended operations having failed to make payments due to its oil supplier, on its airplane leases, and to other creditors.  Shortly thereafter, foreign creditors successfully petitioned a court in the Netherlands, where the airline operated a hub, to initiate insolvency proceedings and appoint an administrator under Dutch law.  The European creditors were owed approximately $10 million, a small proportion of the entire sum of the firm’s total debt that amounted to many billions.  The administrator quickly seized one of Jet Airway’s planes that had been parked in the Netherlands.  Other creditors, including the State Bank of India, subsequently initiated insolvency proceedings pursuant to India’s Insolvency and Bankruptcy Code against the firm in India at the National Company Law Tribunal, the adjudicating authority for corporate insolvencies under the Code.  The Dutch administrator sought recognition of the Netherlands proceedings by the Tribunal in Mumbai as well as financial information about the firm.  The Mumbai Tribunal refused to recognize the Dutch proceeding or allow the Dutch administrator to participate in the insolvency proceeding in India because it found that the Insolvency and Bankruptcy Code did not formally allow for either action.

This overlapping of insolvency proceedings in different countries regarding a common debtor represents a recurring and seemingly intractable challenge of transnational commercial law.  Management of bankruptcy and insolvency cases with cross-border aspects has evolved – and improved – considerably over recent decades.  But it remains a legal domain that is very much in flux, with a spectrum of institutional approaches and varying degrees of transnational cooperation and coordination.  This Essay addresses the move in India to adopt one of these approaches.  In brief, it argues that questions of design of such a regime may be of secondary importance to other institutional challenges, especially the capacity and inclination of judicial actors who will be responsible for operating the regime to cooperate and coordinate with foreign entities, courts, and institutions.


Dr. Surbhi Kapur & Animesh Khandelwal

Insolvency regimes are crucial due to market imperfections, such as coordination problems, incomplete contracts and information asymmetry. For this reason, well-designed insolvency/bankruptcy regimes are crucial to facilitate the exit of failing firms in an orderly fashion and realise the potential productivity gains therefrom. Such regimes are required to deal methodically with the financial distress of commercial entities (i.e., corporate insolvency) and entrepreneurs who have either been trading as a sole proprietor or who are part of a closely- held private entity (i.e., personal/individual insolvency).

A robust framework for insolvency resolution encourages deeper more resourceful capital markets and higher levels of entrepreneurship. Insolvency law is broadly recognised as an essential tool in well-functioning economies. A balance of mechanisms that allow for timely and effective resolution (and if it fails, liquidation) also provides for a “fresh start” for individual entrepreneurs and the rehabilitation of viable businesses. In this way, it tends to enhance creditor recoveries and lender confidence. Globally, a concern has been expressed that while insolvency systems are evolving, there continue to be barriers to effective restructuring for Micro, Small and Medium Enterprises (MSMEs) and whether the system adequately serves the interests of the MSMEs. Therefore, sufficient availability of credit to business entities, specially the MSMEs, while being a major determinant of entrepreneurial activity, is interlocked with the nature of a country’s legal and socio-economic fabric.

MSMEs often face liquidity issues and are generally at a higher default risk. They usually face scarcity of working capital, higher interest rates and larger collateral requirements. More often than not, it is difficult to separate business assets from personal assets. In view of this, MSMEs deserve a differentiated treatment in their insolvency resolution/bankruptcy process. It is necessary that such a specialised regime resolves their insolvency in a time bound manner with the least amount of disruption and low-cost bearing. Concomitantly, the avoidance of social stigma associated with business failure and personal risk of individuals should be given emphasis. Considering the importance of this business sector globally, their exit policy may also provide for out-of-court restructuring mechanisms and measures for debt counselling.

Despite the pivotal role and strategic importance in the context of industrial development and economic growth of a country, the MSME sector experiences several constraints and challenges. Specifically, while in the Indian economic landscape, it is observed that as a catalyst for socio-economic transformation of the country, the MSME sector is extremely crucial in addressing the national objectives of bridging the rural-urban divide, reducing poverty and generating employment to the teeming millions. In this milieu, research is aimed at conducting a preliminary examination of issues relevant to the insolvency resolution/bankruptcy of MSMEs, and in particular, to consider whether the existing legal mechanisms provide sufficient and adequate solutions for MSMEs. It shall also be the endeavor of this research to consider what further potential work might be required to streamline and simplify insolvency/bankruptcy procedures for MSMEs. Additionally, it will be germane to examine whether there exist policies for out of court restructuring, preventive restructuring or pre-packaged insolvency resolution of MSMEs.

Further, the research will also scrutinize the MSME insolvency/bankruptcy procedures from the point of view of the nature of business of MSMEs in general, i.e., varied and innovative. The entire analysis shall be conducted in order to understand all the issues from a cross-country perspective, specifically focusing on the juxtaposition of similar issues/solutions adopted within the Indian legal framework vis-á-vis the procedures and practices followed by the other economies, including that of Japan and France. The research will also reflect upon the importance of international soft law instruments including, but not limited to, the UNCITRAL Model Law on Cross-Border Insolvency and the Reports of the UNCITRAL Working Groups. This discourse will be incomplete without considering the ever-evolving jurisprudence in the area of insolvency resolution/bankruptcy of MSMEs which is reaching a state of matured development, however, the ramifications of the same are yet to attain realization.


Rebecca Parry & Jingchen Zhao

Zombie companies are a legacy of China’s industrial heritage and its planned economy. Recent government policies have emphasized the importance of businesses based on technology and the elimination of unviable zombie companies in efforts to transform China’s image. Paralleling Schumpeter’s idea of creative destruction, in which new ways of doing things replace old established ways, the elimination of zombie companies has been the subject of ambitious implementation targets for local governments. Ostensibly these targets are to be met in market-driven ways, however, much of the Chinese infrastructure requires further development if this is to be the case. This article outlines the approach that has been taken to the resolution of zombie companies as well as the challenges presented by such cases that have so far militated against market-driven resolution. The paper adopts a structure that will consider how state policies decided at the macro-level have been implemented by local governments at the meso-level and will also consider potential impacts on communities at the micro-level. It also considers how achievements in zombie company withdrawal have been reported, identifying narratives of creative destruction, as well as potential impacts of state policies.