Vicarious Liability of the Debtor's Controlling Persons in Cross-Border Insolvency

Cross-border insolvency is an institute widely used around the world. The issues of its application are becoming more urgent with each passing year due to the development and intensification of international trade, the dispersion of economic resources of individual legal entities and because of more frequent cases of the transfer of corporate assets by their beneficiaries to foreign countries. Along with the strengthened importance of legal regulation of cross-border insolvency procedures, the need to resolve legal issues related with holding liable dishonest or incompetent managers, whose actions have led the company to be unable to fulfill its obligations to third parties, is growing as well. The Federal Law of 26 October 2002 № 127-FZ “On Insolvency (Bankruptcy)”, the main normative legal act on bankruptcies in the Russian Federation, lacks rules that would affect the conflictual aspects of cross-border insolvency, as well as the provisions governing the vicarious liability of the debtor’s controlling persons in cross-border insolvency. Such gap in the legal regulation may cause uncertainty on a set of issues related to the choice of applicable law and the determination of a court, competent of hearing disputes about holding the debtor’s controlling persons liable for their actions. This thesis sets the number of tasks, e.g. to study doctrinal researches of domestic and foreign scholars in law, analyse the norms set in international treaties, the legislation of the Russian Federation and the legal provisions of the European Union and the EU Member States and to identify certain patterns in the judicial practice of the Russian Federation, the European Union and the EU Member States. The main goal of this research is to identify the similarities, differences, advantages, and disadvantages of various approaches to this issue, as well as to develop proposals of possible improvement for Russian insolvency law regulating the vicarious liability of the debtor’s controlling persons Upon this research, a number of conclusions were drawn, including the definition of vicarious liability of the debtor’s controlling persons as a unique type of liability that emerges only during insolvencies, as well as the use of the “modified universalism” doctrine as the most optimal model for resolving conflict of laws in cross-border insolvency. Several proposals to improve the domestic bankruptcy law were made in this thesis, e.g. the use of the vis attractiva concursus principle in establishing the international jurisdiction of courts hearing the cases of holding the debtor’s controlling persons liable during cross-border insolvency procedures, as well as usage of lex fori concursus as the main connecting factor governing the applicable law.