Between Efficiency and Sovereignty: Transnational Actors, the European Union, and the Regulation of Bankruptcy

The regulation of regional markets has traditionally challenged the sovereignty of the member states. The increasing presence of transnational actors has intensified this challenge. Those actors can benefit from single regulatory regimes that streamline their operations and activities. No country, however, is inclined to renounce its domestic approach. Can the tension between efficiency and sovereignty be resolved? The recent adoption of a transnational bankruptcy regulation in the European Union (EU) offers instructive insights. The intense struggle lasted from 1960 to 2000. The solution involves a clever compromise: elevating from the national to the regional level the law of the member state most implicated by a given bankruptcy. The approach merits careful consideration, for it departs both from parallel efforts at bankruptcy regulation by the United Nations, NAFTA, and the Scandinavian countries, and from the EU's own efforts in areas other than bankruptcy. Avoiding harmonization improves member states’ acceptance, while reliance on established national regimes guarantees oversight over much of the bankruptcy process. The absence of a fixed legislative framework, however, limits the number of issue areas that this type of approach can effectively target.