Against the veto solution in cross‐border avoidance law

Abstract UNCITRAL is striving to determine the law applicable to cross‐border insolvency avoidances. In principle, this should be the lex fori concursus . However, both Regulation (EU) 2015/848 and the laws of some European countries adopt a combination of lex fori concursus and lex causae called the ‘veto solution’. As a result, the insolvency practitioner applies the lex fori concursus , but the opponent may successfully object to the practitioner that the lex causae does not consider that act as challengeable. This article will maintain four theses. Firstly, when provisions of domestic insolvency avoidance law require proof, concerning the beneficiaries' mental state, this prerequisite concurs with the other prerequisites in detecting the debtor's fraudulent behaviour. This holds true also whenever statutes require that, at the time of the transaction, the beneficiaries should not be aware of the debtors' distress. In fact, in these cases the protection for the beneficiaries' good faith is only an unintended consequence of presumptions that aim at facilitating insolvency practitioners by shifting the burden of proof—this reverse burden transforms ‘bad faith’ proofs into ‘good faith’ proofs. Secondly, this statement covers also the many forms of actio pauliana that exist across Europe. Thirdly, Article 16 of Regulation (EU) 2015/848 is unlawful since it is non‐compliant with Article 81 of the Treaty on the Functioning of the European Union, on which Regulation 2015/848 is based. Fourthly, a lawmaker who intends to determine the law applicable to cross‐border insolvency avoidances ought to opt, both at the EU level and at the non‐EU level, for the lex fori concursus only.