Modified Universalism in Canada: Does it Know No Bounds?

I. Introduction

Over the past three decades, modified universalism has emerged as the preferred approach in Canadian cross-border insolvency cases. While the term “modified universalism” is not statutorily defined, both case law and academic discourse have contributed to a more precise understanding of its underlying rationale, which involves some compromise of state sovereignty under domestic proceedings to advance international comity and cooperation.[1] As new decisions are released, Canadian courts continue to refine our understanding of modified universalism’s parameters and its application, with the recent judgment in Diebold Nixdorf, Incorporated emerging as a key precedent in this process.[2] This paper discusses the Diebold decision and its implications for the future of Canadian cross-border insolvency law. Specifically, it focuses on Morawetz C.J.’s decision to recognize a U.S. Chapter 11 Court’s interim financing (DIP) order that extended a super-priority charge over pre-filing debts, despite Section 11.2(1) of the CCAA prohibiting such relief in domestic proceedings.