Cross-Border Insolvency and Worker Protection: Implementation of Piercing the Corporate Veil in Cross-Country Bankruptcy

Abstract

The era of globalization has increased the activity of multinational corporations and the risk of cross-border insolvency. In this situation, legal protection for workers as preferred creditors is often hampered by the complexity of corporate structures and jurisdictional boundaries. This normative research with a comparative approach examines the possibilities for implementing the Piercing the Corporate Veil theory in the context of cross-border bankruptcy between Indonesia and Malaysia, as well as the legal standing of employees as preferred creditors.The results show that although both countries recognize workers' preferential rights and have a legal basis for applying the Piercing the Corporate Veil doctrine, its effectiveness in a cross-border context is very limited. The main obstacles stem from Indonesia's inadequate bankruptcy legal framework, the conflict between the principles of universality and territoriality, and the lack of a system for acknowledging and upholding foreign rulings. This research concludes that worker protection and the application of Piercing the Corporate Veil in cross-border insolvency between Indonesia and Malaysia will be ineffective without legal reforms, such are bilateral agreements to remove jurisdictional obstacles or the adoption of international instruments like the UNCITRAL Model Law.