A Quebec Superior Court ruling has affirmed that Canadian insolvency courts are not obligated to mirror U.S. claims procedures, even in cases involving large numbers of American claimants, according to Bernard Boucher, a restructuring and insolvency lawyer at LCM Attorneys Inc.
The June 2026 decision concerned Asbestos Corporation Limited (ACL), a company that once mined asbestos in Thetford Mines, Quebec, before ceasing operations decades ago. ACL has since spent years managing a large volume of U.S. damage claims from people alleging harm from exposure to its product. Boucher said the case illustrates the broader tension that arises when two closely linked legal systems handle the same insolvency matter but apply different rules.
The Court’s Reasoning
U.S. claimants in the case argued that the claims process set up by Justice Jean-François Émond under the Companies’ Creditors Arrangement Act (CCAA) should more closely resemble the Trust Distribution Procedures (TDPs) used under the U.S. Bankruptcy Code. The claimants retained a retired U.S. bankruptcy judge as an expert to argue the American system offered greater transparency and oversight.
According to Boucher, Justice Émond rejected that position, finding that U.S. asbestos-related TDPs lacked ongoing court supervision and that the American system had allowed for false and fraudulent claims. Boucher noted that more than 60 U.S. trust funds have been established since 1988 to handle asbestos-related claims, paying out more than US$17.5 billion, but that the process had faced documented cases of fraud, with claimants in some instances seeking payment from multiple funds for the same damages.
By contrast, Boucher said, Émond concluded the CCAA process offered tighter court control over who could claim and how, operating as a public, court-supervised process with all information publicly available. Unlike the standardized U.S. distribution process, Boucher said the CCAA approach is tailored to each specific case. Leave to appeal the ruling was later denied, which Boucher said reflects the high bar for appeals in CCAA matters, where first-instance judges are given considerable discretion.
Cross-Border Insolvency Rules Still Diverge
Boucher said the ACL ruling highlights both how far Canada-U.S. legal alignment on insolvency has progressed and where its limits remain. In 2007, Canada’s Bankruptcy and Insolvency Act and the CCAA were both amended to add provisions for cross-border insolvencies based on the UNCITRAL Model Law on Cross-Border Insolvency, while the U.S. adopted its own version under Chapter 15 of its Bankruptcy Code. However, Boucher noted that each country incorporated only the elements that suited its own legal system rather than adopting identical rules.
He said this represents an improvement over the historical approach, under which recognition of a foreign insolvency proceeding depended largely on discretion rather than a defined legal mechanism. Chapter 15 now provides a more streamlined process for U.S. recognition of Canadian court orders in insolvency matters.
Boucher cautioned that Canadian court orders do not automatically apply outside the country, meaning creditors must seek recognition from courts in other jurisdictions where a debtor’s assets are located before they can enforce those orders. He said this matters for creditors of Canadian-based companies with operations in multiple countries, who need certainty about how they will recover assets.
Protocols Help, But Don’t Unify Systems
Cross-border insolvency protocols, which coordinate hearings, communication between courts, and service procedures, serve as an additional tool to reduce friction between jurisdictions, Boucher said. However, he stressed that such protocols cannot merge two distinct legal systems into one.
Boucher also noted that because there is some flexibility in determining a debtor’s “centre of main interest” for insolvency purposes, it can be worthwhile to evaluate which jurisdiction might offer more favourable treatment before filing—for example, in cases involving insurance policy coverage disputes, filing in a jurisdiction with a more generous approach toward the insured may be advantageous.
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