The avoidance provisions of the Bankruptcy Code, mainly sections 547 and 548, together with section 550, are potent tools of the bankruptcy trustee: Sections 547 and 548 allow the trustee to avoid preferential and fraudulent pre-petition transfers to creditors and non-creditors, while section 550 allows the trustee to recover the avoided transfers for the bankruptcy estate. However, for decades, courts could not reach an agreement on the extraterritorial reach of these avoidance provisions. Two important earlier cases are In re Maxwell Communication, a Second Circuit case which held that section 547, lacking clear Congressional intent of foreign application, cannot be applied extraterritorially, and In re French, a Fourth Circuit case which held section 548 can be applied extraterritorially, as section 548 incorporated the definition of “property of the estate” from section 541, which is given extraterritorial reach with the phrase “wherever located.”
The Supreme Court’s decision in Morrison v. National Australia Bank introduced a strict presumption against extraterritoriality and—albeit being a non-bankruptcy case—defined the regime of extraterritorial avoidance after 2010. In Morrison, the Supreme Court held that without “clear indication” by the Congress, a federal statute has no extraterritorial application, and “clear indication” must be affirmative, excluding any “uncertain” or boilerplate terms. Moreover, Morrison created a two-step test, asking the courts to first look at the applicable statute and determine whether the strict presumption against extraterritoriality is rebutted and then determine whether the cause of action is foreign or domestic.
The post-Morrison world for extraterritorial avoidance was chaotic. A serious intra-circuit split occurred within the Second Circuit. In In re Madoff Securities, Judge Rakoff of the Southern District of New York held that the presumption against extraterritoriality cannot be rebutted, and the disputed transfer was extraterritorial because both the transferor and the transferee were foreign. In In re Lyondell, however, Judge Gerber applied reasoning similar to French and held that section 548 overcomes the presumption against extraterritoriality. The contest continued for years, and it was resolved, but only in part, by the Second Circuit’s recent decision in In re Picard, in which the Second Circuit held that in a case of actual fraud, when an initial transfer made from a U.S. bank account was received by foreign accounts and subsequently transferred to other foreign accounts, section 548 and 550 still apply because the transfer was “domestic” for the purpose of the second step of the Morrison test. Other circuits cannot reach an agreement either.
The Morrison test fails to achieve its purpose, or it achieves its purpose in part at best, but in an inefficient manner. The arguments for the presumption against extraterritoriality include: (1) the presumption helps preventing clashes with the laws of other countries and international laws, and (2) Congress focuses on domestic affairs and is not an expert on international law. The first argument is especially problematic, as the Morrison test applies indiscriminately in all cases, even when there is absolutely no conflict with non-domestic authorities in that case.Moreover, the Morrison test does not help to reduce uncertainty, because its second step is highly malleable for the judge; it also encourages the parties’ pre-transfer planning to circumvent future avoidance actions. For instance, a debtor can easily create a foreign bank account to receive American investors’ money and then transferred the money to another foreign account to make the transfer “foreign,” and judges can interpret the facts to make the “center of gravity” of a transfer foreign or domestic. In other words, the Morrison test makes the first step excessively rigid, and the second step excessively flexible. Furthermore, the Morrison test will almost certainly confuse its examination of the statute with its examination of the case facts, making it logically circular, since the statutory intent of extraterritorial reach must be considered when determining the extraterritoriality of the cause of action. This problem is evident in Picard, in which the Second Circuit focused on the avoidance provisions, instead of the facts themselves, to reach the conclusion that the disputed transfer was domestic.
Additionally, if the strict presumption against extraterritoriality cannot be rebutted for avoidance purposes, it will create logical inconsistencies. It is well accepted that section 362 of the Bankruptcy Code, namely the automatic stay provision, overcomes the presumption and has extraterritorial reach. Since the automatic stay prevents post-petition plundering of the estate, while the avoidance provisions prevent pre-petition plundering of the estate, it makes little sense that the former overcomes the presumption while the latter does not. The more fundamental logical consistency, however, is that it is antithetical to the purpose of the Bankruptcy Code: fair distribution of the estate and efficient bankruptcy proceedings.
Picard, which is arguably the most important judicial solution in recent years, does not provide a coherent answer. To create a predictable future, the first step of the Morrison test, namely the strict presumption against extraterritoriality, should be either displaced or declared to be rebutted for bankruptcy avoidance purposes. This solution is supported by the aforementioned problems of the presumption, as well as the jurisdictional grant for bankruptcy cases in 28 U.S.C. 1334(e). This would not compromise the protection against international discord, as courts almost always did an international comity analysis in addition to the Morrison test. Moreover, the home forum, namely the U.S., should be given special weight for the second step of the Morrison test. This is supported by the recent adoption of Chapter 15, which indicates that Congress embraces the modified universalism approach, which “accepts the central premise of universalism, that assets should be collected and distributed on a worldwide basis, but reserves to local courts discretion to evaluate the fairness of the home-country procedures and to protect the interests of local creditors,” in the area bankruptcy. Although some scholars argue that this would let the U.S. to dump its public policy to foreign countries, it is generally accepted that fair distribution and efficiency is public policy anywhere. Additionally, although the U.S. avoidance provisions are more wide-reaching than many other countries, implicated jurisdictions that find them to be offensive can simply deny their enforcement.
 11 U.S.C. §§ 547, 548, 550.
 In re Maxwell Commc'n Corp. plc by Homan, 93 F.3d 1036 (2d Cir. 1996); In re French, 440 F.3d 145 (4th Cir. 2006). See also In re Bankr. Estate of Midland Euro Exch. Inc., 347 B.R. 708 (Bankr. C.D. Cal. 2006) (holding that the avoidance provisions cannot be enforced extraterritorially).
 561 U.S. 247 (2010).
 Id. at 255–265.
 Id. at. 255–268. See also RJR Nabisco, Inc. v. European Cmty., 136 S. Ct. 2090, 2093–94 (2016).
 Securities Investor Protection Corp. v. Bernard L. Madoff Inv. Sec. LLC (In re Madoff Sec.), 513 B.R. 222, 226 (S.D.N.Y. 2014); Yanan Zhao, Applying The Presumption Against Extraterritoriality To Bankruptcy Avoidance Provisions--A Modified Universalism Solution To The Current Circuit Split, 53 Tex. Int'l L.J. 285, 295 (2018).
 Weisfelner v. Blavatnik (In re Lyondell Chem. Co.), 543 B.R. 127 (Bankr. S.D.N.Y. 2016).
 In re Picard, 917 F.3d 85 (2d Cir. 2019); Barry B. Bazian, Parsing Picard: Assessing the Extraterritorial Reach of the Bankruptcy Code's Avoidance and Recovery Provisions, 29 No. 2 J. Bankr. L. & Prac. NL Art. 4 (2020). For cases in the Second Circuit that denied extraterritorial application of the avoidance provisions before Picard, see Spizz v. Goldfarb Seligman & Co. (In re Ampal-Am. Israel Corp.), 562 B.R. 601 (Bankr. S.D.N.Y. 2017); La Monica v. CEVA Grp. PLC (In re CIL Ltd.), 2018 WL 329893 (Bankr. S.D.N.Y. Jan. 5, 2018).
 For disagreements among other jurisdictions, see In re FAH Liquidating Corp., 572 B.R. 117, 124-25 (Bankr. D. Del. 2017) (holding that the avoidance provisions have extraterritorial reach); King v. Export Dev. Canada (In re Zetta Jet USA, Inc.), 2020 WL 7682101 (Bankr. C.D. Cal. July 29, 2020) (holding that the avoidance provisions cannot be enforced extraterritorially).
 Erin E. Broderick, Replacing the Presumption Against Extraterritoriality for Bankruptcy Avoidance Actions, 2017 Ann. Surv. of Bankr. Law 8; Michael J. Colarossi, An Uncertain Future: The Questionable Extraterritoriality of the Bankruptcy Code's Core Prepetition Avoidance Provisions, 25 Am. Bankr. Inst. L. Rev. 229, 243 (2017).
 Morrison, 561 U.S. at 255; Broderick, supra note 10.
 See, e.g., Bazian, supra note 8.
 Franklin A. Gevurtz, Determining Exterritoriality, 56 Wm. & Mary L. Rev. 341, 370 (2014). See also Broderick, supra note 10; Zhao, supranote 6, at 289–90.
 In re Picard, 917 F.3d at 94–100.
 Zhao, supra note 6, at 306.
 Id. at 303; Broderick, supra note 10.
 28 U.S.C. 1334(e); Edward R. Morrison, Extraterritorial Avoidance Actions: Lessons from Madoff, 9 Brook. J. Corp. Fin. & Com. L. 268, 278–79; but see Colarossi, supra note 10, at 271.
 See, e.g., In re Madoff, 513 B.R. at 232; Picard, 917 F.3d at 100–106.
 Jay L. Westbrook, Chapter 15 at Last, 79 AM. BANKR. L.J. 713, 716 (2005); Jay L. Westbrook, Choice of Avoidance Law in Global Insolvencies, 17 BROOK. J. INT'L L. 499, 517 (1991). See also Colarossi, supra note 10, at 237.
 John J. Chung, In Re Qimonda Ag: The Conflict Between Comity and the Public Policy Exception in Chapter 15 of the Bankruptcy Code, 32 B.U. INT'L L.J. 89, 112 (2014) (criticizing the “one court, one law” ideal of universalists).
 Colarossi, supra note 10, at 234.; Morrison, supra note 17, at 283. For the fact that U.S. avoidance provisions are broader and more potent than many other countries’ avoidance laws, see In re Maxwell, 93 F.3d at 1050.