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Doug Krizner: Remember those two Bear Stearns hedge funds that went belly up? Investors were hoping to address their grievances in court, but Bear Stearns is asking the American legal system to butt out. Jill Barshay reports.

Jill Barshay: Seventy-five percent of all hedge funds are based in the Cayman Islands because it’s a tax haven.

Now, the Cayman Islands may be a good hedge fund home — even when you’re not making any profit.

Two Bear Stearns hedge funds filed for bankruptcy in the Cayman courts one week ago. And now Bear has asked a Federal Judge in New York to defer to the off-shore court in a case that has cost American investors and creditors more than a billion dollars.

Jay Westbrook is a law professor. He helped write a new chapter of the bankruptcy code that allows multinationals to pick one country to quarterback their liquidations. What if Bear were to get its way and other funds followed?

Jay Westbrook: Then in effect the sorting out of a major financial crisis in the United States would have been outsourced to a distant court that most people don’t know very much about and that will not be very visible.

Westbrook hopes the judge will force the hedge funds to re-file their cases where their assets are located — in the U.S.

I’m Jill Barshay for Marketplace.