American College of Bankruptcy/
National Conference of Bankruptcy Judges
First Annual International Insolvency Roundtable
New Orleans, Louisiana
October 14, 2010
International Insolvencies and Controversies:
Chapter 15 and Beyond
American College Introduction:
Paul Singer, Pittsburgh, Pennsylvania, Chair, American College of Bankruptcy
Moderator:
Bruce Leonard, Cassels Brock & Blackwell LLP
Toronto, Ontario
Presenters:
Hon. Charles G. Case II, United States Bankruptcy Court
Phoenix, Arizona
Michael Crystal, Q.C., 3-4 South Square
London, England
Thomas B. Felsberg, Felsberg, Pedretti, Mannrich e Aidar Advogados e
Consultores Legais
Sao Paulo, Brazil
Professor Jay L. Westbrook, University of Texas
Austin, Texas
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International Insolvencies and Controversies:
Chapter 15 and Beyond
Introduction
Bruce Leonard and David Ward
Cassels Brock & Blackwell LLP
Toronto
The American College of Bankruptcy is pleased and proud to be able to
introduce this series of International Roundtables to focus on the most important
and significant developments in the international insolvency area in the world
today.
A dozen years ago it was unusual to find a major case that had significant
international components and ramifications. These days, it is difficult to find a
major case that does not have significant international issues and components.
Frequently, the international issues are critical and determinative of the fate of
the reorganizing business. As a consequence, Chapter 15 and its counterparts
have become exceptionally important features of international trade and
commerce and are having an effect that has substantially exceeded the
expectations and intentions of the founders and drafters of the UNCITRAL Model
Law on Cross-Border Insolvency.
Chapter 15, which adopts the Model Law for purposes of the Bankruptcy Code,
and its counterparts around the world represent a significant and unprecedented
advance in international insolvency systems and procedures which has no equal
in any other developments in the international insolvency field. The enactment of
Chapter 15 and its counterparts in 19 different countries have brought about a
profound change in the way that international insolvencies and restructurings are
able to proceed. A listing of the countries that have adopted the Model Law
(with, in some cases, local variations) appears as Appendix A to this paper in the
Conference CD.
The Model Law on Cross-Border Insolvency was produced under the auspices of
the United Nations Commission on International Trade Law (UNCITRAL) which is
the United Nations’ major commercial law organization headquartered in Vienna.
UNCITRAL began work on the Model Law project in 1994 out of a recognition
among insolvency practitioners that international insolvency systems and
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structures were areas that were ripe for improvement. The UNCITRAL project
focused on the twin concepts of access and recognition: access for foreign
insolvency representatives in domestic insolvency proceedings and recognition
of insolvency proceedings in other jurisdictions (subject to protections for local
domestic creditors). The insolvency profession was solidly behind improvements
of this kind and UNCITRAL’s work on the Model Law on Cross-Border Insolvency
concluded in three years with the Model Law being approved by the United
Nations General Assembly in 1997. This was thought to be the fastest-ever
completion of a major UNCITRAL project in UNCITRAL’s 40 years of commercial
law activities. The Model Law was developed at precisely the right time to begin
to accommodate the wave of business globalization that has swept the world in
recent years.
Chapter 15 and the Globalization of Reorganizations and Restructurings
Globalization and the tremendous advances in information technology within the
last two decades have made it commonplace for businesses to operate in a
variety of different countries at the same time and to link all of these operations
as if they were right next door. A multinational business can make decisions
quickly that affect its global operations; it can allocate resources internationally in
a manner which best suits its objectives and it can utilize its going-concern
values to augment the value of its underlying operating assets on the basis that
the whole is greater than the sum of the parts.
Historically, the onset of an insolvency case stopped all that and turned the
otherwise cohesive business into a series of disconnected segments in several
different countries. In a typical pre-Chapter 15 international insolvency, different
sets of creditors assert different kinds of claims to different assets under different
rules in different countries. The unified international business that was once
carried on comes to an end and separate, unconnected remnants of the
organization attempt to continue until they either starve or implode. It is almost
as if the cross-border insolvency system had been set up deliberately to promote
failures and liquidations.
Until the Model Law and Chapter 15, the structural framework for dealing with
multinational and cross-border businesses in financial difficulty had not evolved
from the state it had been in several decades ago. Typically, when insolvency or
financial failure affected a multinational business, it was most commonly dealt
with through a variety of independent, separate and often-unconnected
administrations, most often for different, if not conflicting, purposes. However,
recent experience under Chapter 15 has brought significant improvements. The
adoption of the UNCITRAL Model Law that has the potential to free the
international legal regime for insolvencies from their historical detrimental
compartmentalization.
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Consider the contrast in domestic terms if traditional international insolvency
rules applied to a domestic business in financial difficulty. Suppose that the
financially-troubled business had operations in New York, Chicago, Dallas and
Los Angeles instead of in England, France, China and the United States. After a
filing, the portions of the business in New York, Chicago, Dallas and Los Angeles
would each be run separately by different court-appointed officials. None of the
courts involved would be obliged to recognize orders made by another court and
there would be severe pressure from local creditors for local courts to ignore the
proceedings in the other courts entirely. Legislation would typically prefer local
creditors over others. Transactions between the different portions of the
business would grind to a halt. Receivables would be collected in the jurisdiction
of the account debtor and would not be released to any of the other courts or
creditors. It is only relatively recently that the insolvency profession and the
courts have been able to work toward a system that pays more attention to the
interests of the stakeholders than to issues of the national sovereignty of the
jurisdictions involved.
The Experience with Chapter 15: Since Chapter 15 was proclaimed in force as part of the BAPCPA in 2005, there
has been a growing trend to its use and application in cases involving
international businesses. A listing of the cases in which Chapter 15 relief has
been considered and, usually, granted is included in the Conference CD as
Appendix B. Although the listing is not exhaustive, it includes over 230 Chapter
15 cases from 36 Bankruptcy Courts including decisions in four Circuit Courts.
We do not believe that a Chapter 15 case has yet had the opportunity to reach
the U.S. Supreme Court.
In addition, the United Nations Commission on International Trade Law
(“UNCITRAL”) which originated the Model Law maintains, on the basis of
information provided to it, a listing of cases involving the application of the Model
Law. To this point, the UNCITRAL system has over 30 cases relating to the
Model Law that are referenced and summarized in its system. The system can
be accessed on the UNCITRAL website (www.uncitral.org). Follow the prompts
to the CLOUT (for Case Law on UNCITRAL Texts) page or search on
UNCITRAL - CLOUT.
Cross-Border Communications in International Cases: The dual impact of globalization and technological innovation has changed
international commerce forever. Transactions involving multinational businesses
can be carried out in mere seconds, regardless of the geographical location of
the parties to the transaction. Transactions among units of the same global
enterprise have also moved firmly into the 21 st century but, where unforeseen or
unfortunate circumstances lead to the need for reorganizations or restructurings,
the pace of communication among jurisdictions reverts to the 19th century. By
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and large, the stakeholders of the global business are the losers in this
technological regression.
The Model Law sought to solve this problem and Chapter 15 consequently
contains provisions that contemplate and even require cooperation between
domestic and foreign courts: Sections 1525 – 1527. Section 1525 is particularly
instructive and provides that:
Section 1525
Cooperation and direct communication between
the court and foreign courts or foreign
representatives
(a)
Consistent with section 1501, the court shall cooperate to the
maximum extent possible with a foreign court or a foreign
representative, either directly or through the trustee.
(b)
The court is entitled to communicate directly with, or to
request information or assistance directly from, a foreign court or a
foreign representative, subject to the rights of a party in interest to
notice and participation.
Cross-border communications between courts in international cases were on the
rise even before Chapter 15 was enacted, largely based on the work of the
American Law Institute. The ALI promulgated its Guidelines for Court-to-Court
Communications in Cross-Border Cases as part of its leading Transnational
Insolvency Project which involved an analysis of the insolvency systems of the
United States, Canada and Mexico and the means by which insolvency
proceedings involving those countries could be coordinated.
(The ALI
Transnational Insolvency Project report is a four volume analysis published by
Juris Publishing and details are available from the ALI at www.ali.org).
The Guidelines have been approved or endorsed by several leading associations
including the National Conference of Bankruptcy Judges, the United States
National Bankruptcy Conference, the Canadian Judicial Conference, the United
States Bankruptcy Court for the Southern District of California and have been
applied by Bankruptcy Courts in six separate states of the United States and four
provinces of Canada.
A copy of the Guidelines for Court-to-Court
Communications in Cross-Border Cases as promulgated by the American Law
Institute and adopted by the International Insolvency Institute are included as
Appendix F in the Conference CD.
Most often in international cases, the Guidelines are incorporated into a CrossBorder Insolvency Protocol between the two courts involved in the cross-border
administration and these types of Protocols have become increasingly popular.
Protocols have been approved and entered by Courts in ten different countries to
this point and, within the United States, protocols have been entered into in ten
separate Bankruptcy Courts including a large number in the Southern District of
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New York and in the District of Delaware. A listing of major Cross-Border
Insolvency Protocols is attached as Appendix G in the Conference CD.
Insolvencies of Multinational Corporate Groups: One of the newest areas of endeavour in the international insolvency area is the
complex and perplexing issue of how best to deal with insolvencies of corporate
groups that carry on business in many different countries. The topic is too large
and complicated for this panel presentation but some valuable preliminary work
has been done in the context of preparing Guidelines for the coordination of
multinational group insolvencies. A copy of the current version of the draft
Guidelines as prepared by Hon. Ralph R. Mabey and Susan Power Johnston of
New York is attached as Appendix H in the Conference CD.
[Authors’ Note:
Delegates and readers who are aware of the application of
the ALI Guidelines for Court-to-Court Communications in Cross-Border Cases in
cross-border cases or of the entry of formal Cross-Border Insolvency Protocols
between courts in international administrations are encouraged to forward the
details (with copies if possible) to Bruce Leonard at bleonard@casselsbrock.com.
The American College of Bankruptcy is keeping a listing of all major protocols
and appreciates being advised of any new Protocols that are entered into and of
orders that are made that adopt or apply the ALI Guidelines for Court-to-Court
Communications in Cross-Border Cases. Everyone’s assistance to this is
sincerely appreciated.]
Bruce Leonard and
David Ward
Cassels Brock & Blackwell LLP
Toronto
July 15, 2010
______________________
Appendices Included in the Conference Materials
Appendix A
Countries that have adopted the UNCITRAL
Model on Cross-Border Insolvency (with dates
of adoption)
Appendix B
Chapter 15 Cases (Organized by the Country
of Foreign Proceeding)
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Appendix C
Chapter 15 Cases (Circuit Court Decisions)
Appendix D
Bibliography of Articles on Chapter 15 of the
United States Bankruptcy Code (as at July 15,
2010)
Appendix E
Bibliography of Articles on the UNCITRAL
Model Law
Appendix F
Guidelines for Court-to-Court Communications
in Cross-Border Cases approved by the ALI
and the III.
Appendix G
Cross-Border Insolvency Orders and Protocols
Appendix H
Guidelines for Coordination of Multi-National
Enterprise Group Insolvencies
______________________
Papers by Presenters included in the Conference CD
Hon. Charles G. Case II, United States Bankruptcy Court, Phoenix: “Fine Tuning
Chapter 15: Recent US Judicial Interpretations of Key Elements of the Statute”
Michael Crystal, 3-4 South Square, London:
Administration Procedure in England”
“An Introduction to the
Thomas B. Felsberg, Felsberg, Pedretti, Mannrich e Aidar Advogados, Sao
Paulo, Brazil
Professor Jay L. Westbrook, University of Texas, Austin
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Appendix A
Countries that have adopted the UNCITRAL Model on Cross-Border Insolvency
(with dates of adoption):
Date
Country Adopting
1998
Eritrea
2000
Japan
Mexico
South Africa
2002
Montenegro
2003
British Virgin Islands
Poland
Romania
2004
Serbia
2005
United States of America
2006
Colombia
Great Britain
New Zealand
Republic of Korea
2007
Slovenia
2008
Australia
2009
Canada
Mauritius
2010
Greece
Source: United Nations Commission on International Trade Law (UNCITRAL:
www.uncitral.org)
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Appendix B
Chapter 15 Cases
(Organized by the Country of the Foreign Proceeding)
Australia
Betcorp Limited, 08-21594 (Bankruptcy Court for the District of Nevada 2008-1002).
Bahamas
CLICO (Bahamas) Limited, 09-17829 (United States Bankruptcy Court for the
Southern District of Florida (Miami) 2009-04-28).
Barbados
Bancafe International Bank, Ltd., 06-16712 (Bankruptcy Court for the Southern
District of Florida 2006-12-19).
Belgium
Compagnie Europeenne d’Assurances Industrielles S.A., 07-12009 (Bankruptcy
Court for the Southern District of New York 2007-06-28).
Bermuda
Alternative Market Exchange Ltd., 06-22657 (Bankruptcy Court for the Eastern
District of California 2006-07-20).
Arion Insurance Company Ltd., 07-12108 (Bankruptcy Court for the Southern
District of New York 2007-07-09).
Bluepoint Re, Ltd., 08-13169 (Bankruptcy Court for the Southern District of New
York 2008-08-13).
Combined Services Ltd., 06-22655 (Bankruptcy Court for the Eastern District of
California 2006-07-20).
Hatteras Reinsurance Ltd., 06-11304 (Bankruptcy Court for the Southern District
of New York 2006-06-08).
New World Network International, Ltd. 06-10157 (Bankruptcy Court for the
Southern District of New York 2006-01-26).
__________________________
Details provided in part courtesy of www.chapter15.com (Beard Group Inc.),
Washington, D.C.
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Sagecrest Holdings Ltd., 09-50546 (Bankruptcy Court for the District of
Connecticut (Bridgeport) 2009-03-27).
Tri-Continental Exchange Ltd., 06-22652 (Bankruptcy Court for the Eastern
District of California 2006-07-20).
Brazil
ITSA Intercontinental Telecommunicacoes Ltda., 08-13927 (Bankruptcy Court for
the Southern District of New York 2008-10-07).
Independencia S.A., 09-10903 (Bankruptcy Court for the Southern District of
New York (Manhattan) 2007-02-27).
Varig Logistica S.A., 09-15717 (Bankruptcy Court for the Southern District of
Florida (Miami) 2009-03-31).
Canada
1306943 Ontario, Ltd., 08-12633 (Bankruptcy Court for the Western District of
New York 2008-06-16).
1444240 Ontario, Inc., 08-12634 (Bankruptcy Court for the Western District of
New York 2008-06-16).
1619005 Ontario Ltd., 06-10093 (Bankruptcy Court for the Southern District of
New York 2006-01-18).
4200217 Canada, Inc., 08-11446ch (Bankruptcy Court for the District of
Delaware 2008-07-14).
4322525 Canada Inc., 07-11030 (Bankruptcy Court for the District of Delaware
2007-08-01).
9165-7999 Quebec Inc., 06-07875 (Bankruptcy Court for the Northern District of
Illinois 2006-07-05).
ACE Formulations Ltd., 06-10094 (Bankruptcy Court for the Southern District of
New York 2006-01-18).
ACE US Trademark Ltd., 06-10096 (Bankruptcy Court for the Southern District of
New York 2006-01-18).
Abitibi-Consolidated Inc., 09-11348 (United States Bankruptcy Court for the
District of Delaware 2009-04-17).
Aker Plastics Co., Inc., 08-11452 (Bankruptcy Court for the District of Delaware
2008-07-14).
Ascalade Communications, Inc., 08-10612 (Bankruptcy Court for the Northern
District of Illinois 2008-04-29).
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Ascalade Technologies, Inc., 08-10616 (Bankruptcy Court for the Northern
District of Illinois 2008-04-29).
Baronet U.S.A., Inc., 07-13821 (Bankruptcy Court for the Southern District of
New York 2007-12-04).
Baronet, Inc., 07-13822 (Bankruptcy Court for the Southern District of New York
2007-12-04).
Biltrite Rubber (1984) Inc., 09-31423 (United States Bankruptcy Court for the
Northern District of Ohio (Toledo) 2009-03-12).
CPI Plastics Group (Canada) Ltd., 09-20181 (U.S. Bankruptcy Court for the
Eastern District of Wisconsin (Milwaukee) 2009-01-08).
CPI Plastics Group Inc., 09-20180 (U.S. Bankruptcy Court for the Eastern District
of Wisconsin (Milwaukee) 2009-01-08).
CPI Plastics Group Limited, 09-20175 (U.S. Bankruptcy Court for the Eastern
District of Wisconsin (Milwaukee) 2009-01-08).
CapCity Clothing, Inc., 08-11540 (Bankruptcy Court for the Southern District of
New York 2008-04-28).
Cavendish Analytical Laboratory, Ltd., 07-00922 (Bankruptcy Court for the
District of Arizona 2007-05-30).
Cell Formulations Ltd., 06-10097 (Bankruptcy Court for the Southern District of
New York 2006-01-18).
Chemokine Therapeutics Corp., 09-11189 (United States Bankruptcy Court for
the District of Delaware (Delaware) 2009-04-03).
Creative Building Maintenance Inc., 06-03587 (Delaware Corporation)
(Bankruptcy Court for the Western District of New York 2006-11-15).
Creative Building Maintenance Inc., 06-03586 (Ontario Corporation) (Bankruptcy
Court for the Western District of New York 2006-11-15).
Crila Investments Inc., 09-20177 (U.S. Bankruptcy Court for the Eastern District
of Wisconsin (Milwaukee) 2009-01-08).
Crila Plastics Industries Inc., 09-20179 (U.S. Bankruptcy Court for the Eastern
District of Wisconsin (Milwaukee) 2009-01-08).
Daymonex Limited, 07-90171 (Bankruptcy Court for the Southern District of
Indiana 2007-02-02).
Destinator Technologies Intellectual Properties, Inc., 08-11004 (Bankruptcy Court
for the District of Delaware 2008-05-20).
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Destinator Technologies, Inc., 08-11003 (Bankruptcy Court for the District of
Delaware 2008-05-20).
Destinator Technologies, Inc. (Canada), 08-11005 (Bankruptcy Court for the
District of Delaware 2008-05-20).
Efrat Friedman, 07-22719 (Bankruptcy Court for the District of Colorado 2007-1101).
Evergreen Gaming Corporation, 09-13567 (United States Bankruptcy Court for
the Western District of Washington (Seattle) 2009-04-15).
G.T.T.-Stats International Inc., 07-11886 (Bankruptcy Court for the Northern
District of New York 2007-07-11).
GENERAL Formulations Ltd., 06-10098 (Bankruptcy Court for the Southern
District of New York 2006-01-18).
Gandi Innovations Holdings, LLC, 09-51782 (United States Bankruptcy Court for
the Western District of Texas (San Antonio) 2009-05-14).
HC Canadian Trademark Ltd., 06-10100 (Bankruptcy Court for the Southern
District of New York 2006-01-18).
HC Foreign Trademark Ltd., 06-10102 (Bankruptcy Court for the Southern
District of New York 2006-01-18).
HC Formulations Ltd., 06-10103 (Bankruptcy Court for the Southern District of
New York 2006-01-18).
HC Trademark Holdings Ltd., 06-10104 (Bankruptcy Court for the Southern
District of New York 2006-01-18).
HC US Trademark Ltd., 06-10105 (Bankruptcy Court for the Southern District of
New York 2006-01-18).
Hidai Friedman, 07-22719 (Bankruptcy Court for the District of Colorado 200711-01).
Hollinger Inc., 07-11029 (Bankruptcy Court for the District of Delaware 2007-0801).
Honeybee Software Technologies Inc., 06-40997 (Bankruptcy Court for the
District of Minnesota 2006-05-30).
Ian Gregory Thow, 05-30432 (Bankruptcy Court for the Western District of
Washington 2005-11-02).
Innua Canada Ltd., 09-16362 (United States Bankruptcy Court for the District of
New Jersey (Newark) 2009-03-16).
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John Francis Quinn, 07-11346 (Bankruptcy Court for the Middle District of Florida
2007-11-21).
Kirshan K. Sudan, 07-11166 (Bankruptcy Court for the Northern District of Ohio
2007-02-26).
Klytie's Development Inc., 07-22719 (Bankruptcy Court for the District of
Colorado 2007-11-01.
Klytie's Development, L.L.C., 07-22719 (Bankruptcy Court for the District of
Colorado 2007-11-01).
MAAX Cabinets, Inc., 08-11448 (Bankruptcy Court for the District of Delaware
2008-07-14).
MAAX Canada, Inc., 08-11444 (Bankruptcy Court for the District of Delaware
2008-07-14).
MAAX Corporation, 08-11443 (Bankruptcy Court for the District of Delaware
2008-07-14).
MAAX KSD, LLC, 08-11449 (Bankruptcy Court for the District of Delaware 200807-14).
MAAX Midwest, Inc., 08-11450 (Bankruptcy Court for the District of Delaware
2008-07-14).
MAAX Spas (Arizona), Inc., 08-11451 (Bankruptcy Court for the District of
Delaware 2008-07-14).
MAAX Spas (Ontario), Inc., 08-11447 (Bankruptcy Court for the District of
Delaware 2008-07-14).
MESO Formulations Ltd., 06-10106 (Bankruptcy Court for the Southern District of
New York 2006-01-18).
MISC Formulations Ltd., 06-10107 (Bankruptcy Court for the Southern District of
New York 2006-01-18).
MT Canadian Supplement Trademark Ltd., 06-10108 (Bankruptcy Court for the
Southern District of New York 2006-01-18).
MT Foreign Supplement Trademark Ltd., 06-10109 (Bankruptcy Court for the
Southern District of New York 2006-01-18).
Mackenzie E. Bowell, 06-01710 (Bankruptcy Court for the District of Arizona
2006-06-09).
Mackenzie Pulp Land, Ltd., 07-11745 (Bankruptcy Court for the District of
Delaware 2008-08-22).
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Madill Corporation, 08-41433 (Bankruptcy Court for the Western District of
Washington 2008-04-01).
Madill Equipment Canada, 08-41426 (Bankruptcy Court for the Western District
of Washington 2008-04-01).
Madill Finance (US), LLC, 08-41434 (Bankruptcy Court for the Western District of
Washington 2008-04-01).
Madill GP, Inc., 08-41430 (Bankruptcy Court for the Western District of
Washington 2008-04-01).
Madill Holdings (Ontario), LP, 08-41429 (Bankruptcy Court for the Western
District of Washington 2008-04-01).
Madill Holdings (US), Inc., 08-41435 (Bankruptcy Court for the Western District of
Washington 2008-04-01).
Madill, Inc., 08-41428 (Bankruptcy Court for the Western District of Washington
2008-04-01).
Madill, LP, 08-41431 (Bankruptcy Court for the Western District of Washington
2008-04-01).
Main Knitting (USA), LLC, 08-11274 (Bankruptcy Court for the Northern District
of New York 2008-04-24).
Main Knitting Inc. (USA), 08-11273 (Bankruptcy Court for the Northern District of
New York 2008-04-24).
Main Knitting, Inc., 08-11272 (Bankruptcy Court for the Northern District of New
York 2008-04-24).
Marwil, Inc., 08-31029 (Bankruptcy Court for the Southern District of Ohio 200803-07).
Mitsui Sumitomo Insurance Company (Europe), Ltd., 07-12934 (Bankruptcy
Court for the Southern District of New York 2007-09-18).
Mount Real Corporation, 06-41636 (Bankruptcy Court for the District of
Minnesota 2006-08-09).
Multy Industries (U.S.A.), Inc., 08-12631 (Bankruptcy Court for the Western
District of New York 2008-06-16).
Multy Industries Flexible Products Group Inc., 08-12632 (Bankruptcy Court for
the Western District of New York 2008-06-16).
Multy Industries, Inc., 08-12630 (Bankruptcy Court for the Western District of
New York 2008-06-16).
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MuscleTech Research and Development Inc., 06-10092 (Bankruptcy Court for
the Southern District of New York 2006-01-18).
NITRO Formulations Ltd., 06-10110 (Bankruptcy Court for the Southern District
of New York 2006-01-18).
Norshield Asset Management (Canada) Ltd., 06-40997 (Bankruptcy Court for the
District of Minnesota 2006-05-30).
Norshield Capital Management Corporation, 06-40997 (Bankruptcy Court for the
District of Minnesota 2006-05-30).
Norshield Investment Partners Holdings Ltd., 06-40997 (Bankruptcy Court for the
District of Minnesota 2006-05-30).
Nortel Networks UK Limited U.S., 09-11972 (Bankruptcy Court for the District of
Delaware (Delaware) 2009-06-08).
North America Steamships Ltd., 06-13077 (Bankruptcy Court for the Southern
District of New York 2006-12-22).
Olympus United Bank and Trust SCC, 06-40997 (Bankruptcy Court for the
District of Minnesota 2006-05-30).
Olympus United Fund Holdings Corporation, 06-40997 (Bankruptcy Court for the
District of Minnesota 2006-05-30).
Olympus United Funds Corporation, 06-40997 (Bankruptcy Court for the District
of Minnesota 2006-05-30).
Olympus United Group Inc., 06-40997 (Bankruptcy Court for the District of
Minnesota 2006-05-30).
Oslo Reinsurance Company (UK) Ltd., 07-12940 (Bankruptcy Court for the
Southern District of New York 2007-09-18).
P.&T. Factoring, L.P., 07-11747 (Bankruptcy Court for the District of Delaware
2008-08-22).
P.&T. Finance One, L.P., 07-11748 (Bankruptcy Court for the District of
Delaware 2008-08-22).
P.&T. Finance Three, L.L.C., 07-11749 (Bankruptcy Court for the District of
Delaware 2008-08-22).
P.&T. Finance Two, L.P., 07-11750 (Bankruptcy Court for the District of
Delaware 2008-08-22).
P.&T. Funding, Ltd., 07-11751 (Bankruptcy Court for the District of Delaware
2008-08-22).
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P.&T. L.F.P. Investment, L.P., 07-11752 (Bankruptcy Court for the District of
Delaware 2008-04-22).
P.&T. Power Co., 07-11744 (Bankruptcy Court for the District of Delaware 200808-22).
Pearl Baths, LLC, 08-11453 (Bankruptcy Court for the District of Delaware 200707-14).
Penn Timber, Inc., 07-11739 (Bankruptcy Court for the District of Delaware 200808-22).
Pope & Talbot Pulp Sales U.S., Inc., 07-11741 (Bankruptcy Court for the District
of Delaware 2008-08-22).
Pope & Talbot Relocation Services, Inc., 07-11742 (Bankruptcy Court for the
District of Delaware 2008-08-22).
Pope & Talbot, Inc., 08-11933 (Bankruptcy Court for the District of Delaware
2008-08-22).
Pope & Talbot, Ltd., 07-11746 (Bankruptcy Court for the District of Delaware
2008-08-22).
Quebecor World Inc., 08-13814 (Bankruptcy Court for the Southern District of
New York 2008-09-30).
ROL Holdings (Canada) Inc., 08-31024 (Bankruptcy Court for the Southern
District of Ohio 2008-03-07).
ROL Holdings USA, Inc., 08-31025 (Bankruptcy Court for the Southern District of
Ohio 2008-03-07).
ROL Manufacturing (Canada) Ltd., 08-31022 (Bankruptcy Court for the Southern
District of Ohio 2008-03-07).
ROL Manufacturing of America, Inc., 08-31027 (Bankruptcy Court for the
Southern District of Ohio 2008-03-07).
RTF International, Inc., 07-20507 (Bankruptcy Court for the District of Kansas
2007-03-14).
Railpower Hybrid Technologies Corp., 09-10198 (United States Bankruptcy Court
for the Western District of Pennsylvania (Erie) 2009-02-05).
Real Assurance Acceptance Corporation, 06-41636 (Bankruptcy Court for the
District of Minnesota 2006-08-09).
Real Vest Investment Ltd., 06-41636 (Bankruptcy Court for the District of
Minnesota 2006-08-09).
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Redcorp Ventures Ltd. and Redfern Resources Ltd., 09-12019 (United States
Bankruptcy Court for the Western District of Washington (Seattle) 2009-03-05).
Shermag Inc., 08-12015 (United States Bankruptcy Court for the Middle District
of North Carolina (Greensboro) 2008-12-10).
Sugra Limited, 07-11031 (Bankruptcy Court for the District of Delaware 2007-0801).
Tembec Industries Inc., 08-13435 (Bankruptcy Court for the Southern District of
New York 2008-09-04).
The Ocean Marine Insurance Company, Ltd., 07-12939 (Bankruptcy Court for the
Southern District of New York 2007-09-18).
Cayman Islands
Amerindo Internet Growth Fund Limited, 07-10327 (Bankruptcy Court for the
Southern District of New York 2007-02-09).
Bancredit Cayman Ltd., 06-11026 (Bankruptcy Court for the Southern District of
New York 2006-05-10).
Basis Yield Alpha Fund (Master), 07-12762 (Bankruptcy Court for the Southern
District of New York 2007-08-29).
Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage, 0712384 (Bankruptcy Court for the Southern District of New York 2007-07-31).
Bear Stearns High-Grade Structured Credit Strategies Master Fund Ltd., 0712383 (Bankruptcy Court for the Southern District of New York 2007-07-31).
Condor Insurance Limited, 07-51045 (Bankruptcy Court for the Southern District
of Mississippi 2007-07-26).
Sphinx Strategy Fund Ltd., 06-11292 (Bankruptcy Court for the Southern District
of New York 2006-06-07).
Trade and Commerce Bank, 05-60279 (Bankruptcy Court for the Southern
District of New York 2005-12-20).
China
De Coro Limited United States, 09-10369 (Bankruptcy Court for the Middle
District of North Carolina (Greensboro) 2009-03-05).
France
S.N.C. Summersun et cie, 06-10955 (Bankruptcy Court for the Southern District
of New York 2006-05-04).
Germany
16
Admin*1393628.1
Alpha-200 GmbH & Co. KG, 06-46562 (Bankruptcy Court for the Eastern District
of Michigan 2006-05-24).
Ecomares, Inc., 08-50074 (Bankruptcy Court for the District of Nevada 2008-0118).
Globale Ruckversicherungs-AG, 08-14940 (U.S. Bankruptcy Court for the
Southern District of New York 2008-12-10).
Industrieplanung Fischer Aktiengesellschaft, 07-30662 (Bankruptcy Court for the
Middle District of Alabama 2007-05-09).
Lehman Brothers Bankhaus AG United States, 09-12704 (Bankruptcy Court for
the Southern District of New York (Manhattan) 2009-04-29).
Hong Kong
Moulin Global Eyecare Holdings, Ltd., 06-30018 (Bankruptcy Court for the
Northern District of California 2006-01-13).
William Hung Yu Yang, 06-13022 (Bankruptcy Court for the Southern District of
New York 2006-12-14).
Iceland
Glitnir banki hf. U.S., 08-14757 (Bankruptcy Court for the Southern District of
New York 2008-11-26).
Israel
Gold & Honey (1995) LP U.S., 09-70464 (Bankruptcy Court for the Eastern
District of New York (Central Islip) 2009-01-28).
Yuval Ran, 06-37067 (Bankruptcy Court for the Southern District of Texas 200612-11).
Italy
Daniele Dolino, 07-17629 (Bankruptcy Court for the Central District of California
2007-08-31).
Japan
Gestion-Privee Location L.L.C., 06-80071 (Bankruptcy Court for the Middle
District of North Carolina 2006-01-18).
Katsumi Iida, 06-00376 (Bankruptcy Court for the District of Hawaii 2006-06-13).
Namirei-Showa Co., Ltd., 08-13256 (Bankruptcy Court for the Southern District of
New York 2008-08-21).
Nanbu Inc. U.S., 09-01274 (Bankruptcy Court for the District of Hawaii (Honolulu)
2009-06-08).
17
Admin*1393628.1
Spansion Japan Limited, 09-11480 (United States Bankruptcy Court for the
District of Delaware (Delaware) 2009-04-30).
Three Estates Company, Ltd., 07-23597 (Bankruptcy Court for the Eastern
District of California 2007-05-15).
Yoshihiko Kokura, 06-00849 (Bankruptcy Court for the District of Hawaii 200611-21).
Korea
Boe Hydis Technology Co., Ltd., 06-52334 (Bankruptcy Court for the Northern
District of California 2006-11-14).
Daewoo Corporation, 06-12242 (Bankruptcy Court for the Southern District of
New York 2006-09-25).
Kumkang Valve Co., Ltd., 09-32474 (United States Bankruptcy Court for the
Southern District of Texas (Houston) 2009-04-08).
Samsun Logix Corporation, 09-11109 (United States Bankruptcy Court for the
Southern District of New York 2009-03-11).
TriGem Computer, Inc., 05-50052 (Bankruptcy Court for the Central District of
California 2005-11-03).
Young Chang Co. Ltd., 06-40043 (Bankruptcy Court for the Western District of
Washington 2006-01-13).
Mexico
Corporacion Durango S.A.B. de C.V., 08-13911 (Bankruptcy Court for the
Southern District of New York 2008-10-06).
Netherlands
Constructiebedrijf Gebroeders Muurmans B.V., 06-50151 (Bankruptcy Court for
the Western District of Texas 2006-02-03).
Muurmans Beheer BV, 06-50151 (Bankruptcy Court for the Western District of
Texas 2006-02-03).
Transquest B.V., 06-50151 (Bankruptcy Court for the District of Kansas 2006-0203).
Vekoma International B.V., 06-50151 (Bankruptcy Court for the Western District
of Texas 2006-02-03).
Vekoma Manufacturing B.V., 06-50151 (Bankruptcy Court for the Western
District of Texas 2006-02-03).
18
Admin*1393628.1
Vekoma Onroerend Goed B.V., 06-50151 (Bankruptcy Court for the Western
District of Texas 2006-02-03).
Vekoma Technology B.V., 06-50151 (Bankruptcy Court for the Western District of
Texas 2006-02-03).
Norway
Oslo Reinsurance Company (UK) Limited, 07-12211 (Bankruptcy Court for the
Southern District of New York 2007-07-19).
Oslo Reinsurance Company ASA, 07-12212 (Bankruptcy Court for the Southern
District of New York 2007-07-19).
Russia
Yukos Oil Company, 06-10775 (Bankruptcy Court for the Southern District of
New York 2006-04-13).
Scotland
Robert Thomson U.S., 09-10665 (Bankruptcy Court for the Southern District of
Florida (West Palm Beach) 2009-01-15).
Singapore
Armada (Singapore) Pte. Ltd., 09-10105 (Bankruptcy Court for the Southern
District of New York 2009-01-07).
Lion City Run-Off Private Limited, 06-10461 (Bankruptcy Court for the Southern
District of New York 2006-03-15).
South Africa
Stephen Anthony Botes, 05-87098 (Bankruptcy Court for the Northern District of
Texas 2005-12-07).
Spain
Afinsa Bienes Tangibles SA, 07-10675 (Bankruptcy Court for the Southern
District of New York 2007-03-13).
Auctentia, S.L.U., 07-11173 (Bankruptcy Court for the Southern District of New
York 2007-04-24).
Avanzit, S.A., 07-13765 (Bankruptcy Court for the Southern District of New York
2007-11-29).
Switzerland
Europaische Ruckversicherungs-Gesellschaft in Zurich, 06-13061 (Bankruptcy
Court for the Southern District of New York 2006-12-21).
19
Admin*1393628.1
Lehman Brothers Finance AG, 09-10583 (United States Bankruptcy Court for the
Southern District of New York (Manhattan) 2009-02-10).
Tradex Swiss AG, 07-17518 (Bankruptcy Court for the District of Massachusetts
2007-11-26).
United Kingdom
A. Cary Harrison, III, 08-07002 (Bankruptcy Court for the Middle District of
Florida 2008-05-16).
AXA Insurance UK PLC, 07-12110 (Bankruptcy Court for the Southern District of
New York 2007-07-09).
Allianz Insurance PLC, 07-12936 (Bankruptcy Court for the Southern District of
New York 2007-09-18).
Britannia Bulk Holdings Inc. U.S., 09-13724 (Bankruptcy Court for the Southern
District of New York (Manhattan) 2009-06-11).
Britannia Bulk Plc U.S., 08-14543 (Bankruptcy Court for the Southern District of
New York 2008-11-17).
Castle Holdco 4, Limited United States, 09-11761 (Bankrupcy Court for the
Southern District of New York (Manhattan) 2009-04-02).
Ecclesiastical Insurance Office plc, 07-12111 (Bankruptcy Court for the Southern
District of New York 2007-07-09).
GLOBAL General and Reinsurance Company Limited (2007), 0712112 (Bankruptcy Court for the Southern District of New York 2007-07-09).
Genesis Bradford, Ltd., 08-17054 (Bankruptcy Court for the Central District of
California 2008-05-21).
Genesis Bradford, Ltd., 08-14939 (Bankruptcy Court for the Central District of
California 2008-12-10).
Global General and Reinsurance Company Limited (2008), 06-11563 (U.S.
Bankruptcy Court for the Southern District of New York (Manhattan) 2006-07-11).
Gordian RunOff (UK) Ltd., fka GIO (UK) Ltd. (Bankruptcy Court for the Southern
District of New York).
Greyfriars Insurance Company Limited, 07-12934 (Bankruptcy Court for the
Southern District of New York 2007-09-18).
Heddington Insurance (UK) Ltd., 07-12937 (Bankruptcy Court for the Southern
District of New York 2007-09-18).
Highlands Insurance Co. (U.K.), Ltd., 07-13970 (Bankruptcy Court for the
Southern District of New York 2007-12-18).
20
Admin*1393628.1
ING Re (U.K.) Ltd., 08-10018 (Bankruptcy Court for the Southern District of New
York 2008-01-04).
Jonathan A. Loy, 07-51040 (Bankruptcy Court for the Eastern District of Virginia
2007-10-28).
La Mutuelle du Mans Assurances IARD, U.K., 05-60100 (Branch Bankruptcy
Court for the Southern District of New York 2005-11-11).
Laurence, Scott & Electromotors Ltd., 07-12017 (Bankruptcy Court for the
Southern District of New York 2007-06-29).
MMA IARD Assurances Mutuelles, 07-12113 (Bankruptcy Court for the Southern
District of New York 2007-07-09).
Mark Steven Parker, 06-05212 (Bankruptcy Court for the District of South
Carolina 2006-11-14).
NRG Victory Reinsurance Ltd., 06-11052 (Bankruptcy Court for the Southern
District of New York (Manhattan) 2006-05-12).
Oilexco North Sea Limited United States, 09-12641 (Bankruptcy Court for the
Southern District of New York (Manhattan) 2009-04-28).
Pro-Fit Holdings, Ltd., 08-17043 (Bankruptcy Court for the Central District of
California 2008-05-21).
Pro-Fit International, Ltd., 08-17049 (Bankruptcy Court for the Central District of
California 2008-05-21).
Sandra Fielding, 07-17417 (Bankruptcy Court for the Southern District of Florida
2007-09-11).
Schefenacker plc, 07-11482 (Bankruptcy Court for the Southern District of New
York 2007-05-15).
Sovereign Insurance (UK) Ltd., 07-12935 (Bankruptcy Court for the Southern
District of New York 2007-09-18).
Spencer Partners Limited, 07-02356 (Bankruptcy Court for the District of South
Carolina 2007-05-02).
The Sea Insurance Company Ltd., 07-12941 (Bankruptcy Court for the Southern
District of New York 2007-09-18).
Tokio Marine Europe Insurance Ltd., 07-12942 (Bankruptcy Court for the
Southern District of New York 2007-09-18).
Wausau Insurance Company (UK) Ltd., 07-12943 (Bankruptcy Court for the
Southern District of New York 2007-09-18).
21
Admin*1393628.1
Appendix C
Chapter 15 Cases
(Circuit Court Decisions)
Argo Fund Ltd. v. Board of Directors of Telecom Argentina., S.A. (In re Board of
Directors of Telecom Arg., S.A.), 528 F.3d 162, 2008 U.S. App. LEXIS 11397,
165 (2d Cir. 2008), aff’d, 2005 U.S. Dist. LEXIS 28640, 55 Collier Bankr. Cas. 2d
(MB) 178 (S.D.N.Y. 2005).
Krys v. Official Committee of Unsecured Creditors (In re Refco Inc.), 505 F.3d
109, 2007 U.S. App. LEXIS 23363 (2d Cir. 2007), aff’d, Masonic Hall & Asylum
Fund v. Official Committee of Unsecured Creditors (In re Refco, Inc.) 2006 U.S.
Dist. LEXIS 85691 (S.D.N.Y. 2006).
Lavie v. Ran (In re Ran), 2010 U.S. App. LEXIS 10882, 1, 53 Bankr. Ct. Dec. 59
(5th Cir. 2010), aff’d, 406 B.R. 277, 2009 U.S. Dist. LEXIS 26269 (S.D. Tex.
2009).
Tacon v. Petroquest Resources Inc. (In re Condor Insurance Ltd.), 601 F.3d 319,
52 Bankr. Ct. Dec. 256, 320 (5th Cir. 2010), rev’d, Fogerty v. Condor Guaranty,
Inc. (In re Condor Inssurance Ltd.), 411 B.R. 314, 2009 U.S. Dist. LEXIS 9126
(S.D. Miss. 2009).
22
Admin*1393628.1
Appendix D
Bibliography of Articles on Chapter 15
of the United States Bankruptcy Code
(as at July 15, 2010)
Adams, Edward S. & Fincke, Jason. Coordinating Cross-Border Bankruptcy: How
Territorialism Saves Universalism, 15 COLUM. J. EUR. L. 43 (2008).
Arends, Gerald. Chapter 15 of the US Bankruptcy Code: Better than its
Reputation? 3 ICR 240 (2006).
Bartolomei, Jose. The revised Bankruptcy Code: new Chapter 15 and crossborder insolvencies, 26-3 MICH. BUS. L.J. 10 (2007).
Beckering, Kevin J. United States Cross-Border Corporate Insolvency: The
Impact of Chapter 15 on Comity and the New Legal Environment, 14 LAW & BUS.
REV. AM. 281 (2008).
Bell, Bruce & Ziegler, Brandon. Chapter 15 of the US Bankruptcy Code: Some
Observations from a UK Perspective, 2-4 INTERNATIONAL CORPORATE RESCUE 216
(2005).
Biery, Evelyn H., Boland, Jason L. & Cornwell, John D. A Look at Transnational
Insolvencies and Chapter 15 of the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005, 47 B.C. L. REV. 23 (2005).
Brown, Scott K. Punching Your Ticket to the High-Speed International Insolvency
Train, 26-8 Am. AMERICAN BANKRUPTCY INSTITUTE JOURNAL 26 (2007).
Bufford, Samuel L. Tertiary and Other Excluded Foreign Proceedings Under
Bankruptcy Code Chapter 15, 83 AM. BANKR. L.J. 165 (2009).
Bufford, Samuel L. International Accord: Included in the New Bankruptcy Law are
Provisions Adopting the U.N. Model on International Insolvencies, 28 LOS
ANGELES LAWYER 32 (2006).
Campbell, Rhett G. Hedge funds and chapter 15 of the Bankruptcy Code:
SPhinX and Bear Stearns High-Grade., Futures & Derivatives, 28-1 LAW REPORT
1 (2008).
Chung, John J. Chapter 15 of the Bankruptcy Code and Its Implicit Assumptions
Regarding the Foreign Exchange Market, 76 TENN. L. REV. 67 (2008).
Chung, John J. The Retrogressive Flaw of Chapter 15 of the Bankruptcy Code: A
Lesson from Maritime Law, 17 DUKE J. COMP. & INT’L L. 253 (2007).
__________________________
Information provided in part courtesy of _________________________
23
Admin*1393628.1
Chung, John J. The New Chapter 15 of the Bankruptcy Code: A Step Toward
Erosion of National Sovereignty, 27 NW . J. INT’L L. & BUS. 89 (2006).
Clark, Leif M., Ancillary and Other Cross-Border Insolvency cases Under Chapter
15 of the Bankruptcy Code, MATTHEW BENDER/LEXISNEXIS, COLLIER MONOGRAPH
(2009).
Conrad, Francis G. Are Preference Lawsuits Permitted in Chapter 15 Cases? A
Tale of Two Decisions, 29-4 AMERICAN BANKRUPTCY INSTITUTE JOURNAL 34 (2010).
Cohen, Howard S. Cross-Border Bankrupties: Hand Across The Water? A Look
at Chapter 15 and the Role of the Financial Advisor, 3 ICR 96 (2006).
Dawson, Andrew B. Offshore Bankruptcies, 88 NEB. L. REV. 317 (2009).
Desai, Neil. How Insolvent Multinational Businesses Should Adjust to Congress’s
Creation: Chapter 15, 7 HOUS. BUS. & TAX L.J. 138 (2006).
Deutsch, Douglas E. & Vazquez, Francisco. Introduction to Recognition under
Chapter 15, 29-4 AMERICAN BANKRUPTCY INSTITUTE JOURNAL 46 (2010).
Drescher, Cullen Ann. Special Feature, 28-6 AMERICAN BANKRUPTCY INSTITUTE
JOURNAL 58 (2009).
Driscoll, Brendan M. International Comity After Cahpter 15: A Residual Right to
Recognition?, 17-5 NORTON JOURNAL OF BANKRUPTCY LAW AND PRACTICE 663
(2008).
Fernandez, Josefina. Tallying Involuntary Insolvency Proceedings in the Wake of
Chapter 15, 27-2 AMERICAN BANKRUPTCY INSTITUTE JOURNAL 34 (2008).
Finelli, Jon et. al. Introduction, 14 AM. BANKR. INST. L. REV. i (2006).
Gallagher, Adam. Center of Main Interest: The EU Insolvency Regulation and
Chapter 15, 28-6 AMERICAN BANKRUPTCY INSTITUTE JOURNAL 44 (2009).
Gaunt, Kevin. Caveat Lessor: U.S. Aircraft Financiers Beware: 11 U.S.C. § 1110
Expectations May Not Be Met in Cross-Border Insolvencies, 6 BYU INT’L L. &
MGMT. REV. 43 (2009).
Gerber, Elizabeth J. Not all politics is local: the new Chapter 15 to govern crossborder insolvencies, 71 FORDHAM LAW REVIEW 2051 (2003).
Glosband, Daniel M. Bankruptcy Court Rejects Cayman Proceedings of Bear
Stearns Hedge Funds, 26-8 AMERICAN BANKRUPTCY INSTITUTE JOURNAL 38 (2007).
Glosband, Daniel M. Opinion Misses the Mark 25-10 AMERICAN BANKRUPTCY
INSTITUTE JOURNAL 44 (2006).
Glosband, Daniel M. An Introduction to Chapter 15: Adapting UNCITRAL’s Model
Law to the Bankruptcy Bankrupcy Code, BANKRUPTCY COURT DECISIONS (BCD),
December 29, 1998, at A4-A8.
24
Admin*1393628.1
Gololobov, Dmitry & Tanega, Joseph. Yukos Risk: The Double-Edged Sword – A
Case Note on International Bankruptcy Litigation and the Transnational Limits of
Corporate Governance, 3 N.Y.U. J.L. 557 (2007).
Greene, Jennifer. Bankruptcy Beyond Borders: Recognizing Foreign
Proceedings in Cross-Border Insolvencies, 30 BROOKLYN J. INT’L L. 685 (2005).
Griffiths, Tony & Smith, Edward. Transatlantic Insolvency Jurisdiction: the
Interplay between Chapter 15 of the US Bankruptcy Code and the EU Insolvency
Regulation, 21-8 JOURNAL OF INTERNATIONAL BANKING LAW AND REGULATION 435
(2006).
Hammer, Aaron L. & McClintock, Matthew E. Understanding Chapter 15 of the
United States Bankruptcy Code: Everything You Need to Know About CrossBorder Insolvency Legislation in the United States, 14 LAW & BUS. REV. AM. 257
(2008).
Harrison, Lynn P. Chapter 15 of the U.S. Bankruptcy Code: a hands-on guide to
the new world order of ancillary and cross-border cases, 14-5 JOURNAL OF
BANKRUPTCY LAW & PRACTICE 3 (2005).
Ho, Look Chan. Creative Uses of Chapter 15 of the US Bankruptcy Code to
Smooth Cross-Border Restructurings, 24-9 JOURNAL OF INTERNATIONAL BANKING
LAW & REGULATION 485 (2009).
Ho, Look Chan. Proving COMI – seeking recognition inder Chapter 15 of the U.S.
Bankruptcy Code, 22-12 JOURNAL OF INTERNATIONAL BANKING LAW & REGULATION
636 (2008).
Hodara, Fred S., Beckering Lisa G., & Geldert, Brian D. Chapter 15 and the
UNCITRAL Model Law: narrowing the US approach to international judicial
cooperation?, THE AMERICAS RESTRUCTURING AND INSOLVENCY GUIDE 2008/2009
36, available at www.americasrestructuring.com.
Howcroft, Nigel John. Universal vs. Territorial Models for Cross-Border
Insolvency: The Theory, the Practice, and the Reality that Universalism Prevails,
8 U.C. DAVIS BUS. L.J. 366 (2008).
Johnston, Susan Power. Conflict between Bankruptcy Code ss. 109(a) and 1515:
do U.S. bankruptcy courts have jurisdiction over chapter 15 cases if the foreign
debtor has no assets or presence in the U.S.?, 17-5 NORTON JOURNAL OF
BANKRUPTCY LAW AND PRACTICE 677 (2008).
Kenney, Martin S. et. al. Utilizing Cross-Border Insolvency Laws to Attack Fraud:
An Analysis of How it Could Work in the British Virgin Islands, the United States,
and Germany, 13 LAW & BUS. REV. AM. 569 (2007).
Labovitz, M. Natascha & Basil, Jessica I. How Will New Chapter 15 Affect
Multinational Restructurings?, NEW YORK LAW JOURNAL 9 & 12 (2005).
25
Admin*1393628.1
Lee, Paul L., Ancillary proceedings Under Section 304 and Proposed Chapter 15
of the Bankruptcy Code, AMERICAN BANKRUPTCY LAW JOURNAL 115 (2002).
Leibner, Jarred. An Executory Approach to Cross-Border Insolvencies, 64 U.
MIAMI L. REV. 1171 (2010).
Lifland, Burton. Chapter 15 of the United States Bankruptcy Code: An Annotated
Section-By-Section Analysis, in CROSS-BORDER INSOLVENCY AND CONFLICT OF
JURISDICTION. A US-EU EXPERIENCE 31ff (Georges Affaki ed., 2007).
Lightner, Mark. Determining the Center of Main Interests Under Chapter 15, 18-5
NORTON JOURNAL OF BANKRUPTCY LAW AND PRACTICE 519 (2010).
Luna, Justin. Thinking Globally, Filing Locally: The Effects of the New Chapter 15
on Business Entity Cross-Border Insolvency Cases, 19 FLA. J. INT’L L. 671
(2007).
Mayr, Kurt A. Enforcing Prepackaged Restructurings of Foreign Debtors Under
the U.S. Bankruptcy Code, 14 AM. BANKR. INST. L. REV. 469 (2006).
Melnik, Selinda A. US Cooperation in Foreign Proceedings: Prepare to Welcome
Chapter 15, 2-3 INTERNATIONAL CORPORATE RESCUE156 (2005).
Melnik, Selinda A. New US Chapter 15 is Put to the Test, 3 ICR 102 (2006).
Moore, Susan. Chapter 15 – a new era for COMI disputes?, 23-6 INSOLVENCY
LAW AND PRACTICE 178 (2008).
Morton, Jennifer D. Recognition of Cross-Border Insolvency Proceedings: An
Evaluation of Solvent Schemes of Arrangement and Part VII Transfers Under
U.S. Chapter 15, 29 FORDHAM INT’L L.J. 1312 (2006).
Moss, Gabriel, Beyond the Sphinx – Is Chapter 15 the Sole Gateway?, 20
INSOLVENCY INTELLIGENCE 55 (2007).
Patella, Raymond M. Bankruptcy Law Reform: A Primer for the General
Practitioner: Business Bankruptcies, 77 PA BAR ASSN. QUARTERLY 100 (2006).
Plank, Thomas E. Federalism and Bankruptcy: Deciphering Katz: State
Sovereignty in Bankruptcy After Katz, 15 AM. BANKR. INST. L. REV. 59 (2007).
Proskurchenko, Ksenia V. Chapter 15 Cross-Border Insolvency: Is It True to Its
Universalism Aspirations?, 5 RUTGERS BUS. L.J. 96 (2008).
Ranney-Marinelli, Alesia. Overview of Chapter 15 Ancillary and Other CrossBorder Cases, 82 AM. BANKR. L.J. 269 (2008).
Salafia, Lesley. Cross-Border Insolvency Law in the United States and its
Application to Multinational Corporate Groups, 21 CONN. J. INT’L L. 297 (2006).
Sarra, Janis. Oversight and Financing of Cross-Border Business Enterprise
Group Insolvency Proceedings, 44 TEX. INT’L L.J. 547 (2009).
26
Admin*1393628.1
Seitz, Gary F. Troubled Waters – Admiralty Law: Insurance, Pollution, and
Finance Issues: Interaction Between Admiralty and Bankruptcy Law: Effects of
Globalization and Recurrent Tensions, 83 TUL. L. REV. 1339 (2009).
Shahid, Omer. The Public Policy Exception: Has § 1506 Been a Significant
Obstacle in Aiding Foreign Bankruptcy Proceedings?, 9 J. INT’L BUS. & L. 175
(2010).
Shuster, George. W. Jr. The Trust Indenture Act and International Debt
Restructurings, 14 AM. BANKR. INST. L. REV. 431 (2006).
Silverman, Ronald J. & Mautner, Erin Kate. Chapter 15: S.D.N.Y. Provides
Additional Guidance to Foreign Representatives, 27-3 AMERICAN BANKRUPTCY
INSTITUTE JOURNAL 36 (2008).
Soh, Andy. Chapter 15 of the U.S. Bankruptcy Code: an invitation to forum
shopping?, 16-5 NORTON JOURNAL OF BANKRUPTCY LAW AND PRACTICE 873 (2007).
Stark, Bryan. Chapter 15 and the Advancement of International Cooperation in
Cross-Border Bankruptcy Proceedings, 6 RICH. J. GLOBAL L. & BUS. 203 (2006).
Stromes, David P. The Extraterritorial Reach of the Bankruptcy Code’s Automatic
Stay: Theory vs. Practice, 33 BROOKLYN J. INT’L L. 277 (2007).
Takagi, Shinjiro. Japanese comments on the extraterritorial offects of U.S.
chapter 15, 16-2 INTERNATIONAL INSOLVENCY REVIEW 95 (2007).
Tovrov, Jessica. Chapter 15 – opportunities and pitfalls, 22-1 INSOLVENCY LAW &
PRACTICE 17 (2007).
Westbrook, Jay Lawrence. Locating the Eye of the Financial Storm, 32 BROOKLYN
J. INT’L L. 1019 (2007).
Westbrook, Jay Lawrence. Chapter 15 at Last, 79 AM. BANKR. L.J. 713 (2005).
Westbrook, Jay Lawrence, Chapter 15 and Discharge, 13 AM. BANKR. INSTIT. L.
REV. 503 (2005).
Westbrook, Jay Lawrence. Multinational Enterprises in general Default: Chapter
15, the ALI Principles, and the EU Insolvency Regulation, 76 AM. BANKR. L.J. 1
(2002).
Wofford, Travis. The Other Establishment Clause: The Misunderstood Minimum
Threshold for Recognition, 44 TEX. INT’L L.J. 665 (2009).
Ziegel, Jacob. Canada-United States Cross-Border Insolvency Relations and the
UNCITRAL Model Law, 32 BROOKLYN J. INT’L L. 1041 (2007).
27
Admin*1393628.1
Appendix E
Bibliography of Articles on the UNCITRAL Model Law
Ailola, D.A. The UNCITRAL Model Law on Cross Border Insolvency: Its Efficacy
and Suitability as a Basis for a SADC Convention, STELLENBOSCH LAW REVIEW
215 (2000).
Barlowski, Michal. The Enactment of the UNCITRAL Model Law into Polish
Bankruptcy and Recovery Law, 3 ICR 231 (2006).
Benning, O. & Wehling, A. UNCITRAL Insolvency Model Law (1997): a regulation
model for international insolvency cases, 8-20 EUROPDISCHE ZEITSCHRIFT FUR
WIRTSCHAFTSRECHT 618 (1997).
Berends, A.J. The UNCITRAL Model Law on Cross-Border Insolvency: A
Comprehensive Overview, 6 TULANE JOURNAL OF INTERNATIONAL AND
COMPARATIVE LAW 309 (1998).
Bruce, Leonard & Birch, John N. When Will Canada Adopt the UNCITRAL Model
Law?, PAPER PRESENTED AT THE THIRD ANNUAL REVIEW OF INSOLVENCY LAW
CONFERENCE, VANCOUVER (Jan. 27, 2006).
Burman, Harold S. & Westbrook, Jay L. Introductory Note to United Nations
Commission on International Trade Law: Model Law on Cross-Border Insolvency,
36 INTERNATIONAL LEGAL MATERIAL 1386 (1997).
Clift, Jenny. The UNCITRAL model law on cross-border insolvency – An answer
to insolvency issues in the framework of international trade and of international
projects, 9 BRUXELLES: BRUYLANT 81 (2002).
Clift, Jenny, The UNCITRAL Model Law On Cross-Border Insolvency – A
Legislative Framework To Facilitate Coordination And Cooperation In CrossBorder Insolvency, 12 TULANE JOURNAL OF INTERNATIONAL & COMPARATIVE LAW
307 (2004).
Cooper, N. UNCITRAL Model Law on Cross-Border Insolvency: Update, INSOL
WORLD 31 (2004).
Cooper, N. Cross-border insolvency: the insolvency practitioner working under
the aegis of the Model Law, 1-2 INSOL W ORLD (1998).
Cronin, M. UNCITRAL Model Law on Cross-Border Insolvency: procedural
approach to a substantive problem, 24 J. CORP. L. 709 (1999).
__________________________
Information provided in part courtesy of United Nations Commission on International
Trade Law (UNCITRAL), Vienna and courtesy of Professor Bob Wessels, Leiden
University, Leiden, Netherlands
28
Admin*1393628.1
CROSS-BORDER INSOLVENCY. A COMMENTARY ON THE UNCITRAL MODEL LAW (Ho,
Look Chan (ed.), Globe Business Publishing 2d ed. 2009).
Dawson, K. The UNCITRAL Model Law on Cross-Border Insolvencies: Will it
make a difference?, RALQ 147 (2000).
Esplugues, Carlos. The UNCITRAL Model Law of 1997 on Cross border
Insolvency: an Approach, 12 DIRITTO DEL COMMERCIO INTERNAZIONALE 657 (1998).
Everett, S., Golick, S., & Shandro, S. Adoption of the UNCITRAL Model Law
gathers momentum: good news and big challenges!, INSOL W ORLD 16-18
(2006).
Everett, S. UNCITRAL Model Law: experiences in the USA and elsewhere,
INSOL W ORLD 26-27 (2006).
Fletcher, I.F. Update on INSOL: Model Law [on Cross-Border Insolvency (1997)],
INSOL W ORLD 9 (1999).
Francis, Angus. Cross-border Insolvency in East Asia: Formal and Informal
Mechanisms and UNCITRAL’s Model Law, in INSOLVENCY LAW IN EAST ASIA 535
(Tomasic ed., 2006).
Gilreath, M. Cameron. Overview and Analysis of How the United Nations Model
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Appendix F
THE AMERICAN LAW INSTITUTE
in association with
THE INTERNATIONAL INSOLVENCY INSTITUTE
Guidelines Applicable to Court-to-Court Communications in
Cross-Border Cases
As Adopted and Promulgated in Transnational Insolvency:
Principles of Cooperation Among the NAFTA Countries
BY
THE AMERICAN LAW INSTITUTE
At Washington, D.C., May, 2000
And as Adopted by
THE INTERNATIONAL INSOLVENCY INSTITUTE
At New York, June, 2001
The American Law Institute
4025 Chestnut Street
Philadelphia, Pennsylvania 19104-3099
Telephone: (215) 243-1600
Telecopier: (215) 243-1636
E-mail: ali@ali.org
Website: http://www.ali.org
The International Insolvency Institute
Scotia Plaza, Suite 2100
40 King Street West
Toronto, Ontario M5H 3C2
Telephone: (416) 869-5757
Telecopier: (416) 360-8877
Email: info@iiiglobal.org
Website: http://www.iiiglobal.org
35
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COPYRIGHT © 2003
By
THE AMERICAN LAW INSTITUTE
All rights reserved
Printed in the United States of America
The Guidelines Applicable to Court-to-Court Communications in Cross-Border
Cases were developed by The American Law Institute during and as part of its
Transnational Insolvency Project and the use of the Guidelines in cross-border
cases is specifically permitted and encouraged.
The text of the Guidelines is available in English and several other languages
including Chinese, French, German, Italian, Japanese, Korean, Portuguese,
Russian, Swedish, and Spanish on the website of the International Insolvency
Institute at http://www.iiiglobal.org/international/guidelines.html.
The American Law Institute
4025 Chestnut Street
Philadelphia, Pennsylvania 19104-3099
Telephone: (215) 243-1600
Telecopier: (215) 243-1636
E-mail: ali@ali.org
Website: http://www.ali.org
The International Insolvency Institute
Scotia Plaza, Suite 2100
40 King Street West
Toronto, Ontario M5H 3C2
Telephone: (416) 869-5757
Telecopier: (416) 360-8877
E-mail: info@iiiglobal.org
Website: http://www.iiiglobal.org
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Foreword by the Director of The American Law Institute
In May of 2000 The American Law Institute gave its final approval to the
work of the ALI’s Transnational Insolvency Project. This consisted of the four
volumes eventually published, after a period of delay required by the need to
take into account a newly enacted Mexican Bankruptcy Code, in 2003 under the
title of Transnational Insolvency: Cooperation Among the NAFTA Countries.
These volumes included both the first phase of the project, separate Statements
of the bankruptcy laws of Canada, Mexico, and the United States, and the
project’s culminating phase, a volume comprising Principles of Cooperation
Among the NAFTA Countries. All reflected the joint input of teams of Reporters
and Advisers from each of the three NAFTA countries and a fully transnational
perspective. Published by Juris Publishing, Inc., they can be ordered on the ALI
website (www.ali.org).
A byproduct of our work on the Principles volume, these Guidelines
Applicable to Court-to-Court Communications in Cross-Border Cases appeared
originally as Appendix B of that volume and were approved by the ALI in 2000
along with the rest of the volume. But the Guidelines have played a vital and
influential role apart from the Principles, having been widely translated and
distributed, cited and applied by courts, and independently approved by both the
International Insolvency Institute and the Insolvency Institute of Canada.
Although they were initially developed in the context of a project arrived at
improving cooperation among bankruptcy courts within the NAFTA countries,
their acceptance by the III, whose members include leaders of the insolvency bar
from more than 40 countries, suggests a pertinence and applicability that extends
far beyond the ambit of NAFTA. Indeed, there appears to be no reason to restrict
the Guidelines to insolvency cases; they should prove useful whenever sensible
and coherent standards for cooperation among courts involved in overlapping
litigation are called for. See, e.g., American Law Institute, International
Jurisdiction and Judgments Project §12(e) (Tentative Draft No. 2, 2004).
The American Law Institute expresses its gratitude to the International
Insolvency Institute for its continuing efforts to publicize the Guidelines and to
make them more widely known to judges and lawyers around the world; to III
Chair E. Bruce Leonard of Toronto, who as Canadian Co-Reporter for the
Transnational Insolvency Project was the principal drafter of the Guidelines in
English and has been primarily responsible for arranging and overseeing their
translation into the various other languages in which they now appear; and to the
translators themselves, whose work will make the Guidelines much more
universally accessible. We hope that this greater availability, in these new
English and bilingual editions, will help to foster better communication, and thus
better understanding, among the diverse courts and legal systems throughout
our increasingly globalized world.
LANCE LIEBMAN, Director
The American Law Institute -
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Foreword by the Chair of the International Insolvency Institute
The International Insolvency Institute, a world-wide association of leading
insolvency professionals, judges, academics, and regulators, is please to
recommend the adoption and the application in cross-border and multinational
cases of the American Law Institute’s Guidelines Applicable to Court-to-Court
Communication in Cross-Border Cases. The Guidelines were reviewed and
studies by a Committee of the III and were unanimously approved but its
membership at the III’s Annual General Meeting and Conference in New York in
June 2001.
Since their approval by the III, the Guidelines have been applied in several crossborder cases with considerable success in achieving the coordination that is so
necessary to preserve values for all of the creditors that are involved in
international cases. The III recommends without qualification that insolvency
professionals and judges adopt the Guidelines at the earliest possible stage of a
cross-border case so that they will be in place whenever there is a need for the
courts involved to communicate with each other, e.g., whenever the actions of
one court could impact on issues that are before the other court.
Although the Guidelines were developed in an insolvency context, it has been
noted by litigation professionals and judges that the Guidelines would be equally
valuable and constructive in any international case where two or more courts are
involved. In fact, in multijurisdictional litigation, the positive effect of the
Guidelines would be even greater in cases where several courts are involved. It
is important to appreciate that the Guidelines require that all domestic practices
and procedures be complied with and that the Guidelines do not alter or affect
the substantive rights of the parties or give any advantage to any party over any
other party.
The International Insolvency Institute expresses appreciation to its members who
have arranged for the translation of the Guidelines into French, German, Italian,
Korean, Japanese, Chinese, Portuguese, Russian, and Swedish and extends its
appreciation to The American Law Institute for the translation into Spanish. The
III also expresses its appreciation to The American Law Institute, the American
College of Bankruptcy, and the Ontario Superior Court of Justice Commercial List
Committee for their kind and generous financial support in enabling the
publication and dissemination of the Guidelines in bilingual versions in major
countries around the world
Readers who become aware of cases in which the Guidelines have been applied
are highly encourages to provide the details of those cases to the III (fax: 416360-8877; email: info@iiiglobal.org) so that everyone can benefit from the
experience and positive results that flow from the adoption and application of the
Guidelines. The continuing progress of the Guidelines and the cases in which
Admin*1393628.1
the Guidelines have been applied will be maintained on the III’s website at
www.iiiglobal.org.
The III and all of its members are very pleased to have been a part of the
development and success of the Guidelines and commend The American Law
Institute for its vision in developing the Guidelines and in supporting their
worldwide circulation to insolvency professionals, judges, academics, and
regulators. The use of the Guidelines in international cases will change
international insolvencies and reorganizations for the better forever, and the
insolvency community owes a considerable debt to The American Law Institute
for the inspiration and vision that has made this possible.
E. Bruce Leonard
Chairman
The International Insolvency Institute
Toronto, Ontario
March 2004
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Judicial Preface
We believe that the advantages of co-operation and co-ordination between
Courts is clearly advantageous to all of the stakeholders who are involved in
insolvency and reorganization cases that extend beyond the boundaries of one
country. The benefit of communications between Courts in international
proceedings has been recognized by the United Nations through the Model Law
on Cross-Border Insolvency developed by the United Nations Commission on
International Trade Law and approved by the General Assembly of the United
Nations in 1997. The advantages of communications have also been recognized
in the European Union Regulation on Insolvency Proceedings which became
effective for the Member States of the European Union in 2002.
The Guidelines for Court-to-Court Communications in Cross-Border Cases were
developed in the American Law Institute’s Transnational Insolvency Project
involving the NAFTA countries of Mexico, the United States and Canada. The
Guidelines have been approved by the membership of the ALI and by the
International Insolvency Institute whose membership covers over 40 countries
from around the world. We appreciate that every country is unique and
distinctive and that every country has its own proud legal traditions and concepts.
The Guidelines are not intended to alter or change the domestic rules or
procedures that are applicable in any country and are not intended to affect or
curtail the substantive rights of any party in proceedings before the Courts. The
Guidelines are intended to encourage and facilitate co-operation in international
cases while observing all applicable rules and procedures of the Courts that are
respectively involved.
The Guidelines may be modified to meet either the procedural law of the
jurisdiction in question or the particular circumstances in individual cases so as to
achieve the greatest level of co-operation possible between the Courts in dealing
with a multinational insolvency or liquidation. The Guidelines, however, are not
restricted to insolvency cases and may be of assistance in dealing with noninsolvency cases that involve more than one country. Several of us have already
used the Guidelines in cross-border cases and would encourage stakeholders
and counsel in international cases to consider the advantages that could be
achieved in their cases from the application and implementation of the
Guidelines.
Mr. Justice David Baragwanath
High Court of New Zealand
Auckland, New Zealand
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Chief Justice Donald I. Brenner
Supreme Court of British Columbia
Vancouver
Hon. Sidney B. Brooks
United States Bankruptcy Court
District of Colorado
Denver
Hon. Charles G. Case, II
United States Bankruptcy Court
District of Arizona
Phoenix
Mr. Justice Miodrag Dordević
Supreme Court of Slovenia
Ljubljana
Mr. Justice J.M. Farley
Ontario Superior Court of Justice
Toronto
Hon. James L. Garrity, Jr.
United States Bankruptcy Court
Southern District of New York
(Ret’d)
Shearman & Sterling
New York
Hon. Allan L. Gropper
Southern District of New York
United States Bankruptcy Court
New York
Mr. Justice Paul R. Heath
High Court of New Zealand
Auckland, New Zealand
Hon. Hyungdu Kim
Supreme Court of Korea
Seoul
Chief Judge Burton R. Lifland
United States Bankruptcy Appellate
Panel for the Second Circuit
New York
Mr. Justice Gavin Lightman
Royal Courts of Justice
London
Hon. George Paine II
United States Bankruptcy Court
District of Tennessee
Nashville
Hon. Chiyong Rim
District Court
Western District of Seoul
Seoul, Korea
Mr. Justice Adolfo A.N. Rouillon
Court of Appeal
Rosario, Argentina
Hon. Shinjiro Takagi
Supreme Court of Japan (Ret’d)
Industrial Revitalization Corporation of Japan
Tokyo
Mr. Justice Wisit Wisitsora – At
Business Reorganization Office
Government of Thailand
Bangkok
Mr. Justice R.H. Zulman
Supreme Court of Appeal of South Africa
Parklands
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Guidelines
Applicable to Court-to-Court Communications
in Cross-Border Cases
Introduction:
One of the most essential elements of cooperation in cross-border cases is
communication among the administrating authorities of the countries involved. Because
of the importance of the courts in insolvency and reorganization proceedings, it is even
more essential that the supervising courts be able to coordinate their activities to assure
the maximum available benefit for the stakeholders of financially troubled enterprises.
These Guidelines are intended to enhance coordination and harmonization of
insolvency proceedings that involve more than one country through communications
among the jurisdictions involved. Communications by judges directly with judges or
administrators in a foreign country, however, raise issues of credibility and proper
procedures. The context alone is likely to create concern in litigants unless the process
is transparent and clearly fair. Thus, communication among courts in cross-border
cases is both more important and more sensitive than in domestic cases. These
Guidelines encourage such communications while channeling them through transparent
procedures. The Guidelines are meant to permit rapid cooperation in a developing
insolvency case while ensuring due process to all concerned.
A Court intending to employ the Guidelines — in whole or part, with or without
modifications — should adopt them formally before applying them. A Court may wish to
make its adoption of the Guidelines contingent upon, or temporary until, their adoption
by other courts concerned in the matter. The adopting Court may want to make
adoption or continuance conditional upon adoption of the Guidelines by the other Court
in a substantially similar form, to ensure that judges, counsel, and parties are not
subject to different standards of conduct.
The Guidelines should be adopted following such notice to the parties and
counsel as would be given under local procedures with regard to any important
procedural decision under similar circumstances. If communication with other courts is
urgently needed, the local procedures, including notice requirements, that are used in
urgent or emergency situations should be employed, including, if appropriate, an initial
period of effectiveness, followed by further consideration of the Guidelines at a later
time. Questions about the parties entitled to such notice (for example, all parties or
representative parties or representative counsel) and the nature of the court’s
consideration of any objections (for example, with or without a hearing) are governed by
the Rules of Procedure in each jurisdiction and are not addressed in the Guidelines.
Admin*1393628.1
The Guidelines are not meant to be static, but are meant to be adapted and
modified to fit the circumstances of individual cases and to change and evolve as the
international insolvency community gains experience from working with them. They are
to apply only in a manner that is consistent with local procedures and local ethical
requirements. They do not address the details of notice and procedure that depend
upon the law and practice in each jurisdiction. However, the Guidelines represent
approaches that are likely to be highly useful in achieving efficient and just resolutions
of cross-border insolvency issues. Their use, with such modifications and under such
circumstances as may be appropriate in a particular case, is therefore recommended.
Guideline 1
Except in circumstances of urgency, prior to a communication with another Court,
the Court should be satisfied that such a communication is consistent with all applicable
Rules of Procedure in its country. Where a Court intends to apply these Guidelines (in
whole or in part and with or without modifications), the Guidelines to be employed
should, wherever possible, be formally adopted before they are applied. Coordination of
Guidelines between courts is desirable and officials of both courts may communicate in
accordance with Guideline 8(d) with regard to the application and implementation of the
Guidelines.
Guideline 2
A Court may communicate with another Court in connection with matters relating
to proceedings before it for the purposes of coordinating and harmonizing proceedings
before it with those in the other jurisdiction.
Guideline 3
A Court may communicate with an Insolvency Administrator in another
jurisdiction or an authorized Representative of the Court in that jurisdiction in connection
with the coordination and harmonization of the proceedings before it with the
proceedings in the other jurisdiction.
Guideline 4
A Court may permit a duly authorized Insolvency Administrator to communicate
with a foreign Court directly, subject to the approval of the foreign Court, or through an
Insolvency Administrator in the other jurisdiction or through an authorized
Representative of the foreign Court on such terms as the Court considers appropriate.
Guideline 5
A Court may receive communications from a foreign Court or from an authorized
Representative of the foreign Court or from a foreign Insolvency Administrator and
should respond directly if the communication is from a foreign Court (subject to
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Guideline 7 in the case of two-way communications) and may respond directly or
through an authorized Representative of the Court or through a duly authorized
Insolvency Administrator if the communication is from a foreign Insolvency
Administrator, subject to local rules concerning ex parte communications.
Guideline 6
Communications from a Court to another Court may take place by or through the
Court:
(a)
Sending or transmitting copies of formal orders, judgments, opinions,
reasons for decision, endorsements, transcripts of proceedings, or other
documents directly to the other Court and providing advance notice to
counsel for affected parties in such manner as the Court considers
appropriate;
(b)
Directing counsel or a foreign or domestic Insolvency Administrator to
transmit or deliver copies of documents, pleadings, affidavits, factums,
briefs, or other documents that are filed or to be filed with the Court to the
other Court in such fashion as may be appropriate and providing advance
notice to counsel for affected parties in such manner as the Court
considers appropriate;
(c)
Participating in two-way communications with the other Court by
telephone or video conference call or other electronic means, in which
case Guideline 7 should apply.
Guideline 7
In the event of communications between the Courts in accordance with
Guidelines 2 and 5 by means of telephone or video conference call or other electronic
means, unless otherwise directed by either of the two Courts:
(a)
Counsel for all affected parties should be entitled to participate in person
during the communication and advance notice of the communication
should be given to all parties in accordance with the Rules of Procedure
applicable in each Court;
(b)
The communication between the Courts should be recorded and may be
transcribed. A written transcript may be prepared from a recording of the
communication which, with the approval of both Courts, should be treated
as an official transcript of the communication;
(c)
Copies of any recording of the communication, of any transcript of the
communication prepared pursuant to any Direction of either Court, and of
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any official transcript prepared from a recording should be filed as part of
the record in the proceedings and made available to counsel for all parties
in both Courts subject to such Directions as to confidentiality as the Courts
may consider appropriate; and
(d)
The time and place for communications between the Courts should be to
the satisfaction of both Courts. Personnel other than Judges in each Court
may communicate fully with each other to establish appropriate
arrangements for the communication without the necessity for participation
by counsel unless otherwise ordered by either of the Courts.
Guideline 8
In the event of communications between the Court and an authorized
Representative of the foreign Court or a foreign Insolvency Administrator in accordance
with Guidelines 3 and 5 by means of telephone or video conference call or other
electronic means, unless otherwise directed by the Court:
(a)
Counsel for all affected parties should be entitled to participate in person
during the communication and advance notice of the communication
should be given to all parties in accordance with the Rules of Procedure
applicable in each Court;
(b)
The communication should be recorded and may be transcribed. A written
transcript may be prepared from a recording of the communication which,
with the approval of the Court, can be treated as an official transcript of
the communication;
(c)
Copies of any recording of the communication, of any transcript of the
communication prepared pursuant to any Direction of the Court, and of
any official transcript prepared from a recording should be filed as part of
the record in the proceedings and made available to the other Court and
to counsel for all parties in both Courts subject to such Directions as to
confidentiality as the Court may consider appropriate; and
(d)
The time and place for the communication should be to the satisfaction of
the Court. Personnel of the Court other than Judges may communicate
fully with the authorized Representative of the foreign Court or the foreign
Insolvency Administrator to establish appropriate arrangements for the
communication without the necessity for participation by counsel unless
otherwise ordered by the Court.
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Guideline 9
A Court may conduct a joint hearing with another Court. In connection with any
such joint hearing, the following should apply, unless otherwise ordered or unless
otherwise provided in any previously approved Protocol applicable to such joint hearing:
(a)
Each Court should be able to simultaneously hear the proceedings in the
other Court.
(b)
Evidentiary or written materials filed or to be filed in one Court should, in
accordance with the Directions of that Court, be transmitted to the other
Court or made available electronically in a publicly accessible system in
advance of the hearing. Transmittal of such material to the other Court or
its public availability in an electronic system should not subject the party
filing the material in one Court to the jurisdiction of the other Court.
(c)
Submissions or applications by the representative of any party should be
made only to the Court in which the representative making the
submissions is appearing unless the representative is specifically given
permission by the other Court to make submissions to it.
(d)
Subject to Guideline 7(b), the Court should be entitled to communicate
with the other Court in advance of a joint hearing, with or without counsel
being present, to establish Guidelines for the orderly making of
submissions and rendering of decisions by the Courts, and to coordinate
and resolve any procedural, administrative, or preliminary matters relating
to the joint hearing.
(e)
Subject to Guideline 7(b), the Court, subsequent to the joint hearing,
should be entitled to communicate with the other Court, with or without
counsel present, for the purpose of determining whether coordinated
orders could be made by both Courts and to coordinate and resolve any
procedural or nonsubstantive matters relating to the joint hearing.
Guideline 10
The Court should, except upon proper objection on valid grounds and then only
to the extent of such objection, recognize and accept as authentic the provisions of
statutes, statutory or administrative regulations, and rules of court of general application
applicable to the proceedings in the other jurisdiction without the need for further proof
or exemplification thereof.
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Guideline 11
The Court should, except upon proper objection on valid grounds and then only
to the extent of such objection, accept that Orders made in the proceedings in the other
jurisdiction were duly and properly made or entered on or about their respective dates
and accept that such Orders require no further proof or exemplification for purposes of
the proceedings before it, subject to all such proper reservations as in the opinion of the
Court are appropriate regarding proceedings by way of appeal or review that are
actually pending in respect of any such Orders.
Guideline 12
The Court may coordinate proceedings before it with proceedings in another
jurisdiction by establishing a Service List that may include parties that are entitled to
receive notice of proceedings before the Court in the other jurisdiction (“Non-Resident
Parties”). All notices, applications, motions, and other materials served for purposes of
the proceedings before the Court may be ordered to also be provided to or served on
the Non-Resident Parties by making such materials available electronically in a publicly
accessible system or by facsimile transmission, certified or registered mail or delivery by
courier, or in such other manner as may be directed by the Court in accordance with the
procedures applicable in the Court.
Guideline 13
The Court may issue an Order or issue Directions permitting the foreign
Insolvency Administrator or a representative of creditors in the proceedings in the other
jurisdiction or an authorized Representative of the Court in the other jurisdiction to
appear and be heard by the Court without thereby becoming subject to the jurisdiction
of the Court.
Guideline 14
The Court may direct that any stay of proceedings affecting the parties before it
shall, subject to further order of the Court, not apply to applications or motions brought
by such parties before the other Court or that relief be granted to permit such parties to
bring such applications or motions before the other Court on such terms and conditions
as it considers appropriate. Court-to-Court communications in accordance with
Guidelines 6 and 7 hereof may take place if an application or motion brought before the
Court affects or might affect issues or proceedings in the Court in the other jurisdiction.
Guideline 15
A Court may communicate with a Court in another jurisdiction or with an
authorized Representative of such Court in the manner prescribed by these Guidelines
for purposes of coordinating and harmonizing proceedings before it with proceedings in
the other jurisdiction regardless of the form of the proceedings before it or before the
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other Court wherever there is commonality among the issues and/or the parties in the
proceedings. The Court should, absent compelling reasons to the contrary, so
communicate with the Court in the other jurisdiction where the interests of justice so
require.
Guideline 16
Directions issued by the Court under these Guidelines are subject to such
amendments, modifications, and extensions as may be considered appropriate by the
Court for the purposes described above and to reflect the changes and developments
from time to time in the proceedings before it and before the other Court. Any Directions
may be supplemented, modified, and restated from time to time and such modifications,
amendments, and restatements should become effective upon being accepted by both
Courts. If either Court intends to supplement, change, or abrogate Directions issued
under these Guidelines in the absence of joint approval by both Courts, the Court
should give the other Courts involved reasonable notice of its intention to do so.
Guideline 17
Arrangements contemplated under these Guidelines do not constitute a
compromise or waiver by the Court of any powers, responsibilities, or authority and do
not constitute a substantive determination of any matter in controversy before the Court
or before the other Court nor a waiver by any of the parties of any of their substantive
rights and claims or a diminution of the effect of any of the Orders made by the Court or
the other Court.
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Appendix G
Cross-Border Insolvency Orders and Protocols
(A)
Chronological Listing
Cross-Border Insolvency Protocol and Order in Re Barzel Industries Canada Inc.
between Ontario Superior Court of Justice, Toronto (Mr. Justice Geoffrey B. Morawetz),
Case No. 09-CL-8363 (September 15, 2009), including approval and adoption of the
American Law Institute Guidelines for Court-to-Court Communications in Cross-Border
Cases and United States Bankruptcy Court for the District of Delaware (Hon. Christopher
S. Sontchi), Case No. 09-13204 (CSS) (September 17, 2009), including approval and
adoption of the American Law Institute Guidelines for Court-to-Court Communications in
Cross-Border Cases.
Cross-Border Insolvency Protocol and Order in Re AbitibiBowater Inc. between the
Superior Court of the Province of Quebec (Hon. Clement Gascon), Case No. 500-11036133-094 (July 28, 2009), including approval and adoption of the American Law
Institute Guidelines for Court-to-Court Communications in Cross-Border Cases and the
United States Bankruptcy Court for the District of Delaware (Hon. Kevin J. Carey), Case
No. 09-11296 (KJC) (July 7, 2009), including approval and adoption of the American Law
Institute Guidelines for Court-to-Court Communications in Cross-Border Cases.
Cross-Border Insolvency Protocol and Order in Re Eddie Bauer Holdings, Inc., et al.
between the Ontario Superior Court of Justice, Toronto (Mr. Justice Geoffrey B.
Morawetz), Case No. 09-8240-CL (June 25, 2009), including approval and adoption of
the American Law Institute Guidelines for Court-to-Court Communications in CrossBorder Cases and the United States Bankruptcy Court for the District of Delaware (Hon.
Mary F. Walrath), Case No. 09-12099 (June 24, 2009), including approval and adoption
of the American Law Institute Guidelines for Court-to-Court Communications in CrossBorder Cases.
Cross-Border Insolvency Protocol and Order in Re Lehman Brothers Holdings Inc., et
al. issued by the United States Bankruptcy Court for the Southern District of New York
(Hon. James M. Peck), Case No. 08-13555 (June 17, 2009), including approval and
adoption of the American Law Institute Guidelines for Court-to-Court Communications in
Cross-Border Cases.
__________________________
Information provided in part courtesy of the International Insolvency Institute and by Cassels
Brock & Blackwell LLP, Toronto
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Cross-Border Insolvency Protocol and Order in Re Bernard L. Madoff Investment
Securities LLC issued by the United States Bankruptcy Court for the Southern District of
New York (Hon. Burton R. Lifland), Adv. Pro. No. 08-1789 (June 9, 2009), including
approval and adoption of the American Law Institute Guidelines for Court-to-Court
Communications in Cross-Border Cases.
Cross-Border Insolvency Protocol and Order in Re SemCanada Crude Company et
al. between the Queen's Bench of Alberta for the Judicial District of Calgary (Justice
B.E.C. Romaine), Action No. 0801-08510 (May 22, 2009), including approval and
adoption of the American Law Institute Guidelines for Court-to-Court Communications in
Cross-Border Cases and the United States Bankruptcy Court for the District of
Delaware (Hon. Brendan L. Shannon), Case No. 08-11525 (BLS), (September 24,
2009).
Cross-Border Insolvency Protocol in Re Masonite International Inc. between Ontario
Superior Court of Justice, Toronto (Mr. Justice Colin L. Campbell), Case No. 09-807500CL (March 16, 2009) and United States Bankruptcy Court for the District of Delaware
(Hon. Peter J. Walsh), Case No. 09-10844 (PJW), (April 14, 2009) substantially
incorporating the principles of the American Law Institute Guidelines for Court-to-Court
Communications in Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Smurfit-Stone Container Canada Inc. between
Ontario Superior Court of Justice, Toronto (Madam Justice Sarah E. Pepall), Case No.
09-7966-00CL (March 12, 2009) and United States Bankruptcy Court for the District of
Delaware (Hon. Brendan L. Shannon), Case No. 09-10235 (BLS), (March 12, 2009)
substantially incorporating the principles of the American Law Institute Guidelines for
Court-to-Court Communications in Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Nortel Networks Corporation between Ontario
Superior Court of Justice, Toronto (Mr. Justice Geoffrey B. Morawetz), Case No. 09-CL7950 (January 14, 2009) and United States Bankruptcy Court for the District of Delaware
(Hon. Kevin Gross), Case No. 09-10138 (KG), (January 15, 2009) including approval and
adoption of the American Law Institute Guidelines for Court-to-Court Communications in
Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Quebecor World Inc. between the Superior
Court for the Province of Quebec (Mr. Justice Robert Mongeon), Case No. 500-11032338-085 (January 21, 2008) and the United States Bankruptcy Court, Southern
District of New York (Hon. James Peck), Case No. 08-10152, (April 17, 2008), including
approval and adoption of the American Law Institute Guidelines for Court-to-Court
Communications in Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Progressive Moulded Products Ltd. between
the Ontario Superior Court of Justice, Toronto (Mr. Justice Geoffrey B. Morawetz), Case
No. CV-08-7590-00CL, (June 24, 2008) and the United States Bankruptcy for the District
of Delaware, including approval and adoption of the American Law Institute Guidelines
for Court-to-Court Communications in Cross-Border Cases.
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Cross-Border Insolvency Protocol and Order in Re Calpine Corporation between the
United States Bankruptcy for the Southern District of New York (Hon. Burton R. Lifland),
Case No. 05-60200 (April 9, 2007) and Court of Queens Bench of Alberta (Madam
Justice B.E.C. Romaine), Case No. 0501-17864 (April 7, 2007) including approval and
adoption of the American Law Institute Guidelines for Court-to-Court Communications in
Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Pope & Talbot Ltd. between the British
Columbia Supreme Court, Vancouver (Chief Justice Donald I. Brenner), Case No.
SO77839, (December 14, 2007) and the United States Bankruptcy Court for the District
of Delaware, (Hon. Christopher Sontchi), Case No. 07-11738 including approval and
adoption of the American Law Institute Guidelines for Court-to-Court Communications in
Cross-Border Cases.
Re Refco Capital Markets ( Supreme Court of Bermuda) (Mr. Justice Ian Kawaley) Case
No. 2005:328 (December 12, 2006) (Approving the application of the American Law
Institute Guidelines for Court-to-Court Communications in Cross-Border Cases.)
Cross-Border Insolvency Protocol in Re Sendo International Limited between the
commercial Court of Nanterre, France (Mr. Justice Jerome Mandrillon) and the Chancery
Division of the High Court of Justice, London (June 1, 2006.)
Cross-Border Insolvency Protocol in Re Systech Retail Systems Corporation between
the Ontario Court of Justice, Toronto (Mr. Justice J.D. Ground), Court File No. 03-CL4836, (January 20, 2003) and the United States Bankruptcy Court for the Eastern District
of North Carolina, Raleigh Division (Hon. A. Thomas Small), Case No. 03-00142-5-ATS,
(January 30, 2003) including approval and adoption of the American Law Institute
Guidelines for Court-to-Court Communications in Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Mosaic Group Inc. between the Ontario Court of
Justice, Toronto (Mr. Justice J.M. Farley), Court File No. 02-CL-4816, (December 7,
2002) and the United States Bankruptcy Court for the Northern District of Texas (Hon.
Harlin DeWayne Hale), Case No. 02-81440, (January 8, 2003), including approval and
adoption of the American Law Institute Guidelines for Court-to-Court Communications in
Cross Border Cases.
Cross-Border Insolvency Protocol in Re Federal-Mogul Global Inc. et al. between the
United States Bankruptcy Court for the District of Delaware (Hon. Randall Newsome),
Case No. 01-10578, (October 4, 2001) and the Chancery Division of the High Court of
Justice of England, (October 1, 2001) and Final Order Approving Cross-Border
Insolvency Protocol in Re Federal-Mogul Global Inc. et al., United States Bankruptcy
Court for the District of Delaware (Hon. Randall Newsome), Case No. 01-10578,
(January 7, 2002).
Cross-Border Insolvency Protocol in Re Financial Asset Management Foundation
between Supreme Court of British Columbia (Chief Justice Donald I. Brenner) Case No.
11-213464/VA.01 (August 1, 2001) and United States Bankruptcy Court for the Southern
District of California (Hon. Louise Adler) Case No. 01-03649-304 (July 25, 2001).
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Cross-Border Insolvency Protocol in Re Pioneer Companies between the Quebec
Superior Court, (Re PCI Chemicals Canada Inc.,) (Madam Justice Danielle Mayrand),
Case No. 5000-05-066677-012, (August 1, 2001) and United States Bankruptcy Court for
the Southern District of Texas, (Re Pioneer Companies Inc.) Case No. 01-38259, (August
1, 2001): providing for Court-to-Court communications consistent with The American Law
Institute Guidelines for Court-to-Court Communications in Cross-Border Cases.
(English/French).
Cross-Border Insolvency Protocol in Re 360Networks Inc. between British Columbia
Supreme Court, Vancouver (Mr. Justice D.F. Tysoe), Case No. L011792, (June 28, 2001)
and United States Bankruptcy Court for the Southern District of New York (Hon. Allan L.
Gropper), Case No. 01-13721-alg, (August 29, 2001).
Cross-Border Insolvency Protocol in Re Laidlaw Inc. between Ontario Superior Court of
Justice, Toronto (Mr. Justice J.M. Farley), Case No. 01-CL-4178, (August 10, 2001) and
United States Bankruptcy Court for the Western District of New York (Hon. Michael J.
Kaplan), Case No. 01-14099, (August 20, 2001).
Cross-Border Insolvency Protocol in Re PSINet Inc. et al. between Ontario Superior
Court of Justice, Toronto (Mr. Justice J.M. Farley), Case No. 01-CL-4155, (July 10, 2001)
and United States Bankruptcy Court for the Southern District of New York (Hon. Robert
E. Gerber), Case No. 01-13213, (July 10, 2001) including approval and adoption of the
American Law Institute Guidelines for Court-to-Court Communications in Cross-Border
Cases.
Cross-Border Insolvency Protocol in Re Matlack Inc. between Ontario Superior Court of
Justice, Toronto (Mr. Justice J.M. Farley), Case No. 01-CL-4109, (April 19, 2001) and
United States Bankruptcy Court for the District of Delaware (Hon. Mary F. Walrath), Case
No. 01-01114 (MFW), (May 24, 2001) including approval and adoption of the American
Law Institute Guidelines for Court-to-Court Communications in Cross-Border Cases.
Cross-Border Insolvency Protocol in Re AgriBio Tech Inc. between Ontario Superior
Court of Justice, Toronto (Mr. Justice J.M. Farley), Case No. 31-OR-371448, (June 16,
2000) and United States Bankruptcy Court for the District of Nevada (Hon. Linda B.
Riegle), Case No. 500-10534 LBR, (June 28, 2000) providing for Court-to-Court
Communications.
Cross-Border Insolvency Protocol in Re Manhattan Investment Fund Limited between
United States Bankruptcy Court for the Southern District of New York (Hon. Burton R.
Lifland), Case No. 00-10922BRL, (April 2000) and High Court of Justice of the British
Virgin Islands (Chief Justice Austin Ward), Case No. 19 of 2000, (April, 2000) and
Supreme Court of Bermuda (Mr. Justice Kenneth A. Benjamin), Case No. 2000/37, (April
2000).
Cross-Border Insolvency Protocol in Re Inverworld, Inc. between United States District
Court for the Western District of Texas (Hon. Frederick Biery), Case No. SA99-C0822FB,
(October 22, 1999) and U.K. High Court of Justice, Chancery Division, (1999) and the
Grand Court of the Cayman Island, (1999).
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Cross-Border Insolvency Protocol in Re Philip Services Corporation between United
States Bankruptcy Court for the District of Delaware (Hon. Mary Walrath), Case No. 99B-02385, (June 28, 1999) and Ontario Superior Court of Justice, Toronto (Mr. Justice
Robert A. Blair), Case No. 99-CL-3442, (June 25, 1999).
Cross-Border Insolvency Protocol in Re Livent Inc. between United States Bankruptcy
Court for the Southern District of New York (Hon. Arthur Gonzales), Case No. 98-B48312, and Ontario Superior Court of Justice, Toronto (Mr. Justice J.D. Ground), Case
No. 98-CL-3162, (June 11, 1999).
Cross-Border Insolvency Protocol in Re Loewen Group between United States
Bankruptcy Court for the District of Delaware (Chief Judge Peter J. Walsh) Case No. 991244, (June 30, 1999) and Ontario Superior Court of Justice, Toronto (Mr. Justice J.M.
Farley) Case No. 99-CL-3384, (June 1, 1999).
Cross-Border Liquidation Protocol in Re AIOC Corporation and AIOC Resources AG
between United States and Switzerland: United States Bankruptcy Court for Southern
District Court of New York (Chief Judge Tina L. Brozman), Case Nos. 96 B 41895 and 96
B 41896, (April 3, 1998).
Cross-Border Insolvency Protocol in Re Solv-Ex Canada Limited and Re Solv-Ex
Corporation between Alberta Court of Queen’s Bench (Mr. Justice G.R. Forsyth), Case
No. 9701-10022, (January 28, 1998) and United States Bankruptcy Court for the District
of New Mexico (Hon. Mark McFeely), Case No. 11-97-14362-MA, (January 28, 1998).
Cross-Border Liquidation Protocol in Re Tee-Comm Electronics Inc. between Ontario
Court of Justice and United States Bankruptcy Court for the District of Delaware (Hon.
Peter J. Walsh), Case No. 97-1100 (PJW), (July 3, 1997).
Cross-Border Insolvency Concordat as Adopted by the Council of the International Bar
Association Section on Business Law (Paris: September 17, 1995) and by the Council of
the International Bar Association (Madrid: May 31, 1996).
Cross-Border Insolvency Protocol between the United States and Israel in Re Nakash
United States Bankruptcy Court for the Southern District of New York, Case No. 94 B
44840, (May 23, 1996) and District Court of Jerusalem, Case No. 1595/87, (May 23,
1996).
Order Co-ordinating Canadian and United States Reorganizational Plans in Re
Everfresh Beverages Inc. Ontario Court of Justice; Toronto (Mr. Justice J.M. Farley),
Case No. 32-077978, (May 15, 1996).
Orders Approving Cross-Border Insolvency Protocol between Canada and the United
States in Re Everfresh Beverages Inc., Ontario Court of Justice, Toronto (Mr. Justice
J.M. Farley), Case No. 32-077978, (December 20, 1995) and United States Bankruptcy
Court for the Southern District of New York. (Hon. Burton R. Lifland), Case No. 95 B
45405, (December 20, 1995).
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Cross-Border Insolvency Protocol in Re Commodore Electronics Limited and
Commodore International Limited between the United States Bankruptcy Court for the
Southern District of New York and the Supreme Court of the Commonwealth of the
Bahamas (December 8, 1994).
Cross-Border Insolvency Protocol in Re Olympia & York Developments Limited
between Ontario Court of Justice, Toronto (Mr. Justice R.A. Blair), Case No. B125/92,
(July 26, 1993) and United States Bankruptcy Court for the Southern District of New York
(Hon. James L. Garrity, Jr.), Case No’s 92-B-42698-42701, (July 15, 1993) (Reasons for
Decision of the Ontario Court of Justice: (1993), 20 C.B.R. (3d) 165).
Cross-Border Insolvency Protocol and Order Approving Protocol in Re Maxwell
Communication plc between the United States and the United Kingdom. United States
Bankruptcy Court for the Southern District of New York (Hon. Tina L. Brozman), Case
No. 91 B 15741, (January 15, 1992) and the High Court of Justice, Chancery Division,
Companies Court, Case No. 0014001 of 1991, (December 31, 1991).
_________________________________________
Cross-Border Insolvency Orders and Protocols
(B)
Alphabetical Listing
Cross-Border Insolvency Protocol in Re 360Networks Inc. between British Columbia
Supreme Court, Vancouver (Mr. Justice D.F. Tysoe), Case No. L011792, (June 28, 2001)
and United States Bankruptcy Court for the Southern District of New York (Hon. Allan L.
Gropper), Case No. 01-13721-alg, (August 29, 2001).
Cross-Border Insolvency Protocol in Re AgriBio Tech Inc. between Ontario Superior
Court of Justice, Toronto (Mr. Justice J.M. Farley), Case No. 31-OR-371448, (June 16,
2000) and United States Bankruptcy Court for the District of Nevada (Hon. Linda B.
Riegle), Case No. 500-10534 LBR, (June 28, 2000) providing for Court-to-Court
Communications.
Cross-Border Liquidation Protocol in Re AIOC Corporation and AIOC Resources AG
between United States and Switzerland: United States Bankruptcy Court for Southern
District Court of New York (Chief Judge Tina L. Brozman), Case Nos. 96 B 41895 and 96
B 41896, (April 3, 1998).
Orders Adopting the American Law Institute Guidelines for Court-to-Court
Communications in Cross-Border Cases with certain modifications in Re Androscoggin
Energy LLC, United States Bankruptcy Court for the District of Maine (Hon. Louis H.
Kornreich), Case No. 04-12221-LHK, (January 12, 2005), and Ontario Superior Court of
Justice (Mr. Justice J.M. Farley), Court File No. 04-CL-5643 January 6, 2005).
Admin*1393628.1
Cross-Border Insolvency Protocol and Order in Re Calpine Corporation between the
United States Bankruptcy for the Southern District of New York (Hon. Burton R. Lifland),
Case No. 05-60200 (April 9, 2007) and Court of Queen’s Bench of Alberta (Madam
Justice B.E.C. Romaine), Case No. 0501-17864 (April 7, 2007) including approval and
adoption of the American Law Institute Guidelines for Court-to-Court Communications for
Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Commodore Electronics Limited and
Commodore International Limited between the United States Bankruptcy Court for the
Southern District of New York and the Supreme Court of the Commonwealth of the
Bahamas (December 8, 1994).
Cross-Border Insolvency Concordat as Adopted by the Council of the International Bar
Association Section on Business Law (Paris: September 17, 1995) and by the Council of
the International Bar Association (Madrid: May 31, 1996).
Order Co-ordinating Canadian and United States Reorganizational Plans in Re
Everfresh Beverages Inc. Ontario Court of Justice; Toronto (Mr. Justice J.M. Farley),
Case No. 32-077978, (May 15, 1996).
Orders Approving Cross-Border Insolvency Protocol between Canada and the United
States in Re Everfresh Beverages Inc., Ontario Court of Justice, Toronto (Mr. Justice
J.M. Farley), Case No. 32-077978, (December 20, 1995) and United States Bankruptcy
Court for the Southern District of New York. (Hon. Burton R. Lifland), Case No. 95 B
45405, (December 20, 1995).
Cross-Border Insolvency Protocol in Re Federal-Mogul Global Inc. et al. between the
United States Bankruptcy Court for the District of Delaware (Hon. Randall Newsome),
Case No. 01-10578, (October 4, 2001) and the Chancery Division of the High Court of
Justice of England, (October 1, 2001) and Final Order Approving Cross-Border
Insolvency Protocol in Re Federal-Mogul Global Inc. et al., United States Bankruptcy
Court for the District of Delaware (Hon. Randall Newsome), Case No. 01-10578,
(January 7, 2002).
Cross-Border Insolvency Protocol in Re Financial Asset Management Foundation
between Supreme Court of British Columbia (Chief Justice Donald I. Brenner) Case No.
11-213464/VA.01 (August 1, 2001) and United States Bankruptcy Court for the Southern
District of California (Hon. Louise Adler) Case No. 01-03649-304 (July 25, 2001).
Cross-Border Insolvency Protocol in Re Inverworld, Inc. between United States District
Court for the Western District of Texas (Hon. Frederick Biery), Case No. SA99-C0822FB,
(October 22, 1999) and U.K. High Court of Justice, Chancery Division, (1999) and the
Grand Court of the Cayman Island, (1999).
Cross-Border Insolvency Protocol in Re Laidlaw Inc. between Ontario Superior Court of
Justice, Toronto (Mr. Justice J.M. Farley), Case No. 01-CL-4178, (August 10, 2001) and
United States Bankruptcy Court for the Western District of New York (Hon. Michael J.
Kaplan), Case No. 01-14099, (August 20, 2001).
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Cross-Border Insolvency Protocol in Re Livent Inc. between United States Bankruptcy
Court for the Southern District of New York (Hon. Arthur Gonzales), Case No. 98-B48312, and Ontario Superior Court of Justice, Toronto (Mr. Justice J.D. Ground), Case
No. 98-CL-3162, (June 11, 1999).
Cross-Border Insolvency Protocol in Re Loewen Group between United States
Bankruptcy Court for the District of Delaware (Chief Judge Peter J. Walsh) Case No. 991244, (June 30, 1999) and Ontario Superior Court of Justice, Toronto (Mr. Justice J.M.
Farley) Case No. 99-CL-3384, (June 1, 1999).
Cross-Border Insolvency Protocol in Re Manhattan Investment Fund Limited between
United States Bankruptcy Court for the Southern District of New York (Hon. Burton R.
Lifland), Case No. 00-10922BRL, (April 2000) and High Court of Justice of the British
Virgin Islands (Chief Justice Austin Ward), Case No. 19 of 2000, (April, 2000) and
Supreme Court of Bermuda (Mr. Justice Kenneth A. Benjamin), Case No. 2000/37, (April
2000).
Cross-Border Insolvency Protocol in Re Masonite International Inc. between Ontario
Superior Court of Justice, Toronto (Mr. Justice Colin L. Campbell), Case No. 09-807500CL (March 16, 2009) and United States Bankruptcy Court for the District of Delaware
(Hon. Peter J. Walsh), Case No. 09-10844 (PJW), (April 14, 2009) substantially
incorporating the principles of the American Law Institute Guidelines for Court-to-Court
Communications in Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Matlack Inc. between Ontario Superior Court of
Justice, Toronto (Mr. Justice J.M. Farley), Case No. 01-CL-4109, (April 19, 2001) and
United States Bankruptcy Court for the District of Delaware (Hon. Mary F. Walrath), Case
No. 01-01114 (MFW), (May 24, 2001) including approval and adoption of the American
Law Institute Guidelines for Court-to-Court Communications in Cross-Border Cases.
Cross-Border Insolvency Protocol and Order Approving Protocol in Re Maxwell
Communication plc between the United States and the United Kingdom. United States
Bankruptcy Court for the Southern District of New York (Hon. Tina L. Brozman), Case
No. 91 B 15741, (January 15, 1992) and the High Court of Justice, Chancery Division,
Companies Court, Case No. 0014001 of 1991, (December 31, 1991).
Cross-Border Insolvency Protocol in Re Mosaic Group Inc. between the Ontario Court of
Justice, Toronto (Mr. Justice J.M. Farley), Court File No. 02-CL-4816, (December 7,
2002) and the United States Bankruptcy Court for the Northern District of Texas (Hon.
Harlin DeWayne Hale), Case No. 02-81440, (January 8, 2003), including approval and
adoption of the American Law Institute Guidelines for Court-to-Court Communications in
Cross Border Cases.
Cross-Border Insolvency Protocol between the United States and Israel in Re Nakash
United States Bankruptcy Court for the Southern District of New York, Case No. 94 B
44840, (May 23, 1996) and District Court of Jerusalem, Case No. 1595/87, (May 23,
1996).
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Cross-Border Insolvency Protocol in Re Nortel Networks Corporation between Ontario
Superior Court of Justice, Toronto (Mr. Justice Geoffrey B. Morawetz), Case No. 09-CL7950 (January 14, 2009) and United States Bankruptcy Court for the District of Delaware
(Hon. Kevin Gross), Case No. 09-10138 (KG), (January 15, 2009) including approval and
adoption of the American Law Institute Guidelines for Court-to-Court Communications in
Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Olympia & York Developments Limited
between Ontario Court of Justice, Toronto (Mr. Justice R.A. Blair), Case No. B125/92,
(July 26, 1993) and United States Bankruptcy Court for the Southern District of New York
(Hon. James L. Garrity, Jr.), Case No’s 92-B-42698-42701, (July 15, 1993) (Reasons for
Decision of the Ontario Court of Justice: (1993), 20 C.B.R. (3d) 165).
Cross-Border Insolvency Protocol in Re Philip Services Corporation between United
States Bankruptcy Court for the District of Delaware (Hon. Mary Walrath), Case No. 99B-02385, (June 28, 1999) and Ontario Superior Court of Justice, Toronto (Mr. Justice
Robert A. Blair), Case No. 99-CL-3442, (June 25, 1999).
Cross-Border Insolvency Protocol in Re Pioneer Companies between the Quebec
Superior Court, (Re PCI Chemicals Canada Inc.,) (Madam Justice Danielle Mayrand),
Case No. 5000-05-066677-012, (August 1, 2001) and United States Bankruptcy Court for
the Southern District of Texas, (Re Pioneer Companies Inc.) Case No. 01-38259, (August
1, 2001): providing for Court-to-Court communications consistent with The American Law
Institute Guidelines for Court-to-Court Communications in Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Pope & Talbot Ltd. between the British
Columbia Supreme Court, Vancouver (Chief Justice Donald I. Brenner), Case No.
SO77839, (December 14, 2007) and the United States Bankruptcy Court for the District
of Delaware, (Hon. Christopher Sontchi), Case No. 07-11738 including approval and
adoption of the American Law Institute Guidelines for Court-to-Court Communications in
Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Progressive Moulded Products Ltd. between
the Ontario Superior Court of Justice, Toronto (Mr. Justice Geoffrey B. Morawetz), Case
No. CV-08-7590-00CL, (June 24, 2008) and the United States Bankruptcy Court,
including approval and adoption of the American Law Institute Guidelines for Court-toCourt Communications in Cross-Border Cases.
Cross-Border Insolvency Protocol in Re PSINet Inc. et al. between Ontario Superior
Court of Justice, Toronto (Mr. Justice J.M. Farley), Case No. 01-CL-4155, (July 10, 2001)
and United States Bankruptcy Court for the Southern District of New York (Hon. Robert
E. Gerber), Case No. 01-13213, (July 10, 2001) including approval and adoption of the
American Law Institute Guidelines for Court-to-Court Communications in Cross-Border
Cases.
Cross-Border Insolvency Protocol in Re Quebecor World Inc. between the Superior
Court for the Province of Quebec (Mr. Justice Robert Mongeon), Case No. 500-11032338-085 (January 21, 2008) and the United States Bankruptcy Court, Southern
Admin*1393628.1
District of New York (Hon. James Peck), Case No. 08-10152, (April 17, 2008), including
approval and adoption of the American Law Institute Guidelines for Court-to-Court
Communications in Cross-Border Cases.
Re Refco Capital Markets ( Supreme Court of Bermuda) (Mr. Justice Ian Kawaley) Case
No. 2005:328 (December 12, 2006) (Approving the application of the American Law
Institute Guidelines for Court-to-Court Communications in Cross-Border Cases.)
Cross-Border Insolvency Protocol in Re Sendo International Limited between the
commercial Court of Nanterre, France (Mr. Justice Jerome Mandrillon) and the Chancery
Division of the High Court of Justice, London (June 1, 2006.)
Cross-Border Insolvency Protocol in Re Smurfit-Stone Container Canada Inc. between
Ontario Superior Court of Justice, Toronto (Madam Justice Sarah E. Pepall), Case No.
09-7966-00CL (March 12, 2009) and United States Bankruptcy Court for the District of
Delaware (Hon. Brendan L. Shannon), Case No. 09-10235 (BLS), (March 12, 2009)
substantially incorporating the principles of the American Law Institute Guidelines for
Court-to-Court Communications in Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Solv-Ex Canada Limited and Re Solv-Ex
Corporation between Alberta Court of Queen’s Bench (Mr. Justice G.R. Forsyth), Case
No. 9701-10022, (January 28, 1998) and United States Bankruptcy Court for the District
of New Mexico (Hon. Mark McFeely), Case No. 11-97-14362-MA, (January 28, 1998).
Cross-Border Insolvency Protocol in Re Systech Retail Systems Corporation between
the Ontario Court of Justice, Toronto (Mr. Justice J.D. Ground), Court File No. 03-CL4836, (January 20, 2003) and the United States Bankruptcy Court for the Eastern District
of North Carolina, Raleigh Division (Hon. A. Thomas Small), Case No. 03-00142-5-ATS,
(January 30, 2003) including approval and adoption of the American Law Institute
Guidelines for Court-to-Court Communications in Cross-Border Cases.
Cross-Border Liquidation Protocol in Re Tee-Comm Electronics Inc. between Ontario
Court of Justice and United States Bankruptcy Court for the District of Delaware (Hon.
Peter J. Walsh), Case No. 97-1100 (PJW), (July 3, 1997).
_________________________________________
(C)
Cross-Border Insolvency Orders and Protocols providing for Court-toCourt Communications
Cross-Border Insolvency Protocol and Order in Re AbitibiBowater Inc. between the
Superior Court of the Province of Quebec (Hon. Clement Gascon), Case No. 500-11036133-094 (July 28, 2009), including approval and adoption of the American Law
Institute Guidelines for Court-to-Court Communications in Cross-Border Cases and the
United States Bankruptcy Court for the District of Delaware (Hon. Kevin J. Carey), Case
No. 09-11296 (KJC) (July 7, 2009), including approval and adoption of the American Law
Institute Guidelines for Court-to-Court Communications in Cross-Border Cases.
Admin*1393628.1
Cross-Border Insolvency Protocol in Re AgriBio Tech Inc. between Ontario Superior
Court of Justice, Toronto (Mr. Justice J.M. Farley), Case No. 31-OR-371448, (June 16,
2000) and United States Bankruptcy Court for the District of Nevada (Hon. Linda B.
Riegle), Case No. 500-10534 LBR, (June 28, 2000) providing for Court-to-Court
Communications.
Orders Adopting the American Law Institute Guidelines for Court-to-Court
Communications in Cross-Border Cases with Certain Modifications in Re Androscoggin
Energy LLC, United States Bankruptcy Court for the District of Maine (Hon. Louis H.
Kornreich), Case No. 04-12221-LHK, (January 12, 2005), and Ontario Superior Court of
Justice (Mr. Justice J.M. Farley), Court File No. 04-CL-5643 January 6, 2005).
Cross-Border Insolvency Protocol and Order in Re Barzel Industries Canada Inc.
between Ontario Superior Court of Justice, Toronto (Mr. Justice Geoffrey B. Morawetz),
Case No. 09-CL-8363 (September 15, 2009), including approval and adoption of the
American Law Institute Guidelines for Court-to-Court Communications in Cross-Border
Cases and United States Bankruptcy Court for the District of Delaware (Hon. Christopher
S. Sontchi), Case No. 09-13204 (CSS) (September 17, 2009), including approval and
adoption of the American Law Institute Guidelines for Court-to-Court Communications in
Cross-Border Cases.
Cross-Border Insolvency Protocol and Order in Re Bernard L. Madoff Investment
Securities LLC issued by the United States Bankruptcy Court for the Southern District of
New York (Hon. Burton R. Lifland), Adv. Pro. No. 08-1789 (June 9, 2009), including
approval and adoption of the American Law Institute Guidelines for Court-to-Court
Communications in Cross-Border Cases.
Cross-Border Insolvency Protocol and Order in Re Calpine Corporation between the
United States Bankruptcy for the Southern District of New York (Hon. Burton R. Lifland),
Case No. 05-60200 (April 9, 2007) and Court of Queens Bench of Alberta (Madam
Justice B.E.C. Romaine), Case No. 0501-17864 (April 7, 2007) including approval and
adoption of the American Law Institute Guidelines for Court-to-Court Communications in
Cross-Border Cases.
Cross-Border Insolvency Protocol and Order in Re Eddie Bauer Holdings, Inc., et al.
between the Ontario Superior Court of Justice, Toronto (Mr. Justice Geoffrey B.
Morawetz), Case No. 09-8240-CL (June 25, 2009), including approval and adoption of
the American Law Institute Guidelines for Court-to-Court Communications in CrossBorder Cases and the United States Bankruptcy Court for the District of Delaware (Hon.
Mary F. Walrath), Case No. 09-12099 (June 24, 2009), including approval and adoption
of the American Law Institute Guidelines for Court-to-Court Communications in CrossBorder Cases.
Cross-Border Insolvency Protocol and Order in Re Lehman Brothers Holdings Inc., et
al. issued by the United States Bankruptcy Court for the Southern District of New York
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(Hon. James M. Peck), Case No. 08-13555 (June 17, 2009), including approval and
adoption of the American Law Institute Guidelines for Court-to-Court Communications in
Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Masonite International Inc. between Ontario
Superior Court of Justice, Toronto (Mr. Justice Colin L. Campbell), Case No. 09-807500CL (March 16, 2009) and United States Bankruptcy Court for the District of Delaware
(Hon. Peter J. Walsh), Case No. 09-10844 (PJW), (April 14, 2009) substantially
incorporating the principles of the American Law Institute Guidelines for Court-to-Court
Communications in Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Matlack Inc. between Ontario Superior Court of
Justice, Toronto (Mr. Justice J.M. Farley), Case No. 01-CL-4109, (April 19, 2001) and
United States Bankruptcy Court for the District of Delaware (Hon. Mary F. Walrath), Case
No. 01-01114 (MFW), (May 24, 2001) including approval and adoption of the American
Law Institute Guidelines for Court-to-Court Communications in Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Nortel Networks Corporation between Ontario
Superior Court of Justice, Toronto (Mr. Justice Geoffrey B. Morawetz), Case No. 09-CL7950 (January 14, 2009) and United States Bankruptcy Court for the District of Delaware
(Hon. Kevin Gross), Case No. 09-10138 (KG), (January 15, 2009) including approval and
adoption of the American Law Institute Guidelines for Court-to-Court Communications in
Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Pioneer Companies between the Quebec
Superior Court, (Re PCI Chemicals Canada Inc.,) (Madam Justice Danielle Mayrand),
Case No. 5000-05-066677-012, (August 1, 2001) and United States Bankruptcy Court for
the Southern District of Texas, (Re Pioneer Companies Inc.) (Hon. Letitia Z. Clark) Case
No. 01-38259, (August 1, 2001): providing for Court-to-Court communications consistent
with The American Law Institute Guidelines for Court-to-Court Communications in CrossBorder Cases.
Cross-Border Insolvency Protocol in Re Pope & Talbot Ltd. between the British
Columbia Supreme Court, Vancouver (Chief Justice Donald I. Brenner), Case No.
SO77839, (December 14, 2007) and the United States Bankruptcy Court for the District
of Delaware, (Hon. Christopher Sontchi), Case No. 07-11738 including approval and
adoption of the American Law Institute Guidelines for Court-to-Court Communications in
Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Progressive Moulded Products Ltd. between
the Ontario Superior Court of Justice, Toronto (Mr. Justice Geoffrey B. Morawetz), Case
No. CV-08-7590-00CL, (June 24, 2008) and the United States Bankruptcy Court,
including approval and adoption of the American Law Institute Guidelines for Court-toCourt Communications in Cross-Border Cases.
Cross-Border Insolvency Protocol in PSINet Inc. et al. between Ontario Superior Court of
Justice, Toronto (Mr. Justice J.M. Farley), Case No. 01-CL-4155, (July 10, 2001) and
United States Bankruptcy Court for the Southern District of New York (Hon. Robert E.
Admin*1393628.1
Gerber), Case No. 01-13213, (July 10, 2001) including approval and adoption of the
American Law Institute Guidelines for Court-to-Court Communications in Cross-Border
Cases.
Cross-Border Insolvency Protocol in Re Quebecor World Inc. between the Superior
Court for the Province of Quebec (Mr. Justice Robert Mongeon), Case No. 500-11032338-085 (January 21, 2008) and the United States Bankruptcy Court, Southern
District of New York (Hon. James Peck), Case No. 08-10152, (April 17, 2008), including
approval and adoption of the American Law Institute Guidelines for Court-to-Court
Communications in Cross-Border Cases.
Court Opinion in Re Refco Capital Markets (Supreme Court of Bermuda) (Mr. Justice
Ian R. Kawaley) Case No. 2005:328 (December 12, 2006), approving the application of
the American Law Institute Guidelines for Court-to-Court Communications in CrossBorder Cases.
Cross-Border Insolvency Protocol and Order in Re SemCanada Crude Company et
al. between the Queen's Bench of Alberta for the Judicial District of Calgary (Justice
B.E.C. Romaine), Action No. 0801-08510 (May 22, 2009), including approval and
adoption of the American Law Institute Guidelines for Court-to-Court Communications in
Cross-Border Cases and the United States Bankruptcy Court for the District of
Delaware (Hon. Brendan L. Shannon), Case No. 08-11525 (BLS), (September 24,
2009).
Cross-Border Insolvency Protocol in Re Smurfit-Stone Container Canada Inc. between
Ontario Superior Court of Justice, Toronto (Madam Justice Sarah E. Pepall), Case No.
09-7966-00CL (March 12, 2009) and United States Bankruptcy Court for the District of
Delaware (Hon. Brendan L. Shannon), Case No. 09-10235 (BLS), (March 12, 2009)
substantially incorporating the principles of the American Law Institute Guidelines for
Court-to-Court Communications in Cross-Border Cases.
Cross-Border Insolvency Protocol in Re Systech Retail Systems Corporation between
the Ontario Court of Justice, Toronto (Mr. Justice J.D. Ground), Court File No. 03-CL4836, (January 20, 2003) and the United States Bankruptcy Court for the Eastern District
of North Carolina, Raleigh Division (Hon. A. Thomas Small), Case No. 03-00142-5-ATS,
(January 30, 2003) including approval and adoption of the American Law Institute
Guidelines for Court-to-Court Communications in Cross-Border Cases.
Admin*1393628.1
Appendix H
GUIDELINES FOR COORDINATION OF MULTI-NATIONAL
ENTERPRISE GROUP INSOLVENCIES1
[July 2010 Draft]
Submitted by the Committee On International Jurisdiction And Cooperation
of the International Insolvency Institute
Hon. Ralph R. Mabey
Professor of Law
S.J. Quinney College of Law
University of Utah
332 South 1400 East
Salt Lake City, Utah 84112
Susan Power Johnston
Covington & Burling LLP
The New York Times Building
620 Eighth Avenue
New York, New York 10018
1
The authors acknowledge the substantial and material contributions of The Honorable Samuel Bufford,
Gabriel Moss and Michael Thierhoff to these materials. Their contributions were part of the Committee’s
panel presentation at the Institute’s Rome 2010 meeting.
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Introduction
The existing cross-border statutory schemes and proposals state common goals for
multi-national enterprise group insolvencies: efficient markets, increased certainty for
trade and investment, fair and efficient administration to protect the interests of parties,
protection and maximization of the value of the debtor’s assets, and facilitation of the
rescue of financially troubled businesses thereby protecting investment and preserving
employment.2 Several of the existing international insolvency schemes also share the
concept of the debtor’s “center of main interests,” frequently referred to as the “COMI.”
These regimes assume that the debtor’s value is more likely to be maximized if its
insolvency is administered from a central location, and they seek to achieve this goal by
recognizing unified international jurisdiction over the debtor and its assets, wherever
found, in the court of the country in which the debtor’s COMI is located.
Despite these shared goals and common approaches, the existing international
insolvency regimes have not resolved many of the problems that arise when multinational enterprise groups fail. Most important for these Guidelines, no legislation
anywhere in the world explicitly governs the insolvencies of multi-national enterprise
groups, nor considers where the coordination center of such an enterprise is located.
Multi-national enterprises are, moreover, not restricted to the regions of the world in
which the existing international insolvency regimes exist. In general, local insolvency
laws do not ensure that the value of the assets of a multi-national enterprise are
maximized, because they have as their principal purpose the regulation and protection
of local concerns. They provide only limited guidance for courts that seek to coordinate
with other jurisdictions to maximize values for stakeholders around the world. In the
absence of legislative guidance, national courts have struggled to address the factspecific needs of insolvent multi-national enterprise groups, and competing claims for
jurisdiction over insolvencies have arisen, putting at risk the fundamental goal of value
maximization. Additional tools to achieve cooperation and coordination between courts
with jurisdiction over the multiple arms of international businesses are needed to
facilitate their efficient restructuring or liquidation.
2
See European Council Regulation on Insolvency Proceedings, Council regulation 1346/2000, 29 May
2000, on insolvency proceedings, 2000 O.J. (L160) (“EU Regulations”), Par. 2 of Preamble; 11 U.S.C. §
1501(a). These provisions track the preamble to the Model Law. See also the Overview to the NAFTA
Principles, which demonstrate that they are intended to achieve some of the same goals as the EU
Regulations within the NAFTA member states: “One of the principal purposes of the NAFTA is to promote
trade and investment on a regional basis throughout North America, without regard to national borders.
As the EU Regulation recognizes, such a goal requires commercial predictability in the event of financial
default and is best served by mechanisms that maximize the value of enterprises in financial distress.
Cooperation and coordination in bankruptcy cases across national lines are essential to those goals. Not
only will investors be more confident in making investments of debt or equity across national borders
when there is a coherent system for managing default, but such a system makes it more likely that
companies can be sold or restructured in a way that preserves jobs and community values.” p. 7.
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These Guidelines are intended to apply to an enterprise group with operations, assets
and employees located in more than one country, which has unified corporate
governance, either through common or interlocking shareholding or by contract. They
are also of assistance in coordinating the insolvencies of multi-national enterprise
groups whose component parts operate with relative independence. Some of these
Guidelines should be implemented before the courts take decisive action that may have
precedential effect within a multi-national enterprise’s insolvency proceedings.
Courts in civil law countries have less discretion than those in common law countries to
adopt or implement guidelines such as these without explicit statutory authority. Even
where courts are unable to implement these guidelines as proposed, however, they may
endeavour to effectuate the objectives of these guidelines within the strictures of
existing law. For example, Model Law Articles 25-27mandate inter-court transnational
cooperation to the “maximum extent possible” and may be read to authorize these
Guidelines in appropriate circumstances.
Multinational Enterprise Groups
Multinational enterprise groups are those companies established in more than one
country which are linked together by some form of control, whether direct or indirect, or
ownership, by which linkage their businesses are centrally controlled or coordinated. 3
Whether a multi-national enterprise in insolvency proceedings should have a single
coordination center, as discussed below, will depend on the strength of its integration
and its central organization.
Central Coordination of Multinational Enterprise Group Insolvencies
Many if not most multi-national enterprise groups are controlled centrally, and crossborder insolvencies of multi-national enterprise groups will function more efficiently if
they are coordinated under central direction.4
Reorganization or rescue of strongly integrated, centrally managed multi-national
enterprise groups in financial distress will be more successful with central coordination.
Even in the absence of strong central management, a multi-national enterprise group
may benefit from central coordination. In certain cases, and in certain jurisdictions, it
may be more appropriate to recognize multiple centers, and to maximize value by
coordination of multiple proceedings either with protocols or, in jurisdictions with
This definition of a multi-national enterprise group is drawn from UNCITRAL’s Working Group V’s
Legislative Guide on Insolvency law, Part Three: Treatment of Enterprise Groups in Insolvency,
A/CN.9/WG.V/WP.82, ¶¶ 2-17 (September 1 2008) (“UNCITRAL Insolvency Working Group Guide”) and
I. Merovach, “The ‘Home Country” of a Multinational Enterprises Group Facing Insolvency,” ICLQ Vo. 57,
April 2008, p 431.
4 See also Principle 1 of IBA Committee J Cross-Border Insolvency Concordat: “If an entity or individual
with cross-border connections is the subject of an insolvency proceeding, a single administrative forum
should have primary responsibility for coordinating all insolvency proceedings relating to such entity or
individual,” quoted in [Proposed] Legislative Guide on Insolvency Law Part Three: Treatment of enterprise
groups in insolvency, II.B.1.¶ 5, A/CN.9/wG.V/WP.85/Add.1.
3
Admin*1393628.1
appropriate legislation, with statutory coordination and cooperation between courts,
rather than through administrative coordination of those proceedings.
The coordination center of multinational corporate groups with strong integration and
central management should be readily ascertainable. Where the group is less
integrated, and/or is organized horizontally rather than vertically, it may not be as easy
to ascertain whether there is an appropriate coordination center, and it may not be
appropriate in such cases for a single coordination center to control the insolvency
process.
Factors Relevant in Determining When Coordination is Appropriate
The factors listed below may be relevant in determining (a) whether recognition of a
single coordination center is appropriate, and if so in what location, or in the alternative
(b) whether coordination among courts with jurisdiction over multiple group members is
more feasible (subject to existing local law, which may prevent consideration of one or
more of these factors).
A.
Is there a single location at which high level coordinated economic
decisions of the enterprise as a whole are made and from which the
enterprise is managed;
B.
To what extent is there financial integration and interdependence among
the members of the group, including the existence of cash management
systems, joint borrowing arrangements and/or cross-guarantee provisions;
C.
To what extent is there business integration and interdependence among
the members of the group;
D.
To what extent is there a single location whose local law will govern most
disputes arising in the enterprise’s insolvency proceedings;
E.
Which of the possible coordination center courts can deliver and enforce
the most pervasive relief;
F.
What is the extent of common ownership among members of the group;
and
G.
What is the extent to which contractual relationships among members of
the group provide central coordination?
Guidelines for Coordination of Multinational Enterprises
Where it is determined that it is appropriate for the reorganization or rescue of a
multinational group to be administratively coordinated, these Guidelines will apply.
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1. When it is determined that administrative coordination of a
multinational enterprise group is appropriate, a single country ("the home country")
should be identified where the coordination center for the enterprise group is located.
2. [Where the law permits,] The home country is presumptively the proper
country for the filing of main insolvency proceedings or cases for each member of the
group, wherever the individual members may have their registered offices or main
places of business. Each member of the group seeking insolvency relief shall file its
own insolvency case in the home country. All such cases filed in the home country shall
be administratively coordinated unless the home court orders otherwise. [Some
jurisdictions permit this approach currently; in other jurisdictions legislation would be
required to achieve this result].
3. Each such case will be governed by the insolvency law of the home
country, with important exceptions, stated in Guidelines 13 and 14. Each case filed in
the home country shall be assigned to the same judge for supervision and
administration. The assignment of the proper court for the insolvency filings of the
enterprise group within the home country will be determined by local law.
4. No main proceeding for a constituent member of an enterprise group
filing its insolvency case in the home country court may be filed or opened in any other
country.
5. Upon the opening of insolvency proceedings against, or a petition for
relief by or against, a debtor that is a member of a multi-national enterprise group, and
before the determination of COMI, notice shall be given and a meaningful opportunity to
be heard shall be provided to all members of the enterprise group, including court
appointed representatives.
6. The Court-to-Court Communications Guidelines shall be employed.5
5
The Court-to-Court Communications Guidelines (reproduced at
http://www.iiiglobal.org/component/jdownloads/?task=view.download&cid=355) authorize a court to
communicate directly with another court or with an administrator in another jurisdiction to coordinate
proceedings before it with foreign proceedings. The court may also permit an administrator it has
appointed to communicate with a foreign court either directly or through a foreign administrator, for the
same goal. The court may receive communications from foreign courts and foreign administrators, and
may respond as appropriate, either directly or indirectly. The court may communicate by sending copies
of transcripts, orders or opinions or other documents, by providing notice to parties in interest, by directing
counsel or a foreign or domestic administrator to transmit copies of documents, pleadings, affidavits,
briefs or other documents filed with the court to the other court, and by participating in telephone or video
conference calls, or other electronic means of communication. Court-to-Court Communication Guideline 7
specifies the ways that telephone and video conference calls should proceed, so as to ensure
transparency and fairness. It is not intended that these oral communications be ex parte; the courts are
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7. Where the local law does not require notice to be given to foreign
affiliates of the debtor, the representatives of the debtor shall ensure that such foreign
affiliates receive notice of key events and dates.6
8. In any case where there are rival applications to open group
proceedings, the court which has received the first request to open group proceedings
may make the first decision, after suitable notice described above, and appropriate
to ensure that notice is given to parties in interest so that they may participate, and that the calls are
transcribed and filed as part of the record in the cases. The Court-to-Court Communications Guidelines
also suggest the possibility of jointly conducted hearings between the courts, and specify the mechanisms
by which such joint hearings may be conducted. The Guidelines have been translated into at least 16
languages, endorsed by a number of courts and professional associations, and adopted in a number of
cases.
6
Local law may permit, if not require, such notice to be given even in the absence of specific direction.
For example, the Model Law (reproduced at
http://www.iiiglobal.org/component/jdownloads/?task=viewcategory&catid=399) Chapter 15 of the United
States Bankruptcy Code and the NAFTA Principles (reproduced
http://www.iiiglobal.org/component/jdownloads/?task=view.download&cid=355) require the debtor or its
insolvency representative to provide the courts with updates on related foreign insolvency proceedings.
Article 31 of the EU Regulation directs insolvency representatives in main and secondary proceedings to
cooperate closely with one another, principally by exchanging information. The Court-to-Court
Communications Guidelines (reproduced at
http://www.iiiglobal.org/component/jdownloads/?task=view.download&cid=355.) suggest methods with
which courts may communicate among themselves about cross-border matters. Many courts should
accordingly be comfortable with the concept of obtaining and providing such communications. This
Guideline contemplates that the courts will require such communications even if the debtors or their
representatives fail to offer them voluntarily, to ensure coordination between insolvency proceedings
involving members of a multi-national enterprise group.
Courts with jurisdiction over insolvent enterprises with multiple COMIs may wish to consider the
applicability of the NAFTA Principles, and specifically those guidelines relevant to enterprise groups. The
European Communication and Cooperation Guidelines for Cross-border Insolvency, proposed by a group
of academics and practitioners, and supported by several judges, may also be helpful, as may the IBA
Committee J Cross-Border Insolvency Concordat. The text of the European Communication and
Cooperation Guidelines for Cross-border Insolvency is included in an article located at
http://bobwessels.nl/wordpress/wp-content/uploads/2007/09/icr-editorial-oct-07.pdf
Some Courts, particularly in civil law jurisdictions, may feel that they are restricted from ordering that
notice be given to entities that are not direct parties to the local proceedings filed before them. Such
Courts may wish to consider whether other statutory provisions may justify the provision of such notice.
For example, section 5 of the German Insolvency Act directs the court to investigate all circumstances
relevant to the proceedings, which could provide support for providing notice to enterprise group
members that have no direct standing in the local case. Similarly, various provisions of the EU
Regulation may permit a local court to permit practices legal in another state with concurrent jurisdiction
over the debtor, even if not explicitly authorized in the local state. See, e.g., Article 38.
Admin*1393628.1
court to court communications with any other jurisdictions in which such an application
is pending.
9. There shall be a single administrator (e.g., restructuring officer, trustee
or liquidator) appointed for all of the cases filed for members of the enterprise group in
the home country. Similarly, there should be a single officeholder for each other
category provided for under the applicable domestic insolvency law. Such officeholders
include legal counsel, accountants, restructuring officers, committees of creditors and
their professionals, and creditors’ representatives [(e.g., French law)] [If local law so
provides, any office holder may consist of an entity or several individuals].
10. Where the group has assets, or where the group requires court
assistance in its reorganization or liquidation, a recognition procedure, similar to that
provided for individual entities under the Model Law, shall be provided for the
recognition in other countries of the main proceedings of an enterprise group in the
home country. Upon the opening of such a secondary proceeding, that proceeding is
governed by the law of the country where the secondary proceeding is located.
11. The moratorium of the home country shall be respected internationally,
except as provided herein. Secondary or non-main proceedings under paragraph 10
above may be opened where necessary to obtain recognition of the moratorium of the
home country.
12. To the fullest extent practicable, the court in the home country shall
respect the local law priorities of any jurisdiction in which a member of the enterprise
group could be made subject to a local insolvency proceeding.
13. The choice of law principles articulated in EU Reg arts. 8-11 and 14
shall apply. In cooperation with the relevant national courts having control of asset
segments, where not in conflict with governing law [such as the EU Regulation], the
national courts of the coordination center may apply one or more of the following choice
of law principles:
(a) The court with jurisdiction over the coordination center will
determine choice of law issues, and may defer to a national court whose law applies
for determinations on the merits, provided a proceeding has been instituted in that
nation;
(b)The court with jurisdiction over the coordination center will
apply the avoiding powers of the jurisdiction with the greatest contacts to the
challenged transaction;
(c) With respect to interests in property, the court with jurisdiction
over the coordination center will apply, as applicable, (1) the UN Convention on
Assignment of Receivables in International Trade, (2) the UNCITRAL Legislative Guide
on Secured Transactions; or (3) the law of the nation where the property is located;
Admin*1393628.1
(d) The court with jurisdiction over the coordination center will
recognize and defer to the national laws and national courts regarding taxation over
assets within the national court’s jurisdiction;
(e) The court with jurisdiction over the coordination center will
apply the law of the nation where employees of the enterprise are employed to issues
affecting the employees;
(f) The court with jurisdiction over the coordination center will
apply to a contract in dispute the non-bankruptcy law of the nation that is specified in
the contract; and
(g) Unless appropriate to preserve or enhance the going concern
value of the enterprise for the benefit of parties in interest generally, the court with
jurisdiction over the coordination center will not consolidate value or assets from
multiple locations until (i) the creditors in that forum are paid in full under the provisions
of local law, or (ii) the creditors in that forum agree.
Coordination of Proceedings Without A Single Coordination Center
Where it is determined that a single coordination center is not appropriate because the
enterprise lacks sufficient integration to justify full central coordination, coordination of
the multinational enterprise group insolvency is nevertheless important. In such cases,
the following Guidelines apply.
A.1. Upon the opening of insolvency proceedings against, or a petition
for relief by or against, a debtor that is a member of a multi-national enterprise group[,
where authorized under local law,] notice shall be given and an opportunity to be heard
shall be provided to all members of the enterprise group, including court appointed
representatives.
A.2. Where the local law does not require notice to be given to foreign
affiliates of the debtor, the representatives of the debtor shall ensure that such foreign
affiliates receive informal notice of key events and dates.
A.3. [Where permitted by local law,] The court shall authorize other
members of the enterprise group or their insolvency representatives to be heard on all
matters affecting the enterprise group.
A.4. [Where permitted by local law,] The courts should authorize, direct
or permit the debtor or insolvency representative over which they have jurisdiction to
enter into protocols with other members of the enterprise group to further the objectives
of these Guidelines. Where courts are not permitted to authorize or direct the parties to
enter into protocols, the debtors, the insolvency representatives and/or the creditors
should initiate development of protocols as needed to coordinate the multinational
insolvency proceedings.
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A.5. Where insolvency proceedings have been commenced in different
nations by or against more than one member of a multi-national enterprise group,
[where permitted by local law,] a court with jurisdiction over a member of the group may
refer to the courts with jurisdiction over other members of the enterprise group, or
abstain from making, any decisions appropriate to be made by those courts.
A.6. Insolvency representatives shall communicate freely and openly
with debtors and other insolvency representatives in other nations to ensure
cooperation and coordination of a multinational insolvency. Creditors’ bodies should
support such cross-border communications among insolvent entities’ representatives.
A.7. [Where appropriate and permitted by local law,] The same
insolvency representative may be appointed for multiple members of a multinational
corporate group.
Admin*1393628.1
Fine Tuning Chapter 15:
Recent US Judicial Interpretations of Key Elements of the Statute
Hon. Charles G. Case II
United States Bankruptcy Judge
Phoenix, Arizona
I.
Introduction
Section 1410(d)(3) of the Bankruptcy Abuse Prevention and Consumer Protection Act
“BAPCPA”) of 2005 repealed 11 U.S.C. § 304 and replaced with a new Chapter 15,
based on the UNCITRAL Model Law on Cross Border Insolvency. In the first few years
after adoption, Chapter 15 cases were fairly rare; now, they are starting to be reported
with more regularity. While most Chapter 15 cases still emanate from either the
Southern District of New York or the District of Delaware, there have been a number of
other cases in the last year from outlying districts and two significant cases from the
Fifth Circuit Court of Appeals. This brief paper will discuss a selection of these cases in
an effort to discern the types of issues the courts are being asked to consider in
contested cases.
A few common, and not surprising, themes are reflected in these cases. These are: 1)
although recognition is a simplified procedure, it is not automatic. The courts will read
and apply the statute and require that every element be met; 2) Court’s are enforcing
Chapter 15’s intended use as the gateway to courts in the United States for a foreign
representative of an insolvency proceeding pending in another jurisdiction. Without
recognition, courts have denied standing to the foreign representative to pursue claims
in U.S. Courts; 3) The scope of relief available, other than what is automatic, is
necessarily fact dependent and will vary from case to case; and 4) Choice of law issues,
often driven by comity, are key elements in Chapter 15 cases.
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II.
Recognition
Chapter 15 was designed to introduce a simplified and objective procedure for the
recognition of a foreign representative of an insolvency case pending in a foreign
jurisdiction. The goal was to reduce the time and cost involved in determining
recognition and to provide more certainty in the outcome by limiting the court’s
discretion to provide assistance by relying on principles of comity, even if the foreign
debtor did not have a cognizable presence in the country of appointment (“center of
main interests” (COMI) for a main proceeding and an “establishment” for a nonmain
proceeding).
However, the case decisions underline that there are still several issues for courts to
consider beyond the simple fact of whether the petition has attached the documents
mandated by 11 U.S.C. § 1515.
For a foreign representative to be recognized under Chapter 15 there must be a “foreign
proceeding.” 11 U.S.C. § 1501(b)(1). While § 1516(a) allows the court to presume that
a foreign proceeding exists if there is a certificate from foreign jurisdiction so stating, the
court still must make an independent decision whether the matter is a foreign
proceeding. A foreign proceeding is defined under § 101(23) as “a collective judicial or
administrative proceeding in a foreign country, including an interim proceeding, under a
law relating to insolvency or adjustment of debt in which proceeding the assets and
affairs of the debtor are subject to control or supervision by a foreign court, for the
purpose of reorganization or liquidation.” At least two courts have recently focused on
whether the foreign action was “collective” in nature.
To be collective in nature an action must consider the rights and obligations of all the
creditors. In Gold & Honey, 410 B.R. 357 (Bankr.E.D.N.Y 2009), the court denied
recognition of receivers appointed by an Israeli court because the receivership
proceeding was commenced as an action “more akin to an individual creditor’s replevin
or repossession action than it was to a reorganization or liquidation by an independent
trustee. Id. at 370. The decision clearly emphasizes the fact that a presumption of
recognition is not conclusive. Although compliance with Section 1515 could be
presumed, the presumption was rebutted and the receivers failed to carry their burden
of proof. Indeed, the decision suggests that the receivers made little effort to satisfy
their burden, reminding all such petitioners once again that they should be prepared to
present their evidence and not rely on the statutory presumption.
In contrast, the court in In re British American Insurance Co. Ltd, 425 B.R. 884
(Bankr.S.D.Fla. 2010) concluded that the proceeding instituted against the insolvent
insurance company was collective in nature. The court considered the nature of the
proceedings, determining that because the judicial manager appointed in the Bahamas
was required to consider the interests of non policyholder creditors, it was instituted for
the benefit of all creditors and contemplated involvement of creditors collectively.
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Each of these cases is notable for other reasons as well. In Gold & Honey, the
receivers were appointed after Chapter 11 cases had been commence in the United
States. The Israeli court chose to ignore the automatic stay (as it had not been
domesticated in Israel) and proceeded to appoint the receivers with knowledge of the
pending U.S. cases. The U.S. court found the appointments void, in essence giving the
stay worldwide effect. In British American, the court refused recognition of the
Bahamas managers because the company’s COMI was not in the Bahamas and it had
no “establishment” there. Echoing In re Bear Stearns High-Grade Structured Credit
Strategies Master Fund Ltd, 374 B.R. 122 (Bankr. S.D.N.Y. 2007), aff’d 389 B.R. 325
(2008), the court concluded that a proceeding that was neither main nor nonmain was
not eligible for recognition.
The Fifth Circuit likewise demonstrated that Bear Stearns lives on, despite the harsh
criticism heaped on it from some corners soon after it was decided. In In re Ran (Lavie
v. Ran), --- F.3d ----, 2010 WL 2106638, (5th Cir. May 27, 2010), the Circuit took the
opportunity to determine if the foreign proceeding qualified as a foreign main or
nonmain proceeding, and, if not, what the consequences were.
Yual Ran is a former Israeli businessman who emigrated to the U.S. in 1996 and is now
a legal permanent resident of the United States. His wife and five children are U.S.
Citizens. An involuntary bankruptcy was filed against Ran in Israel in 1997 where he still
has assets. In 2006, Zuriel Lavie, the trustee in Ran’s Israeli bankruptcy, filed a motion
seeking recognition as a foreign main or nonmain proceeding.
A foreign main proceeding is “a foreign proceeding pending in the country where the
debtor has the center of its main interests.” 11 U.S.C. § 1502(4). Under §1516(c) “[i]n
the absence of evidence to the contrary, the debtor's registered office, or habitual
residence in the case of an individual, is presumed to be the center of the debtor's main
interests.” In a review of both U.S. and foreign law, the circuit determined that, for
purposes of an individual, intent is the key to determining COMI. As Ran showed an
intent to stay in the US, the U.S. was presumed to be Ran’s COMI. However, as Lavie
presented evidence to rebut the presumption, the Circuit had to consider whether the
evidence was sufficient for Lavie to carry the burden of proof.
Evidence in favor or finding that Israel was the COMI included: (1) Ran's creditors are
located in Israel; (2) Ran's principal assets are being administered in a bankruptcy
pending in Israel; and (3) Ran's bankruptcy proceedings were initiated in Israel and
would be governed by Israeli law. Evidence in favor of finding that the U.S. was the
COMI included: (1) Ran and his family left Israel nearly a decade prior to the filing of
the petition; (2) Ran had no intent to return to Israel; (3) Ran had established
employment and a residence in Houston, Texas; (4) Ran was a permanent legal
resident of the United States and his children were United States citizens; and (5) Ran
maintained his finances exclusively in Texas. The Circuit concluded that the receiver
failed to carry his burden and that the proceeding was not a foreign main proceeding.
Admin*1393628.1
The Circuit next turned to 11 U.S.C. § 1517(b)(2) to determine if the foreign proceeding
was a nonmain proceeding. In order for Ran to have an establishment in Israel, Ran
must have (1) had a place of operations in Israel, and (2) been carrying on nontransitory
economic activity in Israel at the time that Lavie brought the petition for recognition in
the United States. The Circuit concluded that assets in Israel do not equate to a place
of operation in Israel and since Ran's departure from Israel in 1997, he has engaged in
almost no economic activity in that country, despite the pendency of the bankruptcy for
the entire time. As a result, the order denying recognition was affirmed.
A final case on recognition presents an entirely different wrinkle. Even though a case
may meet the definitional requirements of a “foreign proceeding” under 11 U.S.C. §
101(23), it may fall prey to one of the exceptions under §1501(c). As a case in point,
Chapter 15 does not apply to “an individual, or to an individual and such individual's
spouse, who have debts within the limits specified in section 109(e) and who are
citizens of the United States or aliens lawfully admitted for permanent residence in the
United States.” The Court in In re Steadman, 410 B.R. 397 (Bankr.N.J. 2009) had to
determine whether a debtor who has: (1) been granted conditional permanent residency
due to his marriage to a United States Citizen; and (2) applied together with his spouse
to remove the expiration date from his Green Card, meets the statutory exception from
Chapter 15. Looking to immigration law for guidance, the court determined that the
Debtor is a permanent resident because “The Debtor has a family, a job, and owns a
home in the United States. He has made clear his intent to remain in the country and
not to return to the U.K. or carry on business in the U.K.” Id. at 403.
The court in Steadman recognized the danger that reading the “consumer” exception as
it did could encourage debtors to “flee to the United States to avoid their debts, making
our country a haven for fraudsters.” 410 B.R. at 403. However, the court felt
constrained to apply the statute as written without applying equitable considerations,
noting that the trustee’s counsel “is taking advice as to what other remedies may be
available to him, for example filing an involuntary petition [under Section 303].” But
then, would 11 U.S.C. § 303(b)(4) confer standing on a trustee that has been denied
recognition under Chapter 15?
III.
Relief Available
Once the foreign representative is past the recognition hurdle, the issue of what relief
may be obtained is far from simple, or settled.
In re Condor Insurance Limited, 601 F.3d 319 (5th Cir. 2010) is a good illustration of the
point. Condor was a Nevis corporation which filed a winding up petition – the equivalent
of Chapter 7 – in Nevis. The bankruptcy court recognized the Nevis proceedings as a
foreign main proceeding under Chapter 15.
Condor’s foreign representative sought to recover over $313 million dollars in fraudulent
transfers. But he faced a large obstacle. Under Section 1521(a)(7), a recognized
foreign representative may not file a fraudulent conveyance case under either §544(b)
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or § 548 in the absence of a plenary case under Chapter 7 or Chapter 11. Further, while
Condor’s foreign representative is eligible for recognition under §1501(c) (even though
Condor is an insurance company), Condor itself is not eligible to be a debtor under
§109(b). Thus, even though a recognized foreign representative in a main proceeding
may normally commence a plenary case under Chapter 7 or 11 (Section 1511) or the
foreign representative may bring such an adversary proceeding in an already pending
Chapter 7 or 11 (Section 1523), the fact that Condor was not eligible to be a debtor
meant that neither avenue was available.
Undeterred, the foreign representative filed an adversary proceeding to recover the
transfers under Nevis law. Unimpressed with this approach, the bankruptcy court
dismissed the complaint and the district court affirmed.
The Circuit saw it differently and reversed, holding that, even in the absence of a
Chapter 7 or 11, a foreign representative may seek to avoid a transfer under foreign
law, even though barred from doing so under United States law. The circuit concluded
that it does not follow from the bar on such actions under United States law that
avoidance actions under foreign law are also barred. Because the purpose of Chapter
15 is to further cooperation under foreign law and because § 1509(b)(3) directs courts to
grant comity to the foreign representative, the Court held that UNCITRAL purposely left
open the choice of law question, consistent with the broad grant of power to a foreign
representative.
When is the automatic stay effective under Chapter 15? Upon recognition, answered
the court in In re Spansion, 418 B.R. 84 (Bankr. D. Del. 2009). A party to an ongoing
lawsuit argued that the stay was not applicable until it received notice of the Chapter 15.
The court disagreed. “In a chapter 15 case, the stay is triggered automatically, not by
the filing of a petition, but upon entry of a recognition order under § 1520.” Id. at 90-91.
Spansion also addressed whether an ongoing patent infringement action was excepted
from the stay under the police or regulatory power provisions in Section 362(b) and,
concluded, applying traditional Section 362 analysis, that it was not. Another case from
Delaware, In re Nortel Networks Corp., 426 B.R 84 (D. Del 2010), came to a similar
conclusion with regard to an action by a pension plan against the debtor plan sponsor.
The court in In re Loy, 2009 WL 2381339 (Bankr.E.D.Va. Aug. 3, 2009) addressed the
interesting issue of when the “case” is commenced for the purposes of determining
whether a transfer is avoidable under Section 549. The trustee of an English
bankruptcy proceeding sought to avoid the transfer by the debtor of US property that
occurred after (and with knowledge of) the English proceedings but before Chapter 15
recognition of the English trustee. No plenary case was filed by or against the debtor.
As noted above, most avoiding powers are not available to a recognized foreign
representative in the absence of a plenary proceeding, with the exception of the
avoidance of unauthorized post-petition transactions under Section 549. The English
trustee argued that the “commencement of the case” for purposes of Section 549 was
the date the English proceedings were opened, not the date of recognition in the
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Chapter 15 case and the debtor took the opposite tack. Looking at the text of the
statute itself, the court found no support for the Trustee’s argument and dismissed the
proceeding. Of course, the simple fix would have been for the English trustee to
commence a Chapter 7 case, as the court had recognized the English case as a main
proceeding, thereby giving either the US trustee or the English trustee standing to seek
to avoid the transfer as fraudulent.
IV.
Chapter 15 as Gateway
A recent case reminds us of the need for formal recognition should a foreign
representative wish to pursue litigation in the United States.
In Reserve International Liquidity Fund, Ltd. v. Caxton International Limited, 2010 WL
1779282 (S.D.N.Y. April 29, 2010), Reserve Fund filed an interpleader action against
Caxton International Limited in the Southern District of New York. After the U.S. lawsuit
began, the Court in the British Virgin Islands appointed liquidators of Reserve Fund.
Based on the appointment, the Liquidators claimed to have displaced the Fund’s board
of directors and sought to control the litigation in the capacity of new management.
The court found that the liquidators lacked standing because they did not seek Chapter
15 recognition. The court determined that “Chapter 15 makes clear that recognition is
required before a foreign representative may avail themselves of the federal courts.”
The Reserve Fund court would not allow this runaround. “If this Court were to allow the
Liquidators to take the place of the Fund Board, such an action would constitute a tacit
recognition that the BVI liquidation proceeding is valid and, as a result, the Liquidators
are in control of the Fund. This is precisely the kind of determination that must be made
in a Chapter 15 proceeding. See 11 U.S.C. §§ 1501, 1509.” Id.
V.
Comity and Choice of Law
Chapter 15 is the only Chapter in the Bankruptcy Code that has a stated purpose. The
court in In re RHTC Liquidating Co., 424 B.R. 714 (Bankr.W.D.Pa. 2010), turned to this
purpose to determine if an involuntary Chapter 11 should be dismissed under § 305(a).
Railpower U.S. is an American company wholly owned by Railpower Canada, a
Canadian company. Railpower Canada and Railpower U.S. filed joint petitions under
Canada’s CCAA in Quebec Superior Court. About a month later, the Bankruptcy Court
for the Western District of Pennsylvania recognized Railpower U.S as a foreign main
proceeding under Chapter 15. In that order, the court reserved the right to review any
proposed distribution of the proceeds of U.S. assets, noting that Railpower U.S. owed
about $800,000 to third party U.S. trade creditors and nearly $67 million to its parent,
Railpower Canada, “raising questions as to the validity of the larger claim”.
Courts in both countries approved the sale of the assets of both companies and the
Canadian monitor was instructed to segregate the portion of the proceeds representing
the U.S. assets. A claims process was established in the Canadian proceedings which
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the U.S. court recognized and enforced on motion of the monitor. The proceeds of the
sale were insufficient to pay all claims in full. The monitor advised the Court that it
intended to seek the subordination of the intercompany claim but no such order had yet
been entered.
Apparently, the U.S. creditors felt insecure that their rights would be adequately
protected as the case was progressing and filed an involuntary Chapter 7 case against
Railpower U.S. The Canadian Monitor asked for dismissal under § 305.
Under § 305(a) a court may dismiss a case if:
(1) the interests of creditors and the debtor would be better served by
such dismissal or suspension; or
(2)(A) a petition under section 1515 for recognition of a foreign proceeding
has been granted; and
(B) the purposes of chapter 15 of this title would be best served by
such dismissal or suspension.
Noting that the monitor had the burden of proof, the court first determined that the
creditors would fare better in U.S. Court and therefore abstention under § 305(a)(1) was
inappropriate. Among the factors considered was that a major Canadian creditor, the
Ontario Teachers Pension Plan, had sought to open a Bankruptcy Insolvency Act
proceeding in Canada that would (1) involve distribution of the U.S. assets and (2) likely
allow the intercompany claim.
Next, the court turned to the more salient issue, i.e. whether, under § 305(a)(2), the
purposes of Chapter 15 would be better served by abstention. Summarizing that
purpose as promoting “comity,” the court concluded “no” and denied the motion to
abstain.
In answering its question the Court addressed each of the elements of §1501(a): (1)
Cooperation with the Canadian court (comity); (2) Legal certainty for trade and
Investment; (3) Fair and efficient administration/protection of interests; (4) Protection
and maximization of debtor assets; and (5) Rescue of financially troubled businesses.
The monitor took the “universalist” approach, arguing that comity requires deference so
long as the foreign proceeding is governed by standards of fundamental fairness, even
if the end result may be different for U.S. creditors than would obtain under U.S. law.
The creditors adopted the more territorialist approach, emphasizing that application of
U.S. law in this circumstance was particularly apt because the Railpower U.S. was
almost totally an American based company, with its headquarters, employees, assets,
and operations are located in the state of Washington. Of course, and interestingly so,
Admin*1393628.1
the Canadian CCAA case of Railpower U.S. had been recognized as a foreign main
proceeding, even with the “reservation of jurisdiction” as to distributions. This was a
compelling factor in favor of the monitor’s position and suggests that the US creditors
did not adequately consider the consequences of main proceeding recognition or
pursue the issue aggressively enough at the initial stages.
At bottom, the court exercised its jurisdiction against abstention, stating bluntly: “It is not
readily apparent why a court in the United States should voluntarily restrain itself from
acting purely out of a sense of comity in these circumstances.”
Considering the other stated purposes of Chapter 15, the court concluded legal
certainty for trade and investment did not compel abstention, noting that “[i]t does seem
reasonable to conclude that creditors or investors dealing with a company from a
particular country, and with most of its assets and operations in that same country,
would anticipate a liquidation of the company would also occur there.” Id. at 726.
As to the factor of the “fair and efficient administration and protection of interests”, the
court frankly stated that it had “misgivings as to the fairness of the Canadian
Proceedings.” Id. at 727. The court also had concerns, from the outset, regarding the
protection of non-insider creditors. Id. In the end, the court not only concluded that a
dismissal would not protect the interest of creditors, but would, “actually have the
opposite effect.” Id. at 728.
As to protection and maximization of debtor assets the court found maximization equally
plausible with or without dismissal.
The court found rescue of financially troubled businesses irrelevant because in either
case the liquidation was to occur.
In sum, the court concluded that, “The recognition of a foreign proceeding in a Chapter
15 case was never intended to be an automatic bar to additional proceedings being
brought in the United States that might, to some extent, conflict with or overlap the
foreign proceeding. This should be apparent from the fact that a request for dismissal
under Section 305(a)(2) is subject to the discretion of the bankruptcy court after
weighing the purposes of Chapter 15.” Id. at 729.
For those who thought that Chapter 15 would usher in an era of easily obtained
universalism, RHTC is a jarring decision and gives fair warning that facts matter, that
every case is different and the court’s “well of discretion” is deep indeed.
Three other cases come to the more predictable result in favor of comity. In re
Qimonda, 2009 WL 4060083 (E.D.Va. 2009), the court recognized the German
insolvency proceeding of Qimonda as a foreign main proceeding. Qimonda was a
company with many counterparties to intellectual property, particularly patents. The
original recognition order provided that § 365 would be applicable to the case. The
foreign representative asked to amend the order because, “The application of § 365 to
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this case substantially undermines the provisions of the German Insolvency Code,
particularly § 103, which addresses how executory contracts are dealt with under the
German Insolvency Code.” Some parties objected fearing that they would be treated
less fairly under German Insolvency Code than U.S. Bankruptcy Code. Turning to §
1501, the court concluded that the goal of Chapter 15 is that the proceeding should be
governed by the law of the nation of the main case. In the particular case, involving
international patents, having one executory contract law is especially important to lead
to uniform results.
Likewise, in CSL Australia PTY. LTD v. Britania Bulkers, PLC, 2009 WL 2876250
(S.D.N.Y Sept. 8, 2009), the bankruptcy court recognized Britiania A/S’s Danish
bankruptcy as a foreign main proceeding. CSL, an Australian company, obtained an
arbitration award in Singapore against Britania resulting in an attachment under
Maritime law. Britania and the Danish trustee sought to vacate the attachment with the
funds to be turned over to Danish trustee for administration. CSL sought to keep the
attachment in place and further sought relief from the automatic stay in order to pursue
alter-egos in the U.S. bankruptcy court. The court vacated the attachment and denied
the relief sought by CSL.
In reaching its decision it turned to pre-BACPA case law regarding comity. According to
the court, “Comity is ‘the recognition which one nation allows within its territory to the
legislative, executive or judicial acts of another nation, having due regard both to
international duty and convenience, and to the rights of its own citizens or of other
persons who are under the protection of its laws.’” Id. at *3 (quoting Hilton v. Guyot, 159
U.S. 113, 164, 16 S.Ct. 139, 40 L.Ed. 95 (1895)). The Court found that vacatur of the
order of attachment is supported by the principles of comity because “Nothing in the
record indicates that deference to the Danish Court would violate or infringe the laws or
public policy of the United States, or that the Danish proceedings are procedurally
unfair.” Id.
Finally, In re Metcalfe & Mansfield Alternative Investments, 421 B.R. 685 (Bankr.
S.D.N.Y 2010) applies the same principles to a case straight out of The Big Short. A
full recitation of the facts is neither helpful nor necessary. It is sufficient to know that
complex financing arrangements involving conduits, LSS swaps, credit default swaps,
mark to market triggers and collateralized debt obligations melted down in the summer
of 2007. Eventually, the parties negotiated a restructuring plan, a key component of
which were broad global releases to non debtors. Both the validity of the releases and
the court’s jurisdiction to enter them were thoroughly considered by the Canadian
superior court and the court of appeals. The superior court approved and the court of
appeals affirmed. The monitor filed a Chapter 15 petition seeking to enforce the orders,
and in particular the releases, in the United States.
The court carefully crafted the issue as whether principles of enforcement of foreign
judgments and comity in Chapter 15 cases allow, or rather encourage, approval of the
releases in the Canadian orders, even if those provisions could not be entered in a
plenary Chapter 11 case. Noting that the “relief granted in the foreign proceeding and
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the relief available in a U.S. proceeding need not be identical,” the court concluded that
the Canadian proceedings were entitled to be treated as res judicata, and therefore
enforced, consistent with principles of comity.
The decision is significant because in the Second Circuit, numerous cases have
emphasized the narrow constrictions placed on a bankruptcy court in approving release
and injunction provisions such as those contained in the Canadian orders. See, e.g.,
SEC v. Drexel Burnham Lambert Group, Inc. (In re Drexel Burnham Lambert Group,
Inc.), 960 F.2d 285 (2d Cir.1992); In re Metromedia Fiber Network, Inc., 416 F.3d 136
(2d Cir.2005); and In re Johns-Manville Corp., 517 F.3d 52 (2d Cir.2008), rev'd on other
grounds sub nom. Travelers Indemnity Co. v. Bailey, --- U.S. ----, 129 S.Ct. 2195, 174
L.Ed.2d 99 (2009). Had the inquiry been whether the Second Circuit standard had been
met, the result may have been different. Importantly, the court did not conclude that the
differences were sufficient to invoke the “public policy” exception of Section 1506,
holding that this provision is to be narrowly construed and was not applicable here. An
even clearer conflict exists in the Ninth Circuit where the case law is that the bankruptcy
court lacks jurisdiction to issue third party injunctions. See In re Am. Hardwoods, Inc.,
885 F.2d 621, 624 (9th Cir.1989); In re Lowenschuss, 67 F.3d 1394, 1401 (9th
Cir.1995), In re Regatta Bay, LLC, 2009 WL 5730501, D.Ariz. 2009 reversing the
contrary holding in In re Regatta Bay, LLC, 406 B.R. 875 (Bankr.D.Ariz.. 2009).
Whether a circuit court would come to the same conclusion as the bankruptcy court in
Metcalfe remains to be seen; no appeal was taken in that case.
VI.
Conclusion
A wise judge once said that presumptions and burdens are tools to aid a court in
resolving otherwise irresolvable issues. The cases decided in the Chapter 15 area in
the last year underscore the importance of this aphorism. When in doubt, start with the
presumption—but never finish with it. Always be prepared to satisfy the burden, if it falls
to you, or to demonstrate that the party with the burden has failed to carry it, if you are
on the other side.
Never assume, if your case fits the definition of a “foreign proceeding” in Section 101,
that, one way or the other, you will be entitled to recognition. The early days of Chapter
15, best exemplified by In re SPhinX, Inc., 351 B.R. 103 (Bankr. S.D.N.Y. 2006) aff’d
371 B.R. (S.D.N.Y. 2007), are over. SPhinX held that a foreign proceeding that did not
qualify as main proceeding could be recognized as a nonmain proceeding, with neither
discussion nor evidence on the issue of whether the “establishment” requirement had
been met. That result would not obtain today, in light of Bear Stearns, British American
and Ran.
Never assume that comity is a given. Take advantage of the fact that Congress has told
us, in the text of the statute itself, the purpose of the law and prepare your case
accordingly; your judge will expect it. Territorialism is not dead.
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Be creative. The lawyers for the Nevis foreign representative in Condor certainly were.
But temper that creativity with solid judgment. That’s something the English trustee’s
lawyers in Loy failed to do. Look for the interstices in the law but exploit them with a
healthy dose of common sense.
Don’t forget that, with very limited exceptions, your foreign representative client must be
recognized before he or she will be able to pursue legal action in any court of the United
States, whether at the federal or state level. Pay attention from the very beginning of a
Chapter 15 case what the consequences may be to your client of recognition. The
failure of the US creditors in RHTC to object to recognition of Railpower U.S. as foreign
main proceeding could have been fatal to their later efforts to wrest control of the case
back to the United States.
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INTERNATIONAL ISSUES AND CONTROVERSIES: CHAPTER 15 AND
BEYOND
Michael Crystal QC
3-4 South Square, Gray’s Inn, London, WC1R 5HP, UK
An introduction to aspects of the administration procedure in England
This introduction7 is intended as background for the panel discussion on Thursday 14
October 2010 at the 84th Annual National Conference of Bankruptcy Judges in New
Orleans.
Background to legislative change
In the mid to late 1970’s a number of countries in the Anglo-Saxon legal family were
actively considering insolvency law reform8. In 1977 the British government appointed a
committee to review insolvency law and practice in England and Wales and make
recommendations for reform. The chairman of the committee was Sir Kenneth Cork 9.
The Cork committee reported in 1982. Its report is colloquially known as “the Cork
A version of this paper was presented at a panel discussion on “Chapter XI and International Contrasts”
at the 10th International Insolvency Institute Conference in Rome, Italy, on 7 June 2010.
8 These included the United States, Canada, Australia and New Zealand.
9 Sir Kenneth Cork was an accountant and City figure. He was the most well-known insolvency
practitioner of his day. The majority of his committee were judges and lawyers.
7
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Report”10. The Cork Report contained the first comprehensive review of the law of
insolvency in England and Wales in more than a century.
The need for a rescue regime in England
The Cork committee was satisfied that in a significant number of cases companies had
been forced into bankruptcy11 and potentially viable businesses capable of being
rescued had been closed down for want of a suitable mechanism which could be used
in all cases12.
The Cork Report proposed that there should be introduced a new procedure involving
the appointment of an ‘administrator’ under which the Court could appoint a suitably
qualified third-party as a fiduciary to consider the reorganisation of a company and its
management with a view to restoring profitability or maintaining employment, to
ascertain whether a company of doubtful solvency could be restored to profitability
and/or to make proposals for the most profitable realisation of assets for the benefit of
creditors and shareholders.
This proposal was, in substance, accepted by the Government and in 1986 the
administration procedure came into force.
The principal provisions concerning
administration are contained in the Insolvency Act 1986, and the Insolvency Rules
1986, both as amended by subsequent primary and secondary legislation. With some
important subsequent legislative changes the administration procedure has been in
existence for nearly 25 years.
The Cork Report contained no international comparison of the pros and cons of any
foreign restructuring or rehabilitation regime. There was no specific discussion of
Chapter 11. The Report simply referred, in passing, to new insolvency codes then
recently introduced or proposed in the United States, France and the Federal Republic
of Germany.
The fundamentals of administration
Under the administration procedure the administrators are officers of the Court and
therefore fiduciaries. They have the express right to seek the directions of the Court.
Their statutory duty is to take control and manage the business and assets of the
company. They have wide powers to realise assets. The exercise of those powers,
and other powers associated with the management of the company’s business, are
“Insolvency Law and Practice: Report of the Review Committee June 1982”. Cmmd 8558.
Known in England as ‘liquidation’ or ‘winding-up’. A convenient brief description of this procedure can
be found in Re T & N Ltd [2005] 2BCLC 488, 512, per Mr. Justice David Richards.
12 Previously this had only been possible where a creditor holding security including ‘a floating charge’
had been given power to appoint a receiver and manager of the whole property and undertaking of the
company.
10
11
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regarded by the Court as matters for the commercial judgment of the administrators
rather than as appropriate matters for directions by the Court13.
Between 1986 and 15 September 2003 an administrator could only be appointed by the
Court. Since then, he can be appointed either by the Court or out of Court 14.
Notwithstanding appointment out of Court, the administrator remains a fiduciary who
has an express right to seek the directions of the Court.
In 2009 there were 4161 administrations. The most substantial proportion of these will
have arisen from out of Court appointments.
Some brief contrasts with Chapter 11
Although UK politicians and the media have at times described the administration
procedure as the UK’s Chapter 11, it is different in many of its fundamentals 15. A
number of these are mentioned below.
Administration is essentially an out of Court proceeding
Although the Court can give directions or determine points arising during the course of
the Administration, the English legislation essentially provides for an out of Court
proceeding under the control of a licenced insolvency practitioner, usually an
accountant, as a fiduciary. The process is not lawyer-driven. In many administrations,
the Court has no substantial involvement at all. It is, culturally, different from the lawyerdriven judge-supervised Chapter 11 proceeding.
There is no debtor in possession concept
The administration procedure does not recognise the concept of a debtor in possession
as a fiduciary. One of the essential features of administration is the almost invariable
director/management displacement on appointment of the administrator. The integrity
and transparency of the administration procedure is designed by the legislation, in large
part, to be ensured through third-party professional control of the company and the
replacement of existing management.
13
Re T & N Ltd [2005] 2BCLC 488, 512- 513 discussing the legislation in force pre September 2003.
Including appointment by the company or its directors.
15 In the first case in the Court of Appeal on the administration procedure, (Bristol Airport plc v Powdrill
[1990] Ch 744), counsel for the administrators (this author) invited the Court to gain assistance from
considering Chapter 11. Whilst emphasising the importance of the administration procedure as a rescue
regime, the Court of Appeal declined to do so. A limited comparison between administration and Chapter
11 was undertaken in Felixstowe Dock Co v US Lines [1989] QB 360. That case has given rise to
controversy, see e.g. “Judicial Attitudes to Insolvency Law” Crystal (1998) Company Lawyer vol. 19, 49 at
53.
14
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No specialist bankruptcy judges
No specialist bankruptcy judges are appointed to deal with administrations. Unlike the
Chapter 11 regime with its cadre of specialist judges, legal issues concerning
administration are dealt with in London and in the provinces by a cadre of Chancery
judges who have no necessary bankruptcy expertise. And, save in all but exceptional
cases, there is no docket system.
No extra-territorial effect to the automatic stay.
Unlike the position in the United States, the automatic stay which is an essential feature
of the administration procedure is not regarded in England as having immediate extraterritorial effect16. This has, on occasion, given rise to tension between administrators
of a company and the self-same company as debtor in possession in Chapter 11
proceedings17.
12 July 2010
Michael Crystal QC
Cf Harms Offshore v Bloom [2009] 2BCLC 473, 478 – 481 per Lord Justice Burnton.
These tensions have invariably been worked out with considerable good sense and tact by the judiciary
in England and in the United States.
16
17
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Cross-border insolvency in Brazil: the need for rules
Thomas Benes Felsberg
Founding Partner
Felsberg, Pedretti, Mannrich e Aidar Advogados e Consultores Legais
1.
Introduction
Brazil is consistently ranked by the IMF and by the World Bank as one of the world’s ten
largest economies; as such, an impressive number of multinational companies are
headquartered or have assets in the country. In addition, Brazilian companies are
investing heavily abroad. The economic and financial problems of all such companies
generate an array of cross-border issues which require a systematic approach for either
their eventual reorganization or liquidation.
These approaches may be universal or territorial in nature. Under the universality
principle, the court where the center of main interests of the debtor is located would
have worldwide jurisdiction over its assets and would coordinate an insolvency
proceeding; creditors of each class would be treated equally and the interests of all
stakeholders would probably be better preserved. A territorial approach, on the other
hand, would imply a plurality of insolvency proceedings, as various countries would
have jurisdiction over the assets within their own borders. Although the territorial
principle appears to protect better local creditors, the reality is that in the last decades
insolvency laws around the world have been moving towards the universality principle,
which requires, in order to be effective, cooperation and coordination among courts in
different countries.
UNCITRAL adopted a Model Law on Cross-Border Insolvency in 1997, which was
enacted by several countries such as the U.S., the U.K. and Japan. The European
Union enacted its Council Regulation (EC) 1346/2000 to regulate cross-border
insolvency, and different countries have adopted different approaches to deal with the
matter. Others, such as Brazil, have largely ignored it, as explained below.
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2.
Brazilian cross-border insolvency legislation
In 2005, Brazilian corporate insolvency law underwent a major reform, which resulted in
the enactment of Law 11,101/2005. The new law created a court-supervised
reorganization proceeding similar to the Chapter 11 and introduced changes to
streamline the liquidation proceeding. However, just like the preceding corporate
insolvency law (Decree-Law 7,661/45), Law 11,101/2005 failed to hand down rules
regulating cross-border issues.
The Bustamante Code of 1928, as part of the Inter-American Convention of Private
International Law, was signed by fifteen Latin American countries, and was ratified by
Brazil and is still in force. The Bustamante Code contains several provisions relating to
cross-border insolvencies. However, although the Code has been used in a few cases
even involving non signatory countries, courts tend to ignore it in most instances.
The Code of Civil Procedure of 1939, which was revoked by the 1973 Code, also
contains rules related to the international aspects of insolvency. However, the 1973
Code does not contain rules regarding cross-border insolvencies. Thus, the only legal
provisions in respect to international insolvency which exist in Brazil are either (i) only
applicable to 15 Latin American States and are thoroughly outdated or (ii) have been
revoked. When necessary and/or convenient, lawyers and the courts have used these
rules for lack of a better alternative.
Decree-Law 4,657/1942, the Introductory Law to the Civil Code governs conflict of laws
in Brazil. It has no specific provisions on cross-border insolvencies, but it does contain
rules on contracts, corporations and related aspects which in some instances can be
helpful.
It must be emphasized that there is no relevant or consistent case law on the subject
and the applicability of the pieces of legislation mentioned above to regulate crossborder insolvency matters is uneven.. Many issues are still open to interpretation and a
territorial reading of the provisions of Law 11,101/2005 cannot be dismissed..
3.
Jurisdiction of Brazilian insolvency courts
Law 11,101/2005, similarly to the former bankruptcy law provides that the courts where
the principal place of business of a debtor is located have (exclusive) jurisdiction over
insolvency proceedings. The same applies to branches of foreign businesses which
operate in Brazil. For the purposes of the law, subsidiaries of foreign companies receive
the same treatment as Brazilian controlled companies. Therefore, instead of center of
main interests (COMI), Brazilian law adopts the concept of principal place of business,
which is, in fact, in many respects, similar to COMI.
Although law is silent on this respect, the insolvency proceeding opened in Brazil
governs all the assets of the debtor, regardless of their location. Brazilian insolvencies
have, therefore, extra-territorial effects.
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There are, however, no rules regarding international cooperation and coordination
between or among courts in more than one country. Law 11,101/2005 simply ignores
the possibility of parallel proceedings with respect to the same debtor in different
jurisdictions, and it does not recognize the existence of foreign main and ancillary
proceedings.
4.
Recognition of foreign judgments
Law 11,101/2005 has no provisions for the recognition of court decisions issued in
foreign insolvency proceedings. In the absence of specific rules, the general rules set
forth by the Constitution, by the Introductory Law to the Civil Code and by the Code of
Civil Procedure which require an exequatur for the recognition of foreign judgments are
applicable. Thus, despite the absence of detailed rules, recognition and enforcement of
an award by a foreign insolvency proceeding is in theory possible in Brazil, provided the
conditions discussed in the next paragraph are present.
A foreign judgment must be submitted to the Superior Court of Justice (the second
highest federal court in the Brazilian judiciary system) for the issuance of an exequatur,
in order to become enforceable in Brazil. After the issuance of exequatur, the claimant
may enforcement the foreign judgment in a lower court of competent jurisdiction. In
order to be recognized in the country, a foreign court decision must be final and not
subject to any appeal; and must not violate Brazilian sovereignty, public policy or
morality, all of which are rather generic concepts. Thus, in most instances it is better to
recognize a trustee or an administrator of a bankrupt estate by the applicable Brazilian
conflicts rules on corporate representation, than trying to recognize the award. On the
other hand, in order to mitigate the risks and delays associated with a recognition of a
foreign award proceeding, in many cases it is possible to file a temporary restraining
order or an injunctive relief, while the proceeding before the Superior Court of Justice is
pending.
Brazil will not recognize a foreign judgment in cases where the law provides for
exclusive Brazilian jurisdiction. As such, a foreign court decision regarding the
insolvency of a debtor with its principal place of business located in Brazil will not be
granted exequatur. In addition, Brazilian courts have exclusive jurisdiction over rights in
rem; as a result, disputes over real estate property of the debtor even if utilized to
secure claims against it may not be subject to a foreign insolvency proceeding in many
respects.
As a practical matter, another possible alternative is to file directly in Brazil a parallel
insolvency proceeding instead of recognizing a foreign proceeding.
5.
Treatment of foreign creditors and claims
Brazilian law provides for the equal treatment, from a formal point of view, of both local
and foreign creditors. Foreign creditors must be represented by local attorneys and all
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documents must be officially translated to Portuguese to be considered valid in court;
and there are no rules aimed at assisting or providing information to foreign creditors.
Except if released from such an obligation by a treaty regarding cooperation and
assistance of jurisdictional matters, a creditor domiciled abroad is only entitled to file for
involuntary insolvency against a debtor if it posts a bond to secure court costs and the
award.
There are also some rules regarding foreign claims (applicable even if the creditor is not
domiciled abroad). In a liquidation proceeding, all claims in foreign currency must be
converted to Brazilian currency as of the date the insolvency proceeding is opened. A
reorganization plan, however, may not convert a claim in foreign currency into local
currency without the consent of the creditor holding such claim.
6.
Conclusion
The law reform carried out in 2005 revamped Brazilian insolvency system, but failed to
address cross-border matters. Whilst it allows for the recognition of foreign insolvencies,
the existing legal framework is fragile and not in line with the current international
standards and guidelines.
Therefore, as a result of the lack of clear rules and of relevant case law on recognition
of foreign proceedings and on cooperation and assistance among courts, Brazilian law
does not provide the necessary certainty in this area. Nevertheless, the country could
take a big step in promoting international commerce and finance by enacting
supplementary legislation to incorporate provisions encouraging the adoption of
universality in cross-border insolvency matters.
The Brazilian chapter of Turnaround Management Association (TMA) is promoting the
development of studies and discussions on a new reform of insolvency law in Brazil,
and one of the issues covered is the enactment of cross-border provisions. The
UNCITRAL Model Law on Cross-Border Insolvency could serve as a guide for this
reform, helped by the World Bank Principles on Effective Insolvency and Creditor Rights
Systems, the UNCITRAL Legislative Guide on Insolvency Law and by initiatives put
forward by INSOL, the American Bankruptcy Institute, the International Insolvency
Institute and other important international organizations.
Admin*1393628.1
An Empirical Look at Chapter 15
Professor Jay Lawrence Westbrook
Benno C. Schmidt Chair of Business Law
The University of Texas School of Law
Austin, Texas
Multinational bankruptcies are resolved in the Fourth Dimension of bankruptcy law, the
legal figure created when all the complexities created by the Bankruptcy Code in
domestic cases are rotated across borders to create the structures required when
multinational corporations encounter financial distress. Perhaps the single most
important pillar of this emerging structure is the Model Law on Cross-Border
Insolvency.18 This paper describes its operation as reflected in cases commenced
under the United States version of the Model Law, Chapter 15 of the United States
Bankruptcy Code.19 It reports the results of an empirical study of all the cases filed
under Chapter 15, along with a selective review of some important reported decisions
relating to recognition and relief under Chapter 15. It also considers the exaggerated
role of the “COMI” dispute and the problem of corporate groups. Its findings are
consistent with the picture painted by Look Chan Ho in a recent article describing the
*An earlier version of this paper was presented at the annual meeting of the International Insolvency
Institute in Rome, June, 2010.
18 U.N. Comm'n on Int'l Trade Law, Model Law on Cross-Border Insolvency with Guide to Enactment,
U.N. Sales No. E.99.V.3 [hereinafter Model Law]; United Nations Commission on International Trade
Law, 30th Sess., at 3, U.N. Doc. A/CN.9/442 (1997) [hereinafter Guide to UNCITRAL Model Law],
reprinted in 6 Tul. J. Int'l & Comp. L. 415, 439 (1998).
19 11 U.S.C. §1501 et seq. The United States effort to enact the Model Law more or less exactly as
written is illustrated by the fact that the Chapter 15 section numbers conform to the article numbers in the
Model Law.
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smooth working of the Model Law, through which a Korean reorganization proceeding
was recognized and supported in Australia, the United Kingdom, and the United
States.20 We have a long way to go in managing multinational insolvencies, but we are
well on our way.
I. Empirical Study
Nowadays, the overwhelming majority of United States bankruptcy cases are filed
electronically, so that the entire record in the case is available through PACER. 21 With
some help from Mike Bickford of AACER, to whom I am deeply grateful, we have looked
at the electronic files for every Chapter 15 case filed through 2/18/2010. 22 We asked a
number of questions of the files.23 We found 375 cases filed since October, 2005, the
effective date for Chapter 15.24 Thus, unlike most empirical studies, we report not a
sample but the data from the entire universe of relevant cases. One general point of
interest is the distribution of countries from which representatives applied for Chapter 15
recognition and relief. On the one hand, nearly half of the cases come from Canada
and about 60% from Canada and the United Kingdom combined; on the other hand,
141 cases came from 26 other countries all over the world.
II. Recognition and COMI
A. Recognition
After the United States courts refused under Chapter 15 to recognize proceedings in
haven jurisdictions with no economic connection to the debtor company, 25 a number of
commentators announced that the United States had regressed by adopting Chapter 15
and was now less willing to recognize foreign insolvency proceedings. Nothing could be
20
Look Chan Ho, Smoothing Cross-Border Insolvency By Synchronizing The UNCITRAL Model Law: In
Re Samsun Logix Corporation, (2009) 24 Butterworths J. Int’l Banking and Fin. L. 395.
21 “Public Access to Court Electronic Records.”
22 The 2005 amendments that included Chapter 15 became effective in October, 2005, so our data
represent just over four years of operation of the Model Law in the United States. These data are not
absolutely final at July 15, 2010, and there are always some ambiguities and glitches, as well as
judgment calls. There is also the possibility that rulings will be issued and prior rulings changed as the
cases proceed after we have looked at them. Because Chapter 15 is so new, eliminating all but closed
cases would have reduced greatly the value of the project.
23 “We” means me, my research assistants Jamie France, Texas ’11 and Alexander Savage, Texas ’11,
who did the legal and case file research, and Sarah Reed, our UT sociology graduate student and STATA
expert, who ran and analyzed the numbers.
24 Our cutoff for this study was cases filed and orders docketed as of February 18, 2010. There were
actually 378 Chapter 15 filings, but 3 of them were by individuals who inadvertently filed in the wrong
chapter. One case was transferred to another district and is counted only for the “Country” variable
mentioned below, so 374 cases are the starting point for most of our report. We are still tracking down
the transferred case. We did not review any cases under section 304 of the Code, which governed
international recognition matters until its repeal as part of the adoption of Chapter 15 in 2005.
25 See, e.g., In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 374 B.R. 122
(Bankr. 2007), aff’d 389 B.R. 325 (S.D.N.Y. 2008).
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farther from the truth, as the reported cases and our empirical study of Chapter 15
reveal.
The data show that the United States courts are very strongly inclined to defer to foreign
main proceedings within the intent of the Model Law and Chapter 15. Of the 253 cases
that we found had reached a clear result, 26 237 resulted in recognition and only 12 in a
denial of recognition. There were 4 more cases that resulted in recognition of the
proceeding as “non-main.” Even if those are included as denials, full main recognition
was denied in only 6% of the 253 cases with bottom lines. The other Chapter 15 filings
totaled 116, divided between 74 pending cases with no relevant ruling or result when we
looked at them and 42 pending cases with some relevant ruling or result other than
recognition or denial. The cases with some relevant action included 4 cases that
granted only provisional relief up to the time we looked at them, 35 voluntary dismissals
and 3 dismissals of ambiguous origins, a total of 42. Those 42 cases may or may not
have been possible denials, but it seems quite likely that many if not most of those 42
cases ended with some agreement among the parties or some development in the case
that made further court proceedings unnecessary. Thus while another 14% of the
cases with some relevant action were potentially denials, it seems likely that that only a
small percentage of cases filed would reach the point of a Chapter 15 petition and then
be dismissed or not pursued because the petitioners thought they would lose them on
the merits. In any case, it is clear that at most only 19% of applications were denied or
were even possibly deniable. The great majority of Chapter 15 petitions for recognition
are granted.27
In re Atlas Shipping A/S28 is illustrative of the hundreds of cases in which recognition
has been granted by the United States courts. The debtors were Danish shipping
corporations that were subject to an insolvency proceeding in Denmark. Foreign
creditors had obtained marine attachments against the debtors’ finds in New York. The
administrator of the Danish proceedings sought recognition of her proceeding as the
main proceeding and release of the attachments. The court granted recognition, turning
over the funds for administration in the Danish cases.29 In the process, the United
States court explicitly left to the Danish court any questions concerning the effect of the
attachments in giving an advantage to the attaching creditors. That aspect of the case
Five more cases are coded “other” because we could not see any result but they appeared to be no
longer pending. Our total for the recognition variable is 374. See notes 5&7, supra.
27 Cf. Andrew B. Dawson, Offshore Bankruptcies, 88 Neb. L. Rev. 317 (2009) (empirical survey of
Chapter 15). Dawson’s figures are different from ours, perhaps in part because he reports many fewer
cases.
28 In re Atlas Shipping A/S, 404 B.R. 726 (Bankr. S.D.N.Y. 2009). See also CSL Australia Pty. Ltd., V.
Britannia Bulkers Plc, 2009 WL 2914334 (S.D.N.Y. 2009).
29 The court suggested that in making the turnover decision under section 1522(a) it need consider only
the circumstances of United States creditors and there were no United States creditors in the case. With
respect, the language of the section (“…interests of the creditors and other interested entities”) and the
legislative history make it clear that the interests of all creditors are to be considered. But I think that
would have made no difference in the outcome.
26
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is important because it narrows the reach of an older case, Koreag,30 in which the rule
was announced that property issues would be resolved by the United States courts prior
to any turnover.
Other cases show that the United States courts have been willing to grant recognition
even where there were plausible excuses to refuse. For example, the United Kingdom
Court of Appeal in the Harms case 31 affirmed issuance of an anti-suit injunction against
further proceedings by the United States District Court in New York with regard to
pending attachment proceedings. It would have been easy for the New York court to
react negatively and to refuse recognition to the United Kingdom administration
proceeding. Instead, the United States court dismissed the attachment case 32 and
thereafter recognized the proceeding in London.33
Another exemplary case is Avanzit.34 There the reorganization-type case in Spain had
been completed to the point of adoption of a plan and establishment of a control
commission to supervise the execution of the plan. In American terms, the company
had “come out of bankruptcy.” On that basis, the objectant sought to defeat the
application for recognition on the ground that the “foreign proceeding” had ended and
that the control commission was not a foreign representative. The court rejected those
arguments and granted recognition.35
A greater legal stretch was recently required in the Metcalfe case.36 The Canadian
debtors had been central parties to the settlement of the great commercial paper
paralysis in Canada through a reorganization proceeding. They sought, in effect, a
United States discharge of obligations by way of injunctions against suits being brought
in the United States on the basis of debts barred by the approved Canadian
reorganization plans.37 Such discharges based on foreign bankruptcy proceedings
have been granted in the United States, but this time the releases included parties who
were not debtors in the Canadian proceedings. There are rather strict rules in the
United States against releasing third parties through a reorganization plan, with only
limited exceptions. The court found, probably correctly, that these releases would not
have been enforceable if entered in a United States proceeding. However, it held that
under Chapter 15 and general principles of comity, it could grant not only recognition
30
Koreag, Controle et Revision S.A. v. Refco F/X Assocs., Inc. (In re Koreag), 961 F.2d 341, 358 (2d
Cir.1992). Atlas found that the Koreag rule was limited to issues of title, not mere disputes over rights in
the property.
31 Harms Offshore AHT v. Bloom, [2009] EWCA Civ 632.
32 Id., Order dated 6/1/09 (copy on file with author)
33 Sub nom. In re Premier Oil Limited, Bankr. S.D.N.Y. No. 09-12641 (RDD), 9/17/09 (copy on file with
author).
34 In Re Oversight And Control Commission Of Avánzit, S.A., 385 B.R. 525 (Bankr. S.D.N.Y. 2008). The
author was involved in the case on the side of the Commission.
35 See also CSL Australia Pty. Ltd., V. Britannia Bulkers Plc, 2009 WL 2914334 (S.D.N.Y. 2009).
36 In re Metcalfe & Mansfield Alternative Investments, 421 B.R. 685 (Bankr. S.D.N.Y. 2010).
37 See generally, Jay L. Westbrook, Chapter 15 and Discharge, 13 Am. Bankr. Inst. L. Rev. 503 (2005).
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but also enforcement of the Canadian orders—in effect, discharge of obligations that
could not have been similarly discharged in the United States.
Both Metcalfe, which in the end granted both recognition and injunctive relief, and
Avanzit, which recognized but reserved any ruling on relief, reveal the important
difference under the Model Law between recognition (fast and easy) and relief (highly
dependent on circumstances).
Another example of the distinction between recognition and relief is found in the case of
In re Loy.38 The debtor there was a natural person who was a citizen of the United
Kingdom but currently resident in the United States. The court recognized the foreign
trustee, but declined to issue injunctive relief protecting the trustee from any personal
lawsuit the debtor might file, holding that no danger as yet presented itself. The
distinction between recognition and relief is further illustrated by the RHTC Liquidating
case, discussed below in the section on groups.
Even in cases where recognition has been denied, the United States courts are often
willing to defer to foreign courts on questions of foreign law. In re Gold & Honey39
involved two Chapter 11 cases filed in the United States, followed by a secured
creditor’s receivership in Israel. Recognition was denied. One important holding is that
a receivership under an English-style “floating charge” may not be a “foreign
proceeding” recognizable under Chapter 15 because it is primarily for the benefit of the
secured creditor only. But the court also considered as a factor in the denial that the
creditor had obtained the receivership in violation of the United States automatic stay,
for which the United States claims global effect. The most notable point for present
purposes is that notwithstanding denial of recognition the court limited the effects of the
Chapter 11 cases to United States assets and left the issues concerning the property in
Israel to be resolved by the Israeli courts. The only statutory limitation on the global
reach of United States bankruptcy law is imposed where a foreign main proceeding has
been recognized,40 but the court here chose to so limit the Chapter 11 cases despite
denying recognition. The reason was that the Israeli courts were better equipped to
resolve questions of Israeli law.41
Finally, one more recent case should be mentioned to indicate the flexibility and
openness to foreign law found in the United States courts. In re Condor42 was another
case in which recognition was not a problem, but rather the argument concerned the
relief to be granted. The foreign representative sought to avoid an allegedly fraudulent
transfer of more than $300 million from the Nevis debtor to an affiliate. The trustee
380 B.R. 154 (Bankr.E.D.Va. 2007). As of our last check, the court was considering the debtor’s motion
to revoke recognition.
39 410 B.R.357 (Bankr. E.D.N.Y. 2009).
40 11 U.S.C. §1528.
41 The court was also influenced by the fact that the Chapter 11 cases were headed for liquidation. If the
property in Israel had been needed for a successful reorganization, the result might have been different.
42 601 F.3d 319 (5th Cir. 2010).
38
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sought avoidance under Nevis law, not United States law. The reason no doubt was
that United States law explicitly forbids use of Chapter 15 to employ United States
avoidance law. A trustee that wants to use United States avoidance provisions must file
a full-fledged bankruptcy proceeding, probably under chapters 7 or 11. 43
The
defendant/transferee claimed that use of foreign law should likewise require the filing of
a full bankruptcy case. The Fifth Circuit Court of Appeals held that the bankruptcy court
could apply foreign avoidance law in a Chapter 15 case. There are a number of
interesting points about this important case, but for present purposes it suffices to
illustrate the willingness of United States courts to not only recognize but make effective
the efforts of foreign administrators to collect assets in the United States.
B. COMI
The Model Law grants far broader relief to a main proceeding than to a nonmain one
and grants no relief, except some level of cooperation, to a foreign proceeding that is
neither main nor nonmain. A main proceeding is one pending in that jurisdiction that is
the “center of [the debtor’s] main interests” (“COMI”).44 A nonmain proceeding can
found in a jurisdiction more peripheral to the debtor’s affairs, but that jurisdiction must
nonetheless be one in which the debtor has a significant economic presence.45 Chapter
15 has adopted similar definitions.46
A vast amount of ink has been spilled, in Europe and the United States, on the proper
understanding of COMI. It is just the sort of problem that lawyers, and especially legal
academics, love to chew upon. There has been wailing and gnashing of teeth over the
prospect of forum shopping and inconsistent judgments.47 So far, at least in the United
States, those concerns have been greatly exaggerated. COMI is a very interesting
issue but is not a major problem in the American courts.
Of the 253 Chapter 15 cases in our study with a ruling on recognition, a serious
argument with regard to COMI was made in only 24 48 and clearly accepted in only 11.49
43
11 U.S.C. §1521(a)(7).
Model Law art. 2(b).
45 Model Law, art. (2)(c).
46 11 U.S.C. §§1502(2)-(3).
47 See, e.g., Edward J. Janger, Virtual Territoriality, xx COLUM. J. TRANSNAT’L L. xx (forthcoming 2010);
Lynn M. LoPucki, Cooperation in International Bankruptcy: A Post-Universalist Approach, 84 CORNELL L.
REV. 696 (1999).
48 The argument was put forward in some pleading in a total of 80 cases, of which 30 had not received a
ruling as of the dates of our observations. In 26 cases of the remaining 50, the COMI argument did not
come up after the initial pleading and we concluded it had not been seriously made. One case had an
unclear result.
49 Inevitably, there are some judgment calls in the coding. For example, In re SPhinX, 351 B.R. 103
(Bankr. S.D.N.Y. 2006), aff'd, 371 B.R. 10 (S.D.N.Y. 2007) was a group of cases in which Judge Drain
found that the Cayman Islands were not the center of main interests of the debtor, but that he would
ordinarily have found COMI nonetheless because of the lack of any investor objection. In the end, he
refused to find the Cayman Islands proceeding as a main proceeding because of the debtor’s abuse of
44
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Even allowing for ambiguities and confusion in the records, the argument was seriously
raised in only 10% of cases and was rejected in most of them. Many issues have arisen
in the hundreds of Chapter 15 cases in the United States, but arguments about COMI
have been minimal. COMI denials are a significant percentage of recognition denials,
but only because the total of denials is so small.
The best-known COMI case is In re Bear, Stearns.50 There two United States based
investment funds sought Chapter 15 recognition for an insolvency proceeding filed in
the Cayman Islands, where the funds were incorporated. The application was not
opposed.51 However, the petition on its face strongly suggested that all of the important
operations of the funds were in the United States, while there was no significant
economic activity of the funds in the Cayman Islands. On that basis, Judge Burton
Lifland ruled that the COMI of the funds was obviously in the United States and that the
lack of economic activity in the state of incorporation meant the foreign proceeding
could not be recognized even as a nonmain proceeding.52 The ruling was affirmed on
appeal. The key points are that the presumption that the state of incorporation is the
COMI is not a strong one and that the court must ascertain the facts in that regard on its
own, if necessary. Although there is some authority that is less rigorous in determining
what sort of proceeding can be recognized,53 it is generally agreed that the Bear tests
are the law in the United States.
While there are few cases in which COMI has been challenged, 54 some of the
challenges have been successful. For example, In Re British American Insurance
Company Limited55 is a very recent case in which the court refused to recognize a
Bahamas proceeding. The debtor was a company with customers all over the
Caribbean but virtually all its actual operations were carried out by an affiliated
management company in Trinidad and it had essentially no operations in the Bahamas
before or after the opening of the Bahamas proceeding. Thus, as in Bear, the Bahamas
case failed to qualify as either a main or a nonmain proceeding. On the other hand, a
proceeding in Saint Vincent and the Grenadines involving the same debtor could be
recognized as a nonmain proceeding because in that jurisdiction the debtor “. . .
conducts business, retains employees . . . who perform insurance business activity,
maintains accounts in SVG relating to its insurance business in that country, and has
bankruptcy law in that case. I coded the several related cases as a rejection of the COMI argument,
which was the bottom line holding.
50 In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 374 B.R. 122 (Bankr.
2007), aff’d 389 B.R. 325 (S.D.N.Y. 2008).
51 One major creditor filed an odd document that was not an acquiescence but also not an objection.
52 See also In re Tri-Continental Exchange Ltd., 349 B.R. 627 (Bankr. E.D. Cal. 2006).
53 In re SPhinX, 351 B.R. 103, 116-20 (Bankr. S.D.N.Y. 2006), aff'd, 2007 WL 1965597 (S.D.N.Y. July 3,
2007). Although the same district judge, Judge Sweet, who affirmed Bear had previously affirmed
SphinX, he distinguished the latter case in a way that strongly suggested Judge Lifland’s analysis
represents the rule.
54 Our data suggest that one reason may be that fewer petitions have been filed from haven jurisdictions
since the decision in Bear.
55 425 B.R. 884 (Bkrtcy.S.D.Fla.).
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existing policyholders in SVG. “56 The court also suggested that operations following
the appointment of an administrator could be considered for this purpose, opening the
possibility that a liquidator could pull operations into the filing jurisdiction to make it the
COMI for Chapter 15 purposes, although one may be permitted to doubt if that dictum is
good law.
A second case finding no sufficient COMI was In Re Tradex Swiss Ag.57 The court
found that the proceeding brought by the Swiss banking authorities was a foreign
proceeding for Chapter 15 purposes but that the COMI of the company was in
Massachusetts. The ruling was based on the simple factual findings that most of the
company’s actual trading and other operations were carried on in Massachusetts, rather
than in Switzerland. There was economic activity in Switzerland, however, so that the
Swiss action was recognized as a foreign nonmain proceeding. Both these cases
would seem to be classic garden-variety denials as they are resolved in the United
States courts in the few instances where they arise.
III. Groups
All of us have long recognized the great difficulties presented by corporate groups. The
Model Law does not deal with these problems and neither did the American Law
Institute Transnational Insolvency Project.58 The United Nations Commission on
International Trade Law (UNCITRAL) Legislative Guide, one of the most valuable
projects in the field, provides only very limited help with group issues.59 UNCITRAL is
finishing a new project on corporate groups but with only limited success.60
The central difficulty is the tension between the legal theory of the corporate form and
the reality of group conduct. The corporate form is not merely a legal concept to be
safely ignored in the face of practical realities. It is economically important to defend
that form to the extent of legitimate expectations it creates in various actors, notably
shareholders, managers, and creditors. On the other hand, a corporate group may
create group-oriented expectations and collective legal difficulties not associated with
stand-alone companies. The whole problem is further complicated by the great
variation in the relationships among affiliates in a corporate group. Some affiliates are
virtually independent, with the group a passive investor, while others are mere shells
under central direction, ignored in every practical decision and not noticed even by
creditors and other stakeholders. Some groups operate generally closer to one end of
that spectrum than the other, while other groups have affiliates scattered along various
points on that line.
56
425 B.R. at 916.
384 B.R. 84 (Bankr. D. Mass. 2008).
58 American Law Institute, TRANSNATIONAL INSOLVENCY: PRINCIPLES OF COOPERATION AMONG THE NAFTA
COUNTRIES (2003).
59 United Nations Commission on International Trade Law, Legislative Guide on Insolvency Law, (2004);
available at: http://www.uncitral.org/pdf/ english/texts/insolven/05-80722_Ebook.pdf.
60 http://www.uncitral.org/uncitral/en/commission/working_groups/5Insolvency.html.
57
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The great problem for an international solution is that most countries have no good
answers to the question of legal treatment of corporate groups in their domestic laws.
Unlike insolvency law as such, where UNCITRAL, the ALI, and others could begin with
sound domestic solutions and extrapolate them to the international stage, most
countries have a patchwork of solutions to particular corporate-group problems and no
very persuasive overall theory. Of course, Philip Blumberg’s massive work on the
subject is the place where scholarship should begin (at least in common law countries),
but we all have very far to go.61
Although we know that corporate groups are common in international commerce,
it is always important to develop the specific facts. In our study in the United States, we
coded a Chapter 15 petition debtor as a stand-alone case, a lead case (generally, the
parent in a group), or an affiliate (generally, a subsidiary). A lead case or an affiliate
case was coded also as a group case. A case was coded as a group case only if two or
more members of a group filed in the United States.62 In our data, 244 of 373 cases
were companies that were members of a corporate group based on their filings in the
United States.63 Of these, only 47 were lead cases, so the relationship between standalone and group filings was approximately 129 to 47, or somewhat less than three to
one.64
Thus in American Chapter 15 practice corporate groups are common, but not dominant.
Often they involve a foreign parent and an American subsidiary, as with In re RHTC
Liquidating Co.65 In this case, the United States court had no hesitation in recognizing
the Canadian proceedings involving the Canadian parent and the United States
subsidiary. Unlike some other countries, the United States does not have a notion that
a subsidiary with its incorporation or “real seat” in jurisdiction A cannot be put into an
insolvency proceeding in jurisdiction B, especially if it has a parent there that is also in
such a proceeding. Thus recognition was easy. The problem arose as to the relief to
be granted.
In RHTC, certain United States creditors had filed an involuntary Chapter 7 case against
the United States subsidiary. The Chapter 15 petition sought dismissal of the United
States involuntary proceeding. The court refused. As noted earlier, the Model Law
makes a distinct cleavage between recognition and its automatic effects (for a main
proceeding) and any further relief that the recognizing court may choose to give if
appropriate. The American court in RHTC was concerned about at least two things: a
61
Phillip I. Blumberg, BLUMBERG ON CORPORATE GROUPS (2005).
That is, we did not try to ascertain if a company that filed in the United States might have affiliates that
did not file in the United States. Instead, we assumed it was a stand-alone company. We have the sense
that in most cases stand-alone cases were not part of corporate groups, but we do not have hard
numbers.
63 The file in one case was too Delphic for us to puzzle out.
64 To be clear, that means 47 groups filed two or more of their affiliates in the United State versus 129
filings that appear to have been stand-alone companies.
65 424 B.R. 714 (Bankr. W.D. Penn. 2010).
62
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very substantial inter-company claim that could greatly reduce the value of the claims of
the United States parties and certain insider transfers. Being unsure about the effects
of these matters on the United States creditors, it declined to dismiss the Chapter 7
cases on the record developed to that point.
The overall point about group filings in the United States is that neither our empirical
study nor the reported cases show any great problems with group cases. A case like
RHTC reflects at most the usual back and forth as courts cooperate while obeying the
Model Law requirement to be careful of the rights of creditors. Thus, while pursuing
better answers for corporate groups is important, we should not let it distract us from the
effective functioning of the Model Law in most cases, including group cases.
C. Communication
I have long been committed to the idea that communication is central to the proper
conduct of a multinational insolvency case.66 Those of us who worked on the Model
Law were at pains to include authorization for direct communication among
administrators and courts, coupled with a mandate for cooperation.67 Pending further
development of methods for dealing with corporate groups, I think that a high level of
communication among courts and professionals, beginning at the very start of a case, is
essential to effective administration. While that is especially true in a reorganization
effort, it is importantly true in liquidation as well.
A second empirical study is interesting in this context. I was given permission to survey
the members of the International Insolvency Institute as to their knowledge and
experience about communication and cooperation in cross-border cases. I got a
response rate of about 25% which believe it or not in the survey business is quite a
good return. My first question inquired if there had been direct communication between
courts or administrators in the cases you know about. Seventy-one percent of them said
yes, which seems to me is very striking. Ninety-three percent of the lawyers reported
this sort of communication resulted in some cooperation. Obviously, this survey was a
somewhat rough cut at the empirical reality, but the results are nonetheless
encouraging.
IV. Conclusion
The Model Law in its United States manifestation--Chapter 15—has achieved a high
level of success, in significant part because of the courts’ understanding of its
enactment as an acceptance by the United States of modified universalism, which is a
pragmatic form of the universalist ideal of having each case managed by a single court
or other authority. Two conclusions stand out from our data
66
See, e.g., Jay L. Westbrook, The Duty to Seek Cooperation in Multinational Insolvency Cases, in THE
CHALLENGES OF INSOLVENCY LAW REFORM IN THE 21ST CENTURY, (Peters, et al ed. 2006) (Geneva),
reprinted in ANNUAL REVIEW OF INSOLVENCY LAW 2004 (Sarra ed. 2005) (Canada).
67 Model Law, art. 25.
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a) Recognition has been granted in the great majority of cases;
b) The much-discussed difficulty in locating the debtor’s center of main interests
(COMI) is a question more intellectually interesting than practically important.
Similarly, the group problem has not proven to be a substantial obstacle to cooperation
in most cases in the United States. Cases like Federal Mogul68 have proven difficult,
but more because of substantive disputes than because of the technical difficulties
associated with coordination of affiliate insolvencies.
As we move forwards toward solution of the next set of problems in multinational
bankruptcies, we should occasionally look back to remember how far we have come
since UNCITRAL first convened an insolvency group fifteen years ago. That backward
glance over the dramatic achievements of recent years will make the way forward look
less daunting.
68
See Mark Andrews, The Federal-Mogul Restructuring, Coordination in International Bankruptcy in
Eighty-First Annual Meeting, National Conference of Bankruptcy Judges 14-5 (Orlando Florida 2007).
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