US: Dynamic Trends in Chapter 15

In summary

This chapter discusses several recent major decisions by US bankruptcy courts in cases brought under Chapter 15 of the US Bankruptcy Code and explores a number of trends that have emerged.

Discussion points

• Chapter 15 jurisprudence not governed by bright-line, per se rules and context of the restructuring can be highly relevant
• General trend in Chapter 15 decisions of US courts’ flexibility in giving effect to foreign insolvency proceedings
• Chapter 15 jurisprudence dynamic and still evolving

Referenced in this article

• UNCITRAL Model Law on Cross-Border Insolvency
• In re Barnet, 737 F.3d 238 (2d Cir. 2013)
• In re Vitro S.A.B. de C.V., 701 F.3d 1031, 1042 (5th Cir. 2012)
• In re Oi S.A., 587 B.R. 253 (Bankr. S.D.N.Y. 2018)
• In re Agrokor d.d., 591 B.R. 163 (Bankr. S.D.N.Y. 2018)
• In re Servicos de Petroleo Constellation S.A., Case No. 18-13952, ECF No. 123, (Bankr. S.D.N.Y August 1, 2019)
• In re Ocean Rig UDW Inc., 570 B.R. 687 (Bankr. S.D.N.Y. 2017)
• In re Oi S.A., 578 B.R. 169 (Bankr. S.D.N.Y. 2017)
• In re BSG Resources Limited, Case No. 19-11845 (Bankr. S.D.N.Y. 2019)
• In re Energy Coal S.P.A., 582 B.R. 619 (Bankr. D. Del. 2018)
• In re Platinum Partners Value Arbitrage Fund L.P., 583 B.R. 803 (Bankr. S.D.N.Y. 2018)
• In re B.C.I. Finances Pty. Ltd., 583 B.R. 288 (Bankr. S.D.N.Y. 2018)
• In re PT Bakrie Telecom Tbk, 601 B.R. 707 (Bankr. S.D.N.Y. 2019)

Introduction

The primary principles underlying the enactment in 2005 of Chapter 15 of the US Bankruptcy Code were the globalisation of commerce and cross-border cooperation. Through its passage, the US Congress sought to effectuate the mandate of the UNCITRAL Model Law on Cross-Border Insolvency (UNCITRAL Model Law), with its stated purpose to ‘provide effective mechanisms for dealing with cases of cross-border insolvency’.¹ In furtherance of this goal, Chapter 15’s comprehensive legislative framework enables a US court to recognise a foreign judicial or administrative insolvency proceeding, thereby providing foreign debtors access to US courts to administer assets, resolve claims and take certain other actions (eg, impose stay over pending litigation or collection) within the United States.

Chapter 15 case law is still in the early stages of development and US courts continue to grapple with just how far to extend the principles of comity and cooperation while staying true to the policies and principles embedded in US domestic restructurings under Chapter 11 of the US Bankruptcy Code. Through that process, a number of trends have emerged in recent US decisions on recognition and enforcement of foreign insolvency proceedings, which largely demonstrate US courts’ flexibility in giving effect to foreign insolvency proceedings, rather than a distrust or rejection of such foreign processes and systems.

Initially following the passage of Chapter 15, a number of bankruptcy court decisions, such as the Second Circuit’s decision in In re Barnet,² (imposing section 109 debtor eligibility requirements in the United States to Chapter 15 foreign debtors) and the Fifth Circuit’s decision in In re Vitro SAB de CV,³ (refusing to grant third-party releases approved by Mexican court), appeared to limit the scope and access of Chapter 15. However, recent cases have generally taken a more permissive approach, although this trend is not linear. While most decisions have increased emphasis on providing broad relief to Chapter 15 debtors and have moved the jurisprudence away from formalistic procedural delays, US courts have not adopted per se rules for Chapter 15 recognition and enforcement, which means jurisprudence in this exciting and dynamic area remains highly unsettled.

This chapter discusses several major decisions in the past two years, exploring issues relating to the enforcement of a plan of reorganisation in the United States pending resolution of appeals, determining a foreign debtor’s centre of main interests, juggling the appropriate scope of relief in Chapter 15 proceedings and establishing appropriate gating requirements for accessing Chapter 15.

Waiting on the world to change: enforcement of foreign-approved plans in the United States pending resolution of foreign appeals

Once a debtor has obtained approval of its restructuring plan through its foreign proceeding, it is not uncommon for that approval to be appealed in whole or in part in foreign courts and for the debtor to nevertheless push forward with seeking enforcement of the plan in the United States. This context implicates the thorny problem of whether the Chapter 15 court should delay enforcement in the United States pending an ongoing foreign appeal. While two cases from 2018 favoured the speedy enforcement of a foreign-approved restructuring in spite of pending foreign appeals as long as the foreign lower court decision’s was not stayed pending appeal, a more recent opinion in 2019 appears to buck that trend, favouring a wait-and-see approach that may hinder closing of restructuring transactions. This pattern suggests that courts will perform a fact-specific inquiry on the question and so counsel to a Chapter 15 debtor seeking enforcement of its plan over a foreign appeal should accordingly be sure to develop a record to support that relief.

In both cases where the Chapter 15 court enforced the foreign restructuring plan over the pending foreign appeals, the court emphasised the importance of comity in avoiding the delay of the debtor’s restructuring. In In re Oi SA,⁴ a foreign debtor’s restructuring plan was overwhelmingly confirmed by a court in Brazil. A group of shareholders appealed the plan confirmation in Brazil without successfully obtaining a stay pending appeal, with the appeal still pending when Judge Lane was asked to enforce the Brazilian plan in the United States. In deciding to enforce the Brazilian plan despite the appeal, Judge Lane emphasised his broad discretionary authority, including the authority to grant relief consistent with principles of comity. The court reasoned that unstayed foreign appeals should not prevent enforcement of a confirmed restructuring plan because doing so would ‘provide the very same stay pending appeal that . . . [was] denied by the Brazilian courts’.⁵

Similarly, in In re Agrokor DD,⁶ Judge Glenn refused to delay enforcement of the restructuring and settlement agreement approved by a Croatian insolvency court despite a potential pending dispute in the UK that may alter the enforcement of the plan with respect to English law-governed debt. Like Judge Lane in Oi, Judge Glenn found that the purposes of Chapter 15 required prioritising the debtor’s ability to effectuate its restructuring plan in a fair and efficient way without requiring incessant analysis of potential foreign appeals. In that case, Agrokor DD, a holding company of food-related companies, reached a settlement agreement with creditors holding 78 per cent of claims. Judge Glenn agreed to enforce the terms of the settlement agreement (with the caveat that he will not enter an order until the settlement agreement becomes effective in Croatia), even though there was a possibility for an English court to modify the settlement agreement. Although the English court had also recognised the proceeding in Croatia, creditors there had argued that the English court should decline to enforce the settlement agreement under an English common law rule known as the Gibbs Rule, which provides that rights under English-law governed debt can only be adjudicated by English laws and cannot be discharged in a foreign proceeding. Judge Glenn dismissed that concern, reasoning that a ‘broader analysis of comity with respect to every nation involved’ is not required ‘because the Court’s decision to recognize and enforce the Settlement Agreement is effective within the territorial jurisdiction of the United States’.⁷ To make the point clearer, Judge Glenn further offered a critique of the Gibbs Rule and its territorialism as incongruent with the UNCITRAL Model Law’s goal for bankruptcy proceedings that are ‘unitary and universal, recognised internationally and effective in respect of all the bankrupt’s assets’.⁸ The Agrokor decision was rendered in the context of no creditor opposition to recognition and enforcement of the Croatian plan, which may also have been a factor in Judge Glenn’s decision.

While these cases appeared to demonstrate a trend of Chapter 15 courts avoiding imposing a delay in enforcement of an unstayed foreign court-approved plan, a more recent decision from 2019 shows that courts will not uniformly enforce unstayed foreign plans. In In re Servicos de Petroleo Constellation SA (QGOG),⁹ Judge Glenn took a decidedly different approach to resolving this question than he took in Agrokor. There, Judge Glenn stayed the motion to enforce a confirmed plan in Brazil pending a decision from the Brazilian Court of Appeals. Crucially, just like in Oi, no stay on the effectiveness of the plan was granted in Brazil. But Judge Glenn noted in his decision in QGOG that he considered issues raised by a dissenting creditor regarding due process and voting issues to be ‘serious’ enough not to rush recognition of the foreign plan until at least the first level of court of appeals in Brazil had a chance to review the issues. Judge Glenn reasoned that there was no purpose in enforcing the confirmed plan in the United States if it will be substantively reversed on appeal. While noting that foreign court-approved plan can be enforced in the exercise of comity, Judge Glenn explained that the interests of creditors, which must also be sufficiently protected, must take precedence even if the result is delay in enforcement of the restructuring.

Interestingly, notwithstanding the apparent inconsistency between QGOG and Oi, Judge Glenn underscored his view that his decision was consistent with his prior opinion from Agrokor, where he had declined to enforce the settlement agreement until it became effective in the foreign jurisdiction. However, the two cases may have had important differences in terms of their practical effects. Agrokor involved a small delay on enforcement until the settlement agreement became effective abroad, resulting in a reasonable approach given that the United States should not accelerate enforcement over a foreign tribunal. On the other hand, the delay in QGOG is more significant and could potentially extend a Brazilian appellate court reviews the confirmed plan on a timeline that is, itself, somewhat uncertain. Moreover, the decision in QGOG effectively granted a stay pending appeal when no such stay was granted in the foreign court, in direct contradiction of the holding in Oi.

Those who were hoping that Oi established a bright-line rule that foreign appeals absent a stay will not delay US enforcement will be sorely disappointed by the QGOG decision. Indeed, QGOG will give renewed steam to dissident creditors who wish to arbitrage between different bankruptcy systems and hold up enforcement of a plan by invoking due process concerns. Still, there are important factual differences that may have motivated Judge Glenn’s opinion in QGOG. For instance, Judge Glenn noted that the Brazilian proceedings had previously been reversed by appellate decisions and that unlike in Agrokor, where no objections to recognition of the foreign plan were raised, several objections were raised before the US court in QGOG. Practitioners navigating this issue should be aware that the jurisprudence remains highly unsettled without bright-line rules and factual nuances may be dispositive in a court’s ultimate decision on whether to delay enforcement in the United States based on foreign appeals.

Where did you go? Determining a debtor’s centre of main interests

At the start of a Chapter 15 case, the first question a US court must answer is whether the foreign proceeding is a ‘main proceeding’ – a case pending in the country where the debtor’s centre of main interests (COMI) is located – or a ‘non-main proceeding’ – a case pending in the country where the debtor has only an ‘establishment’.¹⁰ The determination is important because a foreign main proceeding entitles the foreign debtor to broader automatic relief, including imposition of the automatic stay in the United States, whereas such relief is discretionary for a non-main proceeding. COMI is not defined in the statute, but there is a statutory presumption that the debtor’s COMI lies in the jurisdiction of its registered office. Still, creditors may challenge the location of a debtor’s COMI (and thus whether the proceeding is a main proceeding) in order to disrupt or otherwise limit the reach of the Chapter 15 case.

Recent cases suggest that courts are willing to adopt a flexible approach to determining a debtor’s COMI, in some cases ratifying a debtor’s COMI shifting shortly before a Chapter 15 filing and even granting discretionary automatic stay relief to non-main proceedings. However, this approach is not without exceptions – courts are often vigilant of bad faith on the part of either the debtor or a creditor seeking recognition and may restrict the scope of relief accordingly to address inequities.

Let it be: flexible approach to determining COMI

Two recent decisions by Judge Glenn in the Southern District of New York show a willingness to bend the traditional concept of COMI in order to provide the debtor with Chapter 15 relief necessary to its reorganisation. In In re Ocean Rig UDW Inc,¹¹ Judge Glenn considered whether the actions of a foreign debtor to shift its COMI to the Cayman Islands, a location with favourable insolvency laws, less than a year before commencing insolvency proceedings, constituted legitimate ‘COMI migration’ or bad faith ‘COMI manipulation’. The Second Circuit previously held that a court may find a debtor manipulated its COMI in bad faith to disregard a change in where the debtor’s COMI is located.¹² In Ocean Rig, Judge Glenn found that the debtors had legitimately migrated their COMI because the debtors had taken concrete steps for the ‘proper purpose’ of facilitating a ‘value maximizing restructuring’.¹³ The court found no evidence of ‘insider exploitation, untoward manipulation, [or] overt thwarting of third-party expectations’ indicating bad faith.¹⁴

In the QGOG case, Judge Glenn could not find that the COMI of a Luxembourg parent of a group of debtors was in Brazil (where the other debtors’ COMIs are located), but still granted discretionary automatic stay relief for the resulting foreign non-main proceeding.¹⁵ QGOG was a complex restructuring involving multiple Chapter 15 debtors, which required the court to determine the COMI for each debtor. Judge Glenn found that the location of the ultimate parent holding company’s COMI was Luxembourg, but that the debtor-parent had sufficient ties to Brazil for recognition of Brazilian proceeding as foreign non-main proceeding. For the other debtors, Judge Glenn recognised the Brazilian proceeding as the respective foreign main proceeding. Even so, Judge Glenn granted discretionary automatic stay relief for the non-main recognition of the Luxembourg parent, noting that the foreign main proceeding is entitled to ‘nearly identical relief as the relief afforded to the Chapter 15 Debtors whose COMI was determined to be in Brazil’.¹⁶

QGOG illustrates that even where COMI analysis did not result in foreign main recognition, the court may still grant broad discretionary relief to ensure uniform treatment for the debtors and reduce the likelihood of procedural headaches that may compromise the restructuring.

Be a good boy: evaluating bad faith

Nevertheless, this recent trend of flexibility to COMI analysis is not without exceptions. Frequently, courts have refused to give a blank cheque in COMI analysis and will still scrutinise whether the party seeking recognition acted in bad faith. In In re Oi SA,¹⁷ discussed above, Judge Lane addressed COMI issues in the context of two competing foreign restructuring proceedings of a Dutch subsidiary of a Brazilian conglomerate, one in Brazil (the Brazilian Proceeding) and one subsequently commenced by a creditor in the Netherlands (the Dutch Proceeding). Judge Lane maintained his finding that the debtor’s COMI was in Brazil, in part because of an objecting creditor’s role in initiating the Dutch Proceeding without opposing Chapter 15 relief for the Brazilian proceeding. In that case, Judge Lane previously recognised Oi’s Brazilian Proceeding as the foreign main proceeding for Oi Brasil Holdings Coöperatief UA (Coop), a Dutch subsidiary, because Coop had limited operations and primarily acted as a tax-advantaged financial vehicle for Oi. Certain of Coop’s creditors, unsatisfied with the recognition, commenced legal proceedings against Coop in the Netherlands, which culminated in the competing Dutch Proceeding. The Dutch insolvency trustee then asked Judge Lane to instead recognise the Dutch Proceeding as Coop’s foreign main proceeding.

In a lengthy opinion following trial, Judge Lane denied the petition, finding no basis for the relief sought because the court had been fully aware of Coop’s connections to the Netherlands at the time of recognition of the Brazilian Proceeding. Interestingly, Judge Lane expressly considered an objecting creditor’s role in commencing the Dutch Proceeding as part of its strategy to block recognition of any Brazilian restructuring plan in order to increase its leverage. Judge Lane found that the objecting creditor’s actions were ‘at odds with many of the goals of Chapter 15’, including fair and efficient administration of international insolvencies, and criticised the objecting creditor for ‘weapon[ising] Chapter 15 to collaterally attack’ the Brazilian Proceeding.¹⁸

In a separate case before him, In re BSG Resources Limited,¹⁹ Judge Lane expressed interest in exploring whether a foreign representative filed for Chapter 15 in ‘bad faith’ to avoid an adverse judgment. In this case, Vale, the beneficiary of an arbitral award against the debtor and the debtor’s largest creditor, opposed recognition of the foreign proceeding. At a protective order hearing, Judge Lane suggested that it may be theoretically possible to limit the scope of recognition relief granted to a foreign representative who filed in bad faith, but left the issue to be determined at a later date. Judge Lane noted, albeit cryptically, that there is a ‘difference of opinion about legally the relevance’ of bad faith in determining the scope of recognition relief.²⁰ However, Judge Lane allowed broad discovery on whether the Chapter 15 petition was brought in bad faith, including:

• whether the Chapter 15 proceeding was brought in an effort to avoid compliance with an adverse judgement;
• whether there were improper attempts at controlling a foreign representative; and
• whether the debtor manipulated its COMI in bad faith.

Because there is limited case law on whether a bad faith filing (absent bad faith COMI manipulation) could justify denying recognition, this case is a worthwhile one to follow.

Because a foreign debtor’s COMI is one of the first questions analysed by a US bankruptcy court in a Chapter 15 proceeding, debtors and creditors alike should be cognisant that, while some judges may favour a flexible approach to COMI, facts suggesting bad faith manipulation on the part of the party seeking recognition could easily derail the efforts seeking recognition.

Do you want fries with that? Scope of relief under Chapter 15

Recognition is only the beginning of the Chapter 15 process. Following recognition, a US bankruptcy court has discretion to grant ‘appropriate relief’ under section 1521 or provide ‘additional assistance’ pursuant to section 1507. The question of the scope of appropriate relief often tests the usefulness of comity as a guiding principle. Two recent cases demonstrate that while courts may prioritise comity to grant broad relief under Chapter 15 to implement a foreign court-approved restructuring, there are also limits to comity as a guiding principle. US courts, even when trying to facilitate the enforcement of a foreign plan, are nevertheless constrained by bedrock principles of US law, both bankruptcy and otherwise. Those seeking to predict the scope of relief granted by a US bankruptcy court would be wise to keep in mind these two competing considerations.

No party in the USA: enforcement of choice of law provisions

Throughout the relatively short existence of Chapter 15, the concept of comity to foreign tribunals has been at its heart. Often, the principle of comity has led US courts to limit their involvement (or, as some might call it, interference), in the processes of the foreign proceeding. This trend can be seen in a recent case, in which a Delaware bankruptcy court compelled a creditor to resolve the priority of its claims through a foreign proceeding, even when a choice of law clause pointed to the United States.

In In re Energy Coal SPA,²¹ an Italian debtor entered into a contract with certain US contractors, which contained a Florida choice of law provision for any dispute. The Italian restructuring was later recognised in the United States as a foreign main proceeding. The US contractors objected to the enforcement of the Italian-court approved plan in the United States, arguing that the plan improperly resolved the priority status of their claims because their contracts required adjudication of all disputes by a Florida court. Judge Silverstein sided with the foreign representative, holding that the validity and amount of the claims could be determined by a Florida court, but any dispute over priority and distribution must be resolved in Italy. In reaching that decision, Judge Silverstein emphasised that enforcement of the restructuring is guided by considerations of comity and the contractors had provided no basis for the choice of law provisions to ‘override the comity afforded foreign main proceedings’.²² Judge Silverstein implicitly recognised that an adjudication of the priority of a claim in the United States would undermine the legitimacy of the foreign proceeding and create potentially duelling priority schemes, a result that she characterised as neither ‘appropriate or sensible’.²³

The view of comity taken by the court in Energy Coal is consistent with a modern, uniform view of cross-border insolvencies, showing US courts are willing cede the power of US laws to ensure uniform results across jurisdictions.

My house my rules: the limits of comity

Other decisions nonetheless make clear that there are limits to comity as a guiding principle. Take, for instance, In re Platinum Partners Value Arbitrage Fund LP,²⁴ where Judge Chapman had to determine whether to allow discovery in the United States that may be impermissible under foreign law. In Platinum, the debtor was a Cayman Islands limited partnership that was placed into liquidation in the Cayman Islands, which proceeding was later recognised as a foreign main proceeding. The Cayman liquidators were tasked with investigating the business of the debtor and sought to get discovery in the United States from an auditor who previously provided audit services to the debtor. The auditor opposed the discovery, arguing that much of its documents are not discoverable under Cayman law.

The Platinum case poses a conundrum. Does comity mean that a US court cannot grant discovery relief that would be impermissible in the foreign proceeding? Judge Chapman resolved this problem by first noting that the auditor failed to establish the documents are not discoverable under Cayman law. More interestingly, the opinion explained that, even if the documents were not discoverable under Cayman law, ‘comity does not require that the relief available in the United States be identical to the relief sought in the foreign bankruptcy proceeding.’²⁵ Instead, Judge Chapman looked to the policy underpinnings of Cayman law and concluded that they are not hostile to discovery sought under US laws and, accordingly, ‘principles of comity decisively weigh in favo[u]r of granting’ discovery.²⁶

Platinum demonstrates that while the principle of comity suggests that relief granted in the United States should not offend foreign laws, it does not require identical relief as the foreign court would grant. Indeed, Judge Chapman refused to adopt a reading of comity that would reduce the US court’s role to that of ‘an avatar for the foreign court’ and wished to avoid the prospect of having to ‘engage in a full-blown analysis of foreign law each and every time a foreign representative seeks additional relief’.²⁷

While the case only deals with discovery, Platinum’s reasoning has potentially broad implications, showing that US courts may invoke comity to justify relief that may not otherwise be allowed in the foreign proceeding. Those who are seeking additional relief from US courts under Chapter 15 should keep in mind these two competing considerations: comity favouring relief in line with what is granted by foreign tribunals and refusing to abdicate the role of a US court in deciding appropriate relief in its jurisdiction.

Getting in the door: gating requirements for Chapter 15 relief

While US courts have lowered barriers to debtors seeking Chapter 15 relief in the US, there remain some filters and the protections of Chapter 15 are not available for all foreign debtors. While cases decided shortly after the enactment of Chapter 15 created concerns that the bar for accessing Chapter 15 may have been set improperly high, more recent cases suggest that US courts have generally tried to lower the gating requirements for Chapter 15 relief, specifically, these cases have allowed foreign representatives to easily satisfy the ‘property’ requirement under section 109(a) and have adopted a narrow public policy exception, so as not to overly scrutinise the foreign proceeding.

It does not take much: property requirements under section 109(a)

The Second Circuit’s Barnet opinion in 2013 required a foreign representative to satisfy the requirements for having a domicile, place of business or property in the United States pursuant to section 109(a).²⁸ The opinion was initially met with concerns that US courts would severely curtail the availability of Chapter 15 relief by imposing onerous property requirements for foreign debtors. Recent cases show the exact opposite – courts have set the bar so low for a foreign Chapter 15 debtor to satisfy section 109(a) that it is barely a limitation at all.

For example, in In re BCI Finances Pty Ltd,²⁹ Judge Lane held that a US$1,250 retainer placed in the trust account of the foreign liquidator’s US counsel satisfied the section 109(a) eligibility requirement. Judge Lane relied on prior Chapter 11 decisions holding that the ‘property’ requirement is satisfied by ‘even a minimal amount of property located in the United States’.³⁰ Separately, Judge Lane also held that breach of fiduciary claims against former directors that resided in the United States independently satisfied section 109(a).

The low standard for satisfying section 109(a) means that even foreign debtors with no concrete property and only litigation claims against parties in the United States can easily seek the protection of Chapter 15.

Lowering the bar: limited inquiries into foreign proceeding

In another recent case showing that courts have tended to lower the gating requirements for Chapter 15, Judge Lane denied objecting creditors’ summary judgment motion arguing that:

• a foreign debtor failed to satisfy the property requirement;
• the foreign representative was not properly appointed; and
• the debtor’s Indonesian restructuring proceeding (the Indonesian Proceeding) was manifestly contrary to US public policy.³¹

On the question of whether the debtor has property in the United States, Judge Lane echoed his reasoning in BCI Finance, noting that property can encompass a variety of ‘intangible assets’ and in this case, the debtor was an obligor on an indenture governed by New York law, which constitutes property in the United States.³²

The dissenting creditors also argued that a director of the debtor was not properly appointed as the foreign representative because his appointment by the debtor’s board did not occur until three years after the conclusion of the Indonesian Proceeding and thus did not occur ‘in’ the foreign proceeding pursuant to section 1515(a). Here too, Judge Lane emphasised that the threshold ‘is not an onerous one’ and must be ‘read broadly in order to facilitate the purposes of Chapter 15’.³³ Section 1515(a), which allows a foreign representative ‘authorised in a foreign proceeding’ to file a Chapter 15 application, should be read broadly to include foreign representatives appointed after the foreign proceeding has been closed.

Finally, Judge Lane also rejected the creditors’ motion for summary judgment on the grounds that the Indonesian Proceeding was manifestly contrary to US public policy. Judge Lane started with the proposition that section 1506 of the Bankruptcy Code, which provides that a court may refuse to take action under Chapter 15 if such action would be ‘manifestly contrary to the public policy of the United States’ must be ‘read narrowly’.³⁴ Holding that summary judgment was not appropriate, Judge Lane pointed to lingering questions of fact regarding whether the administrator and judge in the Indonesian Proceeding were independent and emphasised that there are procedural safeguards in the Indonesian Proceeding that the creditors failed to acknowledge. The opinion cited another recent case from New Jersey, In re Manley Toys,³⁵ where the court held that the actions of Hong Kong liquidators did not violate US public policy, even if those liquidators allegedly took directions from insiders of the debtor, because the creditors had ample notice and remedies in the Hong Kong proceeding.

Both the BCI and PT Bakrie opinions stand in contrast to Barnet. Alleviating concerns that US courts would establish prohibitive and onerous requirements for seeking Chapter 15 protection, these recent cases are consistent with a recent trend of increasing the availability of Chapter 15 for foreign debtors, and will likely be commensurate with an increase in Chapter 15 filings in the United States, particularly in the Southern District of New York.

Conclusion

Conflicting trends in recent decisions make it challenging for practitioners or commentators to identify a single direction either for or against the comity afforded to foreign insolvency proceedings under Chapter 15. While some of these holdings are patently in conflict, most can be reconciled by looking to the context for the restructuring and creditors’ opposition.

Notes