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- Title
The International Two-Step: Recognizing Domestic C hapter 15 Reorganizations.
- Authors
Markell, Bruce A.
- Abstract
Chapter 11 has a history as the gold standard for corporate reorganizations. Although still relevant and vibrant, chapter 11 is facing increased competition from revised foreign laws that authorize reorganization tools not available in the United States, and at a cost many think is far less than if the debtor chose chapter 11 as its reorganization regime. The choice between domestic chapter 11 and foreign regimes may not be as stark as it might seem. The United States Bankruptcy Code contains provisions regarding recognition of foreign insolvency proceedings. In particular, chapter 15 of the United States Bankruptcy Code directs United States courts to “recognize” qualifying foreign insolvency proceedings. Recognition, in turn, is intended to give local effect to relief granted abroad, essentially deputizing United States courts as auxiliaries of foreign courts, empowered to enforce these foreign decrees. This enforcement takes place even if the foreign proceeding adversely affects domestic creditors and even if the foreign proceeding employed restructuring methods not generally permitted by United States law. Now that other nations’ laws may be more attractive to debtors, a conundrum arises: Should United States courts permit domestic debtors to restructure abroad and then use chapter 15 to enforce that foreign decree in the United States, thus serving the internationalist goals of chapter 15? Or should courts insist that domestic entities can only restructure locally, thus privileging the policies behind the remainder of the United States Bankruptcy Code? Although the latter might be the most natural policy to some (why allow local entities to evade local law by going abroad?), nothing in the United States Bankruptcy Code either excludes domestic entities from chapter 15 or requires domestic entities to use United States law to reorganize. This article will explore how a United States company could utilize a foreign proceeding and enforce it in the United States in two steps. The first is to file an insolvency proceeding for an affiliate of the debtor which is properly situated in a jurisdiction that offers more favorable insolvency relief to a debtor and its affiliates, such as might be the case under United Kingdom, German, or Netherlands law. After confirming that plan, the next step would be for the foreign affiliate to file a chapter 15 proceeding in the United States, which would extend the relief obtained abroad to the corporate group.
- Subjects
CORPORATE reorganizations; BANKRUPTCY lawsuits; JUDICIAL assistance; UNITED States. Bankruptcy; UNITED States. Bankruptcy. Chapter 11, Reorganization; INTERNATIONAL law
- Publication
American Bankruptcy Law Journal, 2024, Vol 98, Issue 1, p1
- ISSN
0027-9048
- Publication type
Article