Abstract
Because financial distress often extends beyond national borders in today’s globalised economy, one may expect to see convergence in the various national legal systems that address financial distress. However, this chapter shows that in times of financial crisis, there are still many opportunities for a foreign debtor and its creditors to obtain an outcome centred on United States law and procedure. This is particularly true for large corporate debtors, and this trend has held even during the most recent financial difficulties caused by the COVID-19 pandemic. Thus, although bankruptcy law in the United States does have components that may promote convergence, such as chapter 15 of the U.S. Bankruptcy Code, substantive convergence of United States bankruptcy law to conform with the laws of other jurisdictions still seems unlikely.
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Notes
- 1.
Casey and Macey (2021), p. 468.
- 2.
For example, the Ninth Circuit Bankruptcy Appellate Panel recently held that, as long as chapter 15’s recognition requirements are met, a bad faith filing is not a basis for denying recognition of a foreign main proceeding. Samba v. International Petroleum Products & Additives Co (In re Black Gold SARL), 635 BR 517 (9th Cir BAP 2022).
- 3.
This chapter uses the term ‘bankruptcy’ to describe the legal process in the United States for addressing insolvency and financial distress. By contrast, it uses the term ‘insolvency’ in two ways: (i) to identify a state of economic distress where an entity is unable to pay debts upon maturity (e.g., an ‘insolvent debtor’) and (ii) when referring to foreign and model laws designated as insolvency laws (e.g., an insolvency proceeding in the United Kingdom, the Model Law on Cross-Border Insolvency).
- 4.
Chapter 15 of the U.S. Bankruptcy Code: Ancillary and Cross-Border Cases, Cong Res Serv (2006), p. 8.
- 5.
UNCITRAL Model Law on Cross-Border Insolvency (1997), UN Commission on Int’l Trade L (1997).
- 6.
Ibid.
- 7.
Ibid.
- 8.
UNCITRAL Legislative Guide on Insolvency Law, Parts One and Two (2004), p. 2.
- 9.
Ibid.
- 10.
Chapter 15 – Bankruptcy Basics, U.S. Courts, https://www.uscourts.gov.
- 11.
Ibid.
- 12.
Warren and Westbrook (2009), p. 604 note that ‘the world has turned to Chapter 11 as a model to create value for a business’s creditors, workers, investors, and communities’ but also observe that ‘American-style reorganisation has been widely disparaged.’
- 13.
Warren and Westbrook (2009), p. 613.
- 14.
Martos-Vila and Shi (2022).
- 15.
Schwartz et al. (2021).
- 16.
McKiernan (2017).
- 17.
Hals (2017).
- 18.
McKiernan (2017).
- 19.
Ibid.
- 20.
Hals (2017).
- 21.
McKiernan (2017) notes in particular the lack of agreement on ‘how to compel witnesses and collect evidence’ in a cross-border insolvency.
- 22.
McKiernan (2017) quotes Ken Rosenberg, a partner at Paliare Roland Rosenberg Rothstein LLP, which acted for the Canadian Creditors’ Committee in the case.
- 23.
Hals (2017).
- 24.
Ibid.
- 25.
11 U.S.C. §109(a) (2010).
- 26.
Couwenberg and Lubben (2015), pp. 719–720.
- 27.
Ibid., p. 720.
- 28.
Ibid., p. 720.
- 29.
Ibid., p. 720.
- 30.
Ibid., p. 723.
- 31.
Ibid., p. 740.
- 32.
Ibid., p. 741.
- 33.
Couwenberg and Lubben (2015), p. 741.
- 34.
Couwenberg and Lubben (2015), pp. 744–745 note that the use of prepackaged cases ensures that the American reorganisation case will proceed much quicker than in almost any other forum.
- 35.
Dietderich (2021), p. 28.
- 36.
- 37.
Couwenberg and Lubben (2015), pp. 742–743.
- 38.
Ibid., p. 722.
- 39.
Ibid., p. 721.
- 40.
Ibid., p. 721.
- 41.
Ibid., p. 721.
- 42.
Ibid., p. 722.
- 43.
Couwenberg and Lubben (2015), p. 723 cite Quebecor as an example of successful coordination between U.S. and Canadian courts.
- 44.
Couwenberg and Lubben (2015), p. 723.
- 45.
Dietderich (2021), p. 28.
- 46.
Ibid., p. 61.
- 47.
Ibid., p. 62.
- 48.
Ibid., p. 62.
- 49.
Church and Hill (2021).
- 50.
Ibid.
- 51.
Church and Hill (2021) quote Eric Snyder, chairman of the bankruptcy practice at Wilk Auslander, a law firm.
- 52.
Gonzalez (2021).
- 53.
Hill and Villamil (2021).
- 54.
Wong (2021).
- 55.
Church and Hill (2021).
- 56.
Ibid.
- 57.
Scurria and Saeedy (2021).
- 58.
Thomson (2022) notes that, ‘[t]he proposals for local and international bondholders are diametrically different.’
- 59.
Thomson (2022).
- 60.
Ibid.
- 61.
Ibid.
- 62.
Cheok (2020).
- 63.
Ball et al. (2021).
- 64.
11 U.S.C. §1525 (2005).
- 65.
11 U.S.C. §1526(a) (2005).
- 66.
Shuster and Loveland (2021), p. 50.
- 67.
Markell (2021).
- 68.
Ibid.
- 69.
- 70.
In re Barnet, 737 F.3d 238 (2d Cir. 2013).
- 71.
In re Barnet, 737 F.3d 238 (2d Cir. 2013).
- 72.
In re Goerg, 844 F.2d 1562 (11th Cir. 1988).
- 73.
- 74.
Ibid.
- 75.
Ibid.
- 76.
Ibid.
- 77.
Magalhaes (2021), p. 53 cites In re Condor Flugdienst GmbH as an example of a court recognising that relief granted in a foreign ruling need not be identical to that available under U.S. law.
- 78.
In re Sibaham Limited, Case No. 19-31537, 2020 WL 2731870 (Bankr. W.D.N.C. May 4, 2020).
- 79.
Sibaham, 2020 WL 2731870, p. *1.
- 80.
Sibaham, 2020 WL 2731870, p. *2.
- 81.
In re Marconi PLC, 363 B.R. 361 (S.D.N.Y. 2007).
- 82.
Marconi, 363 B.R. at 365.
- 83.
JP Morgan Chase Bank v. Altos Hornos de Mexico, S.A. de C.V., 412 F.3d 418, 419 (2d Cir. 2005).
- 84.
Ibid.
- 85.
In re British American Ins. Co. Ltd., 488 B.R. 205 (Bankr. S.D. Fla. 2013).
- 86.
British American, 488 B.R. at 235, held that plaintiffs could pursue the claim under §1509(f).
- 87.
Shuster and Loveland (2021) observe that ‘U.S. courts are more likely to allow standalone actions filed by the foreign representatives for a chapter 15 foreign debtor than to allow stand-alone actions filed against a chapter 15 foreign debtor.’ (Emphasis in original).
- 88.
In re Culligan Ltd., Case No. 20-12192, 2021 WL 2787926 (Bankr. S.D.N.Y. July 2, 2021).
- 89.
For example, Gavant et al. (2021) discuss the dismissal of the National Rifle Association’s bankruptcy case for lack of a good faith filing.
- 90.
In re Culligan Ltd., Case No. 20-12192, 2021 WL 2787926 (Bankr. S.D.N.Y. July 2, 2021).
- 91.
Ibid.
- 92.
Magalhaes (2021), p. 24.
- 93.
Firefighters’ Retirement System v. Citco Group Ltd., 796 F.3d 520 (5th Cir. 2015).
- 94.
Firefighters, 796 F.3d at 523.
- 95.
- 96.
11 U.S.C. §1521(a)(4) (2010).
- 97.
Berkovich et al. (2021).
- 98.
Ibid.
- 99.
Ibid.
- 100.
Ibid.
- 101.
Ibid.
- 102.
Ibid.
- 103.
Ibid.
- 104.
Ibid.
- 105.
Ibid.
- 106.
Markell (2021) mentions other jurisdictions as possibly being attractive to U.S. debtors.
- 107.
DLA Piper (2020).
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Coordes, L.N. (2024). Bankruptcy Law in the United States. In: Ghio, E., Perlingeiro, R. (eds) Are Legal Systems Converging or Diverging?. Springer, Cham. https://doi.org/10.1007/978-3-031-38180-5_5
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