CHAPTER 15: ANCILLARY AND OTHER CROSS- BORDER CASES Daniel M. Glosband Goodwin Procter LLP

Chapter 15 is an entirely new chapter of the United States Bankruptcy Code Title VIII of Bankruptcy Abuse Prevention and Consumer Protection Act adds chapter 15, related amendments to Bankruptcy and Judicial Codes; effective October 17, 2005 Adopts UNCITRAL Model Law on Cross- Border Insolvency and replaces former §304, Cases ancillary to foreign proceedings Governs: “inbound” foreign proceedings and “outbound” authority to act in a foreign country; coordination of US, foreign cases; rights of foreign parties

Implements Model Law Objectives Cooperation, fair administration in cross- border cases Greater legal certainty for trade, investment Protection, maximization of value of debtor’s assets Facilitation of rescue of businesses to protect investment, enhance employment

Collective judicial or administrative proceeding in foreign country, for purpose of reorganization or liquidation Under law relating to insolvency/adjustment of debt; assets and affairs of debtor subject to control/supervision of foreign court Debtor has center of main interests or establishment in the foreign country Foreign representative a person or body authorized to administer case or act as foreign representative Eligible Foreign Proceeding/Representative

Jurisdiction and Venue United States Bankruptcy Courts can hear and determine chapter 15 cases Venue is determined by a hierarchy: district where the debtor has its principal place of business in the United States if none, in the district in which there is an action pending against the debtor otherwise, where venue will be consistent with the interests of justice and the convenience of the parties

Chapter 15 Construction International obligations of United States will prevail if they conflict with chapter 15 Court may decline to take an action under chapter 15 “if the action would be manifestly contrary to the public policy of the United States.” In interpreting chapter 15, the court must consider its international origin and the goal of uniform application among adopting countries

Recognition of Foreign Proceeding Petition for recognition commences a case under chapter 15. Recognition is foreign representative’s sole entry point to State and Federal court systems (except to collect debtor’s accounts receivable). Recognition not dependent upon findings about nature of foreign proceeding as under former section 304(c)(2).

Recognition, cont. Petition accompanied by (1) certified copy of decision commencing foreign proceeding and appointing foreign representative, (2) certificate from foreign court affirming existence of foreign proceeding and the appointment of the foreign representative, or (3) any other evidence acceptable to court, (all translated into English), (4) statement identifying all other foreign proceedings of debtor Court shall decide on the application for recognition “at the earliest possible time”

Foreign Main/Nonmain Proceeding “[A] foreign proceeding pending in the country where the debtor has the center of its main interests” will be a foreign main proceeding “[A] foreign proceeding, other than a foreign main proceeding, pending in a country where the debtor has an establishment” will be a foreign nonmain proceeding A foreign proceeding based solely on presence of assets in the foreign country will not be eligible for recognition

Pre-Recognition Relief Limited emergency relief between petition for recognition and entry of order granting recognition May stay execution against debtor’s assets; suspend right to transfer, encumber or otherwise dispose of assets; permit discovery and additional relief available to a trustee Assets that are perishable, susceptible to devaluation or otherwise in jeopardy may be delivered to foreign representative Police or regulatory actions generally not stayed

Automatic Relief on Recognition of Foreign Main Proceeding Bankruptcy Code automatic stay takes effect Code sections on use, sale or lease of property, avoidance of post-petition transactions and post-petition effect of security interests apply Principles of adequate protection of interests in property apply Foreign representative can operate debtor’s business, unless court orders otherwise Stay exceptions: commence action in foreign country to preserve claim, commence title 11 case, file claims or take actions in such a case

Discretionary Relief Broad relief available upon recognition of a foreign main or nonmain proceeding to effectuate purpose of chapter 15, protect debtor’s assets or creditors’ interests Assets may be entrusted for administration or realization if court “satisfied that the interests of creditors in the United States are sufficiently protected.” Relief, operation of business may be conditioned on security or bond

Limitations on Relief Police or regulatory actions generally not stayed Foreign representative or affected entity may request that relief be modified or terminated An examiner may be appointed for several purposes

Rights of Foreign Representative upon Recognition Sue, be sued, apply directly to a State or Federal court; court SHALL grant comity or cooperation (not necessarily relief) Participate in debtor’s bankruptcy case and intervene in proceedings in which debtor is party Commence case under chapter 7 or 11(an “involuntary” if nonmain proceeding) Filing recognition petition, full case, for dismissal or suspension does not subject foreign representative to jurisdiction for other purpose

Cooperation and Communication Courts must “cooperate to maximum extent possible” with foreign courts and foreign representatives; may communicate directly with foreign court or foreign representative after notice and hearing Trustee, other authorized person must similarly cooperate; may communicate directly with the foreign court or foreign representative Cooperation by “any appropriate means” including appointment of persons to act, coordination of administration and supervision of assets and affairs, agreements or protocols

Coordination of Concurrent Proceedings Post-recognition, case under another chapter of Bankruptcy Code can be commenced only if debtor has assets in United States “Subsequent” case preceded by notice to chapter 15 court, subject to mandates for coordination and cooperation, to dismissal or suspension if “the purposes of chapter 15 would be best served by such dismissal or suspension.” Jurisdiction restricted to assets within the territorial jurisdiction of the United States.

Coordination, continued If both a chapter 15 case and a local full proceeding, cooperation and coordination subject to guidelines based on sequence in which cases were filed If case under another chapter pending when application for recognition filed, relief must be consistent with relief in the plenary case; no automatic relief

Coordination, continued If case under another chapter commenced after petition for recognition, any relief in chapter 15 case reviewed and modified or terminated if inconsistent with local proceeding; automatic stay in foreign main proceeding modified or terminated if inconsistent with relief in plenary case Case can be dismissed or suspended if interests of creditors and debtor better served If representatives of more than one foreign proceeding seek recognition, foreign main proceeding will be given primary importance

Daniel M. Glosband, Partner Goodwin Procter LLP Exchange Place 53 State Street Boston, MA Areas of Practice Dan Glosband is a partner in the firm’s Business Law Department and a member of its Financial Restructuring Practice. Mr. Glosband’s primary areas of practice are insolvency and reorganization. He represents secured and unsecured creditors, committees and debtors in workouts and proceedings under the Bankruptcy Code. Mr. Glosband has acted as an adviser to the U.S. State Department and the American Law Institute on international insolvency projects. Work for Clients Mr. Glosband recently represented the lead investors in the proposed Chapter 11 plan of US Airways and its merger with America West and the fiduciaries for the employee stock plan in the Delta case. He also represents CNA Insurance, one of the main insurers of W.R. Grace in its asbestos-driven Chapter 11 case. Other recent engagements included the representation of buyers of assets from debtors in reorganization proceedings in Virginia, Michigan and Ontario.

In addition, Mr. Glosband recently served as lead counsel to Arthur D. Little, Inc. in Chapter 11 proceedings in the District of Massachusetts, completed the successful reorganization of GC Companies (General Cinema) in its Chapter 11 proceedings in Delaware and was lead counsel to MHI Shipbuilding LLC (the Fore River Shipyard) in Chapter 11 proceedings pending in the District of Massachusetts. Professional Activities Mr. Glosband was elected to the initial class of the American College of Bankruptcy, where he currently serves as Vice President and a member of the Board of Directors. He is a conferee of the National Bankruptcy Conference, which advises Congress on bankruptcy legislation. Mr. Glosband is a former chairman of the Bankruptcy Law Committees for both the Boston and Massachusetts Bar Associations and is a member of the American Bar Association’s Business Bankruptcy Committee, where he was chairman of the International Bankruptcy Subcommittee. In addition, Mr. Glosband was official liaison of the Creditors Rights and Insolvency Committee of the International Bar Association to the United Nations Commission on International Trade Law project on Cross-Border Insolvency and its ongoing Insolvency Working Group. He served as one of the primary

draftsmen of the UNCITRAL Model Law on Cross-Border Insolvency. Mr. Glosband also served as one of two primary draftsmen (with Professor Jay Westbrook of the University of Texas Law School) for proposed Chapter 15 of the United States Bankruptcy Code, “Ancillary and Other Cross-Border Cases.” Mr. Glosband is listed in Chambers USA: America’s Leading Lawyers for Business, International Who’s Who of Insolvency & Restructuring Lawyers, Who’s Who in American Law and has been listed in every edition of The Best Lawyers in America. Publications/Presentations Mr. Glosband’s recent articles include “Chapter 15: US Insolvency Reform Explained” which appeared in the International Financial Law Review and “Pathology of Section 363 Sales: Not as Simple as They Look,” which appeared in The Journal of Private Equity, National Law Journal and Corporate Counsel Magazine. Mr. Glosband is the author of a number of articles, is a contributing author to the treatise Chapter 11 Theory and Practice and has lectured for the Ministry of Justice of the Kingdom of Thailand, banks, private equity funds, the Massachusetts Attorney General and various continuing legal education, bar and accounting groups, including the American and International Bar Associations, the American

College of Bankruptcy, the International Insolvency Institute, the American Bankruptcy Institute, the Practicing Law Institute, the Massachusetts Society of CPAs and Massachusetts Continuing Legal Education. He is the author of new chapters of Collier on Bankruptcy 15th Ed. and Collier Bankruptcy Practice Guide, dealing with Chapter 15. Mr. Glosband has served on the panel appointed by the First Circuit Court of Appeals to select bankruptcy judges and as a special assistant attorney general for the Commonwealth of Massachusetts. Bar and Court Admissions Mr. Glosband is a member of the Massachusetts and New York Bars and is admitted to practice before the U.S. District Courts in Massachusetts, Connecticut, Vermont and the Southern District of New York, the U.S. Court of Appeals for the First Circuit and the U.S. Supreme Court. Education J.D., Cornell University, 1969 B.A., University of Massachusetts, 1966