1. Cross-Border Proceedings
Developments Under Chapter 15 of the U.S. Bankruptcy Code
Daniel Rubens
May 30, 2019

2. What Is Chapter 15?
Enacted in 2005, Chapter 15 of the U.S. Bankruptcy Code incorporates the UNCITRAL Model Law on Insolvency
Presently, 46 jurisdictions have enacted some version of the Model Law
Chapter 15 provides for cooperation among courts in different jurisdictions to coordinate administration of a debtor with assets in multiple countries
It allows foreign estate representatives to access U.S. courts

3. Key Chapter 15 Concepts Foreign representatives
Center of main interests (COMI)
Foreign “main” vs. “non-main” proceeding
Recognition
Protects U.S. assets from creditor actions
Provides access to U.S. courts
Requests for additional relief

4. Chapter 15’s Purposes
Cooperation among foreign courts in cross-border insolvency cases
Greater legal certainty for trade and investment
Fair and efficient administration of cross-border insolvencies that protects interests of relevant stakeholders
Protection and maximization of value of debtor’s assets
Facilitation of the rescue of financially troubled businesses
Modified universalism

5. Ascertaining COMI COMI not defined in Bankruptcy Code
Presumption that COMI lies where debtor has its registered office or conducts its regular business
Presumption may be overcome in the case of a “letterbox” company
COMI factors include the location of:
the debtor’s headquarters; those who actually manage the debtor; the debtor’s primary assets; the majority of affected creditors; and/or the jurisdiction whose law would apply to most disputes.

6. COMI: Relevant Time
Relevant time period for determining COMI: “[t]he time of the Chapter 15 petition, subject to an inquiry into whether the process has been manipulated.” In re Fairfield Sentry Ltd., 714 F.3d 127 (2d Cir. 2013)
Compare EU Regulation: COMI should “correspond to the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties.” Council Regulation (EC) No 1346/2000 of 29 May 2000.

7. COMI Shifts COMI can shift
In re Ocean Rig UDW Inc., 570 B.R (Bankr. S.D.N.Y. 2017)
“The Court finds that the directors of the Foreign Debtors properly concluded that changing their COMI to the Cayman Islands … offered them the best opportunity for successful restructuring and survival under difficult financial conditions.”

8. Public Policy
Public policy exception generally read narrowly by U.S. courts
Mere conflict between U.S. and foreign insolvency law is insufficient.
Third-party releases under UK law (In re Avanti Commc’ns Grp. Plc (Bankr. S.D.N.Y. 2018))
Sealed court records (Fairfield Sentry)
Ex parte orders re substantive consolidation (In re O.A.S. S.A. (Bankr. S.D.N.Y. 2015))
Far-reaching veil-piercing doctrine (In re Petroforte Brasilero de Petroleo Ltda. (Bankr. S.D. Fla. 2015))
Third-party releases under Mexican law (In re Vitro S.A.B. de C.V. (5th Cir. 2012))
Interception of (In re Toft (Bankr. S.D.N.Y. 2011))
Detrimental effect on technological innovation (In re Quimoda A.G. (Bankr. E.D. Va. 2011))
Violation of U.S. automatic stay (In re Gold & Honey, Ltd. (Bankr. E.D.N.Y. 2011))

9. The Gibbs Rule
A debt governed by English law cannot be discharged or compromised by a foreign insolvency proceeding (Antony Gibbs & Sons v. La Société Industrielle et Commerciale de Métaux (1890) 25 QBD 399)
Lord Esher: “Why should the plaintiffs be bound by the law of a country to which they do not belong, and by which they have not contracted to be bound?”

10. The Gibbs Rule In England
The Gibbs rule is in tension with modified universalism, but remains good law in England
Bakhshiyeva v Sberbank of Russia [2018] EWHC 59 (Ch), aff’d, [2018] EWCA Civ. 2802
Is this a contractual or insolvency-law question?

11. The Gibbs Rule In U.S. Courts
“The true spirit of international comity requires that [foreign insolvency arrangements], legalized at home, should be recognized in other countries.” – Canada Southern Railway Co. v. Gebhard, U.S. 527, 548 (1883)
In re Agrokor d.d., 591 B.R. 163 (Bankr. S.D.N.Y. 2018) (recognizing Croatian settlement agreement discharging English-law debt)