1. Cape Town Convention Academic Project – 8th Conference 10th and 11th September 2019
Oceanair Insolvency: US Ch 15 – Alternative A in a Secondary Insolvency Proceeding
William B. Piels Partner, Holland & Knight

2. Preview
“Simple” Analysis: How should the Court in a Secondary Insolvency Proceeding Interpret the Waiting Period (Stay) of Alternative A
Oceanair Complications
What the US Court Thought and Decided
Lessons Learned

3. “Simple” Analysis – Main Obligations
Two Main CTC Obligations for a Court in a Secondary Insolvency Proceeding with respect to Alternative A:
Cooperation: ‘…cooperate to the maximum extent possible with foreign courts and foreign insolvency administrators in carrying out the provisions of Article XI [Alternative A]’. Prot. Art XI(2), an Opt-In provision adopted by the US.
Enforcement: ‘The courts of Contracting States shall apply Article XI [Alternative A] in conformity with the declaration made by the Contracting State which is the primary insolvency jurisdiction.’ Prot. Art. XXX(4), a mandatory provision applicable in the US and all Contracting States.

4. “Simple” Analysis – Interpreting Brazil’s Declaration
Alternative A sets a “Clear” and “Hard” Waiting Period (or Stay)
The Official Commentary states: ‘Alternative A requires strict adherence to the timetable and the court is precluded from granting any extension of time for payment or other performance….’ OC
The language of Alternative A, Article XI(2) is clear and unqualified: “the insolvency administrator or debtor, as applicable, shall give possession of the aircraft object to the creditor no later than …(a) the end of the waiting period.
Interpreting Brazil’s Declaration Does Not Require Local Law Analysis – it is Autonomous Law, Intended to be Uniform

5. “Simple” Analysis – Interpreting Brazil’s Declaration
The Brazilian declaration states: ‘The Federative Republic of Brazil declares that it will apply the entirety of Article XI, Alternative A, to all insolvency proceedings, and that the waiting period for the purposes of Article XI, paragraph 3, of this Alternative shall be thirty (30) calendar days.’ [UNIDROIT website]
Brazil Selected the Clear/Hard Alternative A Deadline over other options:
No declaration
Alternative B

6. “Simple” Analysis – Conclusions
The US Court Is Obligated by the Convention and Protocol to Apply Brazil’s Alternative A Waiting Period in Accordance with Brazil’s Declaration; Brazil’s 30 Day Waiting Period Declaration is clear and presents no issues of interpretation
The foregoing treaty obligation supersedes any conflicting rule under Chapter 15. Section 1503 of the Bankruptcy Code States: ‘To the extent that this chapter conflicts with an obligation of the United States arising out of any treaty or other form of agreement to which it is a party with one or more other countries, the requirements of the treaty or agreement prevail.’

7. Oceanair Complications
At the commencement of the Chapter 15 Case, before the adverse ruling in Brazil, no creditor asked the US court to make a ruling under Protocol XXX(4), because none of them had a genuine economic interest in limiting the Waiting Period (Stay) in the US
After commencement of the Chapter 15 case the Brazilian Court extended the Waiting Period, to the surprise of all creditors
In response to the improper Brazilian court ruling, creditors sought a ruling under Protocol XXX(4) from the US Court for strategic purposes

8. What the US Court thought and decided
There is no court opinion but the Court’s thinking is readily inferred from its ruling, the arguments made in the Foreign Representative’s brief and the Court’s statements and questions in the hearing
Summarizing the Court’s rationale:
The role of a Chapter 15 court is to support the rulings of the primary insolvency court
Brazil’s waiting period is a matter of Brazilian law and should be interpreted by a Brazilian court
Because Brazil made a declaration under Article 54(2) of the Convention to require court approval for exercise of Convention remedies, creditors in the US may not proceed against US situated assets without first obtaining court approval in Brazil

9. What the US Court thought and decided – Court Role/Brazilian Law
Excerpts from the hearing transcript make the Court’s perspective clear:
[Describing its role] “…my understanding is the role of the court here is for the court to apply this Convention and Protocol as has been interpreted and applied by Brazil.”
[Responding to the argument that Article XXX(4) obligates the court to apply the Brazilian declaration as written, and not give deference to any rulings by the Brazilian Bankruptcy Court] “am I sitting in an appellate posture then, because I'd be saying to the Brazilian court, essentially you got it wrong, because […] my ruling by implication would mean there's no stay in Brazil either, right?”
[Expressing concerns about the implications of not giving deference to the Brazilian Bankruptcy Court] So if I rule in your favor, then someone will take my ruling and bring it down to Brazil and say the U.S. judge disagrees and says that the Cape Town Convention Aircraft Protocol and the application of Article XI of the Aircraft Protocol and according to the declaration made by Brazil and interpreted by the U.S. court, means there is no stay.

10. What the US Court thought and decided – Article 54(2)
Article 54(2): ‘A Contracting State shall, at the time of ratification, acceptance, approval of, or accession to the Protocol, declare whether or not any remedy available to the creditor under any provision of this Convention which is not there expressed to require application to the court may be exercised only with leave of the court.’
Brazilian Article 54(2) Declaration: ‘The Federative Republic of Brazil declares that all remedies available to the creditor under any provision of this Convention and the Protocol may be exercised only with the authorization of the Judiciary, with the exception of the remedy provided for in Article XIII of the Protocol, which may be exercised without judicial authorization.’ [UNIDROIT website]

11. What the US Court thought and decided – Article 54(2)
The US Court believed (as was argued in the brief submitted by counsel to the Foreign Representative) that Brazil’s Article 54(2) Declaration meant that creditors could not exercise any remedy anywhere without the approval of a Brazilian court.
The US Court’s belief was incorrect for several reasons:
The declaration is not applicable with respect to Alternative A. The Official Commentary States: ‘In the case of insolvency proceedings in a Contracting State which has made a declaration under Article 54(2) requiring leave of the court for the exercise of remedies and has then gone on to opt for Alternative A of Article XI of the Aircraft Protocol, the Contracting State must be taken to have intended to exclude the creditors remedies under Alterative A from the scope of its declaration under Article 54(2).’ OC

12. What the US Court thought and decided – Article 54(2)
The declaration is limited to exercise of Convention remedies, and has no effect on national law or contract remedies. OC 2.108/ CTC Arts. 12 and 13(4)
The declaration should be read as limited to the exercise of Convention remedies within the Contracting State. Brazil’s declaration does not address the exercise of a Convention remedy in the US. NB: could the text of OC and OC be read otherwise?

13. Lessons Learned
Convincing a Court in a Secondary Insolvency Proceeding to make a proper ruling under Protocol Article XXX(4) will be challenging
The ruling runs counter to the grain of Chapter 15 thinking
Courts have no experience with the Convention
Courts have no experience applying the Section 1503 exception
The US Judge in Oceanair was a very quick study, and still came to the wrong conclusion
Chapter 15 Creditors (from day 1) should assert that the stay, as it relates to Cape Town objects, must be limited to the applicable waiting period declaration in the primary jurisdiction
Seek to obtain a ruling before any contrary ruling is on record in the primary jurisdiction
Lay the groundwork for briefing/educating the Court on the terms of the Convention