In In re Global Cord Blood Corp., 2022 WL 17478530 (Bankr. S.D.N.Y. Dec. 5, 2022), the U.S. Bankruptcy Court for the Southern District of New York denied without prejudice a petition filed by the joint provisional liquidators for recognition of a "winding-up" proceeding commenced under Cayman Islands law.

Even before chapter 15 of the Bankruptcy Code was enacted in 2005 to govern cross-border bankruptcy proceedings, the enforceability of a foreign court order approving a restructuring plan that modified or discharged U.S. law-governed debt was well recognized under principles of international comity. The U.S. Bankruptcy Court for the Southern District of New York recently reaffirmed this concept in In re Modern Land (China) Co., Ltd., 641 B.R. 768 (Bankr. S.D.N.Y. 2022).

Courts disagree over whether a foreign bankruptcy case can be recognized under chapter 15 of the Bankruptcy Code if the foreign debtor does not reside or have assets or a place of business in the United States. In 2013, the U.S. Court of Appeals for the Second Circuit staked out its position on this issue in Drawbridge Special Opportunities Fund LP v. Barnet (In re Barnet), 737 F.3d 238 (2d Cir. 2013), ruling that the provision of the Bankruptcy Code requiring U.S. residency, assets, or a place of business applies in chapter 15 cases as well as cases filed under other chapters.

The foundation of chapter 15 of the Bankruptcy Code and similar legislation enacted by other countries to govern cross-border bankruptcy cases is "comity" and cooperation among U.S. and foreign courts. The importance of these concepts was recently illustrated by a ruling handed down by the U.S. Bankruptcy Court for the Southern District of Florida. In In re Varig Logistica S.A., 2021 WL 5045684 (Bankr. S.D. Fla. Oct.

Chapter 15 petitions seeking recognition in the United States of foreign bankruptcy proceedings have increased significantly during the more than 16 years since chapter 15 was enacted in 2005. Among the relief commonly sought in such cases is discovery concerning the debtor's assets or asset transfers involving U.S.-based entities. A nonprecedential ruling recently handed down by the U.S. Court of Appeals for the Eleventh Circuit has created a circuit split on the issue of whether discovery orders entered by a U.S. bankruptcy court in a chapter 15 case are immediately appealable.

Despite the absence of any explicit directive in the Bankruptcy Code, it is well understood that a debtor must file a chapter 11 petition in good faith. The bankruptcy court can dismiss a bad faith filing "for cause," which has commonly been found to exist in cases where the debtor seeks chapter 11 protection as a tactic to gain an advantage in pending litigation. A ruling recently handed down by the U.S.

U.S. courts have a long-standing tradition of recognizing or enforcing the laws and court rulings of other nations as an exercise of international "comity." It has been generally understood that recognition of a foreign bankruptcy proceeding under chapter 15 is a prerequisite to a U.S. court enforcing, under the doctrine of comity, an order or judgment entered in a foreign bankruptcy proceeding or a provision in foreign bankruptcy law applicable to a debtor in such a proceeding.

In cases under both chapter 15 of the Bankruptcy Code and its repealed predecessor, section 304, U.S. bankruptcy courts have routinely recognized and enforced orders of foreign bankruptcy and insolvency courts as a matter of international comity. However, U.S. bankruptcy courts sometimes disagree over the precise statutory authority for granting such relief, because the provisions of chapter 15 are not particularly clear on this point in all cases.

Recent Developments

For the benefit of our clients and friends investing in European distressed opportunities, our European Network is sharing some current global developments.