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In cases under both chapter 15 of the Bankruptcy Code and its repealed predecessor, section 304, U.S. bankruptcy courts have routinely recognized and enforced orders of foreign bankruptcy and insolvency courts as a matter of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.

The EMEA Determinations Committee's recent bankruptcy determination involving Selecta CDS provides additional insight on the types of chapter 15 filings that are likely to trigger Credit Events.

In Short

The Situation: On August 11, 2020, a Credit Derivatives Determinations Committee for EMEA ("DC") unanimously determined that the Chapter 15 filing by British retailer Matalan triggered a Bankruptcy Credit Event under standard credit default swaps ("CDS").

The Result: The DC's decision diverged from its only prior decision (involving Thomas Cook) on whether a Chapter 15 petition constituted a Bankruptcy Credit Event.

In Short

The Situation: Should liquidators be removed under section 90-15 of the Insolvency Practice Schedule (Corporations) in circumstances where they engaged in preappointment discussions with a secured creditor, allegedly failed to investigate the company's affairs promptly, and retained the company's preappointment solicitors?

In Short

The Situation: A liquidator can reject a "double proof" for what is, in substance, the same debt as another accepted proof of debt.

The Question: When are liquidators justified in rejecting what could arguably be a double proof?

The Federal Court of Australia rules that receivers appointed to a company in liquidation are entitled to pay employee entitlements and fees.

In Short

The Situation: Section 553C of the Corporations Act 2001 (WA) ("Act")provides that if a creditor and a company in liquidation have mutual dealings, the creditor must offset any sum the creditor owes to the company in liquidation against debt owed by the company.

The Question: Does the existence of a third party security interest over circulating assets (floating charge) which are intended to be set off against other debts prevent the dealings from being "mutual"?

In Short

The Situation: The statutory moratorium period for voluntary administrators to restructure an insolvent company often is too short to find a solution. Administrators frequently utilise "holding" deeds of company arrangement ("DOCAs") to extend the moratorium and "buy" time to investigate potential restructuring opportunities. A creditor challenged this practice by arguing that holding DOCAs are invalid.

The Question: Are holding DOCAs valid under the Corporations Act 2001(Cth)?

In Short

The Background: The administrators of an Australian auction house and gallery business applied to the Federal Court of Australia for directions to recover in excess of $1 million in fees and costs incurred with respect to performing a stocktake of the auction house's inventory and returning consigned goods to owners.

The Issue: Did an equitable lien exist over the consigned goods in favour of the administrators for their fees and costs and, if so, could the administrators recover those fees and costs?