The long arm of the law: Avoidance actions without borders by David Conaway

A June 2018 Bankruptcy Court decision in the Southern District of New York (SDNY) held that foreign companies with no presence in the US were subject to default judgements.

Foreign-based companies doing business in the US, and foreign affiliates of US companies, are routinely counter-parties to a variety of commercial contracts in the US. Given the vicissitudes of financial and economic conditions, it is inevitable that such companies will occasionally encounter the insolvency of their counter-party. The insolvency could be pursuant to a Chapter 11 filing in the US. Increasingly, insolvencies are pursuant to foreign insolvency proceedings. Foreign insolvency proceedings may precipitate the filing of a Chapter 15 (of the US Bankruptcy Code), which is an ancillary procedure able to assist the foreign insolvency estate regarding U.S. assets, claims and related issues.