Journal of Corporate Renewal

May

2014

Nava Hazan is a partner in the Squire Sanders (US)

LLP Restructuring & Insolvency practice group and is resident in the New York office. Her practice involves the representation of foreign liquidators, administrators, and debtors in cross border proceedings, both in and out of court, including the filing of Chapter 15 cases. She also represents debtors, secured and unsecured creditors, and creditors’ committees in Chapter 11 cases. She is admitted to practice both in New York and Paris.

The author thanks Derek Judd, an associate with Squire Sanders for his assistance in writing this article.

code sections to provide appropriate relief. In In re AJW Offshore Ltd., 488

B.R. 551 (Bankr. E.D.N. Y. 2013). The Bankruptcy Court found it had authority in a Chapter 15 case to order the turnover of debtor property under Section 542 of the Bankruptcy Code. The court required that the turnover order apply only to assets located in the U.S. and include appropriate conditions to protect creditors and other parties in interest.

Application of other code sections may be mandatory. For example, in Jaffe v. Samsung Electronics Co. Ltd., 737 F.3d 14 (4th Cir. 2013), the

4th Circuit upheld the Bankruptcy Court’s mandatory application of the protections in Section 365(n) of the Bankruptcy Code to licensees of U.S. intellectual property as part of the protection offered under Chapter 15.

The enforceability in Chapter 15 of certain third-party release provisions in a foreign plan of reorganization, which remains an open question in most jurisdictions, was at issue in In re Sino-Forest Corp., 501 B.R. 655 (Bankr. S.D.N. Y.

2013). In that case, certain third-party
releases of the debtor’s accountants had
been approved as part of the debtor's
Canadian insolvency proceeding.

The Bankruptcy Court determined that through a Chapter 15 case, such releases were enforceable in the U.S.

The court distinguished the case of

In re Vitro S.A.B. de CV, 701 F.3d 1031

(5th Cir. 2012), where certain third-party releases approved in Mexico were not honored in the U.S. because the result of such releases, among other things, would have resulted in violation of the absolute priority rule.

Extensive Discretion

From a foreign representative's point of
view, Chapter 15 provides a very flexible
and efficient way of obtaining relief
from the U.S. Bankruptcy Courts to
preserve the integrity of a debtor’ estate
that spans borders. Once a Bankruptcy
Court recognizes a foreign proceeding
as a main proceeding, or even a non-
main proceeding, the bankruptcy
judge has extensive discretion under
Chapter 15 to provide appropriate relief
and assist the foreign representative in
managing a debtor’s estate, subject to
the proviso that there is no violation of
U.S. laws or the rights of U.S. citizens. J