Creative Uses of Chapter 15 of the US Bankruptcy Code to Smooth Cross-Border Restructurings
Look Chan Ho
Freshfields Bruckhaus Deringer LLP
August 31, 2009
Journal of International Banking Law and Regulation, Vol. 485, 2009
The decisions in Castle Holdco and Grand Prix show some creative uses of Chapter 15 of the US Bankruptcy Code to facilitate cross-border restructurings, from which one may derive the following propositions.
First, an English scheme of arrangement prior to its sanction by the English court is entitled to recognition under Chapter 15.
Second, a BVI plan of arrangement prior to its approval by the BVI court is also entitled to recognition under Chapter 15.
Third, when granting a discretionary relief under section 1521 of the Bankruptcy Code, the US bankruptcy court may cloak the relief with extra-territorial effect.
Fourth, when applying Chapter 15, the US bankruptcy court would be minded to serve the cause of the Model Law with a comity-flavoured mindset.
However, the Grand Prix decision appears to have suffered from an overly keen judicial desire to facilitate a private litigation settlement, at the expense of eloquent reasoning. In Bear Stearns, the court emphasised that the Chapter 15 recognition process is not a rubber stamp exercise even when no objection is filed. In Grand Prix, the court specifically approved the Bear Stearns approach, but its actual decision seems ironically to reflect the rubber stamping exercise proscribed in Bear Stearns. If comparable circumstances arise under UK Cross-Border Insolvency Regulations 2006, it is suggested that the English court should treat this unsettling aspect the Grand Prix decision with great caution.
Number of Pages in PDF File: 10
Keywords: Cross-Border Insolvency, English scheme of arrangement, British Virgin Islands plan of arrangement; cross-border enforcement; UNCITRAL Model Law on Cross-Border Insolvency
JEL Classification: K10,K12,K19,K20,K22,K29,K30,K33,K39,K40,K41,K49
Date posted: August 31, 2009