Sauce for the Goose? Dual Standard Emerging in Cross Border Insolvencies: Domicile not Enough to Recognize Foreign Proceeding

07/25/2012

Recent cases interpreting Chapter 15 of the United States Bankruptcy Code (11 U.S.C. § 101, et seq., as amended) (the “Bankruptcy Code”) suggest that there are different standards for recognizing whether domestic entities and foreign entities have filed insolvency proceedings in the proper venue. This double standard arises not in the actual venue of the Chapter 15 case, but in the refusal of some courts to recognize a foreign proceeding despite the fact that the foreign entity properly filed an insolvency proceeding in its country of registration – what would be domicile and proper for venue for a domestic entity. These courts require a further showing that the foreign entity has an establishment in its country of registration. Thus, some United States courts have refused to recognize a foreign proceeding notwithstanding that the foreign proceeding is filed in a proper venue under that jurisdiction’s insolvency laws under the very standards applied to domestic entities in US bankruptcy cases. Additionally, in instances involving corporate groups, what may be appropriate domicile for one entity may be wholly inappropriate for a related entity. While the Bankruptcy Code has a first-filed rule for bankruptcy jurisdiction for related entities, no such parallel exits for related entities incorporated or registered in different countries.

Presented at Haynes and Boone's Bankruptcy, Restructuring and Insolvency seminar entitled Going South: Issues in Cross-Border Insolvency and Restructuring between the U.S. and Mexico, July 25, 2012. Versions were also presented at Practicing Law Institute Bankruptcy & Reorganizations: Current Developments 2011, New York City, April 14-15, 2011, and elsewhere in 2009 and 2010. To read the full paper, click on the PDF linked below.

PDF - Sauce for the Goose - Elkin.pdf

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