Vol 16 (2019) - Issue 6

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Chapter 15 Court Clarifies Procedures for Seeking to Vacate Recognition: In re Foreign Economic Industrial Bank Ltd. and In re Larisa Markus, 2019 WL 4943752 (Bankr. SDNY)

Synopsis

The US Bankruptcy Court of the Southern District of New York (the 'Bankruptcy Court') recently denied motions to vacate the chapter 15 recognition of two related cases involving foreign main proceedings in Russia, and in so doing, clarified the proper procedures and rules applicable to requests to vacate recognition. The Bankruptcy Court explained that although Rule 60(b) of the Federal Rules of Civil Procedure is generally applicable in US bankruptcy proceedings by virtue of Rule 9024 of the Federal Rules of Bankruptcy Procedure (the 'Bankruptcy Rules'), it does not apply to requests to vacate recognition orders in chapter 15, because section 1517(d) of title 11, United States Code (the 'Bankruptcy Code') sets forth the specific standard for modifying or terminating recognition orders. Under that standard, recognition may be modified or terminated if the grounds for granting recognition are shown to have been lacking, or to no longer exist. Because the movant failed to satisfy the criteria of section 1517(d), the Bankruptcy Court declined to vacate its recognition orders. This ruling stands as a reminder to practitioners that although chapter 15 practice has some similarities with chapter 11, chapter 15 may be governed by special rules that implicate critical procedural distinctions.