Vol 20 (2023) - Issue 3

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Modern Land: The Modification or Discharge of New York Governed Debt Can Be Accomplished in a Foreign Proceeding and a Chapter 15 Recognition

Synopsis
In Modern Land, Judge Martin Glenn considered the important question of whether a U.S. bankruptcy court may recognise and enforce a foreign proceeding that modifies or discharges New York law governed debt. The question was timely in light of the Rare Earth opinion, issued by a Hong Kong court shortly before the Modern Land decision, where the Hong Kong court opined, in dicta, that recognition under chapter 15 is limited in territorial effect and therefore does not discharge debt.
Judge Glenn disagreed ('with great respect') and clarified the long-standing proposition that a decision of a foreign court approving a scheme or plan that modifies or discharges New York law governed debt is enforceable, provided that the foreign court properly exercises jurisdiction over the foreign debtor in an insolvency proceeding, and the foreign court's procedures comport with broadly accepted due process principles.