Vol 3 (2006) - Issue 4

Article preview

Chapter 15 of the US Bankruptcy Code: Better than its Reputation?

On 17 October 2005, the new Chapter 15 of the US Bankruptcy Code (‘Chapter 15’) came into effect by virtue of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. At the same time, § 304 of the US Bankruptcy Code (‘§ 304’), the then current US cornerstone
of the international cooperation in insolvency matters was repealed. This development attracted, and continues to attract, substantial interest for two reasons. First, Chapter 15 follows the UNCITRAL Model Law on Cross-Border Insolvency (the ‘Model Law’) and thereby adds a jurisdiction of eminent importance in terms of juridical developments to the to-date rather eclectic circle of countries having adopted the Model Law: British Virgin Islands, Eritrea, Japan, Mexico, Montenegro, Poland,Romania and South Africa. Given that also Great Britain1 has, with effect from 4 April 2006, enacted a statutory instrument to implement to the Model Law2 – and others consider following3 – developments in the United States are being watched very closely: Not least does § 1508 of the US Bankruptcy Code require that ‘[i]n interpreting this chapter, the court shall consider its international origin, and the need to promote an application of this chapter that is consistent with the application of similar statutes adopted by foreign jurisdictions.’
Similar provisions can be found in the legislation of other jurisdictions having incorporated the Model Law. Secondly, the introduction of Chapter 15 raised concerns that an era characterised by liberal legislation and a permissive stance of the US courts towards international cooperation in insolvency matters has come to an end. Readers will have noted the article by Bruce Bell and Brandon Ziegler in issue 4 of the 2005 volume of this journal, arguing that the future of English company voluntary arrangements and schemes of arrangements in the US courts would now be in doubt.4 On 7 December 2005, for the first time, an order made in the case of In re La Mutuelle du Mans IARD United Kingdom Branch MMA Account (also known as In re Lloyd) granted a foreign proceeding recognition under Chapter 15. This case throws an interesting light on the concerns held by the international community about the coming into effect of Chapter 15.5
The MMA Account
The UK branch of La Mutuelle du Mans Assurances IARD (‘MMA’) had written marine insurance policies until 1994 and had been in run-off since then. It was intended to terminate the run-off earlier than would