Vol 8 (2011) - Issue 2

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You Say You’re a Foreign Representative? Prove it

Chapter 15 of the United States Bankruptcy Code became effective five years ago and oh how much water from foreign rivers has passed under the bridges of the US bankruptcy courts since that time. To date, cases have come to the U.S. for recognition from Australia, Japan, Europe, Mexico, and beyond. Chapter 15, based on the Model Law on Cross Border Insolvency (the 'Model Law') drafted by the United Nations Commission on International Trade Law ('UNCITRAL'), permits a 'foreign representative' to seek recognition of a 'foreign proceeding' by filing a verified petition with the U.S. bankruptcy court. During the five years under Chapter 15, practitioners have struggled with the meaning of the new law and how to present disputes under Chapter 15 to the trial court. In Delaware – one of the venues of choice for filing Chapter 15 cases – the bankruptcy courts have recognised many of the petitions presented on a paper record, such as declarations and copies of the foreign orders. Many of these hearings only last five or ten minutes, with final orders entered without a hearing based on the certification of counsel. In Delaware, there have been a few disputed issues under Chapter 15 and only one trial on the meaning of 'foreign proceeding'. To date in the US, there are no published decisions where a creditor has challenged whether a petitioner is a proper 'foreign representative' in a Chapter 15. Many view the issue of proving who the foreign representative is as 'relatively easy to address'. This article will examine a few situations in which this dispute could arise and how the bankruptcy courts in the U.S. might approach that dispute.



‘Foreign representative’: a brief look back

Chapter 15 was adopted to incorporate the Modal Law so as to provide effective mechanisms for dealing with cases of cross border insolvencies, and Congress has directed the bankruptcy courts to interpret Chapter 15 in consideration of its international origin. As such, it is useful to examine the work of the UNCITRAL Working Group on Insolvency that drafted the model law.6 The UNCITRAL Working Group first referred to the definition of ‘foreign representative’ in the Model International Insolvency Cooperation Act prepared by Committee J of the Section on Business Law of the International Bar Association. Starting from this definition, the Working Group considered the following preliminary draft of the definition of 'foreign representative':

'“Foreign Representative means a duly appointed trustee, administrator or other representative of an estate in a foreign proceeding who has been [specifically] authorized by statue or other order of court (administrative body) to act in connection with a foreign proceeding involving the debtor or its assets'.