Document Type

Article

Disciplines

International Law

Abstract

This paper will discuss whether Chapter 15 of the new Bankruptcy Reform Act of 2005 addresses the problems that arose under section 304 in the quest to bring universalism to foreign bankruptcy proceedings involving assets located in the United States. It will consider Chapter 15 in light of the reality that multinational corporate groups impact bankruptcy proceedings involving parent and subsidiary corporations in ways not previously found in traditional bankruptcy law. Multinational corporate groups cause a solution to cross-border insolvency even more complex to attain.

Part I of this paper will briefly discuss the concept of universalism as applied to cross-border insolvencies. As part of this discussion, the paper will give an overview into the concept of comity established by the United States Supreme Court. Part I will then discuss early attempts by U.S. courts to grant comity to foreign bankruptcy proceedings. Part II of this paper will discuss section 304 and the specific problems that arose under it. The first problem involved the application of the statutory criteria considered by a court when adjudicating a petition for ancillary jurisdiction. The second problem arose with the question of which types of proceedings in a foreign court amounted to "foreign proceedings" applicable for relief under section 304 the U.S. Bankruptcy Code. Part III will look in depth into the new Chapter 15. It will discuss in particular how the new sections of Chapter 15 clarify recognition of foreign proceedings and attempt to make distinctions between main and non-main foreign proceedings. It will also discuss the wide and varied steps that Chapter 15 takes to guarantee coordination and cooperation between U.S. and foreign bankruptcy proceedings, both in cases in which the U.S. bankruptcy courts handle a plenary proceeding along with another jurisdiction and those cases in which the United States is asked to grant ancillary jurisdiction to foreign proceedings. Finally, Part III will discuss ways that Chapter 15 has amended some of the problem litigation that arose under Section 304. Part IV will apply what has been learned from section 304 and Chapter 15 to the problem of insolvent multi-tiered corporations. After providing an overview of the debate between entity versus enterprise corporate structures, this Part will discuss substantive consolidation and the solutions suggested by the American Law Institute. It will then look into the path taken by judges when faced with the complex problems of insolvent multinational corporations prior to Chapter 15 and the possible guidance that the new Chapter 15 may give in the future to navigating these complex issues. In conclusion, it will consider possible other paths that commentators have suggested to guide the insolvency proceedings of multinational corporations.

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