Foreign Third-Party Releases May Be Enforced Under Principles of Comity

(Excerpt) Chapter 15 of title 11 of the United States Code (the “Bankruptcy Code”) provides a mechanism for a foreign debtor or a foreign representative to seek recognition of a foreign insolvency, liquidation, or bankruptcy proceeding and the enforcement of a foreign court’s orders issued in such proceedings in the United States. A foreign bankruptcy proceeding or plan may contain “provisions that release non-debtors, such as officers, directors, shareholders, or non-debtor affiliates, from claims and causes of action held by creditors or other non-debtor parties.” There is a split in the United States courts as to whether such a third-party release in a chapter 11 plan can be enforced. Several U.S. courts have recognized and enforced foreign reorganization plans that contain third-party releases in chapter 15 cases. This memorandum will examine the enforceability of third-party releases in the U.S. under chapter 15 in a threefold approach. Part I explores the availability of relief under § 1521 and § 1507. Part II analyzes the appropriateness of enforcing third-party releases under § 1507. Part III examines the consistency of third-party releases with U.S. public policy under § 1506