Whether Foreign Avoidance Claims May Be Asserted Under Chapter 15

(Excerpt) Chapter 15 was added to title 11 of the Bankruptcy Code in 2005, replacing former Section 304 as the Bankruptcy Code’s operative provision for dealing with cross-border insolvencies. Chapter 15 may be utilized by a foreign representative seeking assistance in U.S. courts in connection with a foreign proceeding. A foreign representative commences a chapter 15 case by filing a petition for recognition of the foreign proceeding in which the representative has been appointed. After obtaining recognition, a foreign representative has the right to sue and be sued in the United States and may apply directly to a U.S. court for appropriate relief. A foreign representative may be entitled to mandatory relief under section 1520 and may also implore the court for discretionary relief under section 1521. Importantly for the purposes of this article, the latter provision allows foreign representatives to pursue a wide range of litigation in the U.S., stating, “the court may, at the request of the foreign representative, grant any appropriate relief.” Foreign representatives may assert foreign avoidance claims under section 1521 due to the fact that courts were empowered to grant such relief under chapter 15’s predecessor, former section 304. Additionally, a foreign representative may also be able to assert a foreign avoidance claim under section 1521. However, this would likely be a rare situation for cases where relief is not available under section 1521 or under other applicable U.S. law. This article discusses chapter 15 law in the context of a 2015 decision by the Bankruptcy Court for the Southern District of New York, which held that foreign representatives may use chapter 15 to assert foreign avoidance claims under U.K. law. To that effect, Part I will discuss how a foreign representative may use chapter 15 to pursue claims in U.S. courts. Part II will discuss how such a representative might pursue a foreign avoidance claim under the discretionary relief provision of section 1521. Part III will examine the as yet undeveloped potential for foreign avoidance claims to proceed under the additional assistance provision of section 1507. Part IV will then examine the result reached in 2015 by the court in the case of In re Hellas