Apr 11, 2013
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New York Bankruptcy & Reorganization partner Douglas Bartner and New York Bankruptcy & Reorganization associate Robert Britton published an article, "The Timing Is Off: The Definitional Gap Between Plain Language and Legislative Intent in the Recognition of Foreign Proceedings," on April 11, 2013 on the Bloomberg Services and in the April 11, 2013 issue of Bloomberg BNA's Bankruptcy Law Reporter.
This article discusses a peculiar issue of statutory interpretation arising under chapter 15 of the United States Bankruptcy Code – what is the point in time that must be examined by a court presented with a request for recognition of a foreign proceeding in determining the situs of the foreign debtor’s center of main interests.
When interpreted literally, the language of the Bankruptcy Code requires the court to determine a debtor’s center of main interests as of the chapter 15 petition date, rather than the date of commencement of the foreign proceeding. This interpretation may allow for forum manipulation by debtors seeking to liquidate in countries that have favorable laws but bear little connection to their prepetition operations. Most courts that have recognized the potential for abuse have determined that they are unable to rectify it given the plain language of chapter 15, while one bankruptcy court split with the body of authority and found that the recognition analysis should focus on the date of commencement of the foreign proceeding.
After this article’s publication date, the Second Circuit issued its opinion in Fairfield Sentry, which held that a court engaged in a recognition analysis should focus on a foreign debtor’s chapter 15 petition date to determine its center of main interests, subject to a review of the period between commencement of the foreign proceeding and the chapter 15 petition date to ensure that the center of main interests was not improperly manipulated in any way. The authors expect to publish a follow-up article examining the Second Circuit's Fairfield Sentry opinion in an upcoming issue of Bloomberg BNA.