Enforcement of Non-Debtor Releases in International Insolvency Proceedings

Reno F.R. Fernandez III and Uzzi O. Raanan

Reno F.R. Fernandez III is a partner with Macdonald Fernandez LLP, a bankruptcy, turnaround and insolvency litigation firm with offices in San Francisco and Modesto, California. Mr. Fernandez is also a member of the Insolvency Law Committee of the Business Law Section of the State Bar of California.

Uzzi O. Raanan is a partner at Danning, Gill, Diamond & Kollitz, LLP, in Los Angeles, California, and specializes in insolvency, bankruptcy, receivership, and commercial law. He is Co-Chair of the Insolvency Committee of the Business Law Section of the State Bar of California.

In 2005, Congress enacted Chapter 15 of the Bankruptcy Code for the purpose of providing "effective mechanisms for dealing with cases of cross-border insolvency" and with the objectives, among other things, of "fair and efficient administration of cross-border insolvencies that protects the interests of all creditors, and other interested entities, including the debtor" and "facilitation of the rescue of financially troubled businesses, thereby protecting investment and preserving employment."¹ One of the ways Chapter 15 accomplishes these goals is by allowing bankruptcy courts in the United States to recognize and enforce foreign plans of reorganization. Almost ten years after the enactment of Chapter 15, enforcement of foreign plans of reorganization in the federal court system is not uniform. Results appear to depend upon the federal circuit in which the Chapter 15 case is filed, the underlying facts, and which foreign court gave rise to the plan in question. Two recent cases represent conflicting approaches: In re Vitro, S.A.B. de C.V.,² applied a more protective approach, while In re Sino-Forest Corp.,³ applied a more traditional, permissive approach. Whether these cases merely reflect their disparate facts, or radically different legal approaches, is an open question.