4. Foreign Representative

A "foreign representative" is not defined in 11 U.S.C. § 1502, but it is defined in 11 U.S.C. § 101(24). A "foreign representative" is:

a person or body, including a person or body appointed on an interim basis, authorized in a foreign proceeding to administer the reorganization or the liquidation of the debtor's assets or affairs or to act as a representative of such foreign proceeding*(60).

Put another way, the foreign representative is the designated agent authorized to manage the foreign proceeding, and to represent the debtor in United States courts and other foreign courts.

After commencing a foreign proceeding, a foreign representative may petition a United States court to recognize the proceeding under Chapter 15. "A federal court's recognition of representatives appointed in the course of a foreign bankruptcy or liquidation proceeding is a matter of comity - it is an acknowledgement of the validity of the foreign proceeding"*(61). Once recognized, a foreign representative can sue or be sued in the United States and can apply directly to the United States court for relief, and Chapter 15 entitles a foreign representative to the comity and cooperation of all United States courts*(62).

5. Foreign Main Proceeding

A "foreign main proceeding" is defined as a "foreign proceeding pending in the country where the debtor has the center of its main interests"*(63). Once a foreign main proceeding is recognized, the automatic stay under 11 U.S.C. § 362 applies to multinational bankruptcies "with respect to the debtor and the property of the debtor that is within the territorial jurisdiction of the United States"*(64). Notably, however, an estate is not created, which makes Chapter 15 unique from other U.S. bankruptcy chapters*(65). Section 541 of title 11 is not among the Bankruptcy Code sections that becomes effective upon recognition under 11 U.S.C. § 1520*(66). Put a different way, 11 U.S.C. § 541(a) recognizes "property of the estate" as protected, whereas 11 U.S.C. § 1520 recognizes "property of the debtor" as protected*(67). Courts have, however, found it an unremarkable proposition that property could be property of a bankruptcy estate and not property of the debtor, or vice versa*(68).

The definition of "foreign main proceeding" has also caused angst amongst United States Courts because the key term "center of main interests" is not defined by the Bankruptcy Code*(69).

6. Center of Main Interests

There is no definition in the Bankruptcy Code of a debtor's center of main interests. As predicted in the original article, interpreting what constitutes a debtor's "center of main interests" ("COMI") has been frequently litigation in Chapter 15 cases. Isolating a debtor's COMI is key to the cooperation and facilitation goals of Chapter 15. As noted previously, after recognition under 11 U.S.C. § 1517, a foreign representative may commence a voluntary bankruptcy case under sections 301 or 302 of the Bankruptcy Code, "if the foreign proceeding is a foreign main proceeding"*(70). Moreover, if the foreign proceeding is recognized as a foreign main proceeding, 11 U.S.C. § 1520 takes effect, and applies the automatic stay of 11 U.S.C. § 362 "with respect to the debtor and the property of the debtor that is within the territorial jurisdiction of the United States"*(71).

Several courts have modeled the test for a debtor's COMI on a "principal place of business" analysis*(72). Other courts have fixed the COMI analysis on the "nerve center" test described in the Hertz v. Friend Supreme Court case*(73). Other courts use a factored list of considerations, such as:

(1) The location of the debtor's headquarters;

(2) The location of those who actually manage the debtor (which may be the headquarters of a holding company);

(3) The location of the debtor's primary assets;

(4) The location of the majority of the debtor's creditors or of a majority of the creditors who would be affected by the case;

(5) The jurisdiction whose law would apply to most disputes; and

(6) The expectations of third parties with regard to the location of a debtor's COMI*(74).

These factors are not meant to be exclusive or comprehensive, and not all must be met in each case*(75). Section 1516 of Title 11, "Presumptions concerning recognition," provides in subsection (c) that "[i]n the absence of evidence to the contrary, the debtor's registered office, or habitual residence in the case of an individual, is presumed to be the center of the debtor's main interests"*(76). Because of this, there is a presumption that the COMI is at the debtor's registered office*(77). Under the introductory clause to 11 U.S.C. § 1516(c), the presumption may be rebutted*(78). Legislative history demonstrates that Congress intended that "[t]he ultimate burden as to each element [of recognition] is on the foreign representative, although the court is entitled to shift the burden to the extent indicated in section 1516"*(79). The legislative history also indicates that the statutory presumption may warrant less consideration with a serious dispute: "[the] presumption that the place of registered office is also the center of the debtor's main interest is included for speed and convenience of proof where there is no serious controversy"*(80). Rebutting this presumption is where COMI factors should come into play*(81).

There is debate as to which date should be used to fix the COMI. Generally, courts have considered two possible dates: (1) the chapter 15 petition filing, or (2) the commencement of the foreign proceeding.

Courts utilize statutory interpretation methods to assess the center of main interests*(82). In In re Ran, the Fifth Circuit looked first at 11 U.S.C. § 1502(4), which defines foreign main proceeding as "a foreign proceeding pending in the country where the debtor has the center of its main interests"*(83). The court observed: "While § 1502 does not expressly discuss a temporal framework for determining COMI, the grammatical context in which it is written provides guidance to the court. Every operative verb is written in the present tense. Congress's choice to use the present tense requires courts to view the COMI determination in the present, i.e., when the petition for recognition was filed"*(84). The Fifth Circuit concluded, relying on Betacorp, that any other date might create a serious chance of conflict with the decision of other courts: "In fact, a meandering and never-ending inquiry into a debtor's past interests could lead to a denial of recognition in a country where a debtor's interests are truly centered, merely because he conducted past activities in a country at some point before the petition was recognized or sought"*(85).

In re Millennium Global rejects this logic. The bankruptcy court for the Southern District of New York flatly stated that the "use of the chapter 15 petition date is not required by the 'plain words' of the statute and produces a result wholly inconsistent therewith. ... In a chapter 15 filing, the U.S. case is ancillary or secondary to the foreign proceeding"*(86). For several reasons, the bankruptcy court held that "[t]he substantive date for the determination of the COMI issue is at the date of the opening of the foreign proceeding for which recognition is sought"*(87). The Millennium court relied on a statutory interpretation and legislative history to reach this conclusion. The Court rejected the argument that the Bankruptcy Code points to the Chapter 15 petition date instead of the commencement of the foreign proceeding date; instead, Chapter 15 "is a matter of happenstance"*(88), and the COMI should be judged on the date the foreign insolvency proceeding is filed.

More recently, the same bankruptcy court determined that a foreign administrator could change a debtor's COMI. Although the debtor in SunTech incorporated in the Cayman Islands, its COMI at the commencement of the Chapter 15 case was "not obvious" because it conducted no activities in the Cayman Islands*(89). Its executive offices and operating assets were in China, but the foreign administrators centralized the administration of the debtor's affairs in the Cayman Islands. The court thus found debtor's COMI to be in the Cayman Islands, and allowed its court-appointed foreign administrators to develop and propose a compromise with the debtor's creditors, file a Chapter 15 petition or otherwise seek recognition of a foreign proceeding, and control debtor's property legal proceedings, among other things*(90). The court disagreed that the administrators changed the COMI in bad faith; despite opening a bank account in the Cayman Islands solely for the payment of professional fees, the court believed this and other actions were legitimate and rational to serve debtor's restructuring goals*(91). The foreign administrators' actions followed their role in the liquidation and the order appointing them to serve as foreign administrators*(92). SunTech is one example of a multi-national business successfully shifting its COMI to more advantageous jurisdiction.

In Fairfield Sentry, the Second Circuit measured the debtor's COMI when the U.S. chapter 15 petition was filed*(93). The effect of this holding "is that in instances in which a foreign representative has engaged in significant pre-U.S. filing work to operate (or even liquidate) the foreign debtor in the jurisdiction where the foreign insolvency proceeding was commenced (even if in a letterbox jurisdiction), the COMI can be found to have shifted from the foreign debtor's original principal place of business to the new locale"*(94). Thus, when a foreign representative relocates a debtor's primary business activities to his or her location, the COMI may "become lodged with the foreign representative"*(95). Debtors therefore have a means for U.S. recognition of letterbox jurisdiction insolvency proceedings, or proceedings in a jurisdiction where the debtor's registered office is situated although it conducts no business in that place, if estate fiduciaries in those jurisdictions do enough work*(96). But determining a debtor's COMI is also subject "to an inquiry as to whether the process has been manipulated"*(97).

Finally, bankruptcy courts also consider the debtor's "nerve center," or where the debtor's activities are directed and controlled, to determine a debtor's COMI*(98). Even financing subsidiaries formed in a separate country due to tax benefits, whose sole purpose was issuing debt and lending the proceeds, can have their COMI in the same place as their parent entity under the "nerve center" test*(99).