IV. Implementation

1. The Reach of Chapter 15: Facilitating Inbound and Outbound Foreign Proceedings

Chapter 15 facilitates and streamlines what was once a cumbersome process by creating a single "gateway" for a foreign representative of a foreign proceeding to enter into the United States legal system - and all courts in the United States. Chapter 15 creates a blueprint for efficient and prompt "inbound" access to the U.S. judicial system. Chapter 15 also controls the "outbound" process. Chapter 15 governs the authority of a United States bankruptcy court and representatives in the process (i.e. trustees and debtors-in-possession) to act in a foreign country. While the focus of this article is on the "inbound" process, the "outbound" process is also important and necessary for international cooperation in insolvency proceedings. Chapter 15 is not a one-way street. It is a two-way boulevard.

Chapter 15 deals with foreign debtors who have assets in the United States and who or against whom claims and actions may be brought in the United States*(111). Importantly, Chapter 15 initiates no bankruptcy case. Nor does it create a bankruptcy estate. In Chapter 15, other courts of competent jurisdiction may exercise personal jurisdiction over the debtor or territorial jurisdiction over foreign assets of the debtor. Chapter 15 protects the debtor's assets within the territory of the United States and requires cooperation with the foreign insolvency proceeding. Unlike other cases under the Bankruptcy Code which are plenary and their commencement creates a bankruptcy estate comprising all of a debtor's property without regard to control or location*(112), Chapter 15 grants a court broad - but defined - jurisdiction over debtor's property within the United States. Here, Chapter 15 is ancillary to the foreign insolvency case, and the foreign court exercises ultimate control over a debtor's assets for insolvency.

2. Summary of the Process of Recognizing a Foreign Proceeding

The process of implementing Chapter 15 for a foreign insolvency proceeding is recognition: this opens the "gateway" for a foreign representative to access the United States legal system. Recognition by a United States court of the foreign proceeding is essential. This recognition procedure markedly distinguishes Chapter 15 from its predecessor, 11 U.S.C. § 304, "making the [Chapter 15] proceeding functionally more similar to ... [filing of a voluntary petition under] other bankruptcy cases"*(113). If a foreign representative does not apply for and obtain recognition, then that foreign representative cannot access the United States court system anywhere*(114). Once a foreign proceeding is recognized, however, the foreign representative may pursue relief in any United States court*(115). Once recognition is granted, the "gateway" is opened, from which many other doors may be opened.

A case*(116) under Chapter 15 is commenced by filing a petition to recognize a foreign proceeding with a bankruptcy court under 11 U.S.C. § 1515*(117). "The primacy of the bankruptcy court's authority over whether ancillary assistance will be granted to a foreign representative is reenforced [sic] by authorization for the bankruptcy court to issue any appropriate order necessary to prevent the foreign representative from obtaining comity or cooperation in another court in the United States if recognition is denied"*(118).

An application for recognition must be accompanied by:

(1) a certified copy of the decision commencing the foreign proceeding and appointing the foreign representative;

(2) a certificate from the foreign court affirming the existence of such foreign proceeding and of the appointment of the foreign representative; or

(3) [absent the above evidence], any other evidence acceptable to the court of the existence of such foreign proceeding and of the appointment of the foreign representative*(119).

In addition, the foreign representative must also file a statement identifying all foreign proceedings regarding the debtor and all documents filed must be translated into English*(120). In recognition that some jurisdictions may be less formal than the United States, the United States court receiving the application for recognition may (1) presume that the foreign proceeding is what it says it is: a foreign proceeding, and (2) presume that the documents submitted are authentic*(121).

Jurisdiction for the Chapter 15 case is found in 28 U.S.C. § 1334. A court may not abstain from a recognition proceeding*(122). A petition for recognition and other matters under Chapter 15 are core proceedings and handled by United States bankruptcy courts*(123).

In British Am. Ins. Co. v. Fullerton, the Court explained that "[w]hether there is subject matter jurisdiction is an entirely separate question from whether there is in rem or personal jurisdiction"*(124). There is a difference between subject matter jurisdiction over Chapter 15 under 28 U.S.C. § 1334 as a case filed "under title 11" and proceedings in Chapter 15 "related to a case under title 11," compared to a court's in rem jurisdiction under 11 U.S.C. § 1521(a)(5) over assets of a debtor in Chapter 15*(125). A court's in rem jurisdiction under 11 U.S.C. § 1521(a)(5) is only limited to the "debtor's assets within the territorial jurisdiction of the United States" and provides no limitation on a court's subject matter jurisdiction over Chapter 15*(126).

Even when a court lacks personal jurisdiction over a debtor or in rem jurisdiction over debtor's property, a foreign representative may initiate a Chapter 15 case to assist in the foreign insolvency proceeding. Examples of such relief include, but are not limited to, conducting discovery or requesting an expansion of the automatic stay provided under 11 U.S.C. §§ 1520(a)(1) and 362.

In fact, for purposes of discovery, upon recognition a foreign representative may conduct a broad inquiry into the debtor's assets and affairs under 11 U.S.C. § 1521(a)(4)*(127) and Fed. R. Bank. P. 2004*(128), without an adversary proceeding or contested matter*(129). For a United States court to enter a binding order in a Chapter 15, however, it must have subject matter jurisdiction over the dispute and personal jurisdiction over the parties or in rem jurisdiction over the property involved in the dispute*(130).

The venue of a case ancillary to a foreign proceeding is governed by 28 U.S.C. § 1410, which was completely revamped with the enactment of Chapter 15. A case under Chapter 15 can be filed in a United States district court or a United States bankruptcy court:

(1) in which the debtor has its principal place of business or principal assets in the United States;

(2) if the debtor does not have a place of business or assets in the United States, in which there is pending against the debtor an action or proceeding in a Federal or State court; or

(3) ... in which venue will be consistent with the interests of justice and the convenience of the parties, having regard to the relief sought by the foreign representative*(131).