Chapter 15 at 11: threshold requirements for recognition

Jeffrey A. LiesemerMember, Caplin & Drysdale, Chartered

This is the third instalment in a series on the US cross-border insolvency statute, Chapter 15 of the
Bankruptcy Code, which took effect 11 years ago (for further details please see “Chapter 15 at 11:
Bankruptcy Code’s cross-border insolvency law approaches 11th anniversary” and “Chapter 15 at 11:
Chapter 15 provides provisional relief in Hanjin Shipping”).

Introduction
The previous update reported on the interim relief that may be granted while a petition for
recognition is pending before the bankruptcy court. This update looks at a few threshold
requirements for obtaining recognition itself. Recognition of a foreign proceeding opens the door to
mandatory or discretionary relief from the bankruptcy court, depending on whether the foreign
proceeding is a foreign main proceeding or a foreign non-main proceeding.(1) Recognition also
enables the foreign representative to apply to a court in the United States for appropriate relief.(2)
Additionally, if recognition is granted, a court in the United States must grant comity or cooperation
to the foreign representative, subject to any limitation that the court may impose consistent with
public policy.(3)

Obtaining recognition from a US bankruptcy court is not a “rubber stamp exercise”.(4) As the
petitioning party, the foreign representative has the burden of establishing the elements for
recognition through evidence.(5) Two threshold requirements for recognition that are discussed
below are the existence of:

l a duly designated foreign representative; and
l a foreign proceeding.
Moreover, the US Court of Appeals for the Second Circuit has held that a foreign debtor must
establish its eligibility to be a debtor under the Bankruptcy Code in order for recognition to be
granted.(6) As explained below, this eligibility requirement is typically satisfied in practice by
showing that the foreign debtor has property in the United States.

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