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further explored in significant detail the nature, range and extent of notice
provided to scheme creditors and other parties in interest both through the
scheme process in the UK and the U.S. Chapter 15 case, and found such notice
to have adequately afforded due process to all concerned.
In re Tri‐Cont. Exch. Ltd., 349 B.R. 627 (Bankr. E.D. Cal. 2006). A judgment
creditor claimed to have a lien on funds tied up in an insurance asset forfeiture
proceeding in the United States respecting debtors in involuntary winding‐up
proceedings in St. Vincent and the Grenadines (“SVG”). The judgment creditor
objected to recognition of the SVG proceedings as foreign main proceedings
and to the grant of broad authority to the debtors’ foreign administrators to
administer and realize the debtors’ assets located within the territorial
jurisdiction of the United States, including the turnover to the foreign
administrators of the proceeds of the U.S. asset forfeiture case.
Despite the fact that the debtors had perpetrated insurance scams primarily in
the U.S. and Canada, the Bankruptcy Court for the Eastern District of California
determined that St. Vincent and the Grenadines were the center of the debtors’
main interests and thus the winding up proceedings were entitled to
recognition as Chapter 15 foreign main proceedings, with all attendant
automatic relief and additional discretionary relief. The Bankruptcy Court
further determined that “all creditors in this instance will be better served by, as
contemplated by 11 U.S.C. §1521(a)(5), entrusting administration and realization of
assets to the foreign representatives without imposing a superfluous, and
potentially inconsistent, trance of judicial supervision.” 349 B.R. 627, 629 (Bankr.
E.D. Cal. 2006).
In re Condor Insurance Limited, 2008 WL 2858943 (Bankr. S.D. Miss. July 17,
2008), aff’d, 2009 WL 321627 (S.D. Miss. Feb. 9, 2009). Joint Official Liquidators
of a Nevis corporation that had been engaged in insurance and surety bond
business obtained Chapter 15 recognition of the Nevis proceeding as a foreign
main proceeding. Thereafter they filed an adversary proceeding in the Chapter
15 case seeking to recover assets they allege had been fraudulently transferred
to the United States from a non‐debtor. The Bankruptcy Court for the Southern
District of Mississippi granted the non‐debtor defendant’s motion to dismiss the
adversary proceeding finding that the court lacked subject matter jurisdiction to
entertain it.
The Joint Official Liquidators appealed the bankruptcy court’s decision to the
District Court, which affirmed. The Court determined that the strict language of
Chapter 15 prohibited a U.S. bankruptcy court from allowing a foreign
representative under Chapter 15 to invoke U.S. bankruptcy avoidance law,
noting the obligation of the U.S. court to defer to the law of the foreign
proceeding and to not impose U.S. law in such instances. The District Court
noted that if the Nevis Liquidators had filed an avoidance action in Nevis under
Nevis law and judgment was granted in that action the Liquidators could seek
recognition and enforcement of that judgment in the United States through
Chapter 15.
The Court further noted that the only way the Nevis Liquidators could take
advantage of U.S. bankruptcy avoidance law would be if they commenced a full
plenary U.S. Bankruptcy Code Chapter 7 or Chapter 11 case, which may be done
after recognition of a foreign proceeding under Chapter 15 if the Chapter 15
debtor otherwise would be eligible to be a debtor under the U.S. Bankruptcy
Code absent Chapter 15. Non‐U.S. re/insurers doing business in the United
States, however, while eligible for recognition and relief under Chapter 15 are
not eligible to be debtors under other sections of the U.S. Bankruptcy Code,
pursuant to 11 U.S.C. §109(b)(3)(a).