7. Foreign Non-Main Proceeding

The counterpart to "foreign main proceeding," is "foreign non-main proceeding," and defined in 11 U.S.C. § 1502(5) as "a foreign proceeding, other than a foreign main proceeding, pending in a country where the debtor has an establishment"*(100).

If the debtor's center of main interests is not in the same country or location where the foreign proceeding is pending, the court can recognize the foreign proceeding as a foreign non-main proceeding*(101). However, to be recognized as a foreign non-main proceeding, the debtor must at least have an "establishment" in the foreign country*(102). Therefore, unlike 11 U.S.C. § 109(a), a case may not be recognized if the sole basis of jurisdiction is the location of assets in the United States*(103).

8. Establishment

Section 1502(2) of Title 11 defines the term "establishment" as "a place of operations where the debtor carries out a nontransitory economic activity." The definition of "establishment" is the centerpiece of a court's analysis in determining whether the court will grant recognition of a foreign proceeding under 11 U.S.C. § 1517(b). This definition is a paradigm shift from the Bankruptcy Code's eligibility requirements of a debtor under 11 U.S.C. § 109(a), where a person may be a debtor if that person "resides or has domicile, a place of business, or property in the United States." Thus, a foreign proceeding will not be recognized if the debtor only has assets in that jurisdiction, but no true "establishment" of operations. In contrast to the COMI, "[t]he existence of an 'establishment' is essentially a factual question, with no presumption in its favor"*(104).

The bankruptcy court for the Southern District of Texas has held that the time to determine establishment is the time of filing the Chapter 15 petition, relying on In re Bear Stearns and In re SPhinX*(105). The logic stems from the court's ultimate conclusion that "[b]ecause courts undertake the establishment analysis when the foreign representative files for recognition, it follows that the court should weigh only the evidence as it exists at the time of filing in the U.S. court"*(106). The court looked at the present tense language in 11 U.S.C. § 1502(5) defining "foreign non-main proceeding," and 11 U.S.C. § 1502(2) defining "establishment." It explained that "[t]he use of the present tense implies that the court's establishment analysis should focus on whether the debtor has an establishment in the foreign country when the foreign representative files for recognition under Chapter 15"*(107).

9. Recognition

11 U.S.C. § 1502(7) defines the term "recognition" as "the entry of an order granting recognition of a foreign main proceeding or a foreign non-main proceeding under this chapter." Recognition is a "gateway" to the United States courts. Only after a United States court recognizes a proceeding can "the foreign representative... apply directly to a court in the United States for appropriate relief in that court"*(108).

Recognition must occur in order for a foreign representative to garner the broad range of relief that Chapter 15 provides. In considering whether to recognize a foreign proceeding and grant relief, it is unnecessary that the result achieved in the foreign bankruptcy proceeding be identical to that which would be had in the United States. It is sufficient if the result is "comparable"*(109). The Fifth Circuit maintains that the foreign laws need not be identical to respective counterparts in the United States, but merely must not be objectionable to United States laws and policies*(110).