5. Simplified and Streamlined Procedures, Part I: The Tools Available to a Foreign Representative from the Inception of Filing a Petition for Recognition

The waiting period between filing an application for recognition and the order granting or denying recognition can gravely affect a debtor's assets. During this period provisional relief is available to a foreign representative to protect assets and preserve the rights of creditors:

From the time of filing a petition for recognition until the court rules on the petition, the court may, at the request of a foreign representative, where relief is urgently needed to protect the assets of the debtor or the interest of the creditors, grant relief of a provisional nature, including-

(1) staying execution against the debtor's assets;

(2) entrusting the administration or realization of all or part of the debtor's assets located in the United States to the foreign representative or another person authorized by the court, including an examiner, in order to protect and preserve the value of assets that, by their nature or because of other circumstances, are perishable, susceptible to devaluation or otherwise in jeopardy; and

(3) any relief referred to in paragraph (3), (4), or (7) of section 1521(a)*(199).

The additional relief referred to in 11 U.S.C. § 1519(a)(3) includes relief that may be granted after recognition:

(1) "suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor to the extent that this right has not been suspended under section 1520(a)"*(200).

(2) "providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor's assets, affairs, rights, obligations or liabilities"*(201).

(3) "granting any additional relief that may be available to a trustee, except for relief available under sections 522, 544, 547, 548, 550, and 724(a)"*(202).

Communication must also occur to avoid unnecessary detriment to a debtor and its creditors. In recognition of the swift and urgent need for open communications and coordination among different courts, 11 U.S.C. § 1518 also provides:

From the time of filing the petition for recognition of a foreign proceeding, the foreign representative shall file with the court promptly a notice of change of status concerning-

(1) any substantial change in the status of such foreign proceeding or the status of the foreign proceeding or the status of the foreign representative appointment; and

(2) any other foreign proceeding regarding the debtor that becomes known to the foreign representative*(203).

This mandate for full disclosure, candor and transparency ensures that the court receives accurate and timely information*(204). Importantly, the House Report to BAPCPA suggests that sanctions should be imposed if a foreign representative does not timely provide information*(205). Bankruptcy courts have rarely dealt with unsatisfactory reporting, and mitigate the issue by placing clear requirements on a foreign representative when the reporting is unsatisfactory*(206).

6. Simplified and Streamlined Procedure, Part II: Once Recognition is Granted

Once recognition of the foreign proceeding is granted, provisional relief is no longer needed. It ceases under section 1519(b) unless extended by the court. The Guide to the Enactment of the Model Law provides that provisional relief may be extended "to avoid a hiatus between the provisional measure issued before recognition and the measure issued after recognition"*(207).

In most instances, termination of provisional relief would occur because of the more powerful relief available under 11 U.S.C. §§ 1520-21. Section 1520 sets forth the relief that is available after recognition as a matter of right*(208). Three types of relief are effective at recognition:

(1) Application of 11 U.S.C. §§ 361, 362, 363, 549, and 552*(209).

(2) The ability to commence an action or proceeding to preserve a claim*(210).

(3) The ability to commence a case under Title 11*(211).

11 U.S.C. § 1521 provides for certain additional relief that is more permissive-that is, it may be granted upon recognition. The first "bundle" of relief that may be granted is that relief which may be necessary to protect a debtor's assets or interests of debtor's creditors*(212) This relief includes:

(1) staying commencement or continuation of actions or proceedings concerning the debtor's assets, rights, obligations, or liabilities to the extent they have not been stayed under 11 U.S.C. § 1520(a)*(213);

(2) staying execution against the debtor's assets to the extent they have not been stayed under 11 U.S.C. § 1520(a)*(214);

(3) suspending the right to transfer, encumber or dispose of assets to the extent they have not been suspended under 11 U.S.C. § 1520(a)*(215);

(4) providing for examination of witnesses and taking evidence with respect to debtor's assets, affairs, rights, obligations or liabilities*(216);

(5) entrusting administration or realization of debtor's assets within the United States to the foreign representative or another person, including an examiner, as authorized by the court*(217);

(6) extending relief granted under 11 U.S.C. § 1519(a)*(218);

(7) granting any other additional relief that may be available to the trustee, except for relief under 11 U.S.C. §§ 522, 544, 545, 548, 550 and 724(а)*(219).

The House Report clarifies that relief in 11 U.S.C. § 1521 does not expand or otherwise limit relief that may also be available under 11 U.S.C. § 105*(220).

In Vitro, the Fifth Circuit assessed a request for relief under 11 U.S.C. §§ 1521 and 1507 under a three-step analysis:

We conclude that a court confronted by this situation should first consider the specific relief enumerated under § 1521(a) and (b). If the relief is not explicitly provided for there, a court should then consider whether the requested relief falls more generally under § 1521's grant of any appropriate relief. We understand "appropriate relief' to be relief previously available under Chapter 15's predecessor, § 304. Only if a court determines that the requested relief was not formerly available under § 304 should a court consider whether relief would be appropriate as "additional assistance" under § 1507*(221).

Case law has brought several issues to light. The Fourth Circuit in Jaffe v. Samsung Electronics Co., Ltd*(222) held that in a case ancillary to a foreign proceeding, the bankruptcy court had to balance protection to creditors and the foreign debtor when granting discretionary relief to the foreign representative. In Jaffe, the bankruptcy court entrusted the representative with "administration or realization of all or part of the assets of [debtor] within the territorial jurisdiction of the United States," specifically identifying debtor's United States patents as among the United States assets he sought to control*(223). The Fourth Circuit affirmed the bankruptcy court's policy of balancing the interests of the creditors with the interests of the foreign representative, finding the court's "thorough examination of the parties' competing interests to have been both comprehensive and eminently reasonable"*(224) This concept is discussed further in the next section.

In 2014, the bankruptcy court for the Southern District of New York gave recognition to a plan of reorganization confirmed by a foreign court, even though the plan may have not been confirmed in the United States*(225). In Rede Energia, the plan was confirmed by a Brazilian bankruptcy court under the cram down provisions of Brazilian bankruptcy law*(226). The U.S. bankruptcy court applied the three-step analytical framework found in Vitro, under 11 U.S.C. §§ 1521 and 1507*(227). The court determined that a broad reading of § 1521 was appropriate, and recognition would protect the debtor's assets and creditors' interest. Although unnecessary, the court continued its analysis and found that recognition of the plan would provide "additional assistance" under § 1507, and the plan was "substantially in accordance" with the Bankruptcy Code's distribution scheme*(228). Thus, as also stated in Vitro, the fact that certain relief is available in a foreign proceeding but would not be available in the U.S. is still not grounds for denying comity*(229).

In Barnet, the Second Circuit opined on the appealability of a grant for relief under 11 U.S.C. § 1521*(230). The court noted that a party aggrieved by the automatic relief imposed by 11 U.S.C. § 1520 may appeal because appellate standing was warranted once recognition was granted, and imposing automatic relief requires no further action by the bankruptcy court*(231). However, the court explained that although the discretionary relief permitted by 11 U.S.C. § 1521 requires an extra step, once that extra step is taken and the bankruptcy court has exercised its discretion, a party aggrieved by section 1521 stands in the same position as a party aggrieved by 11 U.S.C. § 1520*(232). As a result, if appellate review is available to one, it should be available to the other*(233).

Under 11 U.S.C. § 1521, limited relief available and may be precluded, prohibited, restricted, or more difficult to obtain than at first blush. In a foreign non-main proceeding regarding United States law, the court must be satisfied that assets should be administered or that discovery and evidence requests are appropriate*(234). The court may not enjoin a police or regulatory act of a governmental unit, including criminal proceedings. If relief is being sought under 11 U.S.C. § 1521(a) (1), (2), (3), or (6), the same standards, procedures, and limitations that would apply to an injunctive hearing would likely also apply to a foreign representative.