In a judgement here, published on 30 August 2007, Judge Burton Lifland in the US Bankruptcy Court (Southern District of New York) declined to recognise the Cayman Islands provisional liquidations of two Bear Stearns' Hedge Funds as foreign main proceedings.

Although registered in the Cayman Islands, the two companies' Centres of Main Interest were in the USA so the provisional liquidations could not be main proceedings.

Neither could they be foreign non-main proceedings as neither company had an establishment in the Cayman Islands.

The decision specifically uses the UNCITRAL Model Law and the European Insolvency Regulation to interpret the provisions of Chapter 15 of the US Bankruptcy Code. It also disagrees with parts of the Sphinx decision. Eurofood is cited.

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Bob Eisenbach's post at In The (Red) is a great overview of Chapter 15, the US implementation of the UNCITRAL Model Law on Cross-Border Insolvency.

As Bob says:

On October 17, 2005, as part of the Bankruptcy Abuse Prevention and Consumer Protection Act (known as "BAPCPA"), a new Chapter 15 of the Bankruptcy Code went into effect governing ancillary and other cross-border cases. (For those already familiar with ancillary proceedings, Section 304 of the Bankruptcy Code, which previously governed those proceedings, was repealed although many of its concepts have been retained in Chapter 15.)"

Chapter 15 is used:

• principally by representatives of or creditors in foreign insolvency proceedings to obtain assistance in the United States;
• by a debtor or others seeking to obtain assistance in a foreign country regarding a bankruptcy case in the United States; or
• when both a foreign proceeding and a bankruptcy case in the United States are pending with respect to the same debtor.

A really useful feature of Bob's post for those who want detailed analysis is the chart comparing Chapter 15 and the Model Law's provisions, prepared by his partner Adam Rogoff.

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The UNCITRAL Model Law on Cross-Border Insolvency should enhance cross-border assistance for non-EU officeholders and creditors in British insolvency proceedings.

Introduced in England and Wales, and Scotland, on 4 April 2006 it was first applied in the English High Court on 23 November 2006 in Re Rajapakse (unreported) when a US Chapter 7 Trustee sought the court's assistance to recover assets in England.

Cooperation in cross-border insolvency proceedings within the EU is governed by the European Insolvency Regulation.

Chapter 15 of the US Bankruptcy Code similarly introduces the UNCITRAL Model Law into US law.

Richard Howard's post Global Bankruptcy Mutual Assistance addresses the question in relation to Great Britain by outlining the core provisions of The Cross-Border Insolvency Regulations 2006.

We address foreign creditors' rights in the UK in a previous post here, and you can find out more about the UNCITRAL Model law here.

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This post was prompted by the following question on LawGuru.com:

Can someone outside of the European Union start Bankruptcy Proceedings in Great Britain or make a claim in existing British Bankruptcy Proceeedings against an Individual or a Company?

The short answer is "Yes, and yes"!

Foreign creditors are fully recognised in the UK jurisdictions of England and Wales, Scotland and Northern Ireland and, whilst they may benefit from local professional assistance, they can certainly present insolvency petitions and claim in UK insolvencies.

These existing rights were confirmed in England and Wales and in Scotland by The Cross-Border Insolvency Regulations 2006 (and Northern Ireland is planning to introduce similar regulations during 2007):

Article 13. Access of foreign creditors to a proceeding under British insolvency law 1. Subject to paragraph 2 of this article, foreign creditors have the same rights regarding the commencement of, and participation in, a proceeding under British insolvency law as creditors in Great Britain. 2. Paragraph 1 of this article does not affect the ranking of claims in a proceeding under British insolvency law, except that the claim of a foreign creditor shall not be given a lower priority than that of general unsecured claims solely because the holder of such a claim is a foreign creditor.

3. A claim may not be challenged solely on the grounds that it is a claim by a foreign tax or social security authority but such a claim may be challengedó

(a) on the ground that it is in whole or in part a penalty, or

(b) on any other ground that a claim might be rejected in a proceeding under British insolvency law.

The regulations are the British enactment of the UNCITRAL Model Law on Cross-Border Insolvency.

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In a review of the first year of enactment of Chapter 15 of the US Bankruptcy Code (which is based on the UNCITRAL Model Law on Cross-Border Insolvency) Mark Douglas of Jones Day considers the concepts of main and non-main proceedings and of COMI (centre of main interests) by reference to In re SPhinX Ltd and In re Tri-Continental Exchange Ltd under the title:

Chapter 15 Turns One: Ironing Out the Details.

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