The International Scene
By GeorGe W. ShuSter, Jr. and BenJamin W. LoveLand
The recent decision in In re National Bank of
Anguilla (Private Banking Trust) Ltd.1 may
cause readers to do a double-take. First, it
is co-authored by two bankruptcy judges: Hon.
Stuart M. Bernstein and Hon. Martin Glenn.
Second, it arises from two separate lawsuits led
by a foreign representative for two separate foreign
debtor entities, each of which is subject to its own
administration proceeding in Anguilla. Third, each
of the Anguilla foreign debtors is subject not only
to one U.S. chapter 15 case, but also a second U.S.
chapter 11 case. These tandem facts are tough to
wrangle, but they also provided an opportunity for
the New York bankruptcy court to explain a coor-
dinated vision for the application of international
comity principles in cross-border insolvencies.
Background
The U.S. proceedings began unremarkably
enough. The administrator for two Anguilla banks
subject to administration proceedings in Anguilla
led chapter 15 cases for those entities in the U.S.
The bankruptcy court recognized the administrator as
the banks’ “foreign representative” and the Anguilla
administration proceedings as “foreign main proceed-
ings.” However, the normalcy of the background facts
ends there — and an unusual litigation history begins.
Before ling the U.S. chapter 15 cases, the for-
eign representative commenced actions in Anguilla
against a number of entities, challenging certain
transactions relating to the failure of the banks. In
those actions, the foreign representative alleged
that the banks’ parent entities, their directors and
their regulator breached their duties by upstream-
ing depositors’ funds to the parent entities when the
banks were insolvent.
The foreign representative sought declaratory,
equitable and monetary relief in order to restore the
alleged wrongfully upstreamed funds to the banks
for the benet of the banks’ depositors. However,
the foreign representative did not assert claims
under Anguilla’s fraudulent-transfer statutes, likely
in part because those statutes did not recognize the
constructive fraudulent-transfer theories that were
most likely to be applicable to the transactions.
At the time that the foreign representative led
the chapter 15 cases for the Anguilla banks, he was
looking for a way to enhance his claims relating to
the upstreaming transactions, but chapter 15 alone
could not accomplish that goal. While the ling of
the chapter 15 cases for the banks allowed the for-
eign representative to seek and receive certain pro-
tections in the U.S., one thing the chapter 15 lings
did not allow was for the foreign representative to
commence U.S. avoidance actions under chapter 5
of the U.S. Bankruptcy Code. Section 1521 (a) (7) of
the U.S. Bankruptcy Code expressly prohibits a for-
eign representative from commencing such actions
in the context of a chapter 15 case.2
Therefore, the foreign representative, wanting
to commence those U.S. avoidance actions in order
to recover the same funds that were the subject of
the Anguilla actions, led chapter 11 cases for the
Anguilla banks after (and in addition to) ling the
chapter 15 cases. While this layering of chapter 15
and 11 cases is uncommon, it is expressly autho-
rized by statute.
Section 1511 permits a foreign representative to
commence a plenary chapter 11 case for a foreign
debtor whose foreign proceeding has been recog-
nized as a foreign main proceeding, and § 1523 (a)
provides that a foreign representative has standing
in such a case to initiate chapter 5 avoidance actions.
In addition, although the debtors were banks, they
were permitted to le chapter 11 cases in the U.S.
for the same reason they were permitted to le chap-
ter 15 cases: They were not domestic U.S. banks
and did not have a U.S. branch or agency that would
disqualify them from chapter 11 under § 109 of the
U.S. Bankruptcy Code.3
The debtors also satisfied the requirement that
they have property in the U.S., apparently based
on the unearned portion of the retainer paid to
their legal counsel and the avoidance claims that
they sought to assert to recover funds held at U.S.
banks.4 These facts combine to create an unusu-
Benjamin W. Loveland
WilmerHale
Boston and New York
Seeing Double?
Two Judges, Two Lawsuits, Two Types of Bankruptcy—
Buta Single Vision for Comity in Cross-Border Insolvencies
1 580 B.R. 64 (Bankr. S.D.N.Y. 2018).
18 August 2018 ABI Journal
George Shuster
is a partner and
Benjamin Loveland
is counsel with
WilmerHale in the
firm’s Boston and
New York offices.
2 11 U.S.C. § 1521(a)(7) (“Upon recognition of a foreign proceeding ... the court may ...
grant any appropriate relief, including ... granting any additional relief that may be avail-
able to a trustee, except for relief available under sections 522, 544, 545, 547, 548, 550,
and 724 (a).”).
3 Section 109(b)(3)(B), made applicable to chapter 15 debtors by § 1501 (c), provides that
a foreign bank cannot be a debtor if it has a branch or agency in the U.S. See Flynn v.
Wallace (In re Irish Bank Resolution Corp. Ltd. (In Special Liquidation)), 538 B.R. 692, 696
(D. Del. 2015).
4 11 U.S.C. § 1528 (“After recognition of a foreign main proceeding, a case under another
chapter of [title 11] may be commenced only if the debtor has assets in the United
States.”); see also Drawbridge Special Opportunities Fund LP v. Barnet (In re Barnet),
(Bankr. S.D.N.Y. 2018) (“In a controversial ruling, the Second Circuit applied the require-
ments of section 109 (a) to eligibility to file a chapter 15 case.”).
George W. Shuster, Jr.
WilmerHale
Boston and New York
