What Are U.S. Creditors' Rights?

Cross-border bankruptcies, a by-product of the globalization of businesses, are increasing in number, size and complexity. Coordination of reorganization or liquidation of transnational businesses is difficult because the applicable laws, social policies and concerns of the various nations are not uniform or sufficiently similar so as to be interchangeable or harmonized. In partial recognition of the globalization of businesses, Congress enacted Bankruptcy Code ' 304 in 1978, which gives foreign representatives in foreign insolvency proceedings access to U.S. bankruptcy courts.

Under ' 304, a foreign representative may commence an ancillary proceeding, but not a full-blown bankruptcy case, in a U.S. bankruptcy court for relief in aid of a foreign plenary insolvency proceeding. Foreign courts that recognize and give access to U.S. representatives of American debtors have reciprocated such access. The Bankruptcy Code, however, does not compel U.S. bankruptcy courts to cooperate with the foreign proceedings. Nor does ' 304 address circumstances where plenary bankruptcy cases are pending at the same time in courts of the U.S. and one or more other nations, ie, parallel proceedings. In re Maxwell Communications Corporation PLC, 186 B.R. 807, 819 (S.D.N.Y. 1995), aff'g, 170 B.R. 800 (Bankr. S.D.N.Y. 1994), and affirmed at 93 F.3d 1036 (2nd Cir. 1996).