How cross-border bankruptcy resolution might work out

How cross-border bankruptcy resolution might work out

The incorporation of cross-border bankruptcy which means that an insolvent debtor has creditors and assets in more than one nation in the Indian Insolvency and Bankruptcy Code (IBC) will help banks since the assets of companies with large amounts of foreign capital are now into Resolution, enhancing the chances of recovering legal experts have said. Certain experts believe that those who lend money to companies such as Videocon Group, who hold large foreign assets, will have a chance to profit. Read more here about bankruptcy resolution here:

As per Nirav Shah who is a partner of the law firm DSK Legal, India will be required be able to accept this United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross Border Insolvency in 1997. This will be incorporated to IBC in order to implement the concept of cross-border insolvency. The law is a law that has been accepted by 49 nations, including Singapore and South Korea, the UK, US, South Africa and South Korea.

In the present, cross-border insolvency is covered under Sections 234 and 234, of IBC. The Union government has the option of entering to bilateral deals with foreign nations to settle questions related to insolvency across borders. However, the current rules delay recovery. Experts believe that the introduction of a standard framework such as UNCITRAL will benefit both foreign and local lenders.

“Foreign creditor and representatives of their creditors will be allowed to be a part of instances in India. If there’s a contrarian decision in a foreign jurisdiction and in that situation, it will be subject to the proceedings in India and thus protecting Indian creditor,” said Ashish Pyasi the associate partner of the law firm Dhir and Dhir Associates. Others said that, even after the amendments have been completed when the cross-border framework bankruptcy becomes effective there may be delays in gaining access to assets that are located within other jurisdictions.

Since insolvency resolution and liquidation are both time-bound processes It isn’t clear what the best way to ensure that this goal is accomplished within the timelines set by law Srinivas K. Kotni, managing partner of the law firm LexPort. Overall this is an encouraging sign that lenders can take advantage of, Kotni added. Others have pointed out that there is no standard guideline, Indian tribunals have allowed the insolvency of a foreign company in certain instances. “An great example of a successful cross-border insolvency cases in India is that of Jet Airways,” said Prashanth Shivadass, partner of legal firm Shivadass and Shivadass.

Jet Airways was facing insolvency proceedings in both India as well as the Netherlands. In the meantime, the Dutch bankruptcy administrator submitted an appeal to National Company Law Tribunal (NCLT) to be recognized as the initiator of the insolvency proceedings that were taking place in the Netherlands and placing temporarily a hold on this resolution in India The NCLT denied it, citing the lack of international insolvency laws that apply to India.

Then, in a later appeal before the National Company Law Appellate Tribunal (NCLAT) The Tribunal’s ruling was deferred and it ordered Indian as well as the Dutch resolution experts to work together through an agreement signed in September 2019. Shivadass added

Cross-Border Bankruptcy Battleground: The importance of Comity

The process by which U.S. courts acknowledge and enforce the judicial decisions and decisions of foreign courts (commonly called “comity”) is a core element of U.S. law for many years. Comity is an essential element in cross-border bankruptcy proceedings involving creditors who are at risk of insolvency or bankruptcy proceedings outside of the U.S. but have creditors or assets located in U.S. assets or creditors in the U.S. Comity is among the fundamental principles that guide Chapter 15 in the Bankruptcy Code, as well as the provisions in U.S. bankruptcy law governing international cases prior to the enactment of chapter 15 in 2005.

The degree to the extent that U.S. and foreign bankruptcy laws are incompatible is an important factor in the U.S. court’s determination of the legality of foreign court rulings that should be applied by the U.S. under principles of cooperation. Law conflicts that arise in cross-border bankruptcy cases became one of the subjects of two decisions that were issued in the New York bankruptcy courts in the beginning of 2010. In In the case of Metcalfe & Mansfield Alternative Investments the bankruptcy judge Martin Glenn, by way of “additional assistance” in an Chapter 15 case that involved an Canadian debtor, imposed an Canadian court’s decision approving the restructuring plan, which contained nondebtor-related releases and injunctions however, it was unclear whether the U.S. court would have granted the injunctions and releases for a case involving Chapter seven or eleven in the Bankruptcy Code. In the case of In Re Lehman Brothers Holdings, Inc. the Judge of bankruptcy James M. Peck refused to acknowledge rulings of U.K. courts that validated the validity of a “flip clause” in a swap contract that changed claim priority between the noteholder and its counterparty in the swap, a Lehman Brothers affiliate, due to the U.S. bankruptcy filing of the parent company. While this shift in priority was legal in the context of U.K. law, the judge refused to accept the rulings, despite principles of comity. This is since it determined that the”flip” clause which is a popular risk-management technique used in swap transactions and swap agreements, was an in fact unenforceable clause according to U.S. law. The rulings show that comity is an important consideration in cross-border bankruptcy cases that involve the laws that differ between nations, both inside as well as outside of chapter 15. In Part 1 of this piece, which was published in the March/April 2010 issue of business Restructuring Review (Vol. 9, No. 2) We discussed the ruling of the court regarding Metcalfe & Mansfield. Part II discussed how the bankruptcy judge ruled regarding Lehman Brothers.

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