This edition of the news update arrives after INSOL’s Annual Regional Conference held in New York between 29 April and 1 May 2018. The conference was a great success and extremely well attended, with over 875 delegates from 48 different countries. There was an excellent forward looking and stimulating educational programme which prompted in depth debate on a variety of trends and hot topics in international and cross-border insolvency. 
  
It is not surprising that cross-border cases continue to take centre stage in international discourse in insolvency law.  Insolvency practitioners continue to grapple with a myriad of issues arising from the interaction of foreign law and domestic law.   The complexities of such issues are exemplified in the articles in this issue of the newsletter.
 
Singapore saw its first reported decision (Re Zetta Jet) on the application of the recognition procedures under the UNCITRAL Model Law on Cross-Border Insolvency.  We saw another first in the US - the first reported decision (In re Avanti Communications) on the recognition of a UK scheme of arrangement sanctioned under UK law which provided for the release of third party non-debtor guarantees.  On a separate note, the US Bankruptcy Court recently held (In re CIL Limited) that avoidance provisions in the US Bankruptcy Code were not intended to have extra-territorial effect, bringing into focus conflicting decisions which would require clarification by the US Supreme Court in time to come
  

The interaction between insolvency law and other substantive laws often brings about vexing questions, and one sees that illustrated by the Amerind Appeal in Victoria, Australia, where the Federal Court discussed the application of trust assets in the winding up of a trust company.   Another interesting development in Australia was the legislative amendments in September 2017 which introduced the stay on enforcement of ipso facto clauses.  There is now a consultation process in Australia on whether certain types of contracts and rights should be excluded from the stay.
 

The importance of keeping abreast with developments in other jurisdictions cannot be over emphasised and I am grateful to all the contributors of the articles to this issue. I highly commend the articles to you. 

Sim Kwan Kiat

Partner                                                                                                                                                  

   
Recognition of Foreign Insolvency Representatives under the UNCITRAL Model Law – the Public Policy Exception in Singapore 
   

Since Singapore adopted the UNCITRAL Model Law on Cross-Border Insolvency (Model Law) in May 2017, the Singapore legal community has eagerly awaited the first local reported court decision on an application for recognition of foreign insolvency proceedings under the amended Companies Act. That came about in Re Zetta Jet Pte Ltd and others [2018] SGHC 16, a decision of the Honourable Justice Aedit Abdullah. 

On 15 September 2017, Zetta Singapore and Zetta US filed voluntary Chapter 11 bankruptcy proceedings in the US.  Shortly after, AAH (and another shareholder) commenced legal proceedings in Singapore against Zetta Singapore and its other shareholders for commencing the US Chapter 11 proceedings and obtained an injunction order issued by the Singapore High Court prohibiting further steps in and relating to the US bankruptcy proceedings of the Zetta entities.  The US bankruptcy proceedings continued in breach of the Singapore injunction. Subsequently, the US Chapter 11 proceedings were converted to US Chapter 7 proceedings, and the US Chapter 7 trustee of the Zetta entities applied for recognition of the US Chapter 7 proceedings in Singapore under the Model Law. The Model Law allows the court to refuse recognition if it would be “contrary” to the public policy of Singapore. The Model Law as adopted by Singapore is different from the Model Law in its original form, which allows the domestic court to refuse recognition if it would be “manifestly contrary” to public policy.
    

The decision in Re Zetta Jet is significant as it is the first time that the Singapore court has analysed the public policy exception under the Model Law: whether it would be contrary to the public policy of Singapore (under Article 6 of the Model Law) to grant recognition of the Chapter 7 Trustee in the face of the breach of the injunction granted by the Singapore Court by the pursuit of the US bankruptcy proceedings.  

By

Sim Kwan Kiat

Partner                                                                                                                                                  

  
To read the full article please click here

For the case decision please click here

 
Cases
 
USA
  
(i) New York Court Welcomes Foreign Judgment Creditors: Russian Money Judgments are Recognised, Despite the Debtor’s Pending Insolvency Proceeding in Russia 
  
VTB Bank v. Mavlyanov, Index No. 650245/2017 
   
A recent decision of the Supreme Court of the State of New York provides foreign judgment creditors with a roadmap to collection. The court granted recognition of two foreign money-judgments obtained by a Russian bank against an individual debtor while the debtor’s Russian bankruptcy proceedings remained pending. The ruling offers key lessons for judgment creditors to enforce their rights in the U.S. against a foreign adversary and illustrates both New York courts’ willingness to recognise foreign money-judgments and the importance of foreign representatives’ obtaining recognition of foreign insolvency proceedings in the U.S. 
   
For a case note by D. Farrington Yates, George V. Utlik, Darryl G. Stein, Stephanie Hauser and Daniel J. Saval, Kobre & Kim, 10 May 2018 please click here
   
For the case decision please click here
   
   
(ii) U.S. Bankruptcy Court Recognises a Foreign Plan of Reorganisation and Enforces Third-Party Releases in the Chapter 15 Context
 
In re Avanti Communications Group PLC, 582 B.R. 603, 2018 WL 1725544 (Bankr. S.D.N.Y. Apr. 9, 2018)
 
In this case, Avanti Communications Group PLC’s (Avanti) sought recognition under Chapter 15 from the United States Bankruptcy Court for the Southern District of New York of its UK court sanctioned scheme of arrangement and the enforcement of the guarantee releases provided by Avanti’s affiliates on certain debt. 
  
Although there have been many unpublished decisions that have preceded the Avanti opinion on the subject of UK schemes of arrangement, this is the first reported decision by a United States Bankruptcy Court recognising a UK scheme of arrangement and therefore an important legal precedent for the Chapter 15 practitioner. 
   
For a case note by George P. Angelich and Annie Y. Stoops, Arent Fox, May 2018 please click here
   
For the case decision please click here
    
   
Articles
  
Canada
  
The Canadian Steel Industry – Forging a Future on Shifting Sands 
  
Despite the fact that Canadian steel companies continue to avail themselves of Canada’s insolvency statutes, principally the Companies’ Creditors Arrangement Act, Canada’s answer to chapter 11, the fortunes and misfortunes of the Canadian steel industry continue to ebb and flow. For those distressed investors with the transactional creativity and intestinal fortitude necessary to ride those ups and downs and to establish mechanisms to limit the impact of such volatility on a target company’s future, the Canadian steel industry still presents substantial profit and growth opportunities. 
 
This article takes a close look at the potential impact of the creative structure used in Bedrock Industries’ recent acquisition of US Steel Canada a transaction that can, on the one hand substantially protect the new owners from the unpredictable legacy pension, OPEB and environmental liabilities, and on the other hand provide stakeholders with an incentive to see the new business become efficient and profitable. 
     
For the full article please see DLA Piper Restructuring Global Insight, 9 May 2018
   
USA
 
Debate Intensifies as to Whether the Bankruptcy Code’s Avoidance Provisions Apply Extraterritorially
 
The ability of a trustee or chapter 11 debtor-in-possession to avoid fraudulent or preferential transfers is a fundamental part of U.S. bankruptcy law. However, when a transfer by a U.S. entity takes place outside the U.S. to a non-U.S. transferee – as is increasingly common in the global economy – courts disagree as to whether the Bankruptcy Code’s avoidance provisions apply extraterritorially to avoid the transfer and recover the transferred assets. This article looks at how several bankruptcy courts have addressed this issue in recent years, with inconsistent results.
 
For the full article please see Jones Day Business Restructuring Review, March / April 2018
   

Cases
  
Australia
  
Trustee Insolvency – the Full Federal Court Weighs in to the Debate 
   
Jones (Liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40 
      
Below are links to two articles, the first examined the implications of a Victorian Court of Appeal decision on trustee insolvency in the Amerind Appeal and the second refers to the Full Federal Court's recently released decision on similar issues in the Killarnee case. The Full Federal Court came to a similar position to the Victorian court in deciding that trust assets should be applied first in paying employees and other statutory preferred creditors (though for varied reasons). But it came to the opposite position in holding that trust assets could only go to trust creditors, not non-trust creditors. That finding will cheer lenders and others dealing with trusts, but leaves a confused landscape. 
   
For the Amerind case note please see Allens Publications, 13 March 2018
  
For the Killarnee case note please see Allens Publications, 29 March 2018
  
For the Amerind case decision please click here
   
For the Killarnee case decision please click here
  
Legislation
 
Australia
 
Consultation Process on Ipso Facto Insolvency Regulations Begins 
  
In September 2017, the Australian government introduced the most significant reforms to Australia's insolvency regime for the past 30 years with the enactment of the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 (Cth). A key part of the reforms includes a stay on the enforcement of certain contractual rights (known as ipso facto clauses) when a contractual counterparty enters into an administration, a scheme of arrangement or compromise, or a receivership over the whole or substantially the whole of its assets. Because of the potentially wide-ranging impact of the reforms, certain types of contracts and certain types of rights were to be excluded from the operation of the stay by regulation and declaration.  The long-awaited draft regulations and declaration have now been released. This alert highlights some of the key exceptions and the potential impact on certain types of counterparties and transactions.
  
For the full article please see K&L Gates Restructuring & Insolvency Alert, 20 April 2018

 
INSOL International Technical Paper Series - The New Insolvency & Bankruptcy Code in India: Impact on the Distressed Debt Market 
 

April 2018

The Insolvency and Bankruptcy Code, 2016 (IBC 2016) was introduced in India on 1 December 2016. It is seen as one of the most significant economic reforms in the history of the country, with the objective of consolidating and amending the laws relating to re-organisation; ensuring insolvency resolution in a timely manner for the maximisation of the value of assets; promoting both entrepreneurship and the availability of credit; and balancing the interests of all stakeholders.
   
This informative paper examines the key developments that have taken place since the implementation of the IBC 2016 including: the lessons learned from the resolution plans approved so far; the contentious issues raised before the tribunals; and the progress in the 12 large non-performing loan cases directed by the Reserve Bank of India to be placed into the corporate insolvency resolution process of the IBC 2016. It also looks at what the IBC 2016 means for foreign creditors and examines the opportunities in the Indian distressed debt market for investors currently and looking forward to the next 2-3 years.
      

If you would like to send an article for inclusion in one of our forthcoming issues please contact our Technical Officer, Louise Jennings at louise@insol.ision.co.uk

If you would like to introduce a new member to INSOL International please contact our Database Manager, Tony Ashton, at tony@insol.ision.co.uk

American Bankruptcy Institute  
Asociación Argentina de Estudios Sobre la Insolvencia  
Asociacion Uruguaya de Asesores en Insolvencia y Reestructuraciones Empresariales  
Association of Business Recovery Professionals - R3  
Association of Restructuring and Insolvency Experts  
Australian Restructuring, Insolvency and Turnaround Association  
Bankruptcy Law and Restructuring Research Centre, China University of Politics and Law 
Business Recovery and Insolvency Practitioners Association of Nigeria  
Business Recovery and Insolvency Practitioners Association of Sri Lanka  
Canadian Association of Insolvency and Restructuring Professionals  
Canadian Bar Association (Bankruptcy and Insolvency Section)  
Commercial Law League of America (Bankruptcy and Insolvency Section)  
Especialistas de Concursos Mercantiles de Mexico  
Finnish Insolvency Law Association  
Ghana Association of Restructuring and Insolvency Advisors  
Hong Kong Institute of Certified Public Accountants (Restructuring and Insolvency Faculty)  
INSOL Europe  
INSOL India  
INSOLAD - Vereniging Insolventierecht Advocaten 
Insolvency Practitioners Association of Malaysia  
Insolvency Practitioners Association of Singapore  
Instituto Brasileiro de Estudos de Recuperação de Empresas  
Instituto Brasileiro de Gestão e Turnaround  
Instituto Iberoamericano de Derecho Concursal  
Instituto Iberoamericano de Derecho Concursal Colombia
International Association of Insurance Receivers  
International Women’s Insolvency and Restructuring Confederation  
Japanese Federation of Insolvency Professionals 
Korean Restructuring and Insolvency Practitioners Association   
Law Council of Australia (Business Law Section)  
Malaysian Institute of Certified Public Accountants  
National Association of Federal Equity Receivers  
Nepalese Insolvency Practitioners Association  
NIVD – Neue Insolvenzverwaltervereinigung Deutschlands e.V.  
  Recovery and Insolvency Specialists Association (BVI) Ltd  
 Recovery and Insolvency Specialists Association (Cayman) Ltd 
Restructuring and Insolvency Specialists Association of Bahamas
Restructuring and Insolvency Specialists Association of Bermuda 
REFOR–CGE, Register of Insolvency Practitioners within "Consejo General de Economistas, CGE"  
Restructuring Insolvency & Turnaround Association of New Zealand  
Russian Union of Self-Regulated Organizations of Arbitration Managers  
Society of Insolvency Practitioners of India  
South African Restructuring and Insolvency Practitioners Association   
Turnaround Management Association do Brasil
Turnaround Management Association (INSOL Special Interest Group)