This piece was originally published by the International Committee of the American Bankruptcy Institute (ABI). For more information about the ABI, see http://www.abi.org/.
Date Created: Fri, 05/26/2017 - 11:17
Weeks before Hanjin Shipping sought protection from its creditors in Korea, I got an unexpected call: “Tally, I think one of the world’s largest shipping companies is going to file for bankruptcy in Korea and seek chapter 15 protection in New York, are you up for being my local counsel?” This was in early August 2016, and my life has not been the same since.
Come November 2016, there was a lull in the main case in Seoul, Korea and the ancillary chapter 15 proceedings in Newark, N.J., long enough to enable me to co-author an article for the ABI Journal with Prof. Adrian J. Walters of IIT Chicago-Kent College of Law [about the Hanjin Shipping cases in Korea and the United States].[1] The volume of questions and comments that resulted necessitated adding storage space to my domain,[2] and I have since been asked what I make of matters in shipping cases ranging from the Internal Revenue Service filing priority claims in the hundreds of millions of dollars in Toisa Ltd.’s chapter 11 proceedings pending before the U.S. Bankruptcy Court for the Southern District of New York[3] to the relief sought in the chapter 15 proceedings of Ocean Rig[4] in the same district. And more!
Grateful as ever for the opportunity to be of service to people in need of orientation in emergency situations, I thought to share a development in international cases in New York, Delaware and Singapore so that it does not come as a surprise when they need to do what I did: Act in real time.
By resolution of the board of judges for the Southern District of New York, Chief Judge Cecelia G. Morris of the U.S. Bankruptcy Court for the Southern District of New York signed General Order M-511 as of Feb. 17, 2017.[5] The order serves “to improve the efficiency and effectiveness of cross-border insolvency proceedings and to enhance coordination and cooperation among courts under whose supervision such proceedings are being conducted.”[6] It adopts procedural guidelines made available in the clerk of court’s office and on the bankruptcy court’s website, and may be modified by subsequent general orders.[7] The scope of the procedural guidelines is broad; they apply where there are parallel cross-border proceedings relating to insolvency or the adjustment of debt opened in more than one jurisdiction.[8] As the procedural guidelines explain,
In particular, these Guidelines aim to promote:
(i) the efficient and timely coordination and administration of Parallel Proceedings;
(ii) the administration of Parallel Proceedings with a view to ensuring stakeholders’ interests are respected;
(iii) the identification, preservation, and maximization of the value of the debtor’s assets, including the debtor’s business;
(iv) the management of the debtor’s estate in ways that are proportionate to the amount of money involved, the nature of the case, the complexity of the issues, the number of creditors, and the number of jurisdictions involved in Parallel Proceedings;
(v) the sharing of information in order to reduce costs; and
(vi) the avoidance or minimization of litigation, costs, and inconvenience to the parties in Parallel Proceedings.[9]
Interested readers are encouraged to study the procedural guidelines as they alter previous practice under bodies of law including chapter 15 of the Bankruptcy Code, the related Federal Rules of Bankruptcy Procedure, Federal Rules of Evidence and Local Bankruptcy Rules for the Southern District of New York effective as of Dec. 1, 2016.
Procedural guidelines, to the same effect, are also in place in the District of Delaware[10] and can be made applicable to a particular case either by approval of a protocol or entry of an order following application made by the parties — or sua sponte by the bankruptcy court.[11] Meanwhile, in Singapore, the procedural guidelines are part of a broader initiative:
In October 2016, the Supreme Court announced the establishment of a network of insolvency judges from several jurisdictions to encourage communication and cooperation among national courts. The network, known as the Judicial Insolvency Network (“JIN”), comprises judges from Australia (Federal Court and New South Wales), Bermuda, the British Virgin Islands,[12] Canada (Ontario), the Cayman Islands, England [and] Wales[13], Singapore and the [U.S.] (Delaware and Southern District of New York) as pioneer participants. The JIN has approved guidelines (enclosed in Schedule I herein) setting out key features to be reflected in a protocol or order of court for communication and cooperation among courts, and insolvency representatives and other parties in cross-border insolvency proceedings (the “Guidelines”).
In Singapore, the Guidelines supplement all legislation, rules and procedure concerning insolvency….[14]
Conclusion
Given the bulk of interest-bearing notes issued under New York law, the long-lasting effects of the collapse of Lehman Brothers and other macro forces we can expect more companies to collapse under the weight of their leverages. We will be seeing more cross-border cases within and outside of the U.S. with complex parallel proceedings, and it is best to learn the ropes. They are quite interesting, and practitioners who are knowledgeable can provide advice in aid of a host of parties in interest worldwide.
Recent Developments in Practice: New York, Delaware and Singapore
Tally M. WienerWeeks before Hanjin Shipping sought protection from its creditors in Korea, I got an unexpected call: “Tally, I think one of the world’s largest shipping companies is going to file for bankruptcy in Korea and seek chapter 15 protection in New York, are you up for being my local counsel?” This was in early August 2016, and my life has not been the same since.
Come November 2016, there was a lull in the main case in Seoul, Korea and the ancillary chapter 15 proceedings in Newark, N.J., long enough to enable me to co-author an article for the ABI Journal with Prof. Adrian J. Walters of IIT Chicago-Kent College of Law [about the Hanjin Shipping cases in Korea and the United States].[1] The volume of questions and comments that resulted necessitated adding storage space to my domain,[2] and I have since been asked what I make of matters in shipping cases ranging from the Internal Revenue Service filing priority claims in the hundreds of millions of dollars in Toisa Ltd.’s chapter 11 proceedings pending before the U.S. Bankruptcy Court for the Southern District of New York[3] to the relief sought in the chapter 15 proceedings of Ocean Rig[4] in the same district. And more!
Grateful as ever for the opportunity to be of service to people in need of orientation in emergency situations, I thought to share a development in international cases in New York, Delaware and Singapore so that it does not come as a surprise when they need to do what I did: Act in real time.
By resolution of the board of judges for the Southern District of New York, Chief Judge Cecelia G. Morris of the U.S. Bankruptcy Court for the Southern District of New York signed General Order M-511 as of Feb. 17, 2017.[5] The order serves “to improve the efficiency and effectiveness of cross-border insolvency proceedings and to enhance coordination and cooperation among courts under whose supervision such proceedings are being conducted.”[6] It adopts procedural guidelines made available in the clerk of court’s office and on the bankruptcy court’s website, and may be modified by subsequent general orders.[7] The scope of the procedural guidelines is broad; they apply where there are parallel cross-border proceedings relating to insolvency or the adjustment of debt opened in more than one jurisdiction.[8] As the procedural guidelines explain,
In particular, these Guidelines aim to promote:
(i) the efficient and timely coordination and administration of Parallel Proceedings;
(ii) the administration of Parallel Proceedings with a view to ensuring stakeholders’ interests are respected;
(iii) the identification, preservation, and maximization of the value of the debtor’s assets, including the debtor’s business;
(iv) the management of the debtor’s estate in ways that are proportionate to the amount of money involved, the nature of the case, the complexity of the issues, the number of creditors, and the number of jurisdictions involved in Parallel Proceedings;
(v) the sharing of information in order to reduce costs; and
(vi) the avoidance or minimization of litigation, costs, and inconvenience to the parties in Parallel Proceedings.[9]
Interested readers are encouraged to study the procedural guidelines as they alter previous practice under bodies of law including chapter 15 of the Bankruptcy Code, the related Federal Rules of Bankruptcy Procedure, Federal Rules of Evidence and Local Bankruptcy Rules for the Southern District of New York effective as of Dec. 1, 2016.
Procedural guidelines, to the same effect, are also in place in the District of Delaware[10] and can be made applicable to a particular case either by approval of a protocol or entry of an order following application made by the parties — or sua sponte by the bankruptcy court.[11] Meanwhile, in Singapore, the procedural guidelines are part of a broader initiative:
In October 2016, the Supreme Court announced the establishment of a network of insolvency judges from several jurisdictions to encourage communication and cooperation among national courts. The network, known as the Judicial Insolvency Network (“JIN”), comprises judges from Australia (Federal Court and New South Wales), Bermuda, the British Virgin Islands,[12] Canada (Ontario), the Cayman Islands, England [and] Wales[13], Singapore and the [U.S.] (Delaware and Southern District of New York) as pioneer participants. The JIN has approved guidelines (enclosed in Schedule I herein) setting out key features to be reflected in a protocol or order of court for communication and cooperation among courts, and insolvency representatives and other parties in cross-border insolvency proceedings (the “Guidelines”).
In Singapore, the Guidelines supplement all legislation, rules and procedure concerning insolvency….[14]
Conclusion
Given the bulk of interest-bearing notes issued under New York law, the long-lasting effects of the collapse of Lehman Brothers and other macro forces we can expect more companies to collapse under the weight of their leverages. We will be seeing more cross-border cases within and outside of the U.S. with complex parallel proceedings, and it is best to learn the ropes. They are quite interesting, and practitioners who are knowledgeable can provide advice in aid of a host of parties in interest worldwide.
[1] Tally M. Wiener and Adrian J. Walters, “The Dire Straits of Hanjin Shipping,” XXXVI ABI Journal 1, 26-27, 54, January 2017, available at abi.org/abi-journal.
[2] See thecomi.com.
[3] In re Toisa Ltd., et al., Chapter 11 Case No. 17-10184, pending before Hon. Shelley C. Chapman.
[4] In re Ocean Rig UDW Inc., et al., Chapter 15 Case No. 17-10736, pending before Hon. Martin Glenn.
[5] The general order is available on the U.S. Bankruptcy Court for the Southern District of New York’s website at www.nysb.uscourts.gov/sites/default/files/m511.pdf.
[6] Id.
[7] See id.
[8] See Guidelines for Communication and Cooperation Between Courts in Cross-Border Insolvency Matters, adopted by General Order M-511 supra n.5.
[9] Id.
[10] See Local Rule 9029-2, available on the website of the U.S. Bankruptcy Court for the District of Delaware at www.deb.uscourts.gov/sites/default/files/local_rules/9029-2%20Guidelines%20for%20Communication%20and%20Cooperation%20Between%20Courts%20in%20Cross-Border%20Insolvency%20Matters.pdf.
[11] See id.
[12] Increasingly, Singapore courts are handling cases with British Virgin Islands pieces. See, e.g., Tally M. Wiener, “Singapore Court Upholds High Court Ruling in Liquidator’s Favor,” XXXIV ABI Journal 6, 30-31, 66-67, June 2015, available at abi.org/abi-journal.
[13]
With thanks to Adrian J. Walters, Professor of Law at IIT Chicago-Kent
College of Law and a Solicitor of the Senior Courts of England and
Wales, for the update that follows. “In the UK, the JIN guidelines were
adopted with effect from 4 May 2017 as chapter 25 of the Chancery
Guide: https://www.gov.uk/government/publications/chancery-guide#history They have also been recently adopted in Bermuda and the BVI.”
[14]
Registrar’s Circular No. 1 of 2017, available on the website of the
Supreme Court of the Republic of Singapore at
supremecourt.gov.sg/docs/default-source/module-document/registrarcircular/rc-1-2017---issuance-of-guidelines-for-communication-and-coorporation-between-courts-in-cross-border-insolvency-matters-.pdf.
Michael D'Onofrio