Tuesday, December 11, 2018
According to BankruptcyData: SERVICOS DE PETROLEO CONSTELLATION S.A. – BRAZILIAN DRILLING COMPANY SEEKS US RECOGNITION OF BRAZILIAN BANKRUPTCY PROCEEDINGS, ANNOUNCES CREDITOR AGREEMENTS
It has been a long time rule of English law that debt incurred under English law cannot be discharged in a foreign proceeding. It can only be discharged under English law.
Debt incurred under U.S. law has sometimes been thought of as not being subject to this basic and intuitive choice of law principle. But, in fact, there is a limitation on the ability of foreign courts to protect foreign companies with debt incurred under U.S. law, including New York law (which may apply to various loan contracts and other financing arrangements) and the Trust Indenture Act (applicable to certain bond debt).
There is a race-to-the-courthouse dynamic among the creditors that hold debt governed by U.S. law and the debtors that owe it.
For example, coverage of the chapter 15 bankruptcy proceedings of Brazilian oil and gas company Constellation, filed in the Southern District of New York, reflects that creditors of a foreign company with U.S. law governed debt can take action in the United States to collect. In Constellation's case the coverage suggests that the debtors' run to a Manhattan federal courthouse achieved temporary protection from their creditors under chapter 15 of the Bankruptcy Code.