Section 304 of the Bankruptcy Code is proving to be an increasingly constructive means to facilitate international restructurings that begin outside the United States. The most recent application of §304 to assist an international reorganization arose in a case in the U.S. Bankruptcy Court for the Central District of California in Los Angeles.

The case involved was a Canadian airline that filed for reorganizational protection in Toronto under Canada's Companies' Creditors Arrangement Act (CCAA). (The CCAA, as readers of the Journal may already know, is the Canadian equivalent to chapter 11 proceedings under the Bankruptcy Code, although the CCAA is dramatically short on virtually all of the structure and procedures of chapter 11). International assistance was particularly appropriate in this airline's case, as there were creditors in more than 20 countries reflecting its global operations. The airline had major operations in the United States, and many of its creditors were based in the United States.

It was clearly essential to the prospects for a successful reorganization that the airline's operations be continued in the normal course without creditors attempting to seize its aircraft. To that end, the airline applied to the bankruptcy court for an order under §304 granting a stay of proceedings by creditors while the Canadian reorganization proceeded. The bankruptcy court acceded to the request, and Hon. Sheri Bluebond granted a temporary restraining order (TRO) to that effect. The TRO was subsequently enlarged into a preliminary injunction against creditors, which was granted and continued from time to time by Hon. Kathleen March.

ABI members, of course, figured prominently in both the Canadian and the U.S. proceedings. In the §304 proceedings, counsel for the company were Robert Greenfield, Tony Castanares and Margaret (Casey) Giles of Stutman, Treister & Glatt in Los Angeles. Counsel for the company in its Canadian reorganizational proceedings were Bruce Leonard and William J. Burden of Cassels Brock & Blackwell LLP in Toronto. Ironically, the Canadian reorganization became unsuccessful when the emergency Canadian Federal Government funding that had been expected for the Canadian airline after 9/11 did not materialize. Interestingly, however, the preliminary injunction that protected the company in its reorganization continued even after the reorganization turned into the Canadian equivalent of a chapter 7 case. (Re Canada 3000 Inc.: Ontario Superior Court of Justice, Toronto: Case No. 01-CL-4314; Re Canada 3000 Inc.: C.D. Cal.: Case No. LA-01-43656 KM).

Federal Judicial Center Publishes International Insolvency

The Federal Judicial Center (FJC) is the research and education agency of the federal judicial system. It was established by Congress in 1967, and among other activities, it undertakes empirical and explanatory research on international legal developments of importance to the federal judiciary.

The FJC has recently published a very significant and very valuable study on international insolvency systems and procedures called the Federal Judicial Center's International Insolvency Monograph. The Monograph was written by four bankruptcy judges: Hon. Samuel L. Bufford (C.D. Cal.), Hon. Louise deCarl Adler (S.D. Cal.), Hon. Sidney B. Brooks (D. Colo.) and Hon. Marcia S. Krieger (D. Colo.).¹ The authors served on the International Law Relations Committee of the National Conference of Bankruptcy Judges.

The Monograph is a very significant analysis (100 pages of text with 600 footnotes) covering both domestic cases with transnational aspects and international cases with domestic aspects. It includes detailed commentary and descriptions of procedural issues in transnational insolvency cases, international conventions and other sources of international bankruptcy law. The Monograph contains the text of the International Bar Association's Cross-border Insolvency Concordat, the UNCITRAL Model Law on Cross-border Insolvency (on which the proposed new chapter 15 of the Bankruptcy Code is based) and the European Union Regulation on Insolvency Proceedings (which is due to come into force on May 31).

The Monograph is a unique and highly valuable resource for judges, lawyers and insolvency practitioners who are involved in international cases or domestic cases with international aspects. The authors have performed a major service to the national and international bankruptcy and insolvency community, and the Monograph is a highly valuable and constructive guide that everyone who encounters international issues will benefit from. Copies of the Monograph are available from the Publications Division of the Federal Judicial Center, One Columbus Circle N.E., Suite 6-300 Washington, D.C. 2002-8003 (Fax: 202-502-4077). An electronic version of the Monograph is available online from the Federal Judicial Center at www.fjc.gov/newweb/jnetweb.nsf/pages/405. When requesting copies of the Monograph, please remember to indicate that you read about it in the Journal.

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Footnotes

¹ Judge Krieger was recently elevated to the U.S. District Court. Return to article