A U.S. Bankruptcy Court May Enforce a Foreign Restructuring in the U.S.

By: Priya Suresh

St John’s University School of Law

American Bankruptcy Institute Law Review Staff

            Under section 1521 of title 11 of the United States Code (the “Bankruptcy Code”), a bankruptcy court may enter an order enforcing a foreign restructuring in the United States.[1] In In re Olinda Star Ltd., a bankruptcy court in New York held that it would recognize Olinda Star’s British Virgin Island (“BVI”) proceeding and grant full force and effect and comity to a BVI scheme of arrangement, which provided for a restructuring of the debtor.[2] Olinda Star, a BVI company, is part of the Constellation group of companies and a guarantor of certain indebtedness owed by other members of the group.[3] All members of the group, including Olinda Star, commenced restructuring proceedings in Brazil. Thereafter, a subset of the group, including Olinda Star, filed petitions for recognition of the Brazilian proceedings under Chapter 15 of the Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York. Following the decision of the Brazilian Court of Appeals dismissing the Olinda Star restructuring proceeding for lack of jurisdiction,[4] the U.S. court declined to recognize Olinda Star’s Brazilian proceeding. Thereafter, Olinda Star, which was also a debtor in a BVI proceeding, proposed a scheme of arrangement under BVI law, pursuant to which certain guarantees would be restructured.[5] This scheme of arrangement was approved by creditors and thereafter by the BVI Court in February 2020.[6] Olinda then sought an order recognizing the BVI proceeding and enforcing the scheme under Chapter 15. 

            In order for the U.S. court to recognize the BVI proceeding, it must first find that the proceeding is a foreign main proceeding or a foreign nonmain proceeding.[7] A foreign main proceeding is defined as a “foreign proceeding pending in the country where the debtor has the center of its main interests.”[8] Here, Olinda’s center of main interest  (“COMI”) was presumed to be BVI under the Bankruptcy Code because Olinda was incorporated in the BVI.[9] In addition, several other factors supported a finding that Olinda’s COMI was BVI.  First, the location of those who actually manage the debtor. Here, the Joint Provisional Liquidators had a pivotal role in overseeing non-ordinary business transactions and the restructuring process which was in the BVI.[10] Second, it was the reasonable expectation of Olinda’s creditors to consider the COMI to be in the BVI.[11] Consequently, the court recognized the proceeding as a foreign main proceeding, due to finding its COMI in the BVI.[12] Following recognition of the BVI proceeding, the court then addressed enforcement of the BVI scheme.

            Following recognition of a foreign proceeding, a U.S. court may enforce a foreign debt restructuring under section 1521 if certain criteria are met.  In particular, the interests of creditors must be sufficiently protected under section 1522.[13] Here, the court entered an order enforcing the BVI scheme in the U.S. noting the similarities between standards of U.S. law and BVI law,[14] while heavily considering policy. It declared that the U.S. and BVI shared “common-law traditions and fundamental principles of law, including an emphasis on procedural fairness.”[15] Much like a chapter 11 plan, a scheme can only be approved by a BVI court if it is approved first by the creditors. The fact that the creditors “had a full and fair opportunity to vote and be heard . . . is consistent with U.S. due process standards.”[16] Given that the creditors had an opportunity to vote on the BVI scheme and participate in the process, the U.S. court found that the interests of creditors were protected as required by section 1522. Therefore, the U.S. court issued an order enforcing the BVI scheme.[17]



[1] See 11 U.S.C §1521.

[2] See In re Olinda Star Ltd., 614 B.R. 28, 47 (Bankr. S.D.N.Y. 2020).

[3] See id. at 34.

[4] See id. at 32–33.

[5] See id. at 36.

[6] See id. at 38.

[7] See id. at 40.

[8] Id. at 40 (citing 11 U.S.C. §1502(4)).

[9] See In re Olinda Star Ltd., 614 B.R. at 41.

[10] See id. at 42; see also In re Fairfield Sentry Ltd., No. 10 Civ. 7311 (GBD), 2011 WL 4357421,

at *5 (S.D.N.Y. Sept. 16, 2011) (finding COMI where the Joint Provisional Liquidators had been directing and coordinating the debtor’s affairs during liquidation proceedings).

[11] In re Olinda Star Ltd., 614 B.R. at 44.

[12] Id. at 45.

[13] See id. at 47.

[14] See id.

[15] Id.

[16] Id.

[17] Id. at 48.