Maybe the U.K. was the Proper Forum After All

By: Tyler Levine

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

           In In re Hellas[1] the United States Bankruptcy Court for the Southern District of New York stayed an adversary proceeding on the ground of forum non-conveniens.[2] Plaintiffs, the [liquidators of] Hellas Telecommunications (Luxembourg) II SCA (“Hellas II”), filed a complaint in the Bankruptcy Court following recognition of the foreign liquidators of Hellas II under Chapter 15 of the Bankruptcy Code. The plaintiffs sought to avoid and recover an initial transfer from Hellas II to its parent’s entity of approximately $1.57 billion and also to avoid and recover $973.7 million that was later transferred to several named defendants and an unmanned class of transferees.[3] Initially, the court denied the forum non-conveniens motion because it had the jurisdiction to adjudicate the claims under Sections 213 and 423 of the U.K. Insolvency Act.[4] Thereafter, plaintiffs commenced a similar action under U.K. law, in the U.K., against nine dismissed defendants.[5] In response to this new avoidance action filed in the U.K., the defendants filed another forum non-conveniens motion on January 19, 2016, and the court concluded that in light of this new U.K. action it is now best to litigate all the claims in one forum.

            The bankruptcy court applied a three-part test to decide the forum non-conveniens motion.  In this three-part test, the court (1) determined the degree of deference it should give to the plaintiffs’ choice of forum, (2) decided whether an adequate alternative forum exists, and (3) balanced the private and public interests at stake.[6] Because foreign plaintiffs are afforded less deference, the court then analyzed whether this forum was selected as a matter of convenience.[7] The court determined that forum shopping might have motivated the decision to sue in the U.S. because of a “tactical advantage resulting from local laws” or because of a desire to obtain “an advantage given the degree of unpredictably associated with an American court's interpretation of U.K. law”[8] Additionally, the court noted the U.K. was an adequate alternative forum because all U.S. defendants agreed to submit to jurisdiction there.[9]

           The court then analyzed public interest factors and determined that the U.K. court has a greater local interest in hearing this case because U.K. law is being applied, the initial transfer involved English bank accounts and Hellas II compulsory liquidation proceeding is also being held in a U.K. court.[10] The court supported its decision by analyzing private interest factors and ruled that Hellas II did not unreasonably delay in bringing the forum non-conveniens motion and that because many of the witnesses were foreign, the court could not subpoena such witnesses.[11]

            Chapter 15 is used to provide an efficient means for dealing with cases involving cross-border insolvencies.[12] The chapter applies when “assistance is sought in the U.S. by a foreign court or foreign representative in connection with a foreign proceeding.”[13] Initially, liquidators defeated a forum non-conveniens motion and this case would have proceeded in the United States. However, once additional proceedings were brought in the U.K., liquidators lost their right to pursue claims in the U.S because the U.K. provided an adequate alternative forum. When applying the goals of Chapter 15 it is clear the U.S. court is meant to provide assistance and not supplant the U.K. court, which in this case is in a better position to interpret the law and adjudicate all of the claims.[14]

[1] In re Hellas Telecommunications (Luxembourg) II SCA, 2016 WL 4434352 (Bankr. S.D.N.Y. Aug. 22, 2016).

[2] See id. at *23.

[3] See id. at *4.

[4] See id.  at *5.

[5] See id.  at * 8.

[6] See id.

[7] See Norex Petroleum Ltd. v. Access Indus., Inc., 416 F.3d 146 (2d Cir. 2005).

[8] See In re Hellas Telecommunications (Luxembourg) II SCA, 2016 WL 4434352 at *17.

[9] See id. at *18.

[10] See In re Hellas Telecommunications (Luxembourg) II SCA, 2016 WL 4434352 at *19.

[11] See id. at *22–23.

[12] See id.  at *15.

[13] Id.

[14] See id.