IN THE UNITED STATES BANKRUPTCY COURT
`FOR THE DISTRICT OF DELAWARE
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`Chapter 15
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`Case No. 12-10947(CSS)
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`In re:
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`Elpida Memory, Inc.,
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`Debtors.
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`RICHARD, LAYTON & FINGER, P.A.
`Mark D. Collins
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`Paul N. Heath
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`Lee E. Kaufman
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`920 North King Street
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`Wilmington, DE 19801
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`DAVIS POLK & WARDWELL, LLP
`James I. McClammy
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`Giorgio Bovenzi
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`450 Lexington Avenue
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`New York, New York 10017
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`Theodore A. Paradise
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`Izumi Garden Tower 33F
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`Minato-Ku
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`Tokyo 106-6033, Japan
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`Counsel for Foreign Representatives
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`1 This Opinion constitutes the Court’s findings of fact and conclusions of law pursuant to Federal Rule of
`Bankruptcy Procedure 7052.
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`OPINION1
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`LANDIS, RATH & COBB, LLP
`Adam G. Landis
`Matthew B. McGuire
`919 Market Street
`Suite 1800
`Wilmington, DE 19801
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`Counsel for Micron Technology
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`WHITE & CASE, LLP
`Christopher J. Shore
`Lydia E. Lin
`1155 Avenue of the Americas
`New York, New York 10036
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`FOX ROTHSCHILD, LLP
`Jeffrey M. Schlerf
`Citizens Bank Center
`919 North Market Street, Suite 1300
`Wilmington, DE 19899
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`Counsel for the Steering Committee
`of the Ad Hoc Group of Bondholders
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`1
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`BIFFERATO, LLP
`Tom Driscoll
`800 North King Street
`Wilmington, DE 19801
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`Counsel for Rambus
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`Date: November 20, 2012
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`Sontchi, J._______________
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`INTRODUCTION
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`The issue before the Court, which appears to be a matter of first impression, is
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`what legal standard applies in a Chapter 15 case to the transfer of assets located in the
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`United States pursuant to a “global” transaction previously approved by another Court
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`in a foreign main proceeding. Based upon the plain meaning of the statue supported by
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`the legislative history, this Court must review the transaction to the extent it impacts
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`assets located in the United States under the legal standards governing a transfer by a
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`trustee outside the ordinary course of business, i.e., is the transaction a sound exercise
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`of the trustee’s business judgment.
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`JURISDICTION
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`This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and
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`1334. Venue is proper in this District pursuant to 28 U.S.C. §§ 1408 and 1409. This is a
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`core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (M), (N) and (O).
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`2
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`STATEMENT OF FACTS2
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`On February 27, 2012, Elpida Memory, Inc. (“Elpida”) filed a petition for
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`commencement of corporation reorganization proceedings under the Japan Corporate
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`Reorganization Act (Kaishu Kosei Ho) in the Tokyo District Court, Civil Division (the
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`“Tokyo Court”). On March 23, 2012, the Tokyo Court entered its Court Decision on
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`Commencement of Reorganization Proceeding dated March 23, 2012
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`“Commencement Order”). The Commencement Order appointed Messrs. Yukio
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`Sakamoto and Nobuaki Kobayashi as trustees (“Trustees”) for Elpida’s corporate
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`reorganization proceeding in Japan. On March 23, 2012, the Tokyo Court also
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`appointed Mr. Atsushi Toki as examiner of Elpida.
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`On March 19, 2012, Mr. Sakamoto filed a verified petition pursuant to sections
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`1504 and 1515 of the Bankruptcy Code commencing this chapter 15 case. On March 21,
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`2012, the Court entered the Order Granting Provisional Relief, Scheduling Recognition
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`Hearing and Specifying Form and Manner of Notice Pursuant to Sections 105(a) and
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`1519 of the Bankruptcy Code [Docket No. 25]. On April 24, 2012, the Court entered its
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`Order Pursuant to U.S.C. §§ 105, 1504, 1515, 1517, 1520, and 1521 Recognizing Foreign
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`Representatives and Foreign Main Proceeding [Docket No. 65] (the “Recognition
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`Order”). Under the Recognition Order, the Court recognized Elpida’s reorganization
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`2 The Court has scheduled a hearing on the Rambus Motion and Micron Motion (as defined below) for
`December 5-6, 2012. Given the necessity that a ruling on the applicable legal standard be entered
`sufficiently prior to the hearing so that counsel can properly prepare the case for trial, this Court has
`undertaken to issue this opinion on an expedited basis. As such, the Statement of Facts is not as thorough
`as the Court would prefer but believes it is sufficient to resolve the issues presently before it.
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`3
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`proceeding in the Tokyo Court as a “foreign main proceeding” and Messrs. Sakamato
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`and Kobayashi as Elpida’s foreign representatives (the “Foreign Representatives”).3
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`In mid-September, the Foreign Representatives filed four motions under section
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`363 of the Bankruptcy Code seeking authorization to enter into four related
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`transactions: (i) Foreign Representatives’ Motion for Approval of the Pledge of Certain
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`United States Registered Patents to Apple Inc. [Docket No. 157] (the “Apple Motion”);
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`(ii) Foreign Representatives’ Motion for Approval of Security Agreements in
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`Connection with Obtaining Postpetition Financing [Docket No. 143] (the “DIP
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`Financing Motion”); (iii) Foreign Representatives’ Motion to Approve Sale of Certain
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`Patents to Rambus Inc. [Docket No. 163] (the “Rambus Motion”); (iv) Foreign
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`Representatives’ Motion to Approve Patent License Agreement and Technology
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`Transfer and License Agreement [Docket No. 165] (the “Micron Motion,” collectively,
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`the “363 Motions”). All of the transactions under the 363 Motions had been previously
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`approved by the Tokyo Court.
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`The Steering Committee of the Ad Hoc Group of Bondholders (the “Steering
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`Committee”) initially objected to all of the 363 Motions but subsequently withdrew
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`(reluctantly) its objection to the Apple Motion and the DIP Financing Motion. The
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`3 Messrs. Sakamato and Kobayashi are both the Trustees of Elpida in the Japan proceeding and the
`Foreign Representatives of Elpida in the Chapter 15 proceeding. Even though they are the same persons
`they have different jobs. The Court will refer to these gentlemen as Trustees in connection with actions in
`Japan and Foreign Representatives for actions in this Court.
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`4
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`Court entered orders granting those motions on October 31, 2012.4 The Steering
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`Committee continues to object to the Rambus Motion and the Micron Motion.
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`The Foreign Representatives also filed related motions under section 107(b) of
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`the Bankruptcy Code to redact confidential information related to the 363 Motions. The
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`motions to seal in connection with the DIP Financing Motion and Apple Motion were
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`granted without objection. In addition, the motion to seal in connection with the
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`Rambus Motion was withdrawn. The Steering Committee continues to object to the
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`Foreign Representatives’ Motion Pursuant to Section 107(b) of the Bankruptcy Code,
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`Bankruptcy Rule 9018, and Local Rule 9018-1 for Authority to (A) Redact Certain
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`Portions of, and (B) File Under Seal Certain Exhibits to, Foreign Representatives’
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`Motion to Approve Patent License Agreement and Technology Transfer and License
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`Agreement [Docket No. 166] (the “Micron Motion to Seal”).
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`In connection with the Rambus Motion, Elpida is selling certain of its patents,
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`some of which are registered in the United States, to Rambus Inc. (“Rambus”) under a
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`Patent Purchase Agreement (“PPA”). Under the PPA, Rambus is granting a royalty-
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`free, perpetual license to Elpida. The PPA was approved by the Japanese Court on
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`August 10, 2012.
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`In connection with the Micron Motion, Elpida is granting Micron Technology
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`Inc. (“Micron”) a license in the patents being sold to Rambus under a Patent License
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`Agreement (“PLA”). Under a sponsorship arrangement between Elpida and Micron
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`4 Order Approving Pledge of Certain United States Registered Patents to Apple Inc. [Docket No. 249]; and
`Order Approving Security Agreements In Connection With Obtaining DIP Financing [Docket No. 250].
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`5
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`that was approved in Japan on July 2, 2012 (and which is not before this Court), the
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`patents cannot be sold to Rambus absent Micron’s consent. Micron agreed to consent to
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`the Rambus patent sale, provided that Elpida provide Micron with a non-exclusive,
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`royalty-free, non-sublicensable, perpetual and irrevocable license to the Rambus
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`patents. The PLA was approved by the Japanese Court on August 10, 2012. Earlier, on
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`July 12, 2012, the Japanese Court approved a related Technology Transfer and License
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`Agreement (“TTLA”) between Elpida and Micron. The PPA, PLA and TTLA all include
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`a transfer of Elpida’s property located within the territorial jurisdiction of the United
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`States.
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` Elpida’s reorganization proceeding before the Tokyo Court has continued to
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`move forward, albeit with the opposition of certain of Elpida’s bondholders (the
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`“Japanese Bondholders”). On August 14, 2002, the Japanese Bondholders submitted to
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`the Tokyo Court a competing plan proposal (the “Japanese Bondholders’ Plan”),
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`pursuant to the Commencement Order authorizing, “reorganization creditors” to
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`submit reorganization plan proposals. On August 21, 2012, Elpida’s Trustees submitted
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`to the Tokyo Court a reorganization plan proposal (as amended, the “Trustees’ Plan"),
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`pursuant to the Commencement Order authorizing the Trustees to submit a
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`reorganization plan proposal.
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`On October 29, 2012, the Examiner issued his opinion regarding the Trustees’
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`Plan. Immediately thereafter, on October 31, 2012, the Tokyo Court entered an order
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`referring the Trustees’ Plan for creditor voting. The same day, the Tokyo Court entered
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`an order determining that the Japanese Bondholders’ Plan would not be referred for
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`creditor voting. As of the date of this opinion, the Court understands that the Trustees
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`are preparing the vote solicitation package that will be sent to all secured and
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`unsecured reorganization creditors of Elpida.
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`PROCEDURAL POSTURE
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`The Court has bifurcated its review of the Rambus Motion and the Micron
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`Motion. A hearing on the merits of those motions is scheduled for December 5-6, 2012.
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`At the request of the parties, however, the Court conducted a hearing on November 8,
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`2012, as to what legal standard would apply to the Court’s review of the motions. The
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`Court also considered the Micron Motion to Seal at the November 8th hearing. At the
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`conclusion of the hearing, applying section 107(b) of the Bankruptcy Code, the Court
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`granted in part and denied in part the Micron Motion to Seal. The Court reserved
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`judgment, however, on whether the Court’s decision on the Motion to Seal, in whole or
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`in part, should be based upon principles of comity.
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`This is the Court’s decision on the issues before it on November 8th.
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`LEGAL ANALYSIS
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`1. Chapter 15 In General
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`Chapter 15 of the Bankruptcy Code, which adopted the substance and most of
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`the text of the United Nations Commission on International Trade Law (“UNCITRAL”)
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`Model Law on Cross–Border Insolvency (“Model Law”), provides a comprehensive
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`scheme for recognizing and giving effect to foreign insolvency proceedings.5 The
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`5 UNCITRAL Model Law on Cross-Border Insolvency, U.N. GAOR 52d Sess., U.N. Doc. A/52/17 (1997).
`Congress implemented the Model Law through the enactment of Chapter 15 and directed that the Guide
`to the Model Law be used to instruct its interpretation. See In re Ephedra Prods. Liab. Litg., 349 B.R. 333, 336
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`purpose of Chapter 15 is to adopt the Model Law with the objective of encouraging and
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`increasing the cooperation between U.S. courts and authorities and foreign courts and
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`authorities in cross-border insolvency cases; providing greater certainty and consistency
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`in the law for trade and investment; promoting fair and efficient administration of
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`cross-border insolvencies while protecting the interests of all creditors and other
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`interested parties, including the debtor; protecting and maximizing the value of a
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`debtor's assets; and facilitating the rescue of financially troubled businesses.6
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`Chapter 15 begins with the filing of a petition for recognition.7 Where the foreign
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`case is recognized as a foreign main proceeding,8 certain mandatory relief goes into
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`effect automatically.9 The mandatory relief includes the applicability of section 363 of
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`the Bankruptcy Code “to a transfer of an interest of the debtor in property that is within
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`the territorial jurisdiction of the United States to the same extent that the section would
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`apply to property of the estate.”10 After recognition, the Court has discretion to grant a
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`foreign representative relief as provided in section 1521. In addition to relief available
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`after recognition, the foreign representative may request preliminary relief under
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`(S.D.N.Y. 2006)(“the House Judiciary Committee, in enacting Chapter 15, specifically indicated that the
`Guide should be consulted for guidance as to the meaning and purpose of [Chapter 15’s] provisions”’)
`(quoting H.R. Rep. No. 109-31)(I), at 106 n. 101).
`6 11 U.S.C. § 1501
`7 11 U.S.C. § 1515.
`8 A “foreign main proceeding” is defined as “a foreign proceeding pending in the country where the
`debtor has the center of its main interests.” 11 U.S.C. § 1502(4).
`9 11 U.S.C. § 1520.
`10 11 U.S.C. § 1520(a)(2) (emphasis added).
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`section 1519, in order to “protect the assets of the debtor or the interests of the
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`creditors” pending the order of recognition.11
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`Section 1507 further provides that the Court is authorized to grant any
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`“additional assistance” available under the Bankruptcy Code or under “other laws of
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`the United States,” provided that such assistance is consistent with the principles of
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`comity and satisfies the fairness considerations set out in the statute. The relationship
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`between section 1507 and section 1521 is not entirely clear; one court has stated that
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`such post-recognition assistance is “largely discretionary and turns on subjective factors
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`that embody principles of comity.”12 In any event, there is no doubt that the relief
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`available under 1519, 1521, and particularly additional assistance granted pursuant to
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`section 1507 should, when possible, be consistent with the principle of comity. Section
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`1507 specifically so provides with respect to “additional assistance,” and more broadly,
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`section 1509(b)(3) directs that once a foreign representative obtains recognition, “a court
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`in the United States shall grant comity or cooperation to the foreign representative.”
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`3.
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`The Standard Governing A Sale Of Assets In Chapter 15
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`a. Setting the Table
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`In Chapter 15, a “’debtor’ means an entity that is the subject of a foreign
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`proceeding.”13 A foreign proceeding can be either a “foreign main proceeding” or a
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`11 11 U.S.C. § 1519(a).
`12 In re Bear Stearns High–Grade Structured Credit Strategies Master Fund, Ltd., 389 B.R. 325, 333
`(S.D.N.Y.2008), aff'd 374 B.R. 122 (Bankr. S.D.N.Y. 2007).
`13 11 U.S.C. § 1502(1).
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`“foreign nonmain proceeding.”14 A foreign main proceeding is “a foreign proceeding
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`pending in a country where the debtor has the center of its main interests.”15
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`Recognition “means the entry of an order granting recognition of a foreign main
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`proceeding or foreign nonmain proceeding under this chapter.” Where the foreign
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`proceeding is a foreign main proceeding, section 1520(a) becomes applicable “upon
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`recognition.”16
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`In this case, Elpida is the “debtor” and its Japan reorganization proceeding is a
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`“foreign main proceeding.” The Japan reorganization proceeding was “recognized” by
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`this Court on upon entry of the Recognition Order on April 24, 2012 at which time
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`section 1520(a) became applicable to the Chapter 15 case.
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`Section 1520(a)(2) provides that section 363 of the Bankruptcy Code applies “to a
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`transfer of an interest of the debtor in property that is within the territorial jurisdiction
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`of the United States to the same extent that the section would apply to property of the
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`estate.”17 Section 363(b)(1), in turn, provides that the “trustee, after notice and a
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`hearing, may use, sell, or lease, other than in the ordinary course of business, property
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`of the estate.” Under section 1520(a)(3), “the foreign representative may operate the
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`14 11 U.S.C. § 1502(4) and (5).
`15 11 U.S.C. § 1502(4).
`16 11 U.S.C. § 1520(a).
`17 Under section 1502(a)(8), “‘within the territorial jurisdiction of the United States’”, when used with
`reference to property of a debtor, refers to tangible property located within the territory of the United
`States and intangible property deemed under applicable nonbankruptcy law to be located within that
`territory, including any property subject to attachment or garnishment that may properly be seized or
`garnished by an action in a Federal or State court in the United States.”
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`debtor's business and may exercise the rights and powers of a trustee under and to the
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`extent provided by section[] 363.”
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`In this case, the Foreign Representatives (Messrs. Sakamoto and Koboyashi) are
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`the trustees under section 363(b)(1) and they are seeking authority under the Rambus
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`Motion and the Micron Motion to transfer property within the territorial jurisdiction of
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`the United States outside the ordinary course of business to Rambus and Micron,
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`respectively. They clearly have the power to make the request but what standard
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`should be applied?
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`b. Plain Meaning
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`In interpreting a statute, the Court must start with an analysis of its plain
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`meaning. “[C]ontemporary Supreme Court jurisprudence establishes that the purpose
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`of statutory interpretation is to determine congressional intent.”18 To that end, the
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`starting point is to examine the plain meaning of the text of the statute.19 As the
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`Supreme Court observed in Hartford Underwriters Ins. Co. v. Union Planters Bank, “when
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`a statute's language is plain, the sole function of the courts, at least where the
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`disposition by the text is not absurd, is to enforce it according to its terms.”20
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`18 Hon. Thomas F. Waldron and Neil M. Berman, Principled Principles of Statutory Interpretation: A Judicial
`Perspective After Two Years of BAPCPA, 81 AM. BANKR. L.J. 195, 211 (2007).
`19 Id. at 229 (“Statutory analysis . . . must start with the text at issue to determine if its meaning can be
`understood from the text.”). See also Connecticut Nat. Bank v. Germain, 503 U.S. 249, 253 (1992) (“When the
`words of a statute are unambiguous, then, this first canon is also the last: the judicial inquiry is
`complete.”).
`20 Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 7 (2000). See also United States v.
`Ron Pair Enters., 489 U.S. 235, 240 (1989); Caminetti v. United States, 242 U.S. 470, 485 (1917) (“It is
`elementary that the meaning of a statute must, in the first instance, be sought in the language in which
`the act is framed, and if that is plain, and if the law is within the constitutional authority of the law-
`making body which passed it, the sole function of the courts is to enforce it according to its terms.”).
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`Additionally, the Supreme Court has repeatedly stated that “[t]he United States
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`Congress says in a statute what it means and means in a statute what it says there.”21
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`Notwithstanding the foregoing, applying the plain meaning of the statute is the
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`default entrance – not the mandatory exit.22 If the statute is ambiguous, the Court must
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`use other canons of statutory construction, including legislative history where available,
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`to determine the purpose of the statute.23
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`The result here under a plain meaning analysis is straight forward. Section
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`1520(a) unequivocally states that “sections 363, 549, and 552 apply to a transfer of an
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`interest of the debtor in property that is within the territorial jurisdiction of the United
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`States to the same extent that the sections would apply to property of an estate.” (emphasis
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`added). The emphasized language clearly provides that section 363 and, by
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`implication, its standards are applicable to the transfer of assets located in the United
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`States by a foreign debtor in a foreign main proceeding outside the ordinary course of
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`business. The section 363(b) standard is well-settled. A debtor may sell assets outside
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`the ordinary course of business when it has demonstrated that the sale of such assets
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`represents the sound exercise of business judgment. In determining whether a sale
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`21 Hartford Underwriters Ins. Co., 530 U.S. at 6 (quoting Connecticut Nat. Bank, 503 U.S. at 254).
`22 Waldron and Berman, supra note 18, at 232.
`23 See Price v. Delaware State Police Fed. Union (In re Price), 370 F.3d 362, 369 (3d Cir. 2004) (“Thus,
`ambiguity does not arise merely because a particular provision can, in isolation, be read in several ways
`or because a Code provision contains an obvious scrivener's error. Nor does it arise if the ostensible plain
`meaning renders another provision of the Code superfluous. Rather, a provision is ambiguous when,
`despite a studied examination of the statutory context, the natural reading of a provision remains elusive.
`In such situations of unclarity, ‘where the mind labours to discover the design of the legislature, it seizes
`everything from which aid can be derived,’ including pre-Code practice, policy, and legislative history.”)
`(internal citations omitted).
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`satisfies this standard, the courts in this Circuit require that a sale satisfy four
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`requirements (1) a sound business purpose exists for the sale; (2) the sale price is fair; (3)
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`the debtor has provided adequate and reasonable notice; and (4) the purchaser has
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`acted in good faith.24 Thus, under the plain meaning of section 1520(a)(2), this test is
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`applicable to the Rambus Motion and the Micron Motion.
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`c. Legislative Intent
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`Notwithstanding the Supreme Court’s repeated admonition that courts are to
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`interpret statutes according to their plain meaning, one could argue that in Chapter 15
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`cases plain meaning should be subservient to legislative history or more general
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`principles of comity. To that end, section 1508 provides that in interpreting Chapter 15,
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`“the court shall consider its international origin, and the need to promote an application
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`of this chapter that is consistent with the application of similar statutes adopted by
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`foreign jurisdictions.”25 “As each section of Chapter 15 is based on a corresponding
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`article in the Model Law, if a textual provision of Chapter 15 is unclear or ambiguous,
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`the Court may then consider the Model Law and foreign interpretations of it as part of
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`its ‘interpretive task.’”26
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`Section 1520 of the Bankruptcy Code is adopted from Article 20 of the Model
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`Law.27 Article 20 of the Model Law provides in relevant part that:
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`24 In re Delaware & Hudson Railway Co., 124 B.R. 169, 176 (D. Del. 1991).
`25 11 U.S.C. § 1508.
`26 In re Loy, 432 B.R. 551, 560 (E.D. Va. 2010) (footnote omitted) (citing 11 U.S.C. § 1508); In re Condor Ins.
`Ltd., 601 F.3d 319, 321 (5th Cir. 2010)).
`27 See The Guide to Enactment of the UNCITRAL Model Law on Cross-Border Insolvency, ¶ 143, U.D.
`Doc. A/CN.9/422 (1997) (the “Guide to the Model Law”).
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`Upon recognition of a foreign proceeding that is a foreign main
`proceeding,
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`Commencement or continuation of individual actions or
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`individual proceedings concerning the debtor’s assets, rights,
`obligations or liabilities is stayed;
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`(b)
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`Execution against the debtor’s assets is stayed; and
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`1.
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`(c) The right to transfer, encumber or otherwise dispose of any
`assets of the debtor is suspended.
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`The parallels between Article 20 and section 1520 are striking.28
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`Section
`(1)
`intro.
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`Article 20
`Text
`Upon recognition of a foreign
`proceeding that is a foreign main
`proceeding,
`(1)(a) Commencement or continuation of
`individual actions or individual
`proceedings concerning the
`debtor’s assets, rights, obligations
`or liabilities is stayed;
`(1)(b) Execution against the debtor’s
`assets is stayed; and
`(1)(c) The right to transfer, encumber or
`otherwise dispose of any assets of
`the debtor is suspended.
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`Section
`1520(a)
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`1520(a)(1)
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`1520(a)(2)
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`Section 1520
`Text
`Upon recognition of a
`foreign proceeding that is a
`foreign main proceeding--
`sections 361 and 362 apply
`with respect to the debtor
`and the property of the
`debtor that is within the
`territorial jurisdiction of the
`United States;
`
`sections 363, 549, and 552
`apply to a transfer of an
`interest of the debtor in
`property that is within the
`territorial jurisdiction of
`the United States to the
`same extent that the
`sections would apply to
`property of an estate;
`
`(2)
`
`The scope, and the modification or
`termination, of the stay and
`suspension referred to in
`
`unless the court orders
`otherwise, the foreign
`representative may operate
`
`1520(a)(3)
`
`
`28 Italics in original; bold added.
`
`
`
`14
`
`

`
`paragraph 1of this article are
`subject to [refer to any provisions of
`law of the enacting State relating to
`insolvency that apply to exceptions,
`limitations, modifications or
`termination in respect of the stay and
`suspension referred to in paragraph 1
`of this article].
`Paragraph 1 (a) of this article does
`not affect the right to commence
`individual actions or proceedings
`to the extent necessary to preserve
`a claim against the debtor
`
`Paragraph 1 of this article does not
`affect the right to request the
`commencement of a proceeding
`under [identify laws of the enacting
`State relating to insolvency] or the
`right to file claims in such a
`proceeding.
`
`the debtor's business and
`may exercise the rights and
`powers of a trustee under
`and to the extent provided
`by sections 363 and 552;
`
`Subsection (a) does not
`affect the right to commence
`an individual action or
`proceeding in a foreign
`country to the extent
`necessary to preserve a
`claim against the debtor.
`Subsection (a) does not
`affect the right of a foreign
`representative or an entity
`to file a petition
`commencing a case under
`this title or the right of any
`party to file claims or take
`other proper actions in such
`a case.
`
`1520(b)
`
`1520(c)
`
`Article 20 of the Model Law has two basic and related concepts aimed at
`
`(3)
`
`(4)
`
`
`
`protecting and preserving a multinational debtor’s assets: (i) stopping all actions,
`
`proceedings and executions against the debtor’s assets in all jurisdictions;29 and (ii)
`
`stopping the debtor from transferring disposing of any of its assets pending further
`
`court order.30 The drafters of the Model Law considered the stay of actions and
`
`enforcement proceedings “necessary to provide ‘breathing space’ until appropriate
`
`
`29 See Model Law, Art 20(1)(a),(b).
`30 See Model Law, Art.20(1)(c).
`
`
`
`15
`
`

`
`measures are taken for reorganization or fair liquidation of the assets of the debtor,”
`
`and the suspension on transfer “necessary because in a modern, globalized economic
`
`system it is possible for multinational debtors to move money and property across
`
`boundaries quickly.”31 Accordingly, the Model Law protects both multinational
`
`debtors by forestalling their creditors in a foreign, ancillary jurisdiction from exercising
`
`their remedies, and creditors in the ancillary jurisdiction by suspending the debtor’s
`
`ability to transfer its assets in that jurisdiction without authorization from their own
`
`court system.32 Importantly, following the recognition of a foreign main proceeding,
`
`the Model Law expressly imposes the laws of the ancillary forum - not those of the
`
`foreign main proceeding - on the debtor with respect to transfers of assets located in
`
`such ancillary jurisdiction. The Guide to the Model Law explains that:
`
`The automatic consequences envisaged in article 20 are necessary to
`allow steps to be taken to organize an orderly and fair cross-border
`insolvency proceeding. In order to achieve those benefits, it is justified
`to impose on the insolvent debtor the consequences of article 20 in the
`enacting State (i.e., the country where it maintains a limited business
`presence), even if the State where the centre of the debtor’s main interests is
`situated poses different (possibly less stringent) conditions for the
`commencement of insolvency proceedings or even if the automatic effects of
`the insolvency proceeding in the country of origin are different from the
`effects of article 20 in the enacting State. This approach reflects a basic
`principle underlying the Model Law according to which recognition
`of foreign proceedings by the court of the enacting State grants
`effects that are considered necessary for an orderly and fair conduct
`of a cross-border insolvency. Recognition, therefore has its own effects
`
`
`31 Guide to the Model,¶ 32.
`32 See Model Law, Art. 20(2); Guide to the Model Law, at ¶ 33 (“Exceptions and limitation to the scope of
`the stay and suspension … and the possibility of modifying or termination the stay or suspension are
`determined by provisions governing comparable stays and suspension in insolvency proceeding under
`the laws of the enacting State (article 20, paragraph 2).”).
`
`
`
`16
`
`

`
`rather than importing the consequence of the foreign law into the
`insolvency system of the enacting State.33
`
`In essence, the Model Law follows an in rem division of labor between competing
`
`sovereignties - tasking the domestic courts with responsibility over and for assets in
`
`their jurisdiction. Chapter 15’s legislative history leads to the same conclusion as the
`
`plain meaning anaylsis – the sound exercise of business judgment test is applicable.
`
`d.
`
`Comity
`
`Comity has been defined as the “recognition which one nation allows within its
`
`territory to the legislative, executive or judicial acts of another nation, having due
`
`regard both to international duty and convenience, and to the rights of its own citizens
`
`or of other persons who are under the protections of its laws.”34 Granting comity to
`
`judgments in foreign bankruptcy proceedings is appropriate as long as U.S. parties are
`
`provided the same fundamental protections that litigants in the United States would
`
`receive.35
`
`
`
`Notwithstanding the direction that a U.S. court grant comity or cooperation to a
`
`recognized foreign representative in insolvency matters, “[t]he principle of comity has
`
`never meant categorical deference to foreign proceedings. It is implicit in the concept
`
`that deference should be withheld where appropriate to avoid the violation of the laws,
`
`
`33 Guide the Model Law ¶ 143 (emphasis added).
`34 Hilton v. Guyot, 159 U.S. 113, 163–64, 16 S.Ct. 139, 143, 40 L.Ed. 95 (1895).
`35 See id. at 202–03, 16 S.Ct. at 158–59.
`
`
`
`17
`
`

`
`public policies, or rights of the citizens of the United States.”36 Consistent with the
`
`traditional limits of comity, all relief under chapter 15 is subject to the caveat in section
`
`1506, providing the court with authority to deny the relief requested where such relief
`
`would be “manifestly contrary to the public policy of the United States.”37
`
`Decisions relating to Chapter 15 routinely invoke the principle of comity.
`
`Nonetheless, only two provisions in Chapter 15 actually mention comity. Section 1507
`
`provides that the Court is authorized to grant any “additional assistance” available
`
`under the Bankruptcy Code or under “other laws of the United States,” provided that
`
`such assistance is consistent with the principles of comity and satisfies the fairness
`
`considerations set out in the statute.38 In addition, section 1509(