Two distinct decisions handed down in the US Southern District of New York have significantly reinforced the integration of offshore liquidations and onshore US recognition, while establishing strict regulatory guardrails.
First, in New Fortress Energy (NFE), Chief Bankruptcy Judge Martin Glenn issued a comprehensive 57-page opinion explaining the Chapter 15 recognition and enforcement of English Part 26A restructuring plans (UKRPs) by US-affiliated entities. Judge Glenn directly addressed the phenomenon of "COMI tourism"—where a foreign debtor is established specifically to pursue a foreign restructuring solution followed immediately by a Chapter 15 filing. The court confirmed that while nothing in the text of Chapter 15 explicitly precludes this mechanism, US bankruptcy courts will apply deep scrutiny to detect "insider exploitation, untoward manipulation, and the overt thwarting of third-party expectations."
Second, in In re Canterbury Securities, Ltd., the US District Court for the SDNY affirmed the narrow application of the Section 1506 "public policy exception." A debtor's principal sought to dismiss a Chapter 15 petition by alleging that the underlying Cayman Islands liquidation proceeding was being used to cover up massive fraud. The District Court rejected the challenge, ruling that the public policy exception acts as an incredibly high bar that focuses exclusively on whether the foreign tribunal’s procedures and safeguards comport with US due process, rather than the substantive merits or facts of the dispute.
Key Takeaways for Practitioners:
- Transatlantic Restructuring Scrutiny: Corporate groups utilizing English or offshore vehicles to engineer a shift in their Center of Main Interests (COMI) must meticulously document the commercial bona fides of the shift to survive US Bankruptcy Court review.
- Comity Shielded from Collateral Attack: Dissatisfied litigants in Cayman or other offshore liquidations cannot leverage the US courts to relitigate or second-guess findings made by competent foreign tribunals under the guise of public policy objections.
- Sources: Review the detailed structural parameters via Kirkland & Ellis LLP's Restructuring Alert on New Fortress Energy and the appellate framework analysis via Jones Day's Insight on Chapter 15 Public Policy Metrics.
SDNY & Cross-Border Nexuses: "COMI Tourism" and the Narrow Scope of Section 1506