US COLUMN

The Chapter 1 5 Case of Shipp1ng

IIana Volkov presents a case study in the universalist approach to cross-border administration

hapter 15 of the US relief' is also available on a to "coojJerate to the rnaxirnum Code, provisional basis, that is, from the extent possible with a foreign court C which is based on date of tl1 e filin g of the Chapter Or a foreign representative .... " 10 UNCITR.AI;s Model Law on 15 petition to the date of vVhat does all this mean, Cross-Border Insolvency, was recog11ition, "wheTe the Telief is exactl y? The Model Law's enacted in 2005 to provide an wgently needed to jJrotect the assets underlying philosophy was "effective mechanism" for of the debtor or the interests of the explained in an often cited dealing with cross-border crediton. "6 decision, In Te ABC Leami:n.g insolvency cases. 1 Generally, there are two Centres, Lid. , 728 F. 3d 30 1 (3d Some of Chapter 15's express schools of tl1 ought regarding C i1~ 20 13). There, the Court of obj ec ti ves are "greater legal multinational insolvency Appeals for the Third Circuit ceTtainty joT tmde and investment" proceedings: stated: l LANA VOLKOV "The Model Law 1·ejlects a Bankruptcy and Corporate and the ''faiT and efficient I) universalism, where a Restructuring Department of Cole administration of cross-borde·r bankruptcy progresses as a universalism apjJroach. to Schatz PC: Foreign Representative lmnsnationa.l insolvency. It treats that jJrotects the unified global procedure of Hanjin Shipping Co Ltd in lhe US the multinational ba.niy's insolvency p1 pceedings. "11 debtor receives important refl ects a strong Congressional T he Court furtl1 er observed: substantial relief described preference for a "universalist" "ChafJler 15 creates ancillmy 4 rath er than a "tenitorial" ''CHAPTER 15 h e reafte 1~ Among other things, jnoceedings in the United Stales to approach to transnational tl1 e foreign debtor is entitled to an jJrovide supjJort to the foreign REFLECTS A immediate application of the insolvency admi11istration, an insolvency adminislratOJ: The goal approach that recognises today's STRONG automatic stay concerning his/her is to direct creditors and assets property located within the interconnected global economy. to the foreign 1nain proceedings for orderly andfair distribution tenit01i al jurisdiction of the US. For example, Section 1508 of the CONGRESSIONAL of assets, avoiding the seizure of The stay prohibits all entities Bankruptcy Code states: "In PREFERENCE FOR intn jJTeting this ch{/!pte1; the cou1-t assets by creditors operating (except for ce rtain limited outside the jurisdiction of the A UNIVERSALIST exemptions) from : commencing or shall consider its international foreign 111ain proceedings. " 12 continuing pre-petition judicial, migin, and the need to jJmmote an RATHER THAN A The US Bankruptcy Court for th e administrative or other actions or application of this ch{/!jJteT that is District of New Jersey (the proceedings against the debtor; consistent with the ajJjJlication of TERRITORIAL "Bankruptcy Court") whi ch recovering a pre-petition claim similaT statutes adojJted by fm·eign 8 presided over the Chapter 15 case APPROACH TO against the debtor; enforcing a jurisdictio11S ." This approach is of In Te Hanjin ShijJjJing Co ., TRANSNATIONAL pre-petition judgment against the furtl1 er evidenced by Section Ltd. (" Ha 1~in " ) fully embraced tlus debtor or the property of the 1507(b), which provides that upon universalist approach on several INSOLVENCY estate; obtaining possession of granting recognition of tl1 e foreign key occasions throughout the case. property of the estate or exercising main bankruptcy proceedings, a ADMINISTRATION Tlus article will discuss th e control over property of the estate; court may provide additional Bankruptcy Court's ruling and and creating, perfecting or assistance, "consistent with the 9 rationale for granting the foreign enforcing any li en against property jJrincijJles of comity. " representative's motion for of the estate that secures a pre­ Furthermore, Chapter 15 requires the US Bankruptcy Court provisional relief '' petition claim.5 Similar ii~un cLi ve 36 1Summer 2018 eurofenix US COLUMN

Hanjin's business vessels in order to enforce tl1 ose and the insolvency liens. T he m at~ time lien-holders proceedings argued their interests were not "sufficiently p-rotected" if they O n August 3 1, 201 6, Hanjin could not enforce tl1 eir m at~tim e commenced insolvency liens tlwough ship arrests. proceedings in South : its Alternatively, they contended that foreign representative fil ed a if the Bankruptcy Court were to Chapter 15 petition in the US on impose tl1 e automatic stay on the September 2, 201 6. At the time of m a t~ time lien-holders, it should the filin g, H anjin was the largest require, at a minimum, tl1at shipping company in Hanjin post sec m~ly or file a bond and the seventh largest shipping in accordance with II U. S. C. § company in the world, 152 2(c). transporting over I 00 million tons T he Bankruptcy Court of cargo per year and reporteclly overruled the mat~tim e lien­ carrying almost eight percent of holders' obj ections and entered a Conclusion the U.S. market's trans-Pacific provisional order on September 9, It was critical for tl1e Bankruptcy trade volume. Hanjin's business as 201 6, thus permitting H anjin ships Court to grant tl1e foreign a global carrier involved an to enter and leave US ports representative emergent relief in enormous amount of commercial , .,~thou t fear of arrest. After order to avoid disruption of relationships, including with discussing Chapter IS's international commerce and 'THE suppliers of "necessaries," such as universalist approach and tl1 e ABC irreparable harm not only to tl1e BANI). for provisional relief were tl1 e 10 /d. at§ 1525. T he Bankruptcy Court denied II ld. at 307 (internal citations omitted). unpaid providers of "necessaries," 12 ld. at 306-307 (internal citations omitted) that motion; the denial was Share your views! who asserted statutory m at~ time (emphasis supplied). affirmed on appeal by tl1e Dis ti~ct 13 Sec II U.S. C.§ 1522(a). liens on account of tl1 eir pre­ Court. The maritime lien-holders' petition clai ms and wanted tl1 e further appeal to the Circuit Court ability to arrest H anjin's inbound was dismissed as moot.

eurofe ni x Summer 2018 137