1.3.3. Concurrent Proceedings and Abstention

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 
17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 
34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 
51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 
68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 
102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 
119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 
136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 
153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 
170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 
187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 
204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 
221 222 223 224 

United States courts not only enter into cross-border insolvency co-operation with

foreign jurisdictions through the use of the ancillary proceedings of section 304. Cooperation

remains a realistic option where 'independent' proceedings are opened

under the Bankruptcy Code (concurrent proceedings).1 ( 1

Generally, the fact that insolvency proceedings are pending in a foreign jurisdiction

does not by itself bar the commencement of parallel proceedings under the United

States Bankruptcy Code. All that is required is that United States courts have jurisdiction,

which they have whenever the debtor has his or her domicile, place of business

or assets within the United States.1 Insolvency proceedings under the Bankruptcy

Code involve the creation of an 'estate' extending to all of the debtor's property

wherever it is located and by whomever it is h e l d . T h i s may bring the United States

proceedings into direct conflict with the proceedings pending in a foreign jurisdiction,

with the inherent risk of efforts resulting in a wasteful struggle over jurisdiction.'"

Creditors may want to invoke such a struggle, tor instance, to obtain a better position

under United States law than they have under the foreign lex concitrsits. In particular,

they may want to block a foreign representative's attempt in ancillary proceedings to

consolidate the debtor's estate within the foreign proceeding. The United States courts

however do have the necessary powers to prevent the obstruction of the kind of c o operation

envisaged by section 304. The Code provides that a United States insolvency

proceeding may at any time be suspended or dismissed ' i f a foreign proceeding is

pending and the factors specified in section 3 0 4 ( c ) warrant such'.'1 1 Dismissal and

suspension as forms of cross-border insolvency co-operation are therefore part of the

same open-ended framework as the ancillary proceedings.''

However, concurrent proceedings in themselves do not preclude cross-border cooperation

in insolvency. In fact, under the United States approach they may present

an effective alternative to the ancillary proceedings of section 304. In part, this is

already apparent from section 3 0 3 ( b ) ( 4 ) , which entitles the foreign representative to

request the opening of parallel insolvency proceedings instead of seeking assistance

through ancillary proceedings.'

The leading example is Maxwell Coiuitiuiiieatums Corporation pie. (MCC), which

involved concurrent (reorganisation) proceedings in the United Kingdom and the

United States.'5 In principle, both these proceedings claim universal effect. Consequently,

there existed an obvious potential of both proceedings ending in a wasteful

and prolonged struggle over jurisdiction. With about 7 5 % of its value located in the

United States but with its headquarters in the United Kingdom, a struggle would have

reduced M C C ' s chances o f successful reorganisation considerably. Both jurisdictions

therefore opted for actively pursuing co-operation instead. The administrators and

examiner'1 proceeded by negotiating an 'Order and Protocol' which provided a general

framework for further co-operation.'' The responsibilities for administration of MCC's

estate were allocated under this framework. This enabled effective administration of

MCC's business while reducing needless and costly duplication of efforts, thus preserving

and maximising value. Though both jurisdictions committed themselves to

continuing co-operation, the terms of the framework did not stipulate what the actual

outcome of the co-operation was to be. Issues concerning the ultimate resolution of

the proceedings and asset distribution were to be resolved at a later stage."' What was

agreed, however, was that the effort of co-operation should be geared towards the final

resolution of these matters for the benefit of all interested parties and in a manner

acceptable to both jurisdictions. Ultimately, this was achieved by a Plan of Reorganisation

and Scheme of Arrangement, drafted by the administrators and examiner and

confirmed by the courts of b o t h jurisdictions. The Plan and Scheme envisaged reorganisation

through the sale of assets as going concerns, and distribution to the creditors

from a single pool of proceeds. Such a uniform scheme of distribution required several

differences in rules regarding the position of creditors under United States and United

Kingdom law to be overcome. Rather than allocating claims to one or the other legal

regime, the Plan and Scheme 'harmonised' the two laws on various issues, providing

their own uniform substantive rule.

Cross-border insolvency co-operation in concurrent proceedings through the use of

negotiated protocols has been replicated in various later c a s e s . , N However, the Bankruptcy

Code 1978 does not specifically accommodate this type of insolvency co-operation.

The Bankruptcy Abuse Prevention and Consumer Protection Act 2 0 0 5 , by

incorporating the UXCITRAL Model Law, integrates this approach within the

statutory framework."'