Passport? Visa? Letter of Request? A Panel Discussion on Forum Shopping and Cross-Border Issues

INSOL World (Second Quarter 2011)

Chair: Ian S. Grier, Sprecher Grier Halberstam LLP
Robert Hanel, anchor Rechtsanwalte
Chris Honey, McGrath Nicol
Kenneth Krys, KRyS Global

Panel Chair Mr Grier set the stage for this panel by outlining the substantial increase in crisis of cross-border insolvencies and the issues these cases have raised, including forum shopping, cooperation between courts in different jurisdictions and how courts and practitioners can, do and/or will use the various tools and legislation designed to address such issues, including UNCITRAL’s Model Law, the EC Regulation on Insolvency, the Hague Convention and Chapter 15 of the US Bankruptcy Law. The panellists followed this introduction with their own presentations and unique perspectives and experiences as a German lawyer, a Cayman Islands’s liquidator and an Australian accountant and liquidator.

Robert Hanel, a partner in a German law firm who also acts as a court-appointment Administrator, outlined various techniques that have been recently used to enhance the change of success in getting the forum of one’s choice. He raised difficult questions including, “what is wrong, if anything, with forum shopping?” In response, he suggested that the various tactics of establishing residence and/or changing “COMI” may be seen as “good or bad” depending on who (i.e. creditors or a debtor) is using the tactics, who is prejudiced by such tactics and whether the “end game” maximizes value for all constituencies. For example, if forum shopping violates creditor expectations and/or government regulations, should courts sanction such activity? He also asked whether jurisdictions should be able to pass legislation effecting forum shopping (i.e. whether prohibiting it or sanctioning it). In any event, what appears clear is that creditors and companies will continue to use existing tools in their forum shopping efforts.

Kenneth Krys, a Cayman liquidator, made clear his role (and that of all liquidators) to maximize the assets under his jurisdiction and his experiences (successful and frustrating) to gain recognition in various jurisdictions. He noted that some jurisdictions simply will not recognize or assist his efforts, while other jurisdictions have no cumbersome and slow judicial processes as to be tantamount to no recognition. He discussed in particular problems getting recognition in China, Germany and the Netherlands. While his early experiences with getting US recognition (i.e. in the Sphinx case as a result of Refco’s opposition) were frustrating, he noted that more recently US Courts appear more open to recognizing Cayman liquidators and have clarified factors necessary to get recognized as a “foreign main proceeding”. Finally he discussed his use (sometimes successfully, as in Israel) of letters of request to obtain necessary information, particularly in tracking assets.

Chris Honey, an Australian accountant and liquidator, concluded the presentations by discussing his experiences in Australia. For the most part, he reported that forum shopping has not so far generated the kind of contentious litigation evident in other jurisdictions. In fact, Australian Courts have recognized foreign representatives and cases from multiple jurisdictions, including Korea and Cayman. Mr. Honey did point out, however, that the attitude of English Courts is becoming a bit more critical and more fact dependent but support of creditors and others for the choice of forum would be extremely significant in any Court’s decision. A recent example of a change (on the eve of insolvency proceedings) in COMI, supported by creditors and approved by the Court, is the Wind Hellas case.

A spirited question and answer session concluded this successful breakout session and left the presenters and the audience with much to ponder as how best to respond to similar issues, which will be raised by future cross border cases.