SNP Boat Service S.A.: Clarifying The Limited Reach Of A U.S. Bankruptcy Court In Chapter 15

Addressing issues of comity in a chapter 15 bankruptcy proceeding, Judge K. Michael Moore of the United States District Court for the Southern District of Florida recently ruled that a U.S. court can only examine whether the overarching foreign law in question comports with the United States' concepts of fairness and due process, but that it cannot examine specific proceedings or decisions of the foreign court. SNP Boat Service S.A. v. Hotel Le St. James, No. 11-62671 (S.D. Fla. Apr. 18, 2012). Chapter 15 of the Bankruptcy Code was enacted in 2005 for the purpose of providing an effective mechanism for dealing with cases of cross-border insolvency. Through chapter 15, a U.S. bankruptcy court can "recognize" a foreign restructuring proceeding and play an important role in the coordination of an international debtor's affairs. Accordingly, Judge Moore's ruling in SNP Boat Service is significant in that it clarifies a United States court's ability to question the legal framework of a foreign jurisdiction when determining whether or not to give force and effect to its rulings.

Background

When a debtor commences a restructuring proceeding outside of the United States, in order to protect any property located within the United States, the debtor frequently commences a chapter 15 action and seeks recognition of the foreign proceeding by a U.S. bankruptcy court. Chapter 15 allows a court-appointed foreign representative to distribute a debtor's U.S. property in the foreign case "provided that the court is satisfied that the interests of creditors in the United States are sufficiently protected." 11 U.S.C. § 1521(b). This determination is based, in part, on whether the laws governing the foreign proceeding comport with the United States' concept of due process.

In SNP Boat Service, debtor SNP Boat Service S.A., a corporation organized under the laws of France that designs luxury boats and provides related boat management services, and Hotel Le St. James, a Canadian corporation, had been litigating a contract dispute in both French and Canadian courts since 2008. In April of 2009, the French Commercial Court approved a sauvegarde proceeding for SNP (a sauvegarde proceeding shares certain similarities with a U.S. chapter 11 proceeding, including an automatic stay that has an international effect).

St. James ultimately obtained a judgment in the Canadian courts and, after learning that SNP had assets located in Florida, domesticated that judgment in...