International Committee

ABI Committee News

Domestically Avoiding International Fraudulent Conveyances—Can It Be Done?

Can a debtor-in-possession (DIP) or trustee use §548 of the Bankruptcy Code to avoid an extraterritorial fraudulent conveyance? Based on the Fourth Circuit’s recent In re French decision, one would think the answer would be a resounding “yes.” However, the U.S. Bankruptcy Court for the Central District of California recently concluded that 11 U.S.C. §548 does not apply extraterritorially. While the Midland Euro decision does not create a circuit conflict, it is arguably a better reasoned opinion and should be carefully considered as one contemplates whether §§547 and 548 actions may be applied extraterritorially.

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Protecting the Attorney/Client Privilege in Transnational Insolvency Proceedings

The ever-growing proliferation of international trade and the rise of increasingly large transnational corporations means that whenever the next big downturn overtakes us, there will be an unprecedented level of transnational insolvency proceedings. This, in turn, will likely result in a number of unprecedented legal issues that will need to be resolved through a patchwork of overlapping (and potentially contradicting) international treaties, country-specific laws, and established practices relating to international law. One of these key issues will be protection of the attorney/client privilege in a transnational insolvency proceeding.

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Maritime Liens and Assets in Bankruptcy: New Developments

Maritime liens developed as an essential event of vessel operations. They are similar to a security interest but differ from most land liens, although they are analogous in concept to materialmen’s liens, which arise as a matter of law—a result of work performed in the construction industry. The maritime liens arose from contract claims and are controlled by the Federal Maritime Lien Act, which states: “A person providing necessaries to a [private] vessel [with the owner or owner’s agent’s permission] … has a maritime lien on the vessel, may enforce the lien in a civil in rem action, and is not required to allege or prove that credit was given to the vessel.” On foreign-flagged vessels, these liens actually prime all other credits perfected or unperfected against a vessel by operation of law, even though they are not filed and may, in certain instances, be virtually undetectable by other creditors performing lien searches. On vessels flagged in the United States, these liens do not prime secured debt but do come ahead of all unsecured liens in priority.

Read the full article. (Materials from the 2007 Caribbean Insolvency Symposium)


Cross-Border Recovery of Fraudulent Transfers and Foreign Assets

You are never going to find foreign assets or fraudulently transferred assets that are located overseas unless you first discover that they were in the United States and how they were removed.  Use all the tools in your investigative process to make that determination, including the procedures available to you in a bankruptcy case.  Pursuant to 11 U.S.C. §341(a), at the First Meeting of Creditors you can examine the debtor’s affairs.  That examination should include questions regarding foreign assets, transfers of assets overseas, travel abroad, use of passports, assets—protection trusts, and whether there was any employment of professionals overseas or in the United States for asset protection.  Pursuant to Rule 2004, you can issue subpoenas to parties to gather such information and you can take further discovery of the debtor or perhaps the debtor’s professionals under the Crime Fraud Exception, if appropriate. 

Read the full article. (Materials from the 2007 Caribbean Insolvency Symposium)