Amendments Proposed to Rules of Bankruptcy Procedure

The Judicial Conference of the United States Committee on Rules of Practice and Procedure recently released for public comment a preliminary draft of the latest proposed amendments to the Federal Rules of Bankruptcy Procedure. Many of the proposed amendments would implement Chapter 15, which was added to the Bankruptcy Code in 2005 as part of the Bankruptcy Abuse Prevention and Consumer Protection Act. Chapter 15 establishes a framework of rules governing cross-border bankruptcy and insolvency cases patterned on the Model Law on Cross-Border Insolvency formulated by the United Nations Commission on International Trade Law in 1997.

At this juncture, the rule changes have been proposed by the various advisory committees to the Judicial Conference’s Rules Committee. The Rules Committee has not yet approved the proposed amendments, other than authorizing their publication for comment. After considering the public comments, the Advisory Committee on Bankruptcy Rules will determine whether to submit the proposed amendments to the Rules Committee for approval. Any proposals approved by the Rules Committee will then go to the Judicial Conference, and afterward to the U.S. Supreme Court, for approval. Comments on the draft proposed amendments are due no later than February 17, 2009. Approved amendments would become effective at the earliest on December 1, 2010.

Some of the Proposed Rule Amendments

Proposed new Rule 1004.2 would require an entity filing a chapter 15 petition to disclose the country of the foreign debtor’s main interests (“COMI”) and to list each country in which a case involving the debtor is pending. The new rule would also establish a deadline for challenging the COMI asserted in the petition.

Rule 1014 would be amended to apply the rule’s venue provisions to chapter 15 cases. The venue provisions authorize the court to determine where cases should proceed when multiple petitions involving the same debtor are pending.

Rule 1015 would be amended to include chapter 15 cases among those subject to the rule that authorizes the court to order the consolidation or joint administration of cases.

Rule 1018, which governs intervention and the right to be heard, would be amended to reflect the enactment of chapter 15 in 2005. The amendments would also clarify that the rule applies to contests over involuntary petitions but does not apply to matters that are merely related to a contested involuntary petition.

Rule 5009, which governs the closing of chapter 7, 12, 13, and 15 cases, would be amended to require, among other things, that a foreign representative in a chapter 15 case must file and give notice of the filing of a final report in the case.

Proposed new Rule 5012 would establish a procedure in chapter 15 cases for obtaining court approval of an agreement regarding communications in, and the coordination of proceedings with, cases involving the debtor pending in other nations.

The proposed rules, reports from the advisory committees, and a link to submit comments electronically are posted at http://www.uscourts.gov/rules/newrules1.htm on the federal judiciary web site.