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Business Restructuring Review

Delaware Bankruptcy Court Adopts Interim Modalities for Court Communication in Cross-Border Bankruptcies

After discussions among judges from several jurisdictions, including Argentina, Australia, Bermuda, the British Virgin Islands, Canada, the Cayman Islands, England and Wales, Singapore, and the United States, at the initial meeting of the Judicial Insolvency Network (the "JIN") in October 2016, the JIN developed Guidelines for Communication and Cooperation Between Courts in Cross-Border Insolvency Matters (the "Guidelines").

The stated purpose of the Guidelines is "to improve the efficiency and effectiveness of cross-border insolvency proceedings and to enhance coordination and cooperation among courts under whose supervision such proceedings are being conducted." Their overarching objective is to improve efficiency in complex cases, which ideally will minimize litigation, time, and expense for the benefit of all stakeholders.

The Guidelines are noteworthy not only because they provide a framework for cooperation and communication in cross-border bankruptcy and insolvency proceedings, but also because the initiative represents the first time that such a common framework has been adopted (and now implemented) by courts for that purpose. Previously, communication between courts presiding over "parallel" cross-border bankruptcy or insolvency proceedings was often nonexistent or poorly coordinated, in many cases achieved by means of ad hoc protocols. This created significant delay and uncertainty and sometimes resulted in conflicting rulings from the courts involved.

On February 1, 2017, the Supreme Court of Singapore and the U.S. Bankruptcy Court for the District of Delaware announced that they had formally implemented the Guidelines (available here, as implemented by the Singapore Supreme Court, and in Delaware's Local Bankruptcy Rule 9029-2). Since then, the Guidelines have been adopted in some form by the U.S. Bankruptcy Courts for the Southern District of New York (February 17, 2017; General Order M-511) and the Southern District of Florida (February 1, 2018; Administrative Order 2018-03), as well as courts in the United Kingdom (May 4, 2017), Australia (September 15, 2017), The Netherlands (May 1, 2019), South Korea (July 1, 2018), Canada (applied in Re Payless ShoeSource Canada Inc. and Payless ShoeSource Canada GP Inc., 2019 ONSC 1215 (CanLII Feb. 19, 2019)), Bermuda (March 9, 2017), and the Eastern Caribbean (May 18, 2017).

On July 25, 2019, the JIN announced its adoption of the Modalities of Court-to-Court Communication (the "Modalities"), which "apply to direct communications (written or oral) between courts in specific cases of cross-border proceedings relating to insolvency or adjustment of debt opened in more than one jurisdiction."

Key features of the Modalities include:

  • The designation by each court involved in parallel proceedings of one or more judges or administrative officials as a "Facilitator" for the purpose of coordinating communications.
  • Procedures for an "Initiating Judge" to contact the "Receiving Judge" through the Facilitators, initially by means of written correspondence (including email) that details all relevant information concerning the case, the parties, and the specific issues regarding which communication is sought.
  • Communication between Facilitators to establish appropriate arrangements (including translators or a secure means of communication, if necessary) for the communication between the courts without the necessity of participation by counsel or the parties unless otherwise ordered by one of the courts.
  • Direct communication between courts if they wish to bypass the use of Facilitators.

The U.S. Bankruptcy Court for the District of Delaware adopted the Modalities on an interim basis on July 25, 2019. It is anticipated that other courts will do so as well in the near term.

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