Enforcing Ipso Facto Clauses in International Transactions and the Importance of Being Proactive in Dealings with Troubled and Insolvent Entities
A proactive creditor often ends up in a better legal position, and has more negotiating power, than a reactive one. While that may seem obvious, it is a lesson driven home by the decision in the SunEdison bankruptcy case, which involves issues of international comity, choice of law provisions, and ultimately, the tactics employed by a Korean debtor in connection with its contractual relationship with SunEdison. In SMP Ltd. v. SunEdison, Inc. and GCL-Poly Energy Holdings Limited, the SunEdison bankruptcy court refused to apply Korean insolvency law in a contract termination dispute, and enforced a contractual New York choice-of-law provision. Notwithstanding the Chapter 15 recognition of the Korean debtor’s rehabilitation, applying New York law, the court upheld the enforcement of an ipso facto (“by the fact itself ”) clause against the Korean debtor, thereby allowing termination of a license with SunEdison that was essential to the debtor’s business.
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“Enforcing Ipso Facto Clauses in International Transactions and the Importance of Being Proactive in Dealings with Troubled and Insolvent Entities,” by Michael B. Schaedle and Gregory F. Vizza was published in the February/March 2019 edition of Pratt’s Journal of Bankruptcy Law (Vol. 15, No. 2), an A.S. Pratt Publication, LexisNexis. Reprinted with permission.
This article was first published in the October 2018 edition of Mainbrace, Blank Rome's quarterly maritime newsletter.