Fundamental Procedural Fairness: The Sine Qua Non for the Enforcement of Third-Party Releases Authorized in a Foreign Proceeding
Third-party releases have perennially been a hot-button issue in U.S. chapter 11 reorganization cases and have resulted in additional scrutiny in the context of chapter 15 cases, where such releases are included in a foreign restructuring. In PT Bakrie Telecom Tbk, a U.S. bankruptcy court, sitting as a chapter 15 court in the Southern District of New York, recently recognized an Indonesian restructuring as a foreign main proceeding, but refused to recognize and enforce third-party releases included in the restructuring plan. In so holding, the court established a test under §§ 1521 and 1507 of the Bankruptcy Code (and the principles of comity) for the enforcement of such releases: Does a “clear and formal record” exist establishing that the foreign court adhered to fundamental standards of procedural fairness in authorizing a third-party release?
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“Fundamental Procedural Fairness: The Sine Qua Non for the Enforcement of Third-Party Releases Authorized in a Foreign Proceeding,” by Ira L. Herman, Evan J. Zucker, and Matthew E. Kaslow was published in the July 2021 edition of the ABI Journal, a publication of the American Bankruptcy Institute. Reprinted with permission.