Third Circuit Guidance Refines 30-Year-Old Bankruptcy Precedent

The Third Circuit on Thursday clarified the standard US courts should use when deciding whether to defer to foreign bankruptcy proceedings, in an opinion that could have trickle-down effects for any bankrupt foreign companies that face US lawsuits.

Normally, filing for bankruptcy pauses all civil litigation against a company. But the question courts have wrestled with is whether filing for bankruptcy abroad has the same effect. Such questions may play a role in the bankruptcy of major Chinese multi-industry enterprise Evergrande, where creditors are set to recover a fraction of the debt owed to them.

The Third Circuit case ...