Foreign Proceedings Heat Up Bankruptcy Liability Release Debate

The US Supreme Court’s ruling this year prohibiting companies from using Chapter 11 bankruptcy to forcibly strip creditors of legal claims against company insiders is prompting concerns over the effect on cross-border insolvency cases.

Left out of the high court’s June decision in Harrington v. Purdue Pharma LP, which banned nonconsensual third-party litigation releases in corporate bankruptcies, was any discussion of how to approach cases brought to the US by foreign companies seeking federal court recognition under Chapter 15 of the US Bankruptcy Code. The chapter is meant to promote comity by letting international businesses give effect in the ...