Purdue: Impacts on Cross-Border Restructurings
January 2025
Introduction
On 27 June 2024, the United States Supreme Court ruled in Harrington v. Purdue Pharma L.P. that the United States Bankruptcy Code does not authorise non-consensual third-party releases as part of a restructuring plan under Chapter 11.1 The decision is the culmination of decades of litigation over a bankruptcy practice dating back more than 40 years, beginning with the asbestos settlement trusts.2 Prior to Purdue, non-consensual third-party releases had become a key tool in resolving mass tort liabilities through bankruptcy in a number of judicial circuits – a tool that is now unavailable to debtors under Chapter 11. Although much has been written in the wake of Purdue, comparatively less attention has been paid to its knock-on effects outside the Chapter 11 mass tort context.
It was unclear immediately following Purdue whether (or how) the decision would impact the ability of foreign debtors to use Chapter 15 to enforce a foreign reorganisation plan that contains a non-consensual third-party release, given the Supreme Court’s focus on statutory interpretation rather than broader concepts of U.S. public policy, which is a main limitation on recognition. Recent bankruptcy court decisions suggest that the case-by-case analysis that has emerged when courts consider whether to enforce non-consensual third-party releases in Chapter 15 cases may persist.
Introduction
On 27 June 2024, the United States Supreme Court ruled in Harrington v. Purdue Pharma L.P. that the United States Bankruptcy Code does not authorise non-consensual third-party releases as part of a restructuring plan under Chapter 11.1 The decision is the culmination of decades of litigation over a bankruptcy practice dating back more than 40 years, beginning with the asbestos settlement trusts.2 Prior to Purdue, non-consensual third-party releases had become a key tool in resolving mass tort liabilities through bankruptcy in a number of judicial circuits – a tool that is now unavailable to debtors under Chapter 11. Although much has been written in the wake of Purdue, comparatively less attention has been paid to its knock-on effects outside the Chapter 11 mass tort context.
It was unclear immediately following Purdue whether (or how) the decision would impact the ability of foreign debtors to use Chapter 15 to enforce a foreign reorganisation plan that contains a non-consensual third-party release, given the Supreme Court’s focus on statutory interpretation rather than broader concepts of U.S. public policy, which is a main limitation on recognition. Recent bankruptcy court decisions suggest that the case-by-case analysis that has emerged when courts consider whether to enforce non-consensual third-party releases in Chapter 15 cases may persist.
Chapter 15
Chapter 15 of the Bankruptcy Code allows for recognition in the United States of foreign bankruptcy proceedings. Recognition of the proceeding itself allows a foreign representative of a debtor to seek additional relief from U.S. courts, including to enforce the foreign court’s orders, most notably an order confirming a plan of reorganisation, giving the plan the full force and effect of U.S. law.3
Underlying the mechanisms of recognition through Chapter 15 proceedings are five objectives listed in the Bankruptcy Code: ‘cooperation’ between U.S. courts and courts of foreign countries in cross-border insolvency cases; the need for ‘greater legal certainty’ for trade and investment; ‘fair and efficient administration of cross-border insolvencies that protects the interest’ of all parties; ‘protection and maximization of the value of the debtor’s assets’; and ‘facilitation of the rescue of financially troubled businesses’ to protect investment and preserve employment.4 Cooperation and communication between U.S. courts and foreign courts and parties of interest in Chapter 15 are facilitated through a charge to ‘cooperate to the maximum extent possible’ with foreign courts and foreign representatives.5
If a court grants recognition6 to a foreign proceeding, Section 1521 dictates what sorts of relief may be granted upon such recognition, including ‘any appropriate relief ’where ‘necessary to effectuate the purpose of [Chapter 15]’,7 commonly including enforcing the terms in the foreign debtor’s restructuring plan.8 When determining whether to enforce a foreign plan, courts have considered the weight of such factors as whether relief is available under U.S. law9 and whether principles of international comity favour enforcement.10 Additionally, any such decision is subject to the public policy limitation found in Section 1506: ‘Nothing in this chapter prevents the court from refusing to take an action governed by this chapter if the action would be manifestly contrary to the public policy of the United States.’11
Chapter 15
Chapter 15 of the Bankruptcy Code allows for recognition in the United States of foreign bankruptcy proceedings. Recognition of the proceeding itself allows a foreign representative of a debtor to seek additional relief from U.S. courts, including to enforce the foreign court’s orders, most notably an order confirming a plan of reorganisation, giving the plan the full force and effect of U.S. law.3
Underlying the mechanisms of recognition through Chapter 15 proceedings are five objectives listed in the Bankruptcy Code: ‘cooperation’ between U.S. courts and courts of foreign countries in cross-border insolvency cases; the need for ‘greater legal certainty’ for trade and investment; ‘fair and efficient administration of cross-border insolvencies that protects the interest’ of all parties; ‘protection and maximization of the value of the debtor’s assets’; and ‘facilitation of the rescue of financially troubled businesses’ to protect investment and preserve employment.4 Cooperation and communication between U.S. courts and foreign courts and parties of interest in Chapter 15 are facilitated through a charge to ‘cooperate to the maximum extent possible’ with foreign courts and foreign representatives.5
If a court grants recognition6 to a foreign proceeding, Section 1521 dictates what sorts of relief may be granted upon such recognition, including ‘any appropriate relief ’where ‘necessary to effectuate the purpose of [Chapter 15]’,7 commonly including enforcing the terms in the foreign debtor’s restructuring plan.8 When determining whether to enforce a foreign plan, courts have considered the weight of such factors as whether relief is available under U.S. law9 and whether principles of international comity favour enforcement.10 Additionally, any such decision is subject to the public policy limitation found in Section 1506: ‘Nothing in this chapter prevents the court from refusing to take an action governed by this chapter if the action would be manifestly contrary to the public policy of the United States.’11
Pre-Purdue
Prior to the Purdue decision, U.S. courts recognised some circumstances in which non-consensual third-party releases may be enforced. Courts also identified, however, countervailing considerations that may weigh against such enforcement. In 2012, the Fifth Circuit held in In re Vitro SAB de CV12 that denying enforcement of a Mexican reorganisation plan was proper where the plan would release the debtor’s non-debtor subsidiary guarantors from discharging their obligations to creditors. The court acknowledged that Chapter 15’s ‘heavy emphasis on comity’ made it ‘not necessary, nor to be expected, that the relief requested by a foreign representative be identical to, or available under, United States law’.13 Where the relief requested was unavailable under U.S. law, as the court found it was here, the relief ‘properly falls’ under Section 1507 of the Code providing for ‘additional assistance’.14 Analysing the issue under Section 1507, the court held that:
Pre-Purdue
Prior to the Purdue decision, U.S. courts recognised some circumstances in which non-consensual third-party releases may be enforced. Courts also identified, however, countervailing considerations that may weigh against such enforcement. In 2012, the Fifth Circuit held in In re Vitro SAB de CV12 that denying enforcement of a Mexican reorganisation plan was proper where the plan would release the debtor’s non-debtor subsidiary guarantors from discharging their obligations to creditors. The court acknowledged that Chapter 15’s ‘heavy emphasis on comity’ made it ‘not necessary, nor to be expected, that the relief requested by a foreign representative be identical to, or available under, United States law’.13 Where the relief requested was unavailable under U.S. law, as the court found it was here, the relief ‘properly falls’ under Section 1507 of the Code providing for ‘additional assistance’.14 Analysing the issue under Section 1507, the court held that:
[Section] 1507 theoretically provides for the relief Vitro seeks because it was intended to provide relief not otherwise available under United States law. But the devil is in the details, and in this case, the bankruptcy court correctly determined that relief was precluded by § 1507(b)(4). Under that provision, the bankruptcy court had to consider whether the relief requested was comparable to that available under the Bankruptcy Code. We conclude . . . that, although non-consensual, non-debtor discharge would not be available in this circuit, it could be available in other circuits. We also hold that because Vitro has failed to show the presence of the kind of comparable extraordinary circumstances that would make enforcement of such a plan possible in the United States, the bankruptcy court did not abuse its discretion in denying relief.15
[Section] 1507 theoretically provides for the relief Vitro seeks because it was intended to provide relief not otherwise available under United States law. But the devil is in the details, and in this case, the bankruptcy court correctly determined that relief was precluded by § 1507(b)(4). Under that provision, the bankruptcy court had to consider whether the relief requested was comparable to that available under the Bankruptcy Code. We conclude . . . that, although non-consensual, non-debtor discharge would not be available in this circuit, it could be available in other circuits. We also hold that because Vitro has failed to show the presence of the kind of comparable extraordinary circumstances that would make enforcement of such a plan possible in the United States, the bankruptcy court did not abuse its discretion in denying relief.15
In other words, even though the Fifth Circuit would not permit a U.S. debtor to confirm a plan with a non-consensual third-party release, it would permit the enforcement of a foreign plan with such a release, if the foreign debtor could establish necessary ‘extraordinary circumstances’. Those extraordinary circumstances typically are found to exist where the release in question was ‘important to success of the plan’, focusing on considerations such as whether ‘the estate received substantial consideration’, ‘the enjoined claims were channeled to a settlement fund rather than extinguished’ and the enjoined claims would ‘indirectly impact the debtor’s reorganization by way of indemnity or contribution and the plan otherwise provided for the full payment of the enjoined claims’ or the affected creditors consented.16 The court found no such circumstances in In re Vitro, swayed by evidence that creditors did not receive a distribution ‘close’ to what they were owed, did not consent to the plan and were not given an alternative to recover what they were owed in full.17
Later, in 2018, the Bankruptcy Court for the Southern District of New York (located in a judicial circuit where non-consensual third-party releases are permitted in certain instances) confronted the same issue in In re Avanti Communications Group. Chief Judge Martin Glenn held that ‘schemes of arrangements sanctioned under U.K. law that provide third-party guarantor releases should be recognized and enforced under chapter 15 of the Bankruptcy Code.’18 The Court recognised, as did the Fifth Circuit in In re Vitro, that such third-party releases under Chapter 11 pre-Purdue were the subject of much disagreement among circuit courts,19 but noted that ‘third-party releases in chapter 15 cases have received a different analysis than in chapter 11 cases, focusing primarily on the foreign court’s authority to grant such relief.’20 Thus, the principal issue for the Court in In re Avanti was not one of overriding U.S. public policy but one of international comity underpinning the purpose of Chapter 15. To that end, the Court underscored that in deciding ‘whether to grant appropriate relief or additional assistance under chapter 15, courts are guided by principles of comity and cooperation with foreign courts’.21 Because ‘[w]ell-settled case law’ in the United Kingdom ‘expressly authorize[d]’ the kind of third-party releases at issue, and the restructuring was sanctioned by UK courts, the Court found it appropriate to sanction the plan.22
The inquiry emerging from cases such as In re Vitro and In re Avanti for analysing whether non-consensual third-party releases in Chapter 15 cases are enforceable developed into a case-by-case determination under Sections 1521, 1506 and 1507, taking into account holistically the context of the plan to be enforced. Although courts were, in certain circumstances, willing to enforce such releases, uncertainty as to the validity of the releases under U.S. law gave courts pause.
Purdue Decision
The Supreme Court in Purdue held that Chapter 11 of the Bankruptcy Code ‘does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seek to discharge claims against a nondebtor without the consent of affected claimants’.23 The Supreme Court’s decision focused primarily on what is permitted under Chapter 11 of the Bankruptcy Code, and what statutory authority bankruptcy courts have to grant non-consensual third-party releases. The opinion focuses on interpreting Section 1123(b)(6), the catch-all provision allowing for inclusion of terms in the plan ‘not expressly forbidden by the code’ as long as the bankruptcy court deems it ‘appropriate’.24 The Supreme Court read the provision in light of the ‘text and context’ of the Bankruptcy Code, concluding that because ‘each of the preceding paragraphs [of Section 1123(b)] concerns the rights and responsibilities of the debtor’ and ‘authorize a bankruptcy court to adjust claims without consent only to the extent such claims concern the debtor’, Section 1123(b)(6) does not confer authority on a bankruptcy court to discharge the debts of a non-debtor without the consent of affected claimants.25
Purdue Decision
The Supreme Court in Purdue held that Chapter 11 of the Bankruptcy Code ‘does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seek to discharge claims against a nondebtor without the consent of affected claimants’.23 The Supreme Court’s decision focused primarily on what is permitted under Chapter 11 of the Bankruptcy Code, and what statutory authority bankruptcy courts have to grant non-consensual third-party releases. The opinion focuses on interpreting Section 1123(b)(6), the catch-all provision allowing for inclusion of terms in the plan ‘not expressly forbidden by the code’ as long as the bankruptcy court deems it ‘appropriate’.24 The Supreme Court read the provision in light of the ‘text and context’ of the Bankruptcy Code, concluding that because ‘each of the preceding paragraphs [of Section 1123(b)] concerns the rights and responsibilities of the debtor’ and ‘authorize a bankruptcy court to adjust claims without consent only to the extent such claims concern the debtor’, Section 1123(b)(6) does not confer authority on a bankruptcy court to discharge the debts of a non-debtor without the consent of affected claimants.25
Importantly, the Supreme Court in Purdue did not discuss any constitutional due process or policy grounds for prohibiting non-consensual third-party releases, expressly declining to address the policy grounds offered by the plan proponents, stating that ‘this Court is the wrong audience for such policy disputes.’26 The Supreme Court took care to specify that its holding was confined to be ‘only that the bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seeks to discharge claims against a nondebtor without the consent of affected claimants’.27 The Supreme Court instead notes that its ‘proper task is to interpret and apply the law’ and that it is unaware of ‘a statute or case suggesting American courts in the past enjoyed the power in bankruptcy to discharge claims brought by nondebtors against other nondebtors, all without the consent of those affected’.28
The decision did not directly discuss how U.S. courts should analyse non-consensual third-party releases in Chapter 15 cases, but its focus on statutory interpretation over policy is instructive. The Supreme Court grounded its decision primarily on the text of Chapter 11, rather than on due process or policy concerns implicated by non-consensual third-party releases.This suggests that, as a matter of U.S. restructuring law, such releases are not permitted in a Chapter 11 proceeding, but does not foreclose recognition of such provisions in foreign restructuring plans. Indeed, where a foreign jurisdiction’s law allows for such provisions, countervailing considerations of international comity at the forefront of Chapter 15 analyses weigh in favour of recognition, absent a foreign court’s action being ‘manifestly contrary to the public policy of the United States’.29 Purdue declined to opine on what U.S. public policy is with respect to this issue, which does not appear to lend much new ammunition to would-be opponents of a foreign non-consensual third-party release.30 That said, no court has yet been asked to assess the issue post-Purdue, and we should expect an opponent of a release to argue that the Supreme Court’s decision establishes a uniform U.S. policy against allowing non-consensual third-party releases in corporate restructurings.
Analysis Post-Purdue
Less than a month after the Supreme Court issued its decision in Purdue, on 22 July 2024, the United States Bankruptcy Court for the District of Delaware for the first time post-Purdue confronted the issue of whether to enforce a foreign plan of reorganisation including a non-consensual third-party release in a Chapter 15 proceeding.
The debtors in In re Nexii Building Solutions commenced proceedings in the Supreme Court of British Columbia on 11 January 2024 under Canadian federal restructuring law, the Companies’ Creditors Arrangement Act (CCAA), and, on the same day, commenced Chapter 15 proceedings in the United States.31 On 24 June 2024, KSV Restructuring Inc (the court-appointed monitor of the debtors in the Canadian proceedings) requested an order approving an asset purchase agreement between the debtors, as well as an ancillary order containing a clause releasing the debtors, debtors’ current and former officers, debtor-in-posession lenders and purchasers from:
any and all claims that any person may have or be entitled to assert . . . whether known or unknown, matured or unmatured, foreseen or unforeseen, existing or hereafter arising, based in whole or in part on any action or omission, transaction, dealing or other occurrence existing or taking place on or prior to the date of the [termination of the CCAA proceedings] . . . in any way relating to or arising out of the assets, obligations, business or affairs of the [debtors] or in respect of [the CCAA proceedings] . . . 32
Subsequently, on 28 June 2024, the Canadian court issued an order approving the sale of the debtor’s assets, as well as the ancillary order containing the non-consensual third-party release.33 Nexii, the purchaser, filed a motion for enforcement of the order the following week on 1 July 2024.
In its motion for recognition, Nexii, as a foreign representative in the proceeding, argued that Purdue was inapplicable because the majority opinion focused on the statutory construction of the Bankruptcy Code, rather than addressing whether non-consensual third-party releases were contrary to the public policy of the United States.34 Nexii maintained that Section 1506 of the Bankruptcy Code requires a ‘narrow reading’ and prohibits only action that is ‘manifestly contrary’ to U.S. public policy.35 Further, under Third Circuit precedent, the Section 1506 public policy exception applies only ‘where the procedural fairness of the foreign proceeding is in doubt or cannot be cured by the adoption of additional protections’ or where recognition ‘would impinge severely a U.S. constitutional or statutory right’.36
Notably, U.S. bankruptcy courts pre-Purdue also previously found the procedures used by Canadian courts ‘meet [the United States’] fundamental standard of fairness’,37 which is the question at the centre of Chapter 15 recognition inquiries. Finally, the foreign representative argued that though a release ‘arguably could not be granted in a U.S. bankruptcy proceeding’ (i.e., a Chapter 11 proceeding), this is not dispositive in a Chapter 15 setting38 – a point noted by the court in In re Vitro. The Nexii court granted the foreign representative’s motion for recognition, finding that the relief requested was in ‘the best interest’ of all parties involved.39
Other courts have encountered similar questions since Purdue. On the same day as Judge Stickles’ ruling in In re Nexii, Judge Michael E Wiles, United States Bankruptcy Court judge for the Southern District of New York, was asked to consider whether to recognise a Brazilian plan of reorganisation in the In re Americanas S.A. Chapter 15 case, and to provide aid in its implementation and enforcement.40 Creditors in the Brazilian proceedings were given options as to how their claims could be treated under the plan of reorganisation. Under one option, which required granting releases to the debtors (as well as former directors, officers and affiliates of the debtors) and agreement to be paid in a combination of equity in the reorganised company and new debt, creditors would receive recovery equal in value to 80 per cent of their claims.41 Under another option, creditors electing to be paid in cash and to not grant releases were entitled to recovery of 30 per cent of their claims in 15 years.42 Finally, creditors that failed to make any election were deemed to have not granted the releases and would receive 20 per cent recovery of their claims, in case, in 20 years.43
Certain creditors opposed confirmation of the Brazilian plan, arguing that the framework was ‘coercive’ and that it violated Brazilian law due to the disparities in recovery between creditors that did and did not grant releases (while the debtors defended the options as providing ‘incentives’).44 However, as noted in the Court’s decision, the Brazilian court heard the objection and overruled those creditors.45 In giving effect to the Brazilian plan of reorganisation, including the third-party releases, Judge Wiles affirmatively found that terms of the Brazilian plan were ‘not manifestly contrary to U.S. public policy’.46
It should be noted that neither of the courts in Nexii and Americanas was presented with a direct challenge to the respective releases on Purdue grounds (nor was the Americanas court faced with a true non-consensual release). However, the relative quiet from litigants and courts in both cases may suggest that Purdue will not affect the long-standing principles of international comity on which courts rely when faced with requests to enforce foreign bankruptcy plans.
Analysis Post-Purdue
Less than a month after the Supreme Court issued its decision in Purdue, on 22 July 2024, the United States Bankruptcy Court for the District of Delaware for the first time post-Purdue confronted the issue of whether to enforce a foreign plan of reorganisation including a non-consensual third-party release in a Chapter 15 proceeding.
The debtors in In re Nexii Building Solutions commenced proceedings in the Supreme Court of British Columbia on 11 January 2024 under Canadian federal restructuring law, the Companies’ Creditors Arrangement Act (CCAA), and, on the same day, commenced Chapter 15 proceedings in the United States.31 On 24 June 2024, KSV Restructuring Inc (the court-appointed monitor of the debtors in the Canadian proceedings) requested an order approving an asset purchase agreement between the debtors, as well as an ancillary order containing a clause releasing the debtors, debtors’ current and former officers, debtor-in-posession lenders and purchasers from:
any and all claims that any person may have or be entitled to assert . . . whether known or unknown, matured or unmatured, foreseen or unforeseen, existing or hereafter arising, based in whole or in part on any action or omission, transaction, dealing or other occurrence existing or taking place on or prior to the date of the [termination of the CCAA proceedings] . . . in any way relating to or arising out of the assets, obligations, business or affairs of the [debtors] or in respect of [the CCAA proceedings] . . . 32
Subsequently, on 28 June 2024, the Canadian court issued an order approving the sale of the debtor’s assets, as well as the ancillary order containing the non-consensual third-party release.33 Nexii, the purchaser, filed a motion for enforcement of the order the following week on 1 July 2024.
In its motion for recognition, Nexii, as a foreign representative in the proceeding, argued that Purdue was inapplicable because the majority opinion focused on the statutory construction of the Bankruptcy Code, rather than addressing whether non-consensual third-party releases were contrary to the public policy of the United States.34 Nexii maintained that Section 1506 of the Bankruptcy Code requires a ‘narrow reading’ and prohibits only action that is ‘manifestly contrary’ to U.S. public policy.35 Further, under Third Circuit precedent, the Section 1506 public policy exception applies only ‘where the procedural fairness of the foreign proceeding is in doubt or cannot be cured by the adoption of additional protections’ or where recognition ‘would impinge severely a U.S. constitutional or statutory right’.36
Notably, U.S. bankruptcy courts pre-Purdue also previously found the procedures used by Canadian courts ‘meet [the United States’] fundamental standard of fairness’,37 which is the question at the centre of Chapter 15 recognition inquiries. Finally, the foreign representative argued that though a release ‘arguably could not be granted in a U.S. bankruptcy proceeding’ (i.e., a Chapter 11 proceeding), this is not dispositive in a Chapter 15 setting38 – a point noted by the court in In re Vitro. The Nexii court granted the foreign representative’s motion for recognition, finding that the relief requested was in ‘the best interest’ of all parties involved.39
Other courts have encountered similar questions since Purdue. On the same day as Judge Stickles’ ruling in In re Nexii, Judge Michael E Wiles, United States Bankruptcy Court judge for the Southern District of New York, was asked to consider whether to recognise a Brazilian plan of reorganisation in the In re Americanas S.A. Chapter 15 case, and to provide aid in its implementation and enforcement.40 Creditors in the Brazilian proceedings were given options as to how their claims could be treated under the plan of reorganisation. Under one option, which required granting releases to the debtors (as well as former directors, officers and affiliates of the debtors) and agreement to be paid in a combination of equity in the reorganised company and new debt, creditors would receive recovery equal in value to 80 per cent of their claims.41 Under another option, creditors electing to be paid in cash and to not grant releases were entitled to recovery of 30 per cent of their claims in 15 years.42 Finally, creditors that failed to make any election were deemed to have not granted the releases and would receive 20 per cent recovery of their claims, in case, in 20 years.43
Certain creditors opposed confirmation of the Brazilian plan, arguing that the framework was ‘coercive’ and that it violated Brazilian law due to the disparities in recovery between creditors that did and did not grant releases (while the debtors defended the options as providing ‘incentives’).44 However, as noted in the Court’s decision, the Brazilian court heard the objection and overruled those creditors.45 In giving effect to the Brazilian plan of reorganisation, including the third-party releases, Judge Wiles affirmatively found that terms of the Brazilian plan were ‘not manifestly contrary to U.S. public policy’.46
It should be noted that neither of the courts in Nexii and Americanas was presented with a direct challenge to the respective releases on Purdue grounds (nor was the Americanas court faced with a true non-consensual release). However, the relative quiet from litigants and courts in both cases may suggest that Purdue will not affect the long-standing principles of international comity on which courts rely when faced with requests to enforce foreign bankruptcy plans.
Conclusion
The Purdue decision, while leaving unanswered the question of when non-consensual third-party releases allowed under non-U.S. law may be enforced in the United States, provided a lens through which to analyse such releases. Through its focus on statutory authority of courts to enforce the kinds of non-consensual third-party releases at issue, the Court framed the issue as one in which bankruptcy courts may not exceed their statutory authority, rather than a matter of U.S. policy. Because Chapter 15 provides recognition to foreign restructuring plans meeting the statutory requirements of Section 1515 and otherwise declining recognition only where it is ‘manifestly contrary’ to public policy, the Purdue decision does not appear to upend the case-by-case analysis utilised by courts before the decision – an approach to which lower courts in the wake of Purdue appear to have been adhering. Of course, only time will tell how courts will continue to assess the effects of Purdue on a request to enforce a foreign non-consensual third-party release, but one thing is certain: restructuring professionals will be waiting and watching.
Conclusion
The Purdue decision, while leaving unanswered the question of when non-consensual third-party releases allowed under non-U.S. law may be enforced in the United States, provided a lens through which to analyse such releases. Through its focus on statutory authority of courts to enforce the kinds of non-consensual third-party releases at issue, the Court framed the issue as one in which bankruptcy courts may not exceed their statutory authority, rather than a matter of U.S. policy. Because Chapter 15 provides recognition to foreign restructuring plans meeting the statutory requirements of Section 1515 and otherwise declining recognition only where it is ‘manifestly contrary’ to public policy, the Purdue decision does not appear to upend the case-by-case analysis utilised by courts before the decision – an approach to which lower courts in the wake of Purdue appear to have been adhering. Of course, only time will tell how courts will continue to assess the effects of Purdue on a request to enforce a foreign non-consensual third-party release, but one thing is certain: restructuring professionals will be waiting and watching.
This article was first published on Latin Lawyer in December 2024; for further in-depth analysis, please visit the Latin Lawyer Guide to Restructuring.
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