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Irish Insolvency Proceeding of Irish Bank Resolution Corporation Limited Granted Recognition Under Chapter 15

In re Irish Bank Resolution Corp. Ltd. (In Special Liquidation), No. 13-12159 (CSS) (Bankr. D. Del. Apr. 30, 2014)

[Update – On August 4, 2015, the Delaware District Court affirmed the decisions of the Bankruptcy Court, agreeing with its legal and factual findings and concluding that the Court did not err in granting recognition of IBRC’s proceeding pursuant to 11 U.S.C. §§ 101 – 1532.]

On December 18, 2013, the Honorable Christopher S. Sontchi entered an Order granting recognition under Chapter 15 of the Bankruptcy Code of the insolvency-related Irish proceeding of Irish Bank Resolution Corporation Limited (“IBRC”).  Shortly thereafter, the decision of the Court was appealed to, and is currently pending before, Delaware’s District Court.  These Findings of Fact and Conclusions of Law, entered on April 30, 2014, set forth the legal and factual reasons for the Bankruptcy Court’s ruling, and contain a lengthy but rather straightforward analysis of the substantive and procedural requirements for recognition under the Code.  Namely, Section 1517 requires recognition if (i) the proceeding qualifies as a foreign main or non-main proceeding under Section 1502; (ii) the foreign representative applying for recognition is a person or body; and (iii) the petition meets the procedural requirements set forth in Section 1515.  If these requirements are satisfied, the Court must grant recognition unless “the action would be manifestly contrary to the public policy of the United States.”  See 11 U.S.C. § 1506.

Following the financial crisis of 2008, private banks Anglo Irish Bank Corporation Limited (“Anglo”) and Irish Nationwide Building Society (“INBS”) experienced severe liquidity crises, causing the Irish government to nationalize both institutions.  Ireland’s Credit Institutions (Stabilisation) Act 2010 created IBRC as a successor to Anglo and INBS, and both were merged into IBRC.  Ultimately, the wind up of IBRC was deemed necessary, and the Irish Parliament passed the Irish Bank Resolution Corporation Act of 2013 (the “Act”).  The Act changed a substantial portion of Ireland’s existing corporate liquidation laws and was enacted to, among other things, provide for a winding up of IBRC and restore the financial position of Ireland.  Special liquidators (the “Foreign Representatives”) were appointed for IBRC, and liquidation proceedings began under Irish law.  On August 26, 2013, the Foreign Representatives filed the instant recognition proceeding, which was objected to on various grounds.

After determining as a threshold matter that IBRC qualified as an eligible Chapter 15 debtor (and not a foreign bank or government instrumentality), the Court addressed whether IBRC’s Irish proceeding was a “foreign proceeding.”  Applying the definition set forth in Section 101(23) of the Bankruptcy Code, the Court held in the affirmative.  A variety of factors lent support for the Court’s holding, including the Act itself, which is grounded in Irish insolvency law and provides court oversight, public access to proceedings, and a liquidation framework for IBRC both judicial and administrative in nature.

Once IBRC’s proceeding was deemed a foreign proceeding, the Court easily concluded that the recognition factors of Section 1517 were satisfied.  Moreover, Judge Sontchi dispensed with the notion proffered by the objecting parties that a grant of recognition would violate public policy.  According to the Court, the public policy exception should be “narrowly construed.” Applicable Irish and United States law are largely comparable and, even if they were not, no evidence was put forth by the objecting parties to indicate how the conflicts implicated substantive or procedural due process protections available in the United States.  Further, the Court was not concerned that the Act was created to address IBRC’s financial woes because it left undisturbed priority schemes set forth in existing Irish liquidation laws, and the Court likened the Act to the United States’ “too big to fail” legislation.  Ultimately, the Court noted that the recognition of IBRC’s proceedings supported strong public policy “in favor of a universalism approach to complex multinational bankruptcy proceedings.”