US Bankruptcy Court Rules on Extraterritorial Scope of Automatic Stay Arising Upon Recognition of Foreign Main Proceeding

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The United States Bankruptcy Court for the Southern District of New York has issued an opinion in the chapter 15 proceedings concerning JSC BTA Bank (‘BTA’ or the ‘Bank’) regarding the extraterritorial scope of the ‘automatic stay’ of actions against the debtor and its property that arises upon recognition of a foreign main proceeding. The court ruled that the extraterritorial scope of the automatic stay of in personam actions against the debtor that arises upon recognition of a foreign main proceeding is significantly narrower than that of the stay that arises upon the filing of a plenary case in the United States. The court cast its decision as one based upon the statutory mandate to cooperate with foreign courts, but although the opinion is premised on arguably sound policy rationale, its holding departs from the plain language of the applicable provisions of the Bankruptcy Code.

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