Courts, Cooperation, and More: Incorporating Case-Specific Provisions in Insolvency Protocols - September 2017

by Jones Day

Jones Day

In Short

The Situation: In cross-border restructuring cases, court-approved insolvency protocols are applied to facilitate communication between U.S. and foreign courts and standardize certain common procedures. The protocols are sometimes adapted to address case-specific issues.

The Result: Case-specific provisions tend to address information-sharing guidelines, claims reconciliation, the management of assets, and dispute resolution.

Looking Ahead: As cross-border restructurings become more common, protocols will likely become more prominent in case management.

In cross-border restructuring cases, interested parties increasingly rely on court-approved insolvency protocols to aid in managing complex insolvencies involving debtors' assets, liabilities, or operations that span international borders. These protocols facilitate communication between U.S. and foreign courts and standardize certain common procedures, while simultaneously protecting each nation's sovereignty.

A recent survey of protocols implemented since 2000 indicates that while protocols typically contain similar procedural and administrative provisions, the protocols are sometimes adapted to address case-specific issues. For more information on common provisions in protocols, see "Courts, Cooperation, and More: A Review of Cross-Border Insolvency Protocols." Parties involved in cross-border restructurings should consider whether they would benefit from a protocol that includes such case-specific provisions. Based on our survey, unique provisions address, among other things, the following:

Information Sharing Guidelines

In Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, Adv. Pro. No. 08-1789 (BRL) (Bankr. S.D.N.Y. May 29, 2009) (Dkt. No. 232), the joint provisional liquidators and the liquidating trustee relied on a protocol to govern the exchange of confidential information between and among each other and the various debtor entities. Specifically, the protocol listed types of information that could be freely shared between the parties, including, among other things, bank statements, accounting records, and customer statements. The protocol also imposed restrictions on sharing confidential information with third parties.

Similarly, in In re Soundview Elite Ltd., No. 13-13098 (REG) (Bankr. S.D.N.Y. Dec. 30, 2014) (Dkt. No. 502), the joint liquidators in the Cayman Islands proceeding and the chapter 11 trustee agreed to detailed guidelines to facilitate the exchange of information. The protocol sets forth each representative's respective responsibilities for obtaining, maintaining, and sharing relevant information.

Claims Reconciliation

Protocols can establish which proceeding's representative has authority to pursue or settle certain claims. For example, in In re Lancelot Investors Fund, L.P., No. 08-28225 (JPC) (Bankr. N.D. Ill. Sept. 1, 2009) (Dkt. No. 274), the court-approved protocol gave the chapter 11 trustee authority to prosecute claims and causes of action on behalf of the debtors even though both the trustee and the joint liquidators had asserted responsibility over all the debtors' assets. The protocol also established that neither the trustee nor the joint liquidators would "expend material resources on claims reconciliation" until they had agreed there were funds to do so. Finally, the parties agreed that the U.S. trustee had authority over determining the validity of secured claims and certain liens.

In other cases, parties use generic provisions to govern the identification and resolution of intercompany claims. In the Madoff case, the protocol included the following language:

The Representatives shall cooperate and negotiate in good faith regarding any potential claims by either Debtor against the other Debtor. At the appropriate stage, the Representatives shall consider whether it is sensible to implement, subject to the approval of the Tribunals, a mechanism for the resolution of intercompany claims.

Management of Assets

Some protocols include detailed provisions concerning asset identification and administration. In In re Manhattan Investment Fund Ltd., No. 00-10922 (BRL) (Bankr. S.D.N.Y. May 16, 2000) (Dkt. No. 65), the joint liquidators in the British Virgin Islands and the chapter 11 trustee relied on an insolvency protocol to establish their respective responsibilities for asset management. The protocol obligated the parties to create a work plan for asset identification, collection, and management and to discuss any relevant actions that had taken place with respect to the debtors' assets in biweekly telephone calls.

Recent cases have also included similar provisions. In Madoff, the protocol required representatives to "coordinate and cooperate expeditiously with each other regarding the identification, preservation and realization" of assets if another representative had a material interest in that asset.

Dispute Resolution

Most protocols contain guidelines on dispute resolution. Typically, the protocol instructs the parties to petition one (or all) of the courts involved to resolve disputes. However, some parties have chosen instead to include detailed alternative dispute resolution procedures in their protocols. In Manhattan Investments, for example, the protocol set forth default dispute resolution procedures that would automatically begin upon notice to the offending party unless that party opted out of the procedures. In the event the opt-out was not exercised, mediation would proceed according to the timing and procedures established in the protocol.


As cross-border restructuring matters become more prevalent, protocols will likely play a more significant role in the management of cases, particularly those with complex operations and financial structures that touch multiple jurisdictions.

Two Key Takeaways

  1. Case-specific information-sharing protocols tend to identify the types of information that can be shared between parties, and they impose restrictions on sharing confidential information with third parties.
  2. Protocols usually include guidelines pertaining to dispute resolution, but some parties have chosen instead to opt for detailed alternative dispute resolution procedures.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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