SNP Boat Service S.A.: Clarifying the Limited Reach of a U.S. Bankruptcy Court in Chapter 15

by Cadwalader, Wickersham & Taft LLP


When a debtor commences a restructuring proceeding outside of the United States, in order to protect any property located within the United States, the debtor frequently commences a chapter 15 action and seeks recognition of the foreign proceeding by a U.S. bankruptcy court.  Chapter 15 allows a court-appointed foreign representative to distribute a debtor’s U.S. property in the foreign case “provided that the court is satisfied that the interests of creditors in the United States are sufficiently protected.”  11 U.S.C. § 1521(b).  This determination is based, in part, on whether the laws governing the foreign proceeding comport with the United States’ concept of due process.

In SNP Boat Service, debtor SNP Boat Service S.A., a corporation organized under the laws of France that designs luxury boats and provides related boat management services, and Hotel Le St. James, a Canadian corporation, had been litigating a contract dispute in both French and Canadian courts since 2008.  In April of 2009, the French Commercial Court approved a sauvegarde proceeding for SNP (a sauvegarde proceeding shares certain similarities with a U.S. chapter 11 proceeding, including an automatic stay that has an international effect).

St. James ultimately obtained a judgment in the Canadian courts and, after learning that SNP had assets located in Florida, domesticated that judgment in the U.S. and caused the seizure of two of SNP’s vessels.  St. James intended to sell the vessels to satisfy its judgment.  In the meantime, SNP had obtained an order in the sauvegarde proceeding that St. James’ Canadian judgment had been improperly entered and was unenforceable.  In response, St. James argued that it had not been afforded fundamental due process in the proceedings in France.

Before the Florida vessels were sold, the French Commercial Court appointed an administrator of SNP’s estate and the administrator filed a chapter 15 petition seeking recognition of the French sauvegarde proceeding as a “foreign proceeding” pursuant to 11 U.S.C. § 1515.  The U.S. bankruptcy court formally recognized the sauvegarde proceeding as a “foreign proceeding” and ordered a stay with respect to all of SNP’s property located within the United States.

SNP then filed a motion seeking to have the chapter 15 foreign representative entrusted with one of the Florida vessels.  This motion essentially sought to remove the Florida vessel from the jurisdiction of the U.S. bankruptcy court and subject it to the jurisdiction of the French Commercial Court.  St. James also filed a motion seeking authority to compel discovery to determine whether its interests as a creditor had been “sufficiently protected” in the administration of the sauvegarde proceeding.  SNP objected to this relief on several grounds.  The competing motions presented three issues for the bankruptcy court.

First, SNP argued that the U.S. bankruptcy court did not possess the authority to order discovery for the purpose of inquiring into the French sauvegarde proceeding; in effect, SNP asserted that this action amounted to appellate oversight of the French Commercial Court.  However, the bankruptcy court determined that it did indeed have the authority to inquire whether St. James had been afforded sufficient due process in the French sauvegarde proceeding, partially due to SNP and its foreign representative’s uncooperative behavior during the chapter 15 proceeding.  In particular, the bankruptcy court had been particularly displeased by SNP’s repeated dilatory tactics with respect to St. James’ requested discovery.  This frustration eventually reached its peak after SNP filed a motion asking the bankruptcy court to clarify its discovery order and extend the deadline for conducting discovery due to the month-long August holiday in France.

The second issue involved SNP’s assertion that a French “blocking statute” (which is generally designed to relieve non-U.S. parties from compliance with U.S. discovery requests) barred the requested discovery.  The bankruptcy court also rejected this argument by SNP, ruling that such a blocking statute does not relieve foreign parties of the obligation to comply with United States discovery when the party is subject to the U.S. court’s jurisdiction.  Ultimately, the U.S. court concluded that the French blocking statute did not apply to the case at hand.

Finally, and primarily as a result of what it perceived to be a continued lack of cooperation on the part of SNP, the bankruptcy court ultimately denied with prejudice SNP’s entrustment motion and dismissed the chapter 15 proceeding.

SNP appealed the bankruptcy court’s rulings on each of these three issues and sought reinstatement of the chapter 15 proceeding.


With respect to the acceptable level of inquiry into the specific proceedings taking place before the foreign court, the district court relied on the Second Circuit’s ruling in Victrix S.S. Co., S.A. v. Salen Dry Cargo A.B., 825 F.2d 709 (2d Cir. 1987), which addressed the issue of comity within the context of prior section 304 of the Bankruptcy Code, the predecessor cross-border insolvency statute to chapter 15.  In Victrix, the Second Circuit looked “only to whether the ‘foreign laws’ at issue comported with due process and not whether the specific individual proceeding afforded due process.”  Thus, once the U.S. bankruptcy court determined that French sauvegarde proceedings were generally sufficient to protect creditors’ interests, the bankruptcy court was without jurisdiction to inquire any further into any specific foreign proceeding.

The district court in SNP continued that “[t]o inquire into a specific foreign proceeding is not only inefficient and a waste of judicial resources, but more importantly, necessarily undermines the equitable and orderly distribution of a debtor’s property by transforming a domestic court into a foreign appellate court where creditors are always afforded the proverbial ‘second bite at the apple.’”  In attacking the SNP sauvegarde, St. James had not alleged that creditors’ interests as a whole were not sufficiently protected by the French insolvency laws.  Thus, the district court held it would be unjust to allow a court to make specific inquiries as to the rights of an individual creditor that was no more entitled to a distribution of SNP’s assets than any other.

Regarding the second issue concerning the effect of the French “blocking statute,” the district court relied on Société Nationale Industrielle Aérospatiale v. U.S. Dist. Court for the S. Dist. of Iowa, 482 U.S. 522, 544 n.29 (1987), in concluding that the bankruptcy court did not abuse its discretion by disregarding the French blocking statute.  The district court concluded that to give force and effect to such a foreign statute would bestow foreigners with a preferred status within the U.S. court system and also represent an “extraordinary exercise of legislative jurisdiction by the Republic of France over a United States district judge.”

Finally, the SNP district court reversed the bankruptcy court’s dismissal of the chapter 15 proceeding as a sanction, noting that the severe sanction of a dismissal or default judgment should only be used as a last resort and when other remedies would not ensure compliance with a court’s orders.  Significantly, the bankruptcy court’s order denying SNP’s entrustment motion did not explore the possibility of lesser sanctions.  Accordingly, the district court concluded that the bankruptcy court abused its discretion when it dismissed SNP’s entrustment motion with prejudice as a sanction.

The district court’s ruling that a U.S. bankruptcy court may only inquire into the general framework of a foreign insolvency proceeding – and not specific individual proceedings – gives additional guidance to parties seeking to challenge a chapter 15 case.  As long as the laws of a foreign insolvency regime are generally similar to the laws of the U.S., creditors may have limited bases on which to use chapter 15 to challenge the foreign court’s rulings.


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.

© Cadwalader, Wickersham & Taft LLP | Attorney Advertising

Written by:

Cadwalader, Wickersham & Taft LLP

Cadwalader, Wickersham & Taft LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.