Cross-Border Insolvency Proceeding in U.S. and Korea Focused on Issues about Recognition and Extraterritoriality
Presented at the 5th Inter-University Graduate Student Conference at Cornell Law School, March 2009. A version of this paper is to be published in the 2010 volume of the Norton Annual Review of International Insolvency.
When a firm or any other economic entity (debtor), which has assets and employees in multiple countries, goes bankrupt in its principal place of operation, does it possibly liquidate or dispose of assets located in other countries avoiding duplicative insolvency proceeding which would put the debtor at risk of inefficiency in terms of time and cost? Or if the concurrent insolvency proceedings are pending in both countries, is it possible to solve or moderate the procedural conflict between different jurisdictions? Let’s assume one hypothetical case: After a U.S. firm “A” (debtor) filed a chapter 11 proceeding and its reorganization plan was confirmed, foreign creditor “B”, who never filed a proof of claim in that proceeding but entered in the list of creditor, filed a petition of liquidation proceeding against “A” in the court of Korea. In front of Korean Bankruptcy judge, debtor “A” asserted that: i) “B” could not file a new liquidation proceeding in Korea because the claim of “B” was discharged already in the U.S. proceeding, and, ii) even if “B” could allege his claim against the debtor contending the extraterritorial effect of the discharge order of U.S. court, it is useless to begin plenary proceeding in Korea, because “B” could attain his goal just by using ancillary proceeding under Korean Bankruptcy Act.
This paper will discuss on these issues above to examine whether “A” can prove her merits, assuming two involving countries are U.S and Korea in this hypothetical, and comparing these two countries’ laws and legal systems.