New York District Court Rules that Chapter 15 Recognition Is Not Prerequisite to Enforcement of Foreign Bankruptcy Judgment under Principles of Comity

U.S. courts have a long-standing tradition of recognizing or enforcing the laws and court rulings of other nations as an exercise of international “comity.” Since Chapter 15 of the Bankruptcy Code was enacted in 2005, it has been generally understood that recognition of a foreign bankruptcy proceeding under Chapter 15 is a prerequisite to the enforcement by a U.S. court of an order or judgment entered in such a foreign bankruptcy proceeding under the doctrine of comity. A ruling recently handed down by the U.S. District Court for the Southern District of New York directly challenges that principle. In EMA Garp Fund v. Banro Corp., 2019 WL 773988 (S.D.N.Y. Feb. 21, 2019), the court dismissed litigation against a Canadian company and its former CEO, finding that, under principles of comity, the lawsuit was barred by orders approving the company’s Canadian bankruptcy proceeding and releasing all claims against the defendants. The district court did so despite the absence of any order issued by a U.S. bankruptcy court recognizing the Canadian bankruptcy proceeding under chapter 15.