Recent years have seen an expansion of foreign business operations in the United States, and as a result, foreign enterprises have become involved in all areas of the U.S. business environment. Not surprisingly, when such enterprises fail, there may be serious consequences regarding assets located within the United States and the rights of U.S. creditors to satisfy claims they may have against the debtor enterprises and their assets. 

Rights of U.S. creditors against foreign debtors may be altered by section 304 of the Bankruptcy Code (the “Code”), which allows representatives of estates in foreign bankruptcy proceedings to commence a case ancillary to foreign proceedings and seek assistance from U.S. bankruptcy courts. This assistance may include enjoining the commencement or continuation of an action against a debtor with respect to property involved in such foreign proceedings and enjoining lien enforcement. The bankruptcy court may also issue an order releasing a foreign enterprise’s U.S. assets for disposition in a foreign bankruptcy proceeding.

One example of the use of section 304 by a Foreign Representative occurred as a result of the collapse of the Bank of Credit and Commerce International (“BCCI”). But for an early partial settlement, the issues raised in BCCI’s section 304 case would have required the resolution of conflicts among competing interests which frequently arise in international litigation generally and in the application of this section of the Code in particular.