An overview of Chapter 15 of the U.S. Bankruptcy Code and its role in cross-border insolvencies

As a result of increasing globalisation and free trade policies since the end of WWII – led by the United States to further our own economic growth and competitiveness and security – foreign and domestic corporations frequently have operations, assets, and creditors located in multiple countries. When a company with international operations becomes insolvent, unique issues arise under foreign laws concerning individual and business insolvency that may conflict with the U.S. Bankruptcy Code. Such issues include the priority and enforceability of creditors' rights and debtors' discharges in foreign countries.
 
By the 1990s, there was a clear need for a uniform method of dealing with cross-border insolvency cases. In 1997, the United Nations Commission on International Trade Law (UNCITRAL) proposed a Model Law on Cross-Border Insolvency. Eight years later, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) introduced a new Chapter 15 to the Code, which is based on the UNCITRAL Model Law.[1] The stated goals of Chapter 15 are to (i) increase cooperation between domestic and foreign courts, debtors, and representatives; (ii) create greater legal certainty that will foster trade and foreign investment; (iii) provide a fair and efficient administration of cross-border insolvency cases; (iv) protect and maximise the value of the debtor's assets; and (v) facilitate the reorganisation of distressed businesses to protect investments and prevent job losses.[2] The UNCITRAL Model Law has been adopted in a number of countries with close economic ties to the United States, including Mexico, Canada, Japan, and Great Britain.[3]
 
As such, the (UNCITRAL)[4] Model Law on Cross-Border Insolvency[5], aims to provide effective mechanisms for dealing with cross-border insolvency cases. Its objectives include promoting cooperation between U.S. and foreign courts, ensuring greater legal certainty for trade and investment, and facilitating the fair and efficient administration of cross-border insolvencies to protect the interests of all creditors and other interested entities, including the debtor, as well as the protection and maximisation of the debtor's assets.[6]^,[7] In other word, the key function of both Chapter 15 and UNCITRAL is to promote comity, specifically the “comity of nations.”[8]
 
Specific examples from case law illustrate the importance of international cooperation in cross-border insolvency proceedings. In In re Servicos de Petroleo Constellation S.A.,[9] the court recognised the need to apply Chapter 15 standards to a highly interrelated enterprise group with global operations, highlighting the challenges of detaching management and operations from specific locales in an increasingly globalised business environment. Similarly, inIn Agrokor d.d.[10] the court emphasised that the recognition and enforcement of foreign insolvency proceedings should align with established principles of cross-border insolvency law, underscoring the importance of comity.
 
Moreover, the enactment of Chapter 15 was intended to harmonise transnational insolvency proceedings, promoting cooperation and legal certainty, which are crucial for protecting creditors' interests and maximising debtors' assets.[11] The flexibility provided by Chapter 15 allows courts to grant appropriate relief to protect the assets of the debtor or the interests of the creditors, further emphasising the need for international cooperation.[12]
 
The potential impact of the United States inward-focused nationalistic economic and trade policies on the “comity of nations” in light of Trump’s stated efforts to control the American judiciary
 
However, and notwithstanding the key role the U.S. played in the establishment of United Nations in 1945 and UNCITRAL in 1966, the current inward-focused nationalistic tariff, trade and taxation policies espoused by the new Trump Administration, which prioritise domestic over international considerations, can significantly impact global economic cooperation, potentially including in the context of Chapter 15 bankruptcies. Such policies may not only hinder the cooperation between U.S. and foreign governments, but may also hinder the cooperation between U.S. and foreign courts. This is especially the case now, as the second Trump Administration has undertaken activities and stated positions challenging the independence of federal courts that have issued or may issue rulings that don’t align with the administration’s goal of instituting a “unitary presidency” as articulated in the Heritage Foundation’s Project 2025 Mandate for Leadership’s goal of dismantling the “Administrative State.” That is to say, “[t]he 2025 Mandate posits that all federal executive power vests solely in the person of the President and accordingly, “it is the President’s agenda that should matter to the [executive branch] departments and agencies, not their own (pg. 20).…The 2025 Mandate for Leadership project suggests that the next conservative Administration should embrace the Constitution and understand the obligation of the executive branch to use its independent resources and authorities to restrain the excesses of both the legislative and judicial branches, emphasizing the necessity of inter-branch pushback as a positive aspect (pg. 560).”[13]
 
For example, “[p]resident Donald Trump and key members of his administration are lashing out at judges who have blocked some of his second-term agenda, suggesting they don't have the authority to question his executive power.”[14],[15],[16] And, a … “rightwing activist who repeatedly traveled with Trump during his 2024 campaign, went even further. She posted a picture of Justice Coney Barrett’s family, which includes twoadopted black children, and wrote: “Amy Coney Barrett was a DEI appointee….[while another]… popular Maga figure with more than three million followers on X, postedthat Coney Barrett was a “DEI judge”.[17]
 
And judges are not the only key players in our judicial branch that are under attack for being either individuals or entities themselves or for being associated with individuals and entities that the President perceives to be his political opponents. As articulated by the American Bar Association (ABA) President William R. Bay in his March 11, 2025 interview on NPR, there are at least three areas attack currently being undertaken by the Trump Administration that are impeding the long-held, heretofore-believed-to-be inviolate Rule of Law - they are the administration's overt threats and attacks against (i) judges, (ii) outside lawyers and law firms,[18] and (iii) DOJ lawyers,[19] each being punished or threatening to be punished “for simply doing their job.” Furthermore, according to Mr Bay, “[t]hese words and actions [undertaken by the Trump Administration] interfere with the fair and impartial courts, the right to counsel of your choice, its due process, the freedom of speech, for God’s sakes.”[20]
 
To Mr Bay’s three, I'd add a couple of others, namely the administration frontal assault on colleges and universities[21] including institutions chartered to serve students of colour,[22] thereby hampering their ability to train the next generation of classically trained, legally competent and open-minded lawyers and judges. Additionally, Trump is challenging and undermining the competence, expertise and independence of many of the independent federal government agencies that provide a wide array of economic, personal safety and national defense protections historically provided to the American public directly and our international neighbors derivatively, such as the Federal Reserve Board and its Chairman, the Federal Trade Commission, the Consumer Financial Protection Bureau, the Federal Aviation Administration and even the Department of Defense for being too "woke" and having too many people of colour, women and physically challenged (DEIA) flag officers in the ranks, as articulated by the Project 2025 Mandate.[23]
 
Inasmuch as insolvency proceedings are based on the economic, judicial and political climate of each jurisdiction where the debtor’s primary residence or business is located, if the President’s goal of remaking the judiciary in his own image, if taken to its logical conclusion, means that the nearly 60-year global judiciary cooperation pact that is so essential for the continued effective administration of cross-border insolvency proceedings may be ending abruptly. For example, the recognition and enforcement of foreign insolvency proceedings in the U.S. rely heavily on principles of comity and cooperation.[24] However, if the United States’ newfound inward-focused policies reduce the willingness, nay the ability,[25] of U.S. courts to grant comity to foreign proceedings, or even if foreign stakeholders are just fearful that they will not continue to get a fair deal in U.S. courts, these real or perceived inequities could lead to fragmented and inefficient insolvency processes, potentially disadvantaging creditors and reducing the overall value of the debtor's assets.
 
Let’s look at a few of inflection points in global trade relations that have occurred since President Trump’s inauguration that have created a cleavage in the global economic order:
 
In the area of tariffs
 
At the beginning of March, President Trump announced sweeping tariffs against our long-time allies in the western hemisphere, Canada and Mexico, targeting several billions of dollars of goods from auto-related parts and subassemblies to avocados to heating oil crossing and recrossing our boarders each day. The President has also threatened the same treatment for our “closes friends” and long-time allies in Europe. These moves have upended relations with our top trading partners, roiled the stock market and stoked diplomatic tensions.
 
The Trump administration slapped 25% tariffs on goods from Mexico and Canada, as well as 10% tariffs on imports from China. The fresh round of duties on Chinese goods doubled an initial set of tariffs placed on China in February.
 
Then within 24 hours, Trump issued a one-month delay for tariffs on auto-related goods from Mexico and Canada.[26] Soon thereafter Trump instituted an additional one-month pause for goods from Mexico and Canada he believes are compliant with the United States-Mexico-Canada Agreement, or USMCA, the free trade agreement he signed into law during his first term in office.[27]
 
In the area of world trade
 
President Trump and his Administration have undertaken several actions since his inauguration that indicate a real disdain for members of the European Union, NATO, and Europe in general, including Ukraine, that could potentially impact the effectiveness of cross-border insolvencies. For instance, if the administration’s policies lead to strained diplomatic relations or reduced cooperation with European countries, it could hinder the comity and cooperation necessary for the effective administration of cross-border insolvency cases under Chapter 15. This could result in less efficient handling of such cases, potentially affecting the protection of creditors’ interests and the maximisation of debtors’ assets.
 
Again, the effectiveness of Chapter 15 relief relies heavily on international cooperation and comity. Any actions that undermine these principles could negatively impact the administration of cross-border insolvencies. For example, if the U.S. were to impose sanctions or take other actions that disrupt financial and legal cooperation with European countries, it could complicate the recognition and enforcement of foreign insolvency proceedings in the U.S. and vice versa, thereby affecting the overall effectiveness of Chapter 15 relief.
 
In the area taxation law policy
 
The Organisation for Economic Co-operation and Development (OECD) is an international intergovernmental organisation with 38 member countries, including the United States. It was founded in 1961 to stimulate economic progress and word trade. It is a forum whosemember countries describe themselves as committed to democracy and to the market economy, therebyproviding a platform to compare policy experiences, seek answers to common problems, identify good practices, and coordinate domestic and international policies of its members.
 
To that end, “[i]n October 2021, the G20 Leaders Declaration welcomed the historic Two-Pillar international tax package, agreed by more than 135 members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting. Pillar Two of this package involves a global minimum effective corporate tax rate of 15% for large multinational enterprise (MNE), which seeks to respond to continued concerns regarding profit shifting, harmful tax competition, and a damaging ‘race-to-the-bottom’ on corporate tax rates. This report, which has been prepared at the request of the Indonesian G20 Presidency, considers the impact of Pillar Two on the use and design of tax incentives, with a particular focus on developing countries.
 
Pillar Two places multilaterally agreed limits on tax competition and will ease the pressures on jurisdictions to offer tax incentives. Where an MNE’s effective tax rate (ETR) in a jurisdiction falls below 15%, the MNE would potentially be subject to top-up taxes under the Global Anti-Base Erosion (GloBE) Rules, a core component of Pillar Two. In the past, jurisdictions have sought to attract investment through tax incentives, many of which have been found to be wasteful and ineffective, particularly in developing countries. Pillar Two will reduce the incentives for MNE’s to engage in profit shifting for tax advantage purposes and will support jurisdictions in achieving a better balance between using tax policy to attract investment and mobilising domestic revenues.” [28]
 
However, on 20 January 2025, shortly after the inauguration of President Trump, the White House issued a memorandum (the “Memorandum”)[29] announcing that the “Organization for Economic Co-operation and Development (OECD) Global Tax Deal” (the “Global Tax Deal”) has “no force or effect in the United States” and disavowing “any commitments” previously made by the United States with respect to the Global Tax Deal, absent an act of Congress. The Memorandum also directs the Secretary of the Treasury to develop and present to the President a list of “protective measures or other options” towards foreign countries that are either “not in compliance with any tax treaty” with the United States or have (or are likely to have) tax rules that are “extraterritorial or disproportionately affect American companies”.
 
As such, as Trump commences his tariff war, the world business community is uncertain as to USA’s commitment to its outstanding trade and taxation agreements, but also the community is starting to wonder how its members may be treated in U.S. courts as the comity of nations gets kicked to the curb.
 
Conclusion
 
In conclusion, the Trump Administration’s clearly articulated inward-focused nationalistic policies that have already led to the undermining of international cooperation in the areas of tariffs, trade and taxation law can also negatively affect cross-border insolvency proceedings by reducing the effectiveness of mechanisms designed to protect creditors' interests and maximise debtors' assets no matter where located. The principles of comity and cooperation embedded in Chapter 15 are essential for the fair and efficient administration of cross-border insolvencies, and any deviation from these principles could lead to adverse outcomes for all parties involved.