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In a recent ruling that is of particular importance in the field of cross border insolvency and asset recovery, Sequor Law recently obtained a favorable ruling in the matter of In re Talal Qais Abdulmunem Al Zawawi, 97 F.4th 1244 (11th Cir 2024), wherein the United States Court of Appeals for the Eleventh Circuit held that foreign debtors seeking recognition under Chapter 15 within the Circuit (which includes Florida) are not required to meet the eligibility requirements that apply to debtors under 11 U.S.C. § 109(a) of the Bankruptcy Code, which require “persons” (including entities) to reside, or have a domicile, a place of business, or property in the United States to be a debtor.
The decision, which the Zawawi Court stressed was consistent with prior long-standing precedents within the Circuit (and contrary to more onerous eligibility requirements imposed in the Second Circuit, including in New York), confirms that eligibility (i.e., failure to maintain a residence, domicile, business or property in the U.S.) cannot be deemed an obstacle to recognition if a foreign representative can otherwise satisfy the basic requirements for recognition set forth in 11 U.S.C. § 1517, including existence of a foreign main or nonmain proceeding, an application by a foreign representative, and the filing of a petition meeting the statutory requirements.
The Zawawi decision makes it easier for foreign representatives to access U.S. courts in the Eleventh Circuit for ancillary relief, providing such representatives with access to the more liberal discovery rights available to foreign representatives in Florida,[1] and protecting the debtor’s U.S.-based assets from dissipation during the pendency of cross-border insolvency cases. See, e.g., Zawawi, 97 F.4th 1244, 1276-1277 (Tjoflat, J., Specially Concurring) (stressing that a contrary rule, i.e., one requiring assets in the jurisdiction, would incentivize dissipation of assets, which “[c]ommon sense tells us . . . almost certainly cannot be correct.”)
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