CFIUS reviews and the effect on bankruptcy 363 salesThe Committee on Foreign Investment in the United States (CFIUS) is an interagency committee established in 1975 that oversees foreign investment in the U.S. economy. In 1988 CFIUS granted the Executive Office of the President nonreviewable authority to block foreign investments that may present national security concerns. In 2018 the U.S. Congress passed the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA). FIRRMA codified, among other things, CFIUS’ jurisdiction over transactions arising from bankruptcy proceedings, such as a bankruptcy 363 asset sale. In the year since FIRRMA, CFIUS reviews have become more common place and affect certain transactions that may have implications for companies who find themselves participating in a bankruptcy 363 sale.

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In a unanimous 25 February panel decision, the Second Circuit Court of Appeals held that the trustee liquidating Bernard L. Madoff’s investment firm can claw back billions in Ponzi scheme proceeds from investors who received the proceeds indirectly through non-U.S. “feeder funds” (funds that aggregate investor capital to invest in funds such as Madoff’s).

The ruling is significant because it affirmed the power of U.S. bankruptcy trustees to pursue estate funds to their ultimate destination, even if the paper trail involved transactions between non-U.S. entities. The effect of the ruling is to revive 88 adversary cases against international investors by Irving Pickard, the trustee of Bernard L. Madoff Investment Securities LLC (Madoff Securities) who is seeking to recover roughly US$4 billion in funds on behalf of customers who lost money in the Madoff Ponzi scheme.


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In July 2017, we wrote about the case of Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liquidation) (receivers and managers appointed)[1], in which the Western Australian Supreme Court held that rights of set off enjoyed by an insolvent company’s contractual counterparties would not apply if the company had granted a security interest over the relevant contractual rights under the Personal Property Securities Act 2009 (PPSA).

The decision has been overturned by the Court of Appeal of the Supreme Court of Western Australia[2], such that the existence of a security interest will not necessarily of itself preclude the operation of statutory or contractual set off rights in favour of third parties.

The decision is significant because it potentially has a dramatic impact on the competing rights of secured and unsecured creditors in liquidation, and may prevent secured creditors from enjoying a windfall at the expense of unsecured creditors. It also places the emphasis firmly on the terms of the relevant security interest and underlying contract, which will now need to be considered in detail each time there is a claim for set off by the insolvent company’s contractual counterparties.

[1]               [2017] WASC (2 June 2017)

[2]               Hamersley Iron Pty Ltd v Forge Power Group Pty Ltd (in liquidation) (receivers and managers appointed) [2018] WASC 163


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The Supreme Court, in Merit Management Group, LP v. FTI Consulting, Inc., 138 S. Ct. 883 (2018), recently resolved a circuit split in the interpretation of the Bankruptcy Code’s safe harbor provision.  The Court held that section 546(e) does not protect transfers made through a financial institution to a third party regardless of whether the

On February 27, 2018, the U.S. Supreme Court resolved a circuit split under the Bankruptcy Code and determined that where funds passed through financial institutions acting as payment conduits, where the ultimate transfer sought to be avoided was not the type of transaction protected by the safe harbor provisions of the Bankruptcy Code, the safe harbor provisions of Bankruptcy Code Section 546(e), shielding transfers through financial institutions from avoidance actions by bankruptcy trustees, was inapplicable.

The Supreme Court found that prior circuit decisions applying the safe harbor simply because financial institutions were intermediaries in the transfer is not consistent with the language or intent of the safe harbor provisions.
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On January 8, 2018, Senators John Cornyn (R-TX) and Elizabeth Warren (D-MA) introduced the Bankruptcy Venue Reform Act of 2017. The bill would require that individual debtors file in the district where their domicile, residence, or principal assets are located, and would require corporate debtors to file in the district in which their principal assets

The bankruptcy court in In re Ocean Rig UDW Inc., 17-10736 (Bankr. S.D.N.Y. Aug. 24, 2017) determined that a decision by  an offshore drilling company from the Republic of the Marshall Islands (RMI) to shift its Center of Main Interest (COMI) to  the Cayman Islands prior to defaulting on bonds and initiating reorganization proceedings

Hogan Lovells business restructuring and insolvency practice partners Ron Silverman, Robin Keller, and Shaun Langhorne recently joined Debtwire senior legal content specialist Richard Goldman to discuss some “game-changing” revisions to Singapore’s insolvency regime. During the discussion, the panel addresses how Singapore, in an effort to market itself as an international forum for debt restructurings, transformed