35 United States of America
Edited By: William Johnston, Thomas Werlen, Frederick Link
- Banks and cross-border issues — Guarantees and security — Debt — Set-off
35.01 The right of set-off in the United States is a product, for the most part, of state statutory or common law. Although an attempt to distinguish rights of set-off as they vary under the laws of the fifty states would be beyond the scope of this chapter, this chapter will discuss the most common elements of the right, describe the right as it exists in the State of New York, and, most importantly, analyse the statutory law most likely to impede or negate the right of set-off: the United States Bankruptcy Code (the ‘Bankruptcy Code’).2
35.02 Generally in the United States, a bank may apply the deposits of a debtor against the debts owed by such debtor to the bank as such debts become due.3 This right, (p. 552) commonly known as the right of set-off, is the product of the debtor–creditor relationship that exists between a bank and its depositor and should not be confused (although it often is) with the banker’s lien, which encumbers securities or other property in the possession of the bank, title to which is still held by the debtor.4 The banker’s lien creates a charge over the asset in question in favour of the bank.
35.03 The essential ingredient of the right of set-off is a ‘mutual debt’. Mutuality in this context is not the same as similarity. The debts may arise from different transactions and may be dissimilar in nature without destroying the right. The most common formulation of mutuality and the test generally employed by Federal courts is that the mutual debts must be in the same right and between the same parties, standing in the same capacity.5 Thus, under statutory or common law, affiliated but distinct entities generally may not aggregate their claims for set-off purposes. Similarly, in the absence of a contractual provision to the contrary, a bank would not be entitled to set off its debt to one depositor against a claim the bank held against another entity, even if the depositor and the other entity were affiliated. It should be noted that a set-off is not effected automatically whenever the debtor and the creditor have mutual debts. The right must be invoked by the deliberate act of the creditor evidencing the intent to set off.
1. Contractual and statutory set-off
35.05 As a procedural matter, before the onset of a bankruptcy proceeding, the right of set-off may be exercised, both generally and under New York law, without court intervention. New York law does not prohibit the granting of a contractual right of set-off, and parties may freely agree to do so. In addition to set-off rights arising by contract, New York law provides a broad statutory right of set-off6 (linked, however, largely to insolvency or related conditions) and also recognizes such rights arising under common law.7 Based on this legal authority, contractual and (p. 553) statutory set-off is valid and enforceable under New York law outside the insolvency context.
2. Set-off and security interests
35.06 Importantly, the right of set-off is not defined as a security interest under New York law. Article 9 of the New York Uniform Commercial Code (the UCC), which governs secured transactions, explicitly excludes ‘a right of recoupment or set-off’ from virtually all its coverage.8 In other words, the attachment and perfection requirements of the UCC are irrelevant to the enforceability of a right of set-off, assuming all other prerequisites (eg mutuality) have been satisfied.9
35.07 The rules often will change, however, when the debtor enters bankruptcy, and any discussion of the right of set-off in the United States must take into account the dual State–Federal structure of bankruptcy law that governs insolvency proceedings.
35.08 Notably, the Bankruptcy Code does not create set-off rights, but merely preserves set-off rights that arise under applicable non-bankruptcy law (eg under relevant New York statutes or common law precedents). Subject to certain limitations of the Bankruptcy Code discussed below, section 553(a) provides in relevant part that
[e]xcept as otherwise provided in this section and in sections 362 and 363 of this title, [the Bankruptcy Code] does not affect any right of a creditor to offset a mutual debt owing by such creditor to the debtor that arose before the commencement of the case under this title against a claim of such creditor against the debtor that arose before the commencement of the case.10
35.09 When a debtor becomes insolvent, a creditor may be precluded from exercising its right of set-off under New York law by provisions of Federal law embodied in the Bankruptcy Code. As in many jurisdictions, the Bankruptcy Code aims to freeze and then equitably distribute the assets of the debtor. To the extent that a right of set-off existing under applicable state law may interfere with a provision of the Bankruptcy Code, however, Federal law is supreme and the state law will (p. 554) be ‘pre-empted’.11 Consequently, even if a party has a validly existing right to set-off under New York law, enforcement of that right against an insolvent party will depend on the Bankruptcy Code.
35.10 As noted above, section 553(a) preserves the right to set-off under Federal law, but this presupposes that such a right exists otherwise, for example under State law. In fact, New York law expressly creates a very liberal right of set-off for debtors in insolvency. Section 151 of the New York Debtor and Creditor Law sets out an affirmative right of set-off which takes effect upon the insolvency of the debtor (or a variety of potentially ‘insolvency-allied’ events), even if the right is not exercised prior to the commencement of the insolvency case.
35.11 The clear intent of New York’s legislators to create or preserve the right of set-off in bankruptcy (depending on one’s initial perspective) notwithstanding, the right may be limited where State law is pre-empted upon the commencement of a case under the Bankruptcy Code. Despite the apparent neutrality of section 553(a)—recognizing but not affecting a creditor’s right of set-off under State law—other section 553 provisions significantly restrain the ability of a creditor to exercise its otherwise protected right of set-off against an insolvent debtor. These provisions relate to the relationship between set-off and the automatic stay under section 362 of the Bankruptcy Code (to preserve the assets of insolvent parties), restrictions on creditor preferences, and provisions to avoid fraudulent transfers. Additionally, recent bankruptcy case law consistently holds that, in a Code proceeding, debts may be set off only where they are mutual in a strict sense—that is, due to and from the same persons in the same capacity—and that ‘non-mutual debts cannot be transformed into a “mutual debt” under section 553 simply because a multi-party agreement allows for set-off of non-mutual debts between the parties to the agreement’.12 In other words, the courts chose to disregard principles of ‘mutuality by contract’ potentially available under State or other law.13
1. Set-off and the automatic stay of section 362
35.12 The automatic-stay provision, embodied in section 362 of the Bankruptcy Code, squarely conflicts with a creditor’s right to post-petition set-off. Section 362 (p. 555) implements a policy that pervades the Bankruptcy Code: the attempt to freeze the debtor’s estate at the time of the filing of the petition in bankruptcy. Section 362(a)(7) specifically provides that the commencement of a case in bankruptcy operates as a stay of ‘the set-off of any debt owing to the debtor that arose before the commencement of the case . . . against any claim against the debtor’.
35.13 The result of section 362(a)(7) is to require the intervention of a court to implement a right of set-off after the commencement of a bankruptcy case absent an exception (such as exceptions for set-off in relation to swap agreements, securities contracts, and forward contracts). The automatic stay does not defeat the right of set-off but postpones it pending an ‘orderly examination of the debtor’s and creditor’s rights’.14 While the bank may lose its otherwise available remedy of self-help, it will not be demoted to the status of an unsecured creditor by the automatic stay. Section 506(a) of the Bankruptcy Code states in part that:
35.14 Thus, the party holding the right to set-off against an insolvent counterparty enjoys protections akin to those of a secured creditor in bankruptcy, but without the need to record and perfect that interest pre-insolvency.
35.15 Generally speaking, if the creditor has a valid right of set-off, it will be treated as cash-secured to the extent of the creditor’s right. The creditor may then preserve its right by freezing the funds of the debtor in its hands and by applying to the bankruptcy court for relief from the automatic stay.15 In any event, the funds in the creditor’s hands would be treated as cash collateral and, under section 363 of the Bankruptcy Code, the debtor would be required to provide ‘adequate protection’ (ultimately, relief as will result in the realization of the ‘indubitable equivalent’ of the creditor’s interest16) before using the funds. If adequate protection could not be provided, relief from the automatic stay should be granted under section 362(d)(1).17
35.16 In addition to the limitation imposed by the automatic stay, section 553 itself contains several restrictions on the right of set-off. For the most part these restrictions are analogous to the Bankruptcy Code’s prohibition against preferences: all creditors should be treated equally within their class. Stated another way, all creditors are equal but some creditors (eg fully secured creditors as a class) are more equal than others.
35.17 Carving out an exception to the hands-off approach to set-off embodied in section 553(a) described above, section 553(a)(2) and (3) provides that a creditor’s right to offset a mutual debt against an insolvent party can be affected where
(A) after the commencement of the case; or
(B) (i) after 90 days before the date of the filing of the petition; and
(ii) while the debtor was insolvent except for certain limited instances set forth in the Bankruptcy Code; or
35.18 Section 553(a)(2) prohibits a creditor from setting off a claim that was transferred to it by a third party either after the commencement of the case in bankruptcy or within ninety days prior to the filing of the petition and while the debtor was insolvent. The factual question whether the debtor was insolvent is largely avoided by a presumption in section 553(c) that the debtor was ‘insolvent on and during the 90 days immediately preceding the date of the filing of the petition’.
35.19 Section 553(a)(3) covers ‘the situation where the creditor incurs a debt to the debtor rather than merely acquires a claim’.18 Such debts may not be set off when incurred within ninety days of filing and while the debtor was insolvent (again, subject to presumption) if they were incurred for the purpose of obtaining a right of set-off against the debtor.
35.20 What is unsettling about the preference provisions of the Bankruptcy Code, including those contained in section 553, is that they reach transactions that occurred up to ninety days prior to the commencement of the case in bankruptcy. Therefore, when dealing with any number of transfers intended to grant the transferee ‘security’, the parties necessarily face a period of at least ninety days of uncertainty.
(b) (1) [With certain limited exceptions], if a creditor offsets a mutual debt owing to the debtor against a claim against the debtor on or within 90 days before the date of the filing of the petition, then the trustee may recover from such creditor the amount so offset to the extent that any insufficiency on the date of such set-off is less than the insufficiency on the later of—
(A) 90 days before the date of the filing of the petition, and
(B) the first date during the 90 days immediately preceding the date of the filing of the petition on which there is an insufficiency.19
35.23 Section 548 of the Bankruptcy Code generally allows a trustee to avoid any fraudulent transfers made within two years before the filing of the debtor’s bankruptcy petition.20 Specifically, a fraudulent transfer is any transfer of an interest of the debtor in property or any obligation incurred by the debtor, if the debtor:
(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted; or
(IV) made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, under an employment contract and not in the ordinary course of business.21
(p. 558) 35.24 To the extent that an obligation of the debtor is a fraudulent transfer, it is likely that the trustee would avoid that obligation and thus it would not be available to be set off against any debts owed to the debtor. Determination of the existence of a fraudulent transfer is an extremely fact-specific analysis and case law is varied.
35.25 With the foregoing discussion in mind, we consider choice-of-law issues with respect to set-off that may inhere if one of the parties to the obligations proposed to be set off is a non-US party. For purposes of this discussion, it is assumed that the sources of the obligations to be set off are mutual debts, and that the parties are in a Federal or State court in New York after any relevant jurisdictional and forum-choice matters are satisfactorily resolved.
35.26 The likely forums in which such a set-off issue may arise include a New York State court of general jurisdiction, a US Federal court sitting in an exercise of ‘diversity jurisdiction’ (for purposes of this discussion, jurisdiction over a dispute between a US citizen and a non-US person), a US bankruptcy court engaged in a plenary proceeding under Chapter 7 or Chapter 11 of the US Bankruptcy Code, or a US bankruptcy court sitting in an ancillary proceeding under Chapter 15 of the US Bankruptcy Code. For the most part, the law of New York State will dominate the analysis. This is because Federal courts sitting in diversity jurisdiction must apply the choice-of-law rules of the forum state; that is, the state within which they sit.22 Federal courts in New York resolving bankruptcy matters would also apply New York choice-of-law rules,23 unless important concerns implicating national bankruptcy policy were raised.24 This bankruptcy choice-of-law rule, however, may not hold in a Chapter 15 proceeding, as specifically discussed below.
35.27 The New York State law analysis will be articulated differently according to whether the set-off is provided for in contract and, if so, whether the contract contains a choice-of-law provision. If the set-off is provided for contractually and the contract contains a choice-of-law provision, then a court faced with a dispute (p. 559) as to governing law will have to determine the validity of the contractual choice of law.25
35.28 A New York court will apply New York law in determining the validity of a choice of law clause. New York precedent will compel a New York court to honor an express contractual choice-of-law provision absent fraud or violation of public policy, so long as the jurisdiction selected has sufficient contacts with the transaction.26 As for a contractual choice of New York law, New York statute provides, subject to certain exceptions, that parties to a contract arising out of a transaction covering in the aggregate not less than $250,000 may agree to New York law as governing law, whether or not the contract bears a reasonable relation to the State of New York.27
35.29 If the contract provides for set-off but has no choice-of-law clause, and the laws of different jurisdictions could apply, New York courts will apply a ‘center of gravity’ or ‘grouping of contacts’ choice-of-law analysis.28 This analysis will typically consider contacts such as the place of contracting, the place of negotiation and performance, the location of the subject matter of the contract, and the domicile or place of business of the contracting parties.29 In some cases, a contacts analysis may also consider governmental interests.30
35.30 Assuming that the source of the claimed set-off is extra-contractual, but the parties are subject to a contract containing a valid choice-of-law provision, a New York court will again apply New York law, now to determine if the contractual choice-of-law provision is of sufficient scope to encompass the claimed extra-contractual set-off. The court will view this issue through the lens of New York law regardless of whether the contractual choice of law specifies New York law.31
35.31 New York courts are reluctant to construe contractual choice-of-law provisions broadly in order to apply them to extra-contractual matters. A court will both look at the plain language of the choice-of-law provision and attempt to discern whether the extra-contractual claim ‘sounds’ in contract or not.32 An extra-contractual set-off claim has been held to be analogous to a tort claim or a property (p. 560) claim33 and therefore beyond the scope of a simple choice-of-law clause. (‘This Agreement will be governed by …’ (emphasis added)).
35.32 Having determined that the extra-contractual claim is not reached by the contractual choice-of-law provision, a New York court will then determine which choice-of-law analysis it will apply to the claim itself. The characterization of a set-off claim as akin to a tort claim will lead a New York court to apply a so-called ‘interest analysis’ to the question of what law governs the extra-contractual set-off claim.34 An interest analysis seeks to discern which jurisdiction has the greatest interest in the litigation. The only facts or contacts that are significant are those which relate to the purpose of the particular law in conflict.35
35.33 In Fin One the court’s choice of an ‘interest analysis’ was not disputed by the parties.36 Applying that analysis to a disputed set-off right, the court focused on the contacts of the parties and occurrences with each jurisdiction, the policies underlying each jurisdiction’s set-off rules, the strength of the governmental interests embodied in those policies, and the extent to which those interests were implicated by the contracts.37 In Fin One, the application of this New York law interests analysis led to the choice of foreign extra-contractual set-off rights.
35.34 Cases brought under Chapter 15 of the Code present a yet more complex picture. Chapter 15 cases are intended to be ancillary to cases brought in a debtor’s home country, unless a full US bankruptcy case (under Chapter 7 or 11) is brought.38 Even if a full case is brought, the court may decide to stay or dismiss it and limit the US role to an ancillary case under Chapter 15. If the full case is not dismissed, it will be subject to the provisions of Chapter 15 governing cooperation, communication, and coordination with foreign courts and representatives.39
(p. 561) 35.35 Key objectives of Chapter 15 include furnishing effective mechanisms to achieve cooperation between courts of the United States and courts of foreign countries involved in cross-border insolvency cases and promoting fair and efficient administration of cross-border insolvencies that protects the interests of all creditors, and other interested entities, including the debtor.40
35.37 Section 103(a) of the Bankruptcy Code specifies certain sections of other chapters of the Code that apply in Chapter 15 cases. This list does not include section 553, the key Code provision both allowing and limiting set-off. In addition to section 103(a), some provisions of Chapter 15 itself designate yet other non-Chapter 15 Code sections as relevant to a Chapter 15 proceeding. Again however, section 553 is not designated, fairly implying that section 553 is not applicable in a Chapter 15 case.41
35.38 More clearly, the section 548 fraudulent transfer avoidance provision discussed at 35.23 above is not available in a Chapter 15 case.42 Access to both this avoidance provision and section 553, however, may be achieved in a plenary Chapter 7 or Chapter 11 case brought in conjunction with a Chapter 15 case.43
35.39 As indicated above, a Chapter 15 court has many more specialized concerns than just statutory limits on the application of other provisions of the Code. A case under Chapter 15 is brought by the filing of a petition for recognition of a foreign proceeding.44 A stay of execution against the debtor’s assets may be available from the time of filing the petition. Further stays may be available upon recognition.45 A ‘foreign proceeding’ (essentially a non-US insolvency46) may be a ‘foreign main proceeding’47 or a ‘foreign nonmain proceeding’.48 In either case a ‘foreign representative’ may commence the Chapter 15 case and shall be accorded ‘comity’ or ‘cooperation’.49 Principles of comity and (p. 562) cooperation, however, are bounded by a public-policy exception50 that is only to be invoked under exceptional circumstances concerning matters of fundamental importance for the United States.51 The US court may also provide ‘additional assistance’ consistent with principles of comity if, among other things, the additional assistance will provide just treatment of all holders of claims against or interests in the debtor’s property.52 Additionally, under sections 1521 and 1522, the court may entrust the debtor’s assets to a foreign representative, provided that the interests of US creditors are sufficiently protected.
35.40 Where does this leave our inquiry with respect to set-off and relevant choice of law? Presumably a plenary proceeding brought in conjunction with a Chapter 15 proceeding would be subject at the outset to the same set-off and choice-of-law rules as any other plenary proceeding, but subject to the cooperation mandate embedded in Chapter 15. In a Chapter 15 proceeding, however, whether or not the section 553 set-off mechanism is available, the court must choose, potentially among domestic- and foreign-sourced set-off laws and among both domestic and foreign procedural settings. In short, Chapter 15 does not provide either choice-of-law rules or set-off rules—that is left to judicial development.53
35.41 A demonstration of how adroitly a US court may need to proceed is found in In re Sive Srl.54 In Sive, the bankruptcy court recognized a foreign proceeding even though a US creditor had not been given notice or the opportunity to file in that proceeding, and no provision had been made in that proceeding for the US creditor’s secured claim. The bankruptcy court at the same time freed the US creditor from the stay that otherwise would have prevented the creditor from attempting to prove its claim and associated set-off or recoupment rights in a non-bankruptcy action in the US.
35.42 Thus, Chapter 15 complicates our picture of set-off and related choice of law in an international setting. A court sitting in a Chapter 15 proceeding will have both US and foreign law to consider, and will need to find a balance within the context of comity and public policy that Chapter 15 demands.
35.43 A non-US party, in the absence of a Chapter 15 ancillary proceeding, may avail itself of participation in a debtor’s plenary Bankruptcy Code proceeding.55 If it does so, generally speaking, the usual rules will apply to its participation,56 without the Chapter 15 overlay discussed above.
35.44 A foreign party might seek to take action outside the US against the assets of a debtor that is in a Bankruptcy Code proceeding, despite the existence of that proceeding. To do so, however, will not necessarily shield the foreign party from the strictures of the Bankruptcy Code. Commencement of a Bankruptcy Code proceeding ‘creates a worldwide estate of all the legal or equitable interests “wherever located,” held by the debtor at the time of that commencement’.57 The bankruptcy court has jurisdiction over all estate property, including claims and causes of action to recover estate property, regardless of the location of the property or claim.58 The automatic stay, consistently, applies extraterritorially.59
35.45 A foreign party may violate the automatic stay by seeking a judgment in a foreign court that the foreign party would not be obliged to return funds subject to pursuit under the Bankruptcy Code as avoidable preferences. The bankruptcy court’s ability to enjoin the foreign party from pursuing the foreign action and to direct the foreign party to have the action dismissed is based on the premise that the extraterritorial jurisdiction of the Bankruptcy Code extends to persons over which the US court has jurisdiction, but not to foreign courts. It is the bankruptcy court’s exercise of personal jurisdiction over the foreign party that is effective.60 General principles of comity, though potentially available, will not rescue foreign litigation which is inconsistent with the Bankruptcy Code action brought by the trustee.61 The bankruptcy court’s extraterritorial exercise of personal jurisdiction is not confined to cases involving the automatic stay—and can be the basis for extraterritorial application of both fraudulent conveyance and preference provisions of the Bankruptcy Code.62
35.46 The right to set-off in the United States requires taking account of the different applicable statutory and common law regimes at both the State and Federal level. That said, the right to set-off under the law of the State of New York is broadly enforceable outside the insolvency context, assuming the requirements of mutuality are satisfied. This right, furthermore, while not a security interest as defined by the UCC, takes on some of the attributes of a secured interest in the insolvency context. When the party against whom set-off is sought has already entered into bankruptcy, the overall analysis is more complicated, but, generally speaking, the right of set-off largely survives the imposition of the Bankruptcy Code, with certain exceptions relating to multiparty set-off arrangements, the exercise of set-off rights relating to the automatic stay, creditor preferences, and fraudulent transfers.
35.47 If one of the parties is a non-US party, the issue of set-off may be subject to a choice-of-law analysis dependent on the nature of the parties and the relevant court. If the parties are in a Federal or State court in New York, it is likely that New York State statutory and common law choice-of-law rules will drive the choice-of-law analysis, an analysis that has the potential to lead to application of the law of another relevant jurisdiction. If the proceeding is being conducted under Chapter 15 of the Bankruptcy Code, governing for the most part cases intended to be ancillary to cases brought in another country, the choice-of-law analysis, as well as set-off rules themselves, remain subject to judicial development.
35.48 A foreign creditor may participate in a debtor’s plenary Bankruptcy Code insolvency proceeding and, generally speaking, will then be subject to the usual rules governing participation. A foreign party, however, that does not elect to participate in a Bankruptcy Code proceeding may still find it necessary, if subject to the personal jurisdiction of the bankruptcy court, to deal with the automatic stay, preference, fraudulent conveyance, and other provisions of the Bankruptcy Code.
2 The Bankruptcy Code is the Federal law applicable to bankruptcies of various types of entities, including corporations, partnerships, and limited-liability companies, but not banks. 11 USC s 101 et seq (USCS 2017).
3 See United States v Butterworth-Judson Corp., 267 US 387 (1925); Santander Bank, NA v Sturgis, 2013 US Dist LEXIS 161651 (D Mass Nov 13, 2013) (dicta); see also Marine Midland Bank–New York v Graybar Electric Co., 41 NY 2d 703, 708, 395 NYS 2d 403, 407, 363 NE 2d 1139, 1142 (1977).
8 UCC s 9–109(d)(10)(Consol. 2017). The only exception is to clarify the right of recoupment or set-off with respect to deposit accounts and with respect to defences or claims of an account debtor; ibid. Recoupment, which applies when both debts arise out of the same transaction, has its own place under the Code, see Howard v Burlington Northern, 320 BR 226, 241 (Bankr ME 2005), and is not the subject of this chapter.
13 The position is rife with questions. Why should a simple, contractual set-off be less enforceable than one ‘papered’ with guarantees or joint and several liability? Should the formalization of security interests offer a better result than simple contract? Do questions of crossing creditor pools and other equitable concerns colour determinations of extent to which a triangular set-off mechanism will be given effect? Should there be a Bankruptcy Code doctrine of set-off potentially more limited than that under State or other Federal law?
15 Under the discussion of the Supreme Court in Citizens Bank of Maryland v Strumpf, 516 US 16 (1995), a creditor may temporarily withhold payments owed to a debtor (to the extent of its claim) pending resolution of its set-off rights. To do so within the allowed parameters of Citizens Bank, the creditor must avoid any manifestation of intent to permanently settle accounts (eg by recording a set-off in its books and records at the time of the administrative freeze) and the creditor should seek relief from the automatic stay at or promptly after the imposition of the administrative freeze, so as to properly effect set-off.
19 In this subsection, ‘insufficiency’ is defined as the ‘amount, if any, by which a claim against the debtor exceeds a mutual debt owing to the debtor by the holder of such claim’. 11 USC s 553(b)(2).
20 New York’s fraudulent transfer law usually provides a six-year look-back period. NY Debt. & Cred. Law s 273 et seq; NY Civ Prac Law s 213 (Consol. 2017). Note that subsection (b) of s 548 allows application of state law that may have greater reachback periods.
23 Though this discussion is dominated by New York law, many of the cases cited are Federal court cases, attesting to the important role of the Federal bench in studying and articulating New York law.
24 See In re Gaston, 243 F 3d 599, 606–7 (2d Cir 2001). Such concerns are unlikely given that the US Bankruptcy Code looks to other law for the source of actionable set-off rights. See para 35.08 above.
25 A court will be inclined to resolve a choice-of-law dispute only where there is a substantive difference between the laws of the different jurisdictions that may apply. See Hosking v. Hellas Telecom Lux II SCA, 524 BR 488, 516 (Bankr SDNY 2015).
36 The court’s analysis was an evolved one; however, the question whether to apply a contractual-claim analysis, leading to a ‘contacts’ choice-of-law analysis, or an interest analysis, may remain open to further development by parties and courts.
38 See HR Rep No 109-31, 109th Cong, 1st Sess 105 (2005). Code section 1511 permits a foreign representative, upon recognition, to commence an involuntary case, or, if the foreign proceeding is a ‘foreign main proceeding’, a voluntary case. Such a case may be brought after recognition of a foreign main proceeding only with effect upon the debtor’s assets in the US, and to the extent additionally limited by Chapter 15. See 11 USC s 1528. See note 46 below for a definition of a ‘foreign main proceeding’.
41 See 1-13 Collier on Bankruptcy ¶ 13.03 ; but see Awal Bank, BSC v HSBC Bank USA (In re Awal Bank, BSC), 465 BR 73, 87 (Bankr SDNY 2011) (implying that section 553 could be available after a choice-of-law analysis).
43 See 11 USC s 1523(a); Tacon v Petroquest Res Inc. (In re Condor Ins Ltd, 601 F 3d 319, 323–4 (5th Cir 2010) (access to avoidance provisions); Awal at 87 (access to section 553(b) limitation on set-off).
49 11 USC s 1509(b)(3). Comity has been defined as the ‘recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or other persons who are under the protection of its laws’. Vitro, SAB de CV v ACP Master, Ltd (In re Vitro, SAB de CV), 473 BR 117 (Bankr ND Tex 2012) (quoting Hilton v. Guyot, 159 US 113, 163–4 (1895)).
53 Collier on Bankruptcy para 13.03  n 4.
55 11 USC s 1513 (USCS 2017); Awal at 85 n 9.
60 Madoff at 82, 84. That jurisdiction was based on the foreign party’s having requisite minimum contacts with the US. See Sec. Investor Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC.460 BR 106, 117–18 (Bankr SDNY 2011).