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Bankruptcy Court Rules a Foreign Insolvency Plan that Extinguishes Claims Against Non-debtor Subsidiaries Is Manifestly Contrary to U.S. Public Policy

June 15, 2012

In a decision further defining when U.S. public policy restricts the relief a U.S. court may grant in aid of a foreign restructuring or insolvency proceeding, the Bankruptcy Court in the Chapter 15 case of Vitro, S.A.B. de C.V. v. ACP Master, Ltd. (In re Vitro, S.A.B. de C.V.),
Ch. 15 Case No. 11-33335-HDH-15, 2012 WL 2138112 (Bankr. N.D. Tex. Jun. 13, 2012) refused to enforce in the U.S. a Mexican restructuring plan that novated and extinguished the guaranty obligations of the Mexican debtor's non-debtor subsidiary guarantors. The opinion found that the protection of third-party claims under the U.S. Bankruptcy Code constituted a fundamental U.S. public policy within Chapter 15's "public policy" exception. The Bankruptcy Court therefore denied the foreign representative's request to give full force and effect in the U.S. to the Mexican restructuring plan; it also denied the foreign representative's request to grant a permanent injunction prohibiting suits in the U.S. against the non-debtor guarantors.

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