Two and a Half Hurdles Between Eurozone Debts and U.S. Courts: How Recent Distressed Foreign Deals Could Soon Be Unwound Domestically

Abstract

The recent financial unrest in Europe has created significant distressed opportunities for buyers with free capital. In typical arms-length transactions, these buyers would leave with little concern with the viability of their counterparties. But sudden rebounds in values after economic recovery create incentives for counterparties to reclaim once-distressed, but now-valuable, assets through fraudulent transfer litigation. Recent shifts in U.S. jurisprudence may create an opportunity for U.S. bankruptcy courts to unwind these transactions.This article discusses the link between the debt crisis in the Eurozone and a potential flood of future litigation to unwind foreign transactions in U.S. courts. Specifically, this article will address the two and a half hurdles litigants must overcome to reach foreign transactions with U.S. bankruptcy law — namely, Chapter 15 of the U.S. Bankruptcy Code, the presumption against extraterritoriality, and the U.S. Supreme Court’s watershed decision in Stern v. Marshall, 131 S. Ct. 2594 (2011).