Time Out The Problematic Temporality of COMI Analysis in Chapter 15 Bankruptcy Cases in the Second Circuit

Abstract

Under chapter 15 of the Bankruptcy Code, U.S. courts will only recognize foreign insolvency proceedings that are based in the location of the debtor’s center of main interests (“COMI”). In In re Fairfield Sentry, the Second Circuit held that courts should evaluate a debtor’s COMI at the time of its filing a chapter 15 petition, rather than the earlier date of when it commenced the underlying foreign proceeding. Unfortunately, this approach incentivizes forum shopping by allowing companies to file proceedings in the jurisdictions most friendly to their interests and utilize the extra time to reestablish it as their COMI for recognition purposes.

This Note suggests the implementation of “COMI selection clause” requirements in company charters to combat this problem. While requiring companies to designate their COMI in their charters will not eliminate forum shopping, it will substantially increase transparency and allow potential creditors to ascertain the jurisdiction of future insolvency proceedings at the time they enter into contractual relations.