## Facts

- Maxwell Communication Corporation plc was an English public limited company with its principal place of business and management in England.
- As Maxwell’s finances deteriorated, it entered collateral and financing arrangements with Société Générale, Barclays Bank plc, and National Westminster Bank plc.
- Shortly before insolvency proceedings, Maxwell made three payments totaling about $100 million to these European banks.
- The relevant transactions were negotiated and administered in England and involved two U.K. banks and one French bank.
- After Maxwell’s collapse, parallel proceedings were commenced: a chapter 11 case in the Southern District of New York and an English administration proceeding.
- The U.S. and English courts coordinated the parallel proceedings to support orderly administration of the estate.
- Maxwell’s administrators and a U.S.-appointed examiner filed adversary proceedings in the U.S. bankruptcy case seeking to avoid and recover the payments under U.S. Bankruptcy Code avoidance provisions.
- English insolvency law provided materially narrower grounds for avoiding these payments than the U.S. Bankruptcy Code.

## Issues

1. Whether U.S. Bankruptcy Code avoidance law or English insolvency law governs the avoidability of prepetition transfers made by an English debtor in foreign-centered transactions during parallel U.S. and U.K. insolvency proceedings.
2. Whether international comity supports deferring to English insolvency law in deciding avoidance claims litigated in a U.S. bankruptcy forum.

## Decision

- The Second Circuit affirmed the district court’s summary judgment for the transferee banks.
- The court held that English law governed the avoidability of the challenged transfers.
- The court declined to apply U.S. avoidance provisions to the foreign-centered payments.
- The avoidance claims in the U.S. proceeding were dismissed to the extent they depended on applying U.S. avoidance law rather than English law.

## Legal Principles

- In cross-border insolvency, a U.S. court may defer to foreign insolvency law under international comity when doing so is consistent with U.S. interests and fair treatment of affected parties.
- Choice-of-law analysis in insolvency-related avoidance disputes considers which jurisdiction has the most significant connections to the debtor and the transactions, including the debtor’s place of incorporation and management, where the transfers were arranged and executed, and the jurisdictions most directly regulating the debtor-creditor relationship.
- Avoidance rules are part of an integrated insolvency regime; where a foreign main proceeding and core debtor activities are centered abroad, the foreign insolvency system’s avoidance provisions may appropriately govern.
- Comity is less likely to yield to domestic avoidance policy when the debtor is foreign and the transfers and affected relationships are predominantly foreign, absent a strong U.S. public policy conflict.

## Conclusion

The Second Circuit held that, given the English debtor’s center of operations, the English-centered transactions, and coordinated parallel proceedings, international comity and conflicts principles required applying English insolvency law to the avoidability of the transfers, thereby precluding recovery under U.S. Bankruptcy Code avoidance provisions.


In re Maxwell Commc’n Corp. plc, 93 F.3d 1036 (2d Cir. 1996)