## Facts

- Argentine companies Sociedad Comercial del Plata S.A. (SCP) and Compañia General de Combustibles S.A. (CGC) commenced reorganization proceedings (*concursos preventivos*) in a federal commercial court in Buenos Aires in September 2000.
- Argentine *concursos* imposed an automatic statutory stay, created a creditors’ committee including foreign creditors, and used court-appointed independent accountants (including a monitor/receiver-type role).
- In December 2000, the companies’ boards, acting as foreign representatives, filed an ancillary case in the Southern District of New York under former 11 U.S.C. § 304 seeking to enjoin U.S. actions against the debtors and U.S. property.
- In February 2001, the bankruptcy court entered a preliminary injunction staying U.S. actions, while allowing creditors to seek later modification or dissolution.
- Reef Exploration, Inc. and Hess Energy Trading Co. LLC, U.S. derivatives/swap counterparties, objected to continuing the injunction and Hess sought to vacate it.
- Reef and Hess argued Argentine law lacked Bankruptcy Code “safe harbor” protection for swaps comparable to § 560; Argentine law gave the debtor a limited period to decide whether to assume or reject executory contracts, during which counterparties could not penalize nonperformance.
- After an October 2001 hearing, the court issued a supplemental written decision addressing arguments grounded in Second Circuit authority concerning whether foreign distributions must be “substantially” consistent with U.S. bankruptcy principles.

## Issues

1. Whether, under former 11 U.S.C. § 304(c), the court should continue an injunction in aid of Argentine *concursos* to prevent U.S. litigation or enforcement against the debtors or U.S. assets.
2. Whether differences between Argentine insolvency law and the Bankruptcy Code—especially the absence of swap termination protections like § 560—made the foreign proceedings not “substantially in accordance” with U.S. bankruptcy principles.
3. Whether Reef and Hess showed concrete prejudice or unfair treatment sufficient to deny comity or to dissolve or narrow the injunction.

## Decision

- The court continued the preliminary injunction staying actions in the United States against SCP, CGC, and their U.S. property.
- The court denied Hess’s motion to vacate the injunction.
- The court held that comity to the Argentine *concursos* remained appropriate under § 304(c).
- The court found the asserted harms to Reef and Hess insufficiently concrete; differences in swap treatment did not amount to fundamental unfairness or a violation of U.S. public policy.

## Legal Principles

- In an ancillary case under former 11 U.S.C. § 304, the court may grant injunctive relief to support a foreign insolvency proceeding after weighing § 304(c) factors, including comity, creditor protection, and distribution consistency with U.S. bankruptcy principles.
- Comity does not require that foreign insolvency law replicate the Bankruptcy Code; the inquiry focuses on overall fairness and whether the foreign distribution scheme is substantially consistent with U.S. bankruptcy policies.
- A creditor seeking to deny comity or dissolve ancillary relief must show more than theoretical disadvantage; speculative concerns about future treatment in the foreign forum generally do not justify withdrawing injunctive protection.
- The absence of Bankruptcy Code swap safe harbors (such as § 560) in a foreign reorganization system does not, by itself, make the foreign proceeding fundamentally unfair or bar ancillary injunctive relief.

## Conclusion

The bankruptcy court continued § 304 injunctive relief to protect Argentine reorganization proceedings, concluding that the foreign framework provided generally fair creditor protections and that asserted swap-related disadvantages did not establish concrete, policy-offending prejudice warranting dissolution of the injunction.


In re Petition of the Bd. of Dirs. of Compania Gen. de Combustibles S.A., 269 B.R. 104 (Bankr. S.D.N.Y. 2001)