Clifford Chance

How Purdue May Impact Cross-Border Bankruptcy Filings, Including the Use of Chapter 15

July 11, 2024

It is clear that the US Supreme Court’s ruling striking down nonconsensual third-party releases in Harrington v. Purdue Pharma will have a meaningful impact on larger Chapter 11 cases, as such releases have become common if not essential to larger restructurings.  What may be less apparent is that the ruling is also likely to encourage more multi-national companies to file bankruptcy outside of the United States as a number of popular foreign bankruptcy regimes permit nonconsensual third-party releases. Once a company files for bankruptcy in one of these countries, the company could then use another part of the Bankruptcy Code, Chapter 15, to recognize and effectuate the foreign bankruptcy relief in the US, including with respect to any third-party releases approved by the foreign court. This circuitous route to obtaining relief that Purdue now prohibits under Chapter 11 is possible because the Purdue ruling focuses on the statutory text of Chapter 11, sidestepping other constitutional and due process issues that might have implicated Chapter 15’s public policy exception.

Download PDF