In Re International Banking Corp. B.S.C.
439 B.R. 614
| Bankr. S.D.N.Y. | 2010Background
- TIBC is a Bahraini-formed wholesale bank with no NY offices; administered in Bahrain after Bahraini authorities placed it in administration in 2009.
- Deutsche Bank and Mashreqbank obtained NY attachment orders over TIBC assets in NY (May 2009) to secure alleged FX-transaction claims.
- Attached funds totaling about $26.9 million (plus approximately $2.35 million held by HSBC) are in NY sheriff custody due to the attachments.
- TIBC filed a Chapter 15 petition (Dec. 14, 2009) and a recognition order (Jan. 15, 2010) recognizing the Bahraini administration as a foreign main proceeding.
- The Administrator seeks to vacate NY attachment orders and turnover the funds to Bahrain for administration, arguing the attachments are void under Bahraini law; Banks oppose.
- Judge Denies Turnover Motion without prejudice pending Bahraini court consideration and potential comity relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether NY attachments create a valid lien under NY law | Banks claim secured status via NY lien; attachments perfected lien. | TIBC Administrator argues attachments may be de facto preferences under Bahraini law. | Attachments create NY judicial liens; turnover denied pending Bahraini ruling. |
| Whether to vacate attachments and turnover funds to Bahraini administration | Turnover aligns assets with foreign main proceeding. | Turning over would undermine Banks' secured interests and conflate local and foreign proceedings. | Discretionary; court defers, keeping attachments in place pending Bahraini determination. |
| Role of comity and Bahraini law in determining validity of attachments | Bahraini court would resolve voidability issues and protect assets. | U.S. court should protect secured creditors and not relace local law with Bahraini assumptions. | Court directs parties to seek Bahraini ruling on voidability; if unavailable, Court will decide. |
| Protection of Banks' cash collateral under 1521(a)(5)/(b) and 1522 | Turnover would be consistent with entrustment to foreign representative. | Banks' cash collateral requires adequate protection and cannot be released without US safeguards. | Banks hold cash collateral; relief subject to protections and conditions; comity considerations apply. |
Key Cases Cited
- In re Treco, 240 F.3d 148 (2d Cir. 2001) (comity and creditor protections in foreign proceedings)
- Atlas Shipping A/S, 404 B.R. 726 (S.D.N.Y. 2009) (treatment of cross-border turnover and foreign recognition)
- Bear Stearns High-Grade Structured Credit Strategies Master Fund, 374 B.R. 122 (S.D.N.Y. 2007) (interpretation of chapter 15 comity principles)
- Cunard S.S. Co. v. Salen Reefer Servs. AB, 773 F.2d 452 (2d Cir. 1985) (deference to foreign insolvency proceedings)
- Victrix S.S. Co., S.A. v. Salen Dry Cargo A.B., 825 F.2d 709 (2d Cir. 1987) (comity and execution against local assets post-foreign filing)
- Koreag, Controle et Revision S.A., 961 F.2d 341 (2d Cir. 1992) (Koreag exception to deference when ownership disputes exist)
- Tri-Cont'l Exch., Ltd., 349 B.R. 627 (Bankr. E.D. Cal. 2006) (distinguishes entrustment under 1521(a)(5) from 1521(b))
- In re Milovanovic, 357 B.R. 250 (Bankr. S.D.N.Y. 2006) (examples of attachment/order interplay with foreign proceedings)