Yet Another Ruling Deepens The Divide On Whether The Bankruptcy Code's Avoidance Provisions Apply Extraterritorially

The ability to avoid fraudulent or preferential transfers is a fundamental part of U.S. bankruptcy law. However, when a transfer by a U.S. entity takes place outside the U.S. to a non-U.S. transferee—as is increasingly common in the global economy—courts disagree as to whether the Bankruptcy Code's avoidance provisions apply extraterritorially to avoid the transfer and recover the transferred assets. A pair of bankruptcy court rulings handed down in 2017 widened a rift among the courts on this issue.

In Spizz v. Goldfarb Seligman & Co. (In re Ampal-Am. Israel Corp.), 562 B.R. 601 (Bankr. S.D.N.Y. 2017)— discussed in the March/April 2017 edition of the Business Restructuring Review—the court, disagreeing with other courts both within and outside its own district, ruled that the avoidance provisions of the Bankruptcy Code do not apply outside the U.S. because, on the basis of the language and context of the provisions, Congress did not intend for them to