Anna Nolan

Third-party releases and cross-border restructurings: enforceability of UK-issued nonconsensual third-party releases in the United States

The UK and US implemented cross-border structuring procedures to facilitate, among other things, international comity and the effective structuring and reorganisation of distressed entities with international operations. A key component of any such international structuring is recognition of the actions undertaken in the applicable jurisdiction (eg the UK) in other relevant jurisdictions (eg the US). Nonconsensual third-party releases are an important tool in a practitioners' toolbox to facilitate an effective restructuring. Recently, case law in the US both:

(i) invalidated nonconsensual releases in the context of Ch 11 proceedings in the US; and
(ii) upheld the continued legality of nonconsensual third-party releases in cross-border matters under Ch 15 of the US Bankruptcy Code (which chapter governs US recognition of non-US restructuring proceedings).

In light of those developments, this In Practice article provides an overview of fundamental concepts underlying nonconsensual third-party releases and explores their continued utility as an available mechanism to facilitate UK-US restructurings.