Case of the Day: In re SNP Boat Service SA

The case of the day is In re SNP Boat Service SA (Bankr. S.D. Fla.). The court’s opinion is very short, which is unfortunate, because the case seems quite interesting and the court does not lay out all the facts. But the outlines seem clear enough. The case involves foreign intransigence about US discovery and a US court’s resulting threat to deny recognition to a foreign proceeding.

The foreign representative of SNP, a French firm, petitioned for recognition of its French insolvency proceedings under Chapter 15 of the Bankruptcy Code. At the time of the petition, Hotel Le St. James, Inc. had brought an action in the Broward County (Florida) Circuit Court for recognition and enforcement of a Canadian judgment against SNP, and the Hotel had obtained a writ of execution, on the basis of which the Sheriff had seized the M/Y Sixty Five and scheduled a sale of the vessel. The aim of the bankruptcy petition, according to the judge, was to retake possession of the M/Y Sixty Five and return the vessel to France, to be administered as part of the French insolvency case. The French court had apparently refused to recognize the Canadian judgment, which was the basis of the Broward County judgment against SNP and the basis on which the Sheriff had seized the vessel. The Hotel, of course, vigorously opposed the motion, argued that it had been deprived of due process in the French proceeding, and sought to take discovery from the foreign representative, but the foreign representative resisted discovery, pointing to the French blocking statute:

This Chapter 15 proceeding was instituted by the Foreign Representative of the French company for the purpose of obtaining possession of the M/Y Sixty Five. The French Foreign Representative, meanwhile, has resolutely refused to provide any discovery with respect to the proceedings in France, has been unable or unwilling to provide a docket or a complete court file of the relevant proceedings in France, and—despite its officers’ and agents’ repeated visits to South Florida—has refused to make anyone available for deposition (at which issues of due process could be explored).

Courts in the United States will recognize foreign proceedings as a matter of comity under the UNCITRAL Model Law, adopted in the United States as Chapter 15 of the Bankruptcy Code. When a foreign representative obtains recognition of a foreign main proceeding, and then proceeds to stonewall all efforts to assist a judicial determination as to whether due process was afforded, the wisdom of an American court continuing to recognize the foreign main proceeding becomes questionable. The Foreign Representative has raised the so-called French blocking statute to impede discovery in these proceedings. United States courts have found that the blocking statute exists to provide [French litigants] with tactical weapons and bargaining chips in foreign courts.The United States Supreme Court has expressly found that the Hague Convention protocols are not the exclusive means for obtaining international discovery, notwithstanding a blocking statute. The Supreme Court noted that “[t]he French ‘blocking statute,’ … does not alter our conclusion. It is well settled that such statutes do not deprive an American court of the power to order a party subject to its jurisdiction to produce evidence even though the act of production may violate that statute.” Courts have routinely found that the French blocking statute and the Hague Convention do not relieve foreign parties of the obligation to comply with United States discovery when the parties are subject to the court’s jurisdiction.

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If discovery is not promptly had … so that this court may determine whether due process was afforded in the French proceedings, the court will conclude that the order granting recognition of the foreign main proceeding was improvidently entered, will revoke recognition of the foreign main proceeding, and will abstain from this matter [ed., thus leaving the Hotel free to complete the sale of the vessel].

The moral of the story is one we’ve seen before. If you come to the courts of the United States seeking their aid, think hard before you invoke foreign blocking statutes in order to avoid giving discovery and to obtain a tactical advantage. Courts hate that, and rightly so.

About Ted Folkman

Ted Folkman is a shareholder with Murphy & King, a Boston law firm, where he has a complex business litigation practice. He is the author of International Judicial Assistance (MCLE 2012), a nuts-and-bolts guide to international judicial assistance issues, and of the chapter on service of process in the ABA's forthcoming treatise on International Aspects of US Litigation, and he is the publisher of Letters Blogatory, the Web's first blog devoted to international judicial assistance, which the ABA recognized as one of the best 100 legal blogs in 2012, 2014, and 2015.

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