By Corinne Ball, Dan T. Moss, David S. Torborg, and Isel M. Perez (Jones Day)
Chapter 15 of the Bankruptcy Code reached its 20th year of enactment in October 2025. A legislative framework premised on international comity, it has proven to be an invaluable tool for coordinating cross-border bankruptcy and insolvency cases and providing assistance to foreign bankruptcy courts and their functionaries.
One safeguard built into chapter 15 to ensure that recognition of foreign bankruptcy proceedings and related relief does not violate chapter 15’s purpose and underlying principles is the “public policy exception” set forth in section 1506 of the Bankruptcy Code. That exception dictates that any form of chapter 15 relief (including recognition of a foreign bankruptcy) may be denied by a U.S. bankruptcy court if it is “manifestly contrary” to U.S. public policy. However, as demonstrated by a ruling handed down by the U.S. District Court for the Southern District of New York, the exception erects a high bar and has rarely been successfully invoked to preclude chapter 15 relief.
In In re Canterbury Securities, Ltd., 675 B.R. 109 (S.D.N.Y. 2025), appeal filed, No. 25-3200 (2d Cir. Dec. 23, 2025), the district court affirmed a bankruptcy court’s denial of a motion to dismiss a chapter 15 petition and terminate related relief. The motion was based upon allegations by a foreign debtor’s principal that the debtor’s Cayman Islands liquidation proceeding was commenced to further massive fraud and securities law violations. According to the district court, those allegations were both unsupported and not a basis for denying chapter 15 relief under the public policy exception.
Canterbury provides useful guidance regarding both a U.S. bankruptcy court’s role in a chapter 15 case and the scope of the public policy exception in section 1506 of the Bankruptcy Code.
Key takeaways from the decision include the following:
- Chapter 15 continues to be a sound resource for providing aid and cooperation to foreign courts.
- Substantial similarity, not identical treatment, is the benchmark for recognition.
- The public policy exception remains a high bar that is rarely cleared.
- The public policy exception focuses on the foreign court’s procedures and safeguards.
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