Snell & Wilmer
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June 2014

Dear Friend of Snell & Wilmer,

Global trade trends are a critical component to staying ahead of changes in international markets. This edition of Global Connection offers insight into international trade in Southern California, as well as a look into the United States’ cross-border insolvency proceedings under Chapter 15 of the Bankruptcy Code. It also contains an article describing the process of bringing a foreign brand to the United States. 

We hope this edition of Global Connection proves useful as you continue to seek out new opportunities at home and abroad. Please feel free to contact me if you have ideas for future articles or topics for the Global Connection or if you would like to be included in future international events hosted by the Firm.

Best regards,

Lindsey E. Martínez
Editor

 

Positive Trends in Southern California’s International Trade Growth

After economic turmoil in Southern California, and in the entire country, the Los Angeles County Economic Development Corporation’s (LACEDC) most recent June 2014 report on international trade in the region contained some welcome news.

The ports of Los Angeles and Long Beach were listed as the United States’ top gateways for international trade in 2013. Indeed, 40 percent of the nation’s containers pass through Southern California’s twin ports. Container traffic through the twin ports is expected to rise 5.5 percent in 2014 and 5.8 percent in 2015. The ports of Los Angeles and Long Beach handled 14.6 million containers in 2013—up 3.4 percent from 2012.

The Los Angeles Customs District (LACD) two-way trade hit $414.5 billion in 2013, due to activity at the San Pedro ports and Los Angeles International Airport. LACD’s two-way trade is forecasted to grow by 3 percent in 2014 and 5 percent in 2015. California’s export trade in April 2014 topped $14.09 billion, up 7.8 percent from the prior year.

The top export categories moving out of the LACD in 2013 were computers, peripherals, machinery and parts; electrical equipment, TVs and parts, aircraft, spacecraft and parts; and medical, surgical and dental instruments. The most valuable import categories were computers, peripherals, machinery and parts; electrical equipment, TVs and parts, motor vehicles and parts; and refined oil products and natural gas.

The LACEDC also notes that investment into Los Angeles County from China has doubled over the past five years, with China becoming one of the county’s top investors. China was also LACD’s largest trading partner in 2013, with two-way trade of $173.1 billion. Japan ranked second to China as LACD’s largest trading partner, with a 9.9 percent decrease in two-way trade from 2012. South Korea came in as LACD’s third largest trading partner, with Taiwan and Germany rounding out the fourth and fifth spots, respectively.  

These statistics demonstrate how important and crucial international trade is for Southern California, showing the region's prominence in the international trade arena. LACEDC’s report suggests that trade is expected to improve in 2014 and 2015, as economies at home and abroad continue to rebound.

 

Cross-Border Insolvency Proceedings: Recent Chapter 15 Filings in the United States

It is not surprising that the amount of Chapter 15 bankruptcy filings is growing in the global economy. Chapter 15 was added to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. It is the United States’ adoption of the Model Law on Cross Border Insolvency (the Model Law) that was promoted by the United Nations Commission on International Trade Law. 

The purpose of Chapter 15 and the Model Law is to provide an effective mechanism for dealing with insolvency cases involving debtors, assets, claimants, creditors and other parties in cases involving more than one country. This general purpose is specified in the statute through five objectives: (1) to promote cooperation between the United States courts, parties of interest, and the courts and other competent authorities of foreign countries involved in cross-border insolvency cases; (2) to establish greater legal certainty for trade and investment; (3) to provide for the fair and efficient administration of cross-border insolvencies that protect the interests of all creditors and other interested entities, including the debtor; (4) to afford protection and maximization of the value of the debtor's assets; and (5) to facilitate the rescue of financially troubled businesses, thereby protecting investment and preserving employment. 11 U.S.C. § 1501.

Recently, two Chapter 15 cases have garnered national and international attention: Mt. Gox and Veris Gold Corporation. 

Mt. Gox is the failed Tokyo-based bitcoin exchange which has entered insolvency proceedings in Japan. However, the company filed for Chapter 15 bankruptcy protection in March to prevent U.S. customers who had filed a class action lawsuit from seizing its United States assets, such as computer servers. On June 16, 2014, Judge Stacey Jernigan of the United States Bankruptcy Court in Dallas granted recognition of the Chapter 15 case, which allows Mt. Gox's foreign representative to file lawsuits and pursue potential funds to repay creditors here in the United States. As there is a foreign proceeding taking place in Japan, the bankruptcy court’s jurisdiction is generally limited to the debtor's assets that are located in the United States. 11 U.S.C. § 1528. The limitation promotes cooperation with the foreign main proceeding by limiting the assets subject to United States jurisdiction, so as not to interfere with the foreign main proceeding. 

Another recent Chapter 15 bankruptcy is mining company Veris Gold Corporation who filed for Chapter 15 protection in Nevada bankruptcy court on June 10, 2014 in an attempt to protect its assets in the United States from creditors as it enters insolvency proceedings in its native Canada. As the automatic stay is not automatically invoked in a Chapter 15 proceeding, Veris immediately moved for a temporary restraining order to stop creditors from pursuing its assets—most notably a gold mine located in Elko, Nevada. Contemporaneously, Veris announced that the Supreme Court of British Columbia had granted its application for creditor protection under Canada's Companies Creditors Arrangement Act. The order also extends the protection to its subsidiaries, including Veris Gold USA Inc. and Queenstake Resources Ltd. 

For the bankruptcy courts involved in the Mt. Gox and Veris cases, they will have to “cooperate to the maximum extent possible” with foreign courts and the respective foreign representatives in their cases. 11 U.S.C. §§ 1525-1527. These cases should also be watched as they may provide additional guidance as to the interpretation of still rather new Chapter 15 rules and their outcomes will likely impact trade creditors. 

 

Taking the Leap: Bringing a Foreign Brand to the United States

Los Angeles partner Susan Grueneberg recently co-authored an article entitled “Taking the Leap: Bringing a Foreign Brand to the United States” that appeared in the International Journal of Franchise Law (Vol. 12, Issue 2, 2014). Read the full article here.

 

In Other News

Las Vegas partner Rob Kinas is leading the way to unite the Global Community through cancer research, philanthropy and tennis. Through these efforts, two cancer research grants have been funded at Stanford University. Read more about his efforts here.

 

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