This week it has been commented, with moderate enthusiasm and not without criticism from public opinion, that LATAM accepted the procedure of the so-called Chapter 11 of the Bankruptcy Code or, something that we could translate, such as the Bankruptcy Law, in the United States.
It is curious that LATAM having the possibility of availing itself in Chile of a Reorganization procedure, which operates under the same principle of restructuring of liabilities and assets that Chapter 11 has chosen to do in the United States. It shows, in our view, that there was a deliberate decision to do so in that sense rather than merely an accident.
In the comparative study of the rules that make up the various procedures related to insolvency or also called bankruptcy, there is an analysis regarding companies that, because they have offices in different countries and, therefore, various laws dealing with bankruptcy matters are decided by one to the detriment of others. This action is known with the anglicism of forum shopping, something like a showcase for the place that, by its legislation, is most convenient for the company for the reasons that the board determines.
Forum shopping has been assumed by several laws that, taking into account the benefits of hosting many bankruptcy proceedings, have modified their rules making them more attractive to companies and that they may choose to undergo procedures, particularly restructuring, in those countrie
In this way, for example, Singapore with the amendment to its bankruptcy regulations of 2017 fully assumed this challenge and carried out major changes in its laws to make them attractive to transnational companies when reorganizing or restructuring their debts. Seeking to win the bet against the world and, particularly, legislation that has dominated this matter such as the United Kingdom and the United States, it has sought to become a pole of bankruptcy development.Although we do not know for sure, we believe that in this case there was forum shopping by LATAM seeking rules that, in their particular situation, are more just or appropriate, such as, for example, the Cramdown rule existing in the Chapter. 11 and that, without a doubt, could be a great advance in our national legislation.
Finally add that, in addition to what has been said, and in a globalized world, there is the existence of the UNCITRAL Model Law adopted by many countries, among which is Chile, which would allow internalizing the restructuring agreements reached in the United States to the light of the aforementioned Chapter 11.
Rene Sottolichio R. is a lawyer and partner at Sottolichio & Aguilera Abogados, with special dedication to bankruptcy law.