Global Preferences

An important opinion by one of our most knowledgeable bankruptcy judges, Judge Bernstein in Manhattan, may have reached the right result by the wrong path in deciding if a foreign debtor’s Chapter 7 trustee can avoid a foreign transfer to a foreign creditor. In re Ampal-American Israel Corp., 562 B.R. 601 (2017) (Ampal). Because the opinion’s reasoning may seriously weaken section 547 of the Bankruptcy Code, it is worth imposing on the reader’s time for a brief analysis.

Ampal, a corporation organized in the United States but operated in Israel, filed a Chapter 11 case that was converted to Chapter 7. The trustee sought to recover a preference paid through a bank in Israel to its Tel Aviv law firm. The company’s only substantial business connection with the United States was its listing on NASDAQ. The court held that section 547 of the Bankruptcy Code did not apply, which was very likely correct. (The trustee apparently did not seek to apply Israeli law.)