While recent case law developments under Chapter 15 might suggest a retrenchment from the international comity and cooperation goals of cross-border insolvency law, reports from Mexico indicate that there might yet be hope for global harmony in the insolvency world.

The Mexican reorganization of Vitro S.A.B. de C.V. opened a rift between Mexico and the United States when the U.S. courts refused to enforce Vitro’s reorganization plan.  See In re Vitro, 701 F.3d 1031 (5th Cir. 2012).  Among the most troubling aspects of the Vitro plan for U.S. creditors was its extinguishment of guarantees owed by non-debtor subsidiaries of Vitro.  In addition, the requisite creditor majority votes for plan confirmation came from votes cast by Vitro affiliates that were based on intercompany claims that arose under suspicious circumstances.

Apparently Mexican authorities found those aspects as troubling as did the U.S. courts.  In January, a major amendment to Mexico’s commercial insolvency law (Ley de Concursos Mercantiles) became effective.  While the amendment makes a number of important improvements that should make the law more effective, it also addresses the major Vitro abuses.  First, non-consensual non-debtor releases like those involved in Vitro are not permitted in reorganization plans.  Second, the Vitro voting problem is addressed by subordinating most subsidiary and affiliate debt and requiring a majority vote of non-insider creditors for plan confirmation in cases with substantial insider debt.

This amendment should give U.S. courts more confidence in the Mexican insolvency process.  In addition, the convergence of legal rules reflected by the amendment should make it more likely that U.S. courts will view Mexican bankruptcy proceedings as providing “sufficient protection” to U.S. creditors to be enforced in the U.S. under Chapter 15.  See 11 U.S.C. § 1522(a).  More importantly, the Mexican response to Vitro suggests that there is a constructive “conversation” going on between the United States and Mexico that is strengthening the international norms for cross-border insolvency.