Bahamas: The Bahamas Issues Practice Direction For Adoption Of Judicial Insolvency Network ('JIN') Guidelines For Use Of Joint Hearings In Cross-Border Insolvency Proceedings

The Chief Justice of the Commonwealth of The Bahamas, Sir Ian Winder has issued Cross-Border Insolvency Practice Direction No. 14 of 2023 for Court-to-Court Communications and Cooperation in cross-border insolvency and restructuring cases after consultation with the Justices of the Supreme Court, Commercial Division.

The practice direction addresses the use and adoption of published JIN guidelines in cases pending before the Supreme Court of the Commonwealth of The Bahamas. The practice direction took effect on 19 December 2023.

The JIN Guidelines for Communication and Cooperation between Courts in Cross-Border Insolvency Matters were issued by the Judicial Insolvency Network in October 2016 and have been adopted by a number of courts in multiple jurisdictions including the United States Bankruptcy Court for the Southern District of Delaware, the United States Bankruptcy Court for the Southern District of New York, the Chancery Division of the High Court of England and Wales, the Eastern Caribbean Supreme Court and the Grand Court of the Cayman Islands.

The Guidelines cover the procedural rules that may be adopted and applied in cross-border insolvency or restructuring proceedings for regulating the manner of communications between the courts involved in cases which may have a dual element with an overseas Court for example where there is a concurrent bankruptcy proceeding. The JIN Guidelines will also facilitate communications between courts in parallel proceedings and the acceptance of official documents or orders made in the foreign jurisdiction as authentic. Notably, the JIN Guidelines also permit the use of joint hearings.

The Guidelines are to be applied either by being incorporated in a protocol between respective officeholders which would be approved by the Bahamas Court and the foreign Courts, or by a separate order of the Court without a protocol.

The JIN Guidelines would supplement the statutory provisions as contained in Order 21 Rule 2(1) of the Bahamas Companies Liquidation Rules 2012 which provide that companies which are the subject of an official liquidation under Part VII of the Companies Act are required to consider whether or not it is appropriate to enter into an international protocol with any foreign officeholder where the company in liquidation is subject to a concurrent bankruptcy proceeding under the law of a foreign country or has assets located in a foreign country which are the subject of a bankruptcy proceeding or receivership under the law of that country. Directions may be sought from the Court as to the manner in which to use and apply the Guidelines in any particular case.

In the Official Liquidation of FTX Digital Markets Ltd. a Global Settlement Agreement was entered into between the Joint Official Liquidators ("JOLs") of FTX Digital Markets Ltd. and the Chapter 11 Debtors, on 19 December 2023, subject to Court sanction. The Global Settlement Agreement provides for the use of a Dispute Resolution Protocol mechanism for resolution of any potential disputes which may arise under the Global Settlement Agreement.

The Global Settlement Agreement seeks to resolve all outstanding disputes arising from the adversary proceeding which the Debtors commenced against FTX DM and the JOLs in Alameda Research LLC, et al. v. FTX Digital Markets Ltd., et al., Adv. Pro. No. 23-50145 (JTD) [D.I. 1119] (the "Adversary Proceeding") on March 19, 2023 regarding ownership of assets of the FTX Estate. FTX DM and the JOLs disputed the Debtors' allegations and asserted counterclaims against the Debtors in the Adversary Proceeding and Proofs of Claim in the sum of $9,150,790,714.84 billion plus contingent and unliquidated amounts were filed by FTX Digital Markets Ltd. (In Liquidation) against the US Debtors in the Chapter 11 proceedings.

As a result of the Global Settlement Agreement, the JOLs and the Chapter 11 Debtors have agreed not to initiate any action or proceeding in any court or tribunal in respect of any claim arising out of or related to the Settlement Agreement without reasonable advance notice and consultation with the other Party. The JOLs and Chapter 11 Debtors have agreed that any action or proceeding in respect of any claim arising out of or related to the Global Settlement Agreement must be brought in accordance with the cross-border dispute resolution protocol attached as an Exhibit to the Global Settlement.

The Dispute Resolution Protocol provides for a Concurrent Jurisdiction Procedure that in the event that a Dispute is not resolved by the Parties within twenty (20) days after the delivery of a Dispute Notice, either Party may give written notice to the other Party of its intent to seek judicial intervention to resolve the Dispute ("Judicial Intervention Notice"). Following the delivery of a Judicial Intervention Notice, the Parties shall negotiate in good faith a procedure to resolve the Dispute that involves the concurrent jurisdiction of the Bankruptcy Court and the Bahamas Court and is consistent with the JIN Guidelines and applicable Law ("Concurrent Jurisdiction Procedure"). The issuance of the Practice Direction therefore is a positive development for the involvement of the Judiciary of The Bahamas in seeking to resolve cross-border insolvency cases with a contentious element and will enhance the jurisdiction in coordination of cross-border insolvency cases.

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