MEMORANDUM OF DECISION ON PETITION FOR RECOGNITION AND RELATED RELIEF

ALLAN L. GROPPER, Bankruptcy Judge.

INTRODUCTION

Before the Court are chapter 15 petitions filed by the joint liquidators (the "Liquidators" or "Petitioners") of Millennium Global Emerging Credit Master Fund Limited and Millennium Global Emerging Credit Fund Limited (respectively, the "Master Fund" and "Feeder Fund" and collectively the "Funds"), seeking recognition of Bermuda liquidation proceedings as foreign main proceedings or, alternatively, foreign nonmain proceedings.1 The Liquidators seek recognition in order to investigate the Funds' financial affairs, conduct discovery related to potential causes of action against parties in the United States, and ultimately provide for a distribution of recovered property to creditors. Verified Petition of Foreign Representatives Michael W. Morrison, Charles Thresh and Richard Heis at ¶ 38, Dkt. No. 2 ("Verified Petition"). Recognition of the Bermuda proceedings is opposed by BCP Securities, LLC ("BCP" or "the Objectant") on the ground that Bermuda is not the Funds' center of main interests ("COMI") or a place of nontransitory economic activity of the Funds. A separate objection by GlobeOp Financial Services, LLC was withdrawn after an agreement between the parties that if recognition were granted, the automatic stay would not prevent GlobeOp from pursuing any claims it may have against the Funds outside the United States.

An evidentiary hearing regarding recognition was held on July 27, 2011, at which one of the Liquidators of the Funds, Michael Morrison, testified. By consent, the Petitioners' case was presented by admitting into evidence the verified petitions, the declarations in support of the petitions filed by Morrison and the Funds' Bermuda counsel, Robin J. Mayor, and the Offering Memorandum for the Feeder Fund ("Offering Memorandum"). Declaration of Robert K. Dakis, Ex. A., Dkt. No. 38. BCP cross-examined Morrison and introduced the confidential information memorandum of Millennium Global Emerging Credit Fund, L.P., a Delaware Limited Partnership (the "Delaware Fund"). Declaration of Marc D. Powers, Ex. 2, Dkt. No. 16.2 The facts as summarized below are based on the record and were substantially undisputed.

At the conclusion of the hearing, the Court informed the parties that it would enter an order recognizing the Bermuda proceedings as foreign main proceedings, with a written decision to follow.

FACTS

The Funds were incorporated in Bermuda for the purpose of creating an offshore investment fund that would invest in sovereign and corporate debt instruments from developing countries. Declaration of Michael Morrison ("Morrison Declaration") at ¶ 4, Dkt. No. 4. The Feeder Fund was incorporated in Bermuda on October 12, 2006, and the Master Fund was incorporated in Bermuda on September 20, 2007. Id. at ¶¶ 12, 19. The Feeder Fund began operations in December 2006 as a Bermuda Institutional Scheme under the Bermuda Investment Funds Act of 2006. Id. at ¶¶ 12-14. The Master Fund was incorporated in order to create a master-feeder structure that could facilitate investment from certain classes of foreign investors, and it operated under the Bermuda Investment Funds Act as a private fund with fewer than 20 participants. Id. at ¶¶ 18-20. In fact, the Feeder Fund and the Delaware Fund were its only participants. At the time of the Master Fund's incorporation, the Feeder Fund transferred substantially all its assets to it in exchange for a 97% ownership interest in the Master Fund, with the other 3% held by the Delaware Fund, and all the service agreements of the Feeder Fund were novated in favor of the Master Fund. Id.

The registered office of both Funds was in Bermuda at all times, at the address of their common administrator. As set forth in the Offering Memorandum, during the course of the Funds' operations they had no employees other than their three directors, Michael Collins, James Keyes, and Deborah Sebire, who each served on the boards of directors of both Funds. Id. at ¶¶ 15, 19. Collins and Keyes are both residents of Bermuda, and Sebire is said to be a resident of the Bailiwick of Guernsey (Channel Islands). Id. Both funds retained the same administrator in Bermuda, Argonaut, Limited ("Argonaut"), a Bermuda company, as well as the same bank, Butterfield Trust (Bermuda) Limited, a subsidiary of Bank of NT Butterfield & Son Ltd. ("Butterfield Bank"). Id. The Funds had approximately BD$900,000 on deposit at Butterfield Bank at the time of the opening of the Liquidation in 2008.3

The Master Fund had a "manager," Millennium Asset Management Limited (the "Manager"), responsible for "management, administration, back office activities, marketing and investment activities"; it was said to be located in Guernsey. Offering Memorandum at 29. The Manager in turn appointed as investment manager Millennium Global Investments Limited, which was described as London-based. Id. at 30. The Funds maintained prime brokerage accounts with Credit Suisse Securities (Europe) Limited and Citigroup, Inc., through which the investment manager conducted securities transactions. Transcript of Recognition Hearing, Held on July 27, 2011, Dkt. No. 43 at 45; Offering Memorandum at 58. The Funds also conducted derivative and hedging transactions under standard ISDA contracts with various counterparties. Morrison Declaration at ¶ 23.4 The Offering Materials indicate that subscriptions of investors would be invested in the Master Fund, which was identified as a Bermuda entity, and that the Master Fund would set investment objectives for the Funds, exercise direct authority to oversee the investment manager's decisions, and replace the investment manager if necessary. The Offering Materials contain a directory that identifies the key parties involved in the management of the Funds, including: (i) the directors, located in Bermuda and Guernsey; (ii) the manager, located in Guernsey; (iii) the investment manager, apparently located in London; (iv) the administrator, located in Bermuda; (v) the prime broker, apparently located in London; (vi) the custodian, located in Bermuda; (vii) the auditors, located in Bermuda; (viii) the valuation agents, located in the United States; (ix) the legal advisors, located in Bermuda, the United Kingdom, and the United States; and (x) the Feeder Fund's banker, located in Bermuda. The Offering Materials direct potential investors to direct subscription documents to the administrator in Bermuda and cash to Butterfield Bank in Bermuda.

The liquidation of the Funds commenced as a result of their inability to meet a margin call of the Master Fund's prime broker, Credit Suisse, on October 6, 2008. Morrison Declaration at ¶ 25-26. A default notice was issued by Credit Suisse on October 16, 2008, and on the same day the directors petitioned the Bermuda Court for an order directing the wind-up of the Funds. Id. The Bermuda Court's order commencing the liquidation divested the directors of all authority over the Funds and caused the appointment of Michael W. Morrison, Charles Thresh, and Richard Heis, all of KPMG Advisory Ltd. or KPMG LLP, as provisional liquidators with full managerial authority over the Funds. Id. The provisional liquidators were appointed as joint liquidators of the Master Fund on March 5, 2009 and of the Feeder Fund on April 16, 2009. Committees of inspection, which appear to be similar to the creditors' committee in a chapter 11 case, were formed by the Bermuda Court in both foreign proceedings. Id. at ¶¶ 28-30.5

As of the commencement of the liquidation, subscriptions to the Funds totaled $390 million, and the Liquidators estimate that as of September 30, 2008 the value of the Funds' portfolio was $738,209,753. Id. at ¶¶ 17, 35. However, subsequent to the closure of the prime brokerage accounts, the Funds' prime brokers asserted that there was a $170 million deficiency owed by the Funds. Id. Although the prime brokers ultimately asserted claims against the Funds, there was an initial return of cash totaling $21.85 million, of which $10 million was allocated to the Feeder Fund and $11.85 million to the Master Fund. Id. at 32. Approximately three years later, the Funds now have on hand close to $7 million held by the Feeder Fund and $7.5 million held by the Master Fund. Id. at 40. Morrison testified that expenses to date have been exclusively for administration of the estates, including the fees of the Liquidators and for counsel in Bermuda, the United Kingdom, and the United States, and that all expenses have been subject to oversight by the committees of inspection and the Bermuda Court.

As a consequence of the decline in value of the Funds' portfolio, the Liquidators currently have at least one litigation pending in the United Kingdom and are pursuing an investigation of potential causes of action against parties in the United States. The filing of the chapter 15 petition on June 30, 2011 was authorized by the Feeder Fund Committee and approved by the Bermuda Court on June 22, 2011, with the stated purpose to pursue discovery against parties in the United States, commence litigation if indicated, and in the meantime, if possible, obtain relief from the expiration of any statutes of limitations.

The Objectant is one of the parties that was designated by the Liquidators in the Verified Petition as potentially affected by provisional relief, admittedly as a target of the Liquidators' investigation. On cross-examination of Morrison, the Objectant established that the administration of the Funds' liquidation proceedings in Bermuda has cost approximately $9 million to date, including about $5 million spent outside of Bermuda, predominantly on fees for counsel in the United Kingdom and United States. Transcript of Recognition Hearing at 58. Morrison testified that the litigation that is currently pending or which may be commenced, all against parties outside of Bermuda, is likely to be the most valuable asset of the estates. Id. at 24-28. It was also established that: (i) the Funds' investment manager was located in London and had an exclusive contractual right to invest the Funds' portfolio; (ii) the Funds' asset valuation agent, GlobeOp, operates out of multiple locations including the United States, the United Kingdom, and India; (iii) a majority of the Funds' investors were located outside Bermuda; (iv) substantially all of the Funds' assets were invested outside of Bermuda or committed to contracts (including derivatives such as swaps) with counterparties outside of Bermuda; (v) directors' meetings were customarily held with Collins and Keyes present in Bermuda and Sebire participating by telephone from Guernsey; (vi) meetings with the Funds' service providers prior to the liquidation were frequently held by telephone or in London; (vii) meetings with creditors required by Bermuda law as part of the liquidation have routinely been held in London for the convenience of creditors; (viii) claims have been submitted in the Bermuda liquidation but only for voting purposes, with no distributions having yet occurred; and (ix) none of the members of the Funds' committees of inspection is located in Bermuda. Id. at 19-92. Morrison testified on redirect that all subscriptions and all requests for redemptions from the Funds were required to be directed to the Funds' administrator, Argonaut, in Bermuda, and that the investment manager in London was subject to dismissal by the Funds' directors, located in Bermuda and Guernsey. Id. at 92-96.

The Objectant argued at the conclusion of the hearing that the Funds' COMI should be determined to be the United Kingdom based on the location of the investment manager, the location of many creditors and creditors' meetings, the location of the prime broker, Credit Suisse, and the fact that litigation is allegedly pending in London. The Petitioners argued that the record supported the conclusion that the Funds' COMI was in Bermuda prior to the commencement of the liquidation and had remained there or, in the alternative, had become lodged in Bermuda due to the control exercised by the Liquidators there and the fact that creditors look to the Bermuda proceedings for recoveries. Alternatively, the Petitioners argued that the Funds had an "establishment" in Bermuda and the foreign proceedings are entitled to recognition as foreign nonmain proceedings.

DISCUSSION

The principal issue in dispute with respect to this application for recognition under chapter 15 of the Bankruptcy Code is whether the Funds have their "center of main interests" or an "establishment" in Bermuda, entitling the Liquidators to recognition of the foreign proceedings as "foreign main" or "foreign nonmain" proceedings. BCP contends that the Bermuda liquidation proceedings in question, which have been pending in Bermuda for more than three years without any apparent objection by creditors or others affected by the proceedings and which have cost more than $9 million in fees and expenses, are not entitled to recognition as either main or nonmain proceedings because Bermuda is not the "center of main interests" of either of the Funds and because they did not have an "establishment" in Bermuda, as required for nonmain recognition. If BCP is correct and the Bermuda proceedings are not recognized, the Liquidators may be unable to access the U.S. courts to investigate and prosecute possible claims against BCP and others, or they might have to start a new proceeding in some putative "center of main interests" and incur all the costs of duplicative liquidation proceedings. Chapter 15 of the Bankruptcy Code which is designed to foster cooperation with foreign proceedings, not to thwart them, does not mandate this result.

Main and Nonmain Recognition: "Center of Main Interests" and "Establishment"

The requirement that a court determine the COMI of the debtor in a foreign proceeding is an integral element of the recognition procedures adopted as part of chapter 15, the U.S. version of the Model Law on Cross-Border Insolvency ("Model Law") drafted by the United Nations Commission on International Trade Law (UNCITRAL).6 Among other things, chapter 15 allows the representative of a foreign insolvency estate to file a petition in the U.S. bankruptcy court and seek an order of recognition, after which certain relief may come into effect automatically and additional relief can be granted by the court. As relevant to this proceeding, the foreign representatives seek an order of recognition, and they have also made it clear that if a recognition order is entered, they will seek discovery from U.S. entities, including BCP, to investigate possible claims.7

Chapter 15 contemplates a short and relatively simple petition for recognition, accompanied by proof of the existence of the foreign proceeding, and it specifically avoids giving the court the degree of discretion at the outset of a case that was required under former § 304, where the court had to consider issues such as "comity" and the interests of creditors in the United States before an order was entered.8 In the words of one decision, chapter 15 imposes a fairly rigid procedural structure for recognition of a foreign proceeding but then affords the court "substantial discretion and flexibility" in fashioning relief.9 The UNCITRAL Guide to Enactment further explains, "[I]f recognition is not contrary to the public policy of the enacting State and if the application meets the requirements set out in the article, recognition will be granted as a matter of course."10

Notwithstanding the goal of a simplified procedure for obtaining an order of recognition, the process has been complicated by the introduction into the Model Law and chapter 15 of the COMI concept. The court is directed to recognize the foreign proceeding "(1) as a foreign main proceeding if it is pending in the country where the debtor has the center of its main interests; or (2) as a foreign nonmain proceeding if the debtor has an establishment within the meaning of section 1502 in the foreign country where the proceeding is pending," 11 U.S.C. § 1517(b). "Establishment" is defined in § 1502(2) as "any place of operations where the debtor carries out a nontransitory economic activity." The statute does not expressly deal with a proceeding from a foreign country that satisfies neither of these requirements, i.e., a proceeding that is not or was not the debtor's "center of main interests" or a place where the debtor has or had an "establishment." Id. BCP draws the implication that in such circumstances the foreign representative is completely shut out of the U.S. judicial system and can obtain no substantive relief whatsoever.11

Neither the Model Law nor chapter 15 defines the term "COMI." Article 16(3) of the Model Law provides that, "In the absence of proof to the contrary, the debtor's registered office, or habitual residence in the case of an individual, is presumed to be the center of the debtor's main interests." The U.S. adopted the principle in § 1516(c), which is identical but uses the phrase, "in the absence of evidence to the contrary."12 An insolvency proceeding from the debtor's COMI is designated the main proceeding, and any other case filed in a nation where the debtor has an "establishment" is designated as a nonmain proceeding.

These deceptively simple terms have engendered considerable litigation. Although most cases have not involved a COMI issue,13 disputes to date have included: the COMI of an enterprise that moved to the United States;14 the COMI of a company doing business in Australia, Canada, and the United States via the internet;15 the COMI of a fraudulent enterprise;16 the COMI of a businessman who claimed "there is no legal regime covering [his] commercial activities";17 and the COMI of a businessman who moved to the United States before the filing of the chapter 15 petition.18 More relevant to the instant case, there are multiple cases, further discussed below, regarding the recognition (if any) to be afforded to insolvency proceedings brought by offshore funds like these debtors.

In determining the COMI of these Funds or the existence of an "establishment," it is necessary to separate two issues: (i) the appropriate date at which to make the determination; and (ii) the factors to be considered in making the determination. We start with the question of the date at which the determination should be made.

The Date at Which to Determine COMI or the Existence of an Establishment

As the Liquidators point out, the few cases on point (both business and individual) have determined the COMI of an entity and whether an establishment exists as of the date of the filing of the chapter 15 petition. See In re Ran, 607 F.3d 1017, 1025 (5th Cir.2010) (individual); In re Betcorp Ltd., 400 B.R. 266, 290-92 (Bankr. D.Nev.2009) (business); In re British American Ins. Co. Ltd., 425 B.R. 884, 909-11 (Bankr.S.D.Fla.2010) (business); In re Fairfield Sentry, Ltd., 440 B.R. 60 (Bankr. S.D.N.Y.2010) (business). In In re Ran, for example, the Court started its analysis with § 1502(4), which provides that a "foreign main proceeding means a foreign proceeding pending in the country where the debtor has the center of its main interests." The Court continued, "While § 1502 does not expressly discuss a temporal framework for determining COMI, the grammatical tense in which it is written provides guidance to the court. Every operative verb is written in the present tense. Congress's choice to use the present tense requires courts to view the COMI determination in the present, i.e. at the time the petition for recognition was filed." 607 F.3d at 1025. It continued by asserting that use of any other date in the past would create a serious chance of conflict with the decisions of other courts:

Id. Similar language and approach is set forth in the Betcorp decision, on which Ran relies. In re Ran, 607 F.3d at 1026.19

Notwithstanding the authority in support of using the chapter 15 filing date as the date for making a COMI determination, use of the chapter 15 petition date is not required by the "plain words" of the statute and produces a result wholly inconsistent therewith. Starting with the words of the statute, the cases stress that § 1502 speaks in the present tense, as it does. See In re Ran, 607 F.3d at 1025-26; In re Betcorp, 400 B.R. at 291-92. However, the courts do not explain why they assume that the statute refers to the filing of the chapter 15 petition rather than the filing of the petition in the case for which recognition is sought. In a chapter 15 filing, the U.S. case is ancillary or secondary to the foreign proceeding. 11 U.S.C. § 1504; see In re Toft, No. 11-11049, 2011 WL 3023544 at *4 (Bankr.S.D.N.Y. July 22, 2011).20 The date of the petition for recognition is a matter of happenstance; in this case, for example, the chapter 15 filing took place three years after the filing of the liquidation in Bermuda, apparently occasioned by the possible passage of one or more statutes of limitation on causes of action of the estates. The substantive date for the determination of the COMI issue is at the date of the opening of the foreign proceeding for which recognition is sought.

This construction is clear if one simply translates the arcane term "center of main interests" into plain English. The Court observed in In re Tri-Continental Exchange Ltd., 349 B.R. 627, 634 (Bankr. E.D.Cal.2006), that the term center of main interests "generally equates with the concept of `principal place of business' in United States law." The decision quotes the explanation of Professor Westbrook, one of the drafters of the UNCITRAL Model Law and chapter 15, as to why the term "center of main interests" was substituted:

Tri-Continental, 349 B.R. at 633, quoting Jay Lawrence Westbrook, Chapter 15 at Last, 79 Am. Bankr. L.J. 713, 719-20 (2005).21 Other courts have similarly used "center of main interests" and "principal place of business" interchangeably. See In re Basis Yield Alpha Fund (Master), 381 B.R. 37, 48 (Bankr.S.D.N.Y.2008); In re Betcorp, 400 B.R. at 287-88.

If the term "principal place of business" is substituted for "center of main interests," it is obvious that the date for determining an entity's place of business refers to the business of the entity before it was placed into liquidation. A debtor does not continue to have a principal place of business after liquidation is ordered and the business stops operating. As the Court recognized in Fairfield Sentry, as a result of the opening of liquidation proceedings, "the Debtors have no place of business, no management. . . ." 440 B.R. at 64. Although a debtor in a reorganization case may continue to have a principal place of business, this is the place of business of the reorganizing entity, not the debtor. In any event, a liquidating company, like the debtors in the case at bar, does not have a principal place of business, and the drafters of the Model Law would not have employed the term with a reorganization case in mind because reorganization is rare in most countries outside the United States.22

Prior to the adoption of chapter 15, the Bankruptcy Code required the Court to consider the "principal place of business" or "principal assets" of a debtor in determining whether to recognize a foreign proceeding under § 304. The concept appeared in the definition of "foreign proceeding" in § 101(23), which, prior to the adoption of chapter 15, defined "foreign proceeding" to mean:

11 U.S.C. § 101(23) (1990) (amended by Pub. Law No. 109-8 (2005)). Section 101(23) thus made it clear that the determination as to "principal place of business" was to be made as of "the commencement of the proceeding," i.e., the foreign proceeding. The Model Law simplified and shortened the definition and distinguished between "main" and "nonmain" proceedings, but there is no indication in chapter 15 or the legislative history that Congress intended to change the prior bankruptcy practice of looking to the date on which foreign proceedings were first commenced.23

The Model Law is explained in a Guide to Enactment, also drafted by UNCITRAL and intended for the use of countries considering adoption of the Model Law. There is no substantive analysis of the COMI concept in the UNCITRAL Guide to Enactment, merely an observation that the term "corresponds to the formulation in article 3 of the European Union Convention on Insolvency Proceedings, thus building on the emerging harmonization as regards the notion of a `main' proceeding."24 In fact, the COMI concept and the terms "center of main interests" and "establishment" were both imported into the Model Law from the European Insolvency Regulation ("EU Regulation"), which requires members of the European Union to recognize and give effect to insolvency proceedings commenced in other nations of the Union.25 The EU Regulation does not contemplate the commencement of a separate ancillary proceeding to seek recognition of a foreign insolvency case, as in the Model Law and chapter 15, as the members of the Union are automatically required to recognize foreign proceedings from the date of their opening. The date of the opening of initial insolvency proceeding is the only date that the original drafters of the term for the EU Regulation could have contemplated.26

Similarly, the drafters of the EU Regulation had the date of opening of insolvency proceedings in mind when they coined the term "establishment." It is important to note that in the EU Regulation the requirement of an "establishment" is a limitation on the right of any creditor or other entity to open an insolvency proceeding regarding a debtor. Since the EU Regulation does not prevent the opening of an insolvency case in one nation merely because a case is pending in another EU jurisdiction (including at the COMI), the requirement that there be an establishment constitutes a prohibition on the opening of a proceeding in a jurisdiction where the debtor was not "established." EU Regulation, Art. 3(2). Thus, in the European Union, there cannot be an anomaly such as the Objectant proposes in the instant case—a proceeding that has lasted for three years but is not entitled to any recognition. In the European context, a case can only be opened in a jurisdiction where the debtor has an establishment.

Both the Ran and Betcorp cases argue that it would be bad policy to establish a date prior to the chapter 15 filing as the relevant date for determining COMI, asserting that "a meandering and never-ending inquiry into the debtor's past interests could lead to a denial of recognition. . . ." In re Ran, 607 F.3d at 1025; see also In re Betcorp, 400 B.R. at 291-92. They shoot down this straw-man, and there is no contention here that COMI should be determined on the basis of some indeterminate date "in the past." However, reference to the commencement date of the insolvency proceeding for which recognition is sought does not invite a "meandering" inquiry. It is consistent with the "plain words of the statute" and would seemingly avoid the result of cases such as In re Ran, in which the COMI concept was applied in a manner which resulted in denial of any hearing in the United States for an individual debtor's foreign creditors.27 The COMI inquiry need not be construed by courts in a manner that allows it to be used as a shield against foreign creditors, especially as that would be at odds with the stated purpose of chapter 15, "to promote cooperation with foreign proceedings."28

Use of chapter 15 petition date as the date for determining recognition also leads to the possibility of forum shopping, as it gives prima facie recognition to a change of residence between the date of opening proceedings in the foreign nation and the chapter 15 petition date. The Ran court considered this issue and found that the there was a failure of proof that the individual debtor there had absconded. It pointedly said, "A similar case brought immediately after the party's arrival in the United States following a long period of domicile in the county [country] where the bankruptcy is pending would likely lead to a different result." 607 F.3d at 1026. It did not explain how this "different result" could obtain in view of its rigid construction of the "plain words" of the statute, or how long a period of domicile would suffice.

As the facts of the Ran case bear out, the construction of the term COMI that avoids the use of chapter 15 as a shield by absconding debtors looks to the time period on or about the commencement of the foreign case whose recognition is sought. In Ran, if the liquidator were guilty of laches—and it appears that 10 years passed before he sought an order of recognition in the United States—he might be denied substantive relief, a result that is entirely consistent with chapter 15, which requires that the interests of the debtor as well as creditors be "sufficiently protected." 11 U.S.C. § 1522(a). In any event, the "plain words" of the statute do not require that a foreign representative in a case like Ran be denied any relief by use of the chapter 15 petition date. The appropriate date at which to determine COMI is on or about the date of the commencement of the foreign proceeding for which recognition is sought. The same date should be used to determine whether the foreign debtor has an "establishment" in the foreign nation. We therefore turn to the following questions: (i) the COMI of these debtors as of the date of the commencement of the liquidation in Bermuda in 2008; and (ii) whether they had an "establishment" in Bermuda at that time.

The Debtors' COMI at the Commencement of the Liquidation in Bermuda

To determine the COMI of the Funds at the commencement of the liquidation in 2008, it is necessary, once again, to consider the "plain words of the statute." The term COMI is not defined in either the Model Law or in chapter 15. Section 1516, entitled "Presumptions concerning recognition," provides in subsection (c) that, "In the absence of evidence to the contrary, the debtor's registered office, or habitual residence in the case of an individual, is presumed to be the center of the debtor's main interests." This establishes a rebuttable presumption that the COMI is at the debtor's registered office. Tri-Continental, 349 B.R. at 635; In re Betcorp, 400 B.R. at 285. Rule 301 of the Federal Rules of Evidence, which governs the standard for rebuttal of statutory presumptions, provides:

Fed.R.Evid. 301. "Courts and commentators are in general agreement that proffered evidence is `sufficient' to rebut a presumption as long as the evidence could support a reasonable jury finding of `the nonexistence of the presumed fact.'" ITC Ltd. v. Punchgini, Inc., 482 F.3d 135, 149 (2d Cir.2007). The party seeking to rebut a statutory presumption must present "enough evidence . . . to withstand a motion for summary judgment. . . ." McCann v. Newman Irrevocable Trust, 458 F.3d 281, 288 (3d Cir.2006).

In determining the COMI of a foreign debtor, cases have examined a number of factors, including:

In re SPhinX, 351 B.R. 103, 117 (Bankr. S.D.N.Y.2006), aff'd 371 B.R. 10 (S.D.N.Y. 2007); see also In re Bear Stearns, 374 B.R. at 128, aff'd, with this language quoted by the District Court, 389 B.R. at 336; In re Loy, 380 B.R. 154, 162 (Bankr. E.D.Va.2007); In re Betcorp, 400 B.R. at 286; In re Ernst & Young, Inc., 383 B.R. 773, 779 (Bankr.D.Colo.2008). Many of the COMI cases also emphasize that the COMI should be "ascertainable by third parties." In re Betcorp, 400 B.R. at 291; Bear Stearns 374 B.R. at 129; In re Basis Yield Alpha Fund (Master), 381 B.R. at 47. As explained in the Betcorp decision, the language emphasizing that the COMI should be "ascertainable by third parties" comes from ¶ 13 of the EU Regulation, the first major legislation to employ the terms "COMI" and "establishment." In re Betcorp, 400 B.R. at 286.29

In this case, many of the factors that the courts have used in the COMI determination point toward Bermuda, and others point in various directions. Starting with those that point toward Bermuda, two of the Funds' three directors were located in Bermuda, and the directors had the right to replace all of the Funds' other agents, as well as the right to determine whether to place the Funds into an insolvency proceeding. Bermuda was also the location of the Funds' bank, their custodian, and their auditors. On the other hand, the day-to-day management of the Funds' investments did not take place in Bermuda. As the Offering Memorandum disclosed, the directors appointed as manager for the Funds an entity described as "Millennium Asset Management Limited, a Guernsey company." The manager had "responsibility for the Fund's management, administration, back-office activities, marketing and investment activities, all of which are subject to the overall control of the Directors." The Offering Memorandum further disclosed that the "manager" had appointed as "investment manager" a "London-based investment management company regulated by the Financial Services Authority of the United Kingdom" and also "registered with the SEC as an investment advisor." There is no evidence that any of the Funds' investors or other creditors resided in Bermuda, and the Funds did not invest in property in Bermuda.

A simple tally of the foregoing factors demonstrates that more point toward Bermuda than elsewhere. On the record of this case, this supports the finding that the COMI was Bermuda. In addition, there are two further reasons for finding that the Funds' COMI was in Bermuda as of the date of the wind-up order.

Most important, in the case at bar, the only center of main interests reasonably "ascertainable by third parties" was Bermuda. The Offering Memorandum for the Feeder Fund offered shares in "A Bermuda Exempted Company (Mutual Fund), classified as an Institutional Fund under the Investment Funds Act 2006 of Bermuda." The Offering Memorandum made it clear that the Funds were located in Bermuda and subject to the control of a Bermuda-based board of directors, and all investors were directed to send their cash to an account in Bermuda. The Funds' investors did not invest in a London hedge fund; they invested in an offshore fund, and if the daily investment decisions were made by a London-based adviser, the investment manager was subject to the ultimate control of the directors of the Funds. An investor could speculate as to the location of the manager (Guernsey, elsewhere?), and investors were informed that the investment manager was "London-based." Nevertheless, Bermuda was the only jurisdiction clearly identified with the Funds, and on this record it was the only jurisdiction reasonably "ascertainable by third parties."30

Moreover, because the formation of the funds in Bermuda was clearly disclosed in the Offering Memorandum, investors could have reasonably expected that Bermuda was likely to be the venue of any proceeding to wind up or liquidate the Funds. Under Bermuda law, a Bermuda company is subject to being wound up, voluntarily or involuntarily, in a proceeding in Bermuda.31 It would have been pure speculation that the Funds would be liquidated or wound up in any other jurisdiction. One of the authors of the Model Law and of chapter 15 has suggested that the COMI determination should be affected by the likelihood that the COMI jurisdiction would have an acceptable substantive law.32 Although there are decisions that rigidly assert that equitable factors should play no role at the recognition phase of a chapter 15 case,33 it would seem that a determination relative to recognition and to the "center of main interests" of an enterprise should take into account the existence of a fair and impartial judicial system and a sophisticated body of law, as aspects of the bona fides of the proceedings.34 It bears noting, therefore, that Bermuda has a sophisticated, fair and impartial legal system that has been recognized and granted comity by our courts. See, e.g., In re Board of Directors of Hopewell Int'l Ins. Ltd., 275 B.R. 699 (S.D.N.Y. 2002), aff'g. 238 B.R. 25 (Bankr.S.D.N.Y. 1999) (after 8-day trial and searching inquiry into Bermuda law and insolvency procedures, Bankruptcy Court recognized Bermuda insolvency proceeding and injunction issued by the Bermuda court; order affirmed by District Court).35

In addition to the fact that Bermuda was the only COMI reasonably ascertainable by third parties, there is insufficient evidence in this case that establishes the COMI in a location other than Bermuda. There was a manager, ostensibly in Guernsey, but even the Objectant does not contend that the Funds' COMI was Guernsey. The Funds' investment manager was said to be "London-based," but there is very little evidence of record as to where the investment manager actually was located; as a practical matter an investment manager can be anywhere he or she has access to a computer terminal to make a trade and to follow the market.36 The Funds' assets were securities issued in "emerging countries," probably represented by book entries in ledgers throughout the world. The location of the prime broker for the Funds, identified as Credit Suisse Securities (Europe) Limited, was disclosed in at least some of the offering materials as London, but testimony indicated that Citigroup, Inc. was also used as a prime broker, suggesting that at least some of the Funds' investments were subject to control from New York. Furthermore, there is evidence that the location of the prime broker could vary; a footnote in the Offering Memorandum states, "To the extent that assets of the Master Fund are treated as `plan assets' under ERISA, the prime broker will be located in the United States." The record does not disclose where the Funds' investors were located, except that some were in the United Kingdom, some were in the United States, and some were themselves located in offshore jurisdictions. The evidence did disclose that post-liquidation meetings have been held in London for the convenience of creditors, but there is no evidence that the Funds' creditors were closely identified with any one jurisdiction.

On this record, the proof does not establish an alternative COMI. Since every entity has a center of main interests, In re Chiang, 437 B.R. at 403, the fact that the evidence does not disclose a COMI other than Bermuda operates in favor of granting recognition of the Bermuda proceedings as foreign main proceedings.

The Objectant relies heavily on In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 374 B.R. 122, 128 (Bankr.S.D.N.Y.2007), aff'd, 389 B.R. 325 (S.D.N.Y.2008) (hereinafter "Bear Stearns"). In that case the issue of recognition was not contested; nevertheless, the Court found that the burden of proof as to recognition as a main or nonmain proceeding remained on the foreign representatives and that the "rebuttable presumption" in § 1516(c) that the place of the entity's registered office is its COMI "at no time relieves a petitioner of its burden of non-persuasion on the issue."37 The Bankruptcy Court ultimately concluded, based on the record that the liquidators had presented in support of the petition, that the hedge fund's operations were controlled entirely from New York, that it had no personnel or business in the Caymans other than a letterbox, and that its COMI was at the New York headquarters of Bear Stearns. The decision was affirmed by the District Court, and it has been followed by several other courts, some of which have placed an increasingly heavy burden on the foreign representative to establish COMI, whether or not there was any opposition to recognition.38

The Bear Stearns facts can be distinguished from those of the instant case. In Bear Stearns, the fund had no presence in the Caymans other than a letterbox; in this case, the Funds have extensive contacts with Bermuda. In Bear Stearns, representatives of a feeder fund operating out of the United States appeared and supported denial of the petition, on the theory that there needed to be an investigation of the U.S. fund, which would be impeded by proceedings in the Caymans. There are no such allegations in this case, and the only objection comes from the target of proposed discovery. In Bear Stearns, it was possible to determine an alternative COMI because the fund there was wholly identified with and controlled by a brokerage firm located in New York, whose name it bore. In the cases at bar, there is no jurisdiction other than Bermuda that can be fairly construed as the center of main interests.

In any event, the policy concerns that apparently drove the decision in Bear Stearns are not present in this case. Recognition of these Bermuda proceedings would be consistent with the principal purpose of establishing a COMI requirement—to provide a basis for centralizing insolvency proceedings relating to an enterprise in one forum.39 The drafters of the Model Law hoped that identification of a "center of main interests" would point toward a single forum in which proceedings could be centralized or would at least foster a cooperative spirit and increase the likelihood of reorganization or sale of an enterprise as a whole, with its worldwide assets intact, rather than piecemeal dismemberment and the likelihood of liquidation on a national basis.40 These goals would be impeded, rather than fostered, by a construction of chapter 15 that would exclude the Funds from obtaining recognition in the United States. This is underscored by the fact that refusal to recognize the foreign proceedings on either a main or nonmain basis would deny all recognition to a liquidation that has proceeded for years at an expense of millions of dollars, seemingly with the support of creditors. The apparent result would be to deny the Liquidators access to any judicial relief in the United States, or if they could not obtain nonmain recognition, compel them to start another proceeding in some putative third jurisdiction in the hope that a U.S. court, years in the future, might deem that place the COMI and grant an order of recognition.

Indeed, it is relevant that those courts and commentators who have advocated denial of main recognition to cases from tax havens have assumed that the foreign representative would not be shut out of the U.S. judicial system altogether.41 Yet the developing case law is to the contrary. Section 1509(b) provides that if the bankruptcy court grants recognition, the foreign representative may sue and be sued "in a court in the United States." Section 1511(a) similarly provides that "upon recognition," a foreign representative may commence a voluntary case, if the foreign proceeding is a foreign main proceeding, or an involuntary case. The clear implication of failure to obtain any recognition, borne out by the case law, is that without an order of recognition the foreign representative cannot be heard in any court in the United States.42 Any exclusionary rule would be contrary to U.S. interests. For example, denial of any recognition to the Liquidators here would appear to deny them access to our judicial system and possibly prevent them from pursuing legitimate claims against third parties. This would disadvantage U.S. creditors who claim in the Bermuda proceedings.

It has been suggested that laxity in the application of the COMI principle or in recognition of cases from tax havens would encourage companies to register and then file in an "outlier" jurisdiction whose law is unduly favorable to debtors and disadvantageous to creditor interests.43 Hedge or mutual funds such as these foreign debtors are not holding companies of major enterprises located elsewhere attempting to justify a filing in Bermuda. In any event, a court has ample power to protect creditors in recognized chapter 15 cases. For example, recognition of a case as a foreign main proceeding does not require that the COMI's law be applied to a specific dispute. See In re Maxwell Comm'n Corp., 93 F.3d 1036 (2d Cir.1996).44 All relief that automatically goes into effect after main recognition can be modified or vacated. Under chapter 15 the court is required to ascertain that the interests of U.S. creditors are "sufficiently protected" before it grants any discretionary relief, particularly if it entrusts the distribution of assets to the foreign representative, and the court is also empowered to effectuate other procedures for the protection of U.S. creditors, such as the appointment of an examiner. 11 U.S.C. §§ 1522, 1521(b).45 Moreover, although multiple proceedings should be the exception, U.S. creditors are not precluded from filing an involuntary plenary proceeding against the debtor in the United States if there is an adequate showing of a need for additional protection.46

Finally, the COMI requirement should not be applied in a manner that would effectively establish a presumption against recognition of cases from offshore jurisdictions. Such a presumption would set the text of the statute on its head and construe chapter 15 to reverse a line of cases under the predecessor provision, § 304, that recognized proceedings from the Caribbean.47 The text of chapter 15 and its legislative history do not expressly disavow this authority, and the COMI requirement can be faithfully applied consistently with it. See Dewsnup v. Timm, 502 U.S. 410, 419, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992) ("When Congress amends the bankruptcy laws, it does not write `on a clean slate'. . . . This Court has been reluctant to accept arguments that would interpret the Code . . . to effect a major change in pre-Code practice that is not the subject of at least some discussion in the legislative history."); Pennsylvania Dept. of Public Welfare v. Davenport, 495 U.S. 552, 562, 110 S.Ct. 2126, 109 L.Ed.2d 588 (1990) ("We will not read the Bankruptcy Code to erode past bankruptcy practice absent a clear indication that Congress intended such a departure.").

In conclusion, based on the record, assuming that the evidence is sufficient to rebut the § 1516(c) presumption, the Liquidators satisfied their burden of establishing that the COMI of the Funds was in Bermuda as of the commencement of the liquidation in 2008. The foreign proceedings are entitled to recognition as foreign main proceedings.

The Presence of an "Establishment" in Bermuda at the Commencement of the Liquidation

Similarly, even if the Funds did not have their COMI in Bermuda at the outset of the liquidation there and were not entitled to "main" recognition, the Funds would be entitled to recognition as foreign nonmain proceedings. As noted above, a foreign nonmain proceeding is defined as a foreign proceeding "pending in a country where the debtor has an establishment." 11 U.S.C. § 1502(5). Establishment is defined as "any place of operations where the debtor carries out a nontransitory economic activity." 11 U.S.C. § 1502(2). The definition is a slightly shorter version of the definition in the Model Law, which adds, at the end, the words, "with human means and goods or services." Model Law, Art. 2(f). There is no substantive analysis of the term "establishment" in the Model Law Guide to Enactment, only a statement that the term was "inspired by" the EU Convention. Guide to Enactment ¶ 75.

There is relatively little U.S. authority construing the term "establishment" as it is used in chapter 15. In Bear Stearns, 374 B.R. at 128, the Bankruptcy Court denied nonmain recognition to a company registered in the Cayman Islands that appears to have had nothing more than a letterbox there. It did not have any business or even any cash in the Cayman Islands at the time the fund was placed in liquidation. The Court held that there was insufficient economic activity in the Cayman Islands to find an establishment, noting that the presence of assets alone would not justify such a finding. 374 B.R. at 131, n. 12.48 In In re Ran, the businessman had moved from Israel to Texas and had no remaining business in Israel when the chapter 15 petition was filed, and the Court held he did not have an establishment in Israel at that time. 607 F.3d 1017.

Notwithstanding the paucity of U.S. authority, there are U.K. cases that have construed the same term "establishment" as used in the U.K. version of the Model Law and the EU Regulation.49 The English courts have found that the presence of an asset together with minimal management of the asset can constitute an "establishment." In Shierson v. Vlieland-Boddy, [2005] EWCA Civ. 974, [2005] W.L.R. 3966 (2005) (hereinafter "Shierson"), the individual debtor had moved from England to Spain a substantial period of time prior to the opening of insolvency proceedings. However, there was evidence that the corporate owner of certain property that he had mortgaged while resident in England was his nominee, and that he managed the property individually or through an agent. The Court concluded that nonmain proceedings could be opened against him.

In the Shierson case, the English judges relied heavily on a report by Miguel Virgos and Etienne Schmit on a draft "European Convention on Insolvency" (the "Virgos-Schmit Report") that was a predecessor of the EU Regulation and that first used the terms "center of main interests" and "establishment."50 In the Virgos-Schmit Report, the term establishment is explained as follows:

Virgos-Schmit Report at ¶ 71. The report places emphasis on several factors that contribute to identifying an establishment: the economic impact of the debtor's operations on the market, the maintenance of a "minimum level of organization" for a period of time, and the objective appearance to creditors whether the debtor has a local presence. Id. In the Shierson case, the judges accepted the analysis in the Virgos-Schmit Report, finding that an establishment means economic activities carried out with "a minimum level of organization. A purely occasional place of operations cannot be classified as an `establishment.' A certain stability is required." Shierson at ¶ 66. On the other hand, the judges held that there is no minimum period for such activity, as "the negative formula (`non-transitory') aims to avoid minimum time requirements." Id. As noted above, evidence of some management of an asset through a nominee was sufficient to constitute an establishment.

Based on available authority and giving the operative words of the statute their fair meaning, the Funds carried out nontransitory economic activity sufficient to constitute an "establishment" in Bermuda, entitling their Liquidators to recognition of the Bermuda proceedings as nonmain proceedings. In contrast to the Fund in Bear Stearns, where the only cash migrated to the Caymans after the liquidation proceedings were opened, the Funds accepted and processed investors' cash deposits in Bermuda, kept some or all of their books of account in Bermuda, and were subject to the control of directors, a majority of whom were located in Bermuda. Examining the factors in the Virgos-Schmit Report, the Funds maintained a "minimum level of organization" in Bermuda—registered offices and a local board of directors—in a manner that was stable and apparent to third-parties, as disclosed in the Offering Memorandum. There is no question that the Funds' investment activities were controlled from outside Bermuda, but to deem the services of the investment manager as controlling would improperly consolidate the Funds with a third party that is not in an insolvency proceeding. Moreover, the location of a professional advisor such as an investment manager—who could be hired or fired at the discretion of the Funds' directors— should not override what on an objective analysis was the Funds' maintenance of a local presence. Since the term "nontransitory" is used in the sense of having stability rather than being constant and ongoing, and since there is no minimum time period required, the front-end costs incurred in setting up a fund, including fees paid to retain local counsel and commitment of capital to local banks, should also be considered "economic activities" of a fund, so long as the actions are taken in good faith.

Obviously, before a court grants a foreign proceeding nonmain recognition, it must be satisfied that the main proceeding is—or ought to be—in another known location. In this case, the Court is convinced that the Funds' COMI was in Bermuda. However, assuming arguendo that it was not, and that the Funds are not entitled to main recognition, they had an "establishment" in Bermuda at the time the liquidation was opened there and would be entitled to nonmain recognition.

COMI and "Establishment" Determined as of the Date of the Chapter 15 Petition

Even if the date for determining a foreign debtor's COMI and the existence of an "establishment" were not the date of the opening of the proceedings for which recognition is sought, and if the contrary authority cited above is followed, the Funds' COMI is Bermuda. Several recent decisions have analyzed COMI as of the date of the petition for recognition and concluded that COMI can be premised on liquidation activities. In In re Fairfield Sentry Ltd., 440 B.R. 60, 64 (Bankr. S.D.N.Y.2010), the Court held that the center of main interests of a hedge fund was at its place of registry in the British Virgin Islands ("BVI") because that was the location of its liquidation. The Court found that:

Fairfield Sentry, 440 B.R. at 64; see also, In re British Am. Isle of Venice (BVI), Ltd., 441 B.R. 713, 723 (S.D.Fla.2010) (COMI in BVI based on numerous factors, including location of insolvency proceedings); In re British Am. Ins. Co., 425 B.R. 884, 914 (Bankr.S.D.Fla.2010) (COMI may "become lodged with the foreign representative where a foreign representative remains in place for an extended period, and relocates all of the primary business activities of the debtor to his location (or brings business to a halt), thereby causing creditors and other parties to look to the [foreign representative] as the location of a debtor's business.").

Accepting this approach, and determining COMI as of the date of the petition for recognition, the center of main interests of the Funds would still be Bermuda, where they have been in liquidation and under the control of the Liquidators since 2008. Assuming arguendo that the Funds had "interests" on the date the chapter 15 petition was filed, they would consist of the process of collecting assets, closing out contracts, and (hopefully) paying creditors as well as the Liquidators and their counsel. BCP made an effort to show at the hearing that some of the activities in connection with the liquidation have taken place outside of Bermuda. For example, of the $9 million spent to date on the administration of the insolvency cases, only about $4 million has been paid to the Liquidators in Bermuda and much of the remainder to counsel in the United Kingdom, who have been pursuing contract rights in that jurisdiction. The Fairfield Sentry Court properly rejected the proposition that the location of "contingent and disputed litigation claims" could form the basis for a COMI determination. 440 B.R. at 65. In any event, in this case, counsel are controlled by their clients located in Bermuda, and the Liquidators in turn are subject to the control of the court there.51

In conclusion, assuming that the date for determining whether the foreign proceedings should be recognized as main cases is the date of the filing of the chapter 15 petition, the Funds' center of main interests is Bermuda.

CONCLUSION

Based on the foregoing, the Liquidators are entitled to an order recognizing the foreign proceedings as foreign main proceedings. Alternatively, the foreign proceedings would be entitled to recognition as foreign nonmain proceedings. In addition, the Liquidators seek an order of the Court confirming that § 108 of the Bankruptcy Code applies in this chapter 15 case. Section 108 provides for an extension of certain limitation periods if the period has not expired under applicable nonbankruptcy law before the date of the filing of the petition.

Section 103(a) of the Bankruptcy Code provides that chapter 1 (which includes § 108) applies in a case under chapter 15, and § 101(42) of the Bankruptcy Code, as amended in 2010, provides that the term "petition" includes a petition filed under chapter 15. Section 1521(a)(7) further provides that the court may grant a foreign representative in a chapter 15 case any additional relief in a case available to a trustee appointed under other chapters of the Bankruptcy Code (with exceptions not relevant here). Construing the clear language of the statute, the Court in a second Fairfield Sentry decision found that a foreign representative in a chapter 15 case was entitled to the extensions of the time periods provided for in § 108. See In re Fairfield Sentry, 452 B.R. 52, 59 (Bankr. S.D.N.Y.2011). The thorough and convincing analysis in that case is adopted here. The foreign representatives are entitled to confirmation as to the availability of § 108 relief in this chapter 15 case.52

The Liquidators are directed to settle an order consistent with this decision.