Comity is a common law legal principle that allows U.S. courts to afford deference to foreign judgments. Comity is utilized as a basis for granting extraterritorial effect to judgments of foreign courts. This principle plays an integral role in a number of cross-border bankruptcy proceedings and has been adopted as a predominate legal principal in the Model Law on Cross-Border Insolvency (the “Model Law”), promulgated by the United Nation’s Commission on International Trade, and Chapter 15 of title 11 of the United States Code (the “Bankruptcy Code”).
Although American courts have long recognized the need to extend comity to foreign proceedings, they have not been uniform in the application. Early court decisions viewed reciprocity as a prerequisite for granting conclusive effect to foreign judgments. When a foreign court refused to grant comity to a valid U.S. judgment that was sufficient for a U.S. court not to enforce an otherwise valid foreign judgment. More recently, courts have moved away from the reciprocity requirement and approach issues of comity based on efficiency and fairness. A court may also withhold comity when a foreign judgment “clearly undermine[s] the public interest, the public confidence in the administration of law, or security for individual rights of personal liberty or of private property . . .” Congress intended courts to exercise restraint and limit the applicability of this public policy exception to situations involving fundamental notions of fairness.
This article addresses comity’s role in bankruptcy proceedings, with a focus on the different requirements as well as the circumstances under which a court would not extend comity to a foreign proceeding. Part I discusses the historical application of comity and how courts have moved away from the reciprocity requirement. Part II discusses the public policy exception through various court decisions indicating that Congress intended comity to be used sparingly. This article concludes by determining that a broad application of the public policy exception erodes comity's objective to provide for cooperation and deference to foreign proceedings.