In a 2021 chapter 15 decision, In re Bankruptcy Estate of Norske Skogindustrier ASA,1 the United States Bankruptcy Court for the Southern District of New York held that foreign law avoidance claims that are sufficiently analogous to claims under section 548(a)(1)(A)2 of the Bankruptcy Code—but not identical—may fall within the intentional fraud exception to the safe harbor provisions of section 546(e)3 of the Bankruptcy Code (the “Safe Harbor”). In doing so, the court declined to follow In re Fairfield Sentry Limited,4 and rejected a strict interpretation of sections 546(e), 561(d),5 and 1521(a)(7)6 of the Bankruptcy Code in favor of a more flexible application focused on both a foreign avoidance statute’s language and the broader context of the foreign legal regime.


Norske Skogindustrier ASA (“Norske ASA”), a Norwegian limited liability company, was the parent of several subsidiaries involved in the production of newsprint and magazine paper (Norske ASA, collectively with its subsidiaries, the “Norske Enterprise”).7 In 2012, the Norske Enterprise began experiencing financial distress purportedly due to decreasing demand for paper products, which led to two restructurings occurring between 2015 and 2016.8 One year later, the Norske Enterprise defaulted on an interest payment and a subsequent attempt at a third restructuring ultimately failed.9

In December 2017, Norske ASA and its Norwegian subsidiaries commenced voluntary bankruptcy proceedings in Norway and a trustee was appointed over Norske ASA’s Norwegian bankruptcy estate (the “Plaintiff”).10 The following year, the Plaintiff obtained chapter 15 recognition of the Norwegian proceedings from the U.S. Bankruptcy Court for the Southern District of New York.11 Upon the court’s grant of recognition, the Plaintiff commenced an adversary proceeding, which sought, among other things, to avoid alleged fraudulent transfers—the Cyrus Sale and GSO Transfer (as defined below)—pursuant to Sections 5‑9 and 5‑5 of the Norwegian Recovery Act of 1984.12 The Plaintiff alleged that:

  • In 2016, after becoming two of Norske ASA’s largest creditors and shareholders, Cyrus Capital Partners, L.P. and certain of its affiliates (“Cyrus”) and GSO Capital Partners LP and certain of its affiliates (“GSO,” and, together with Cyrus, the “Defendants”) appointed two (2) directors to Norske ASA’s board (the “Norske Board”)—a move the Plaintiff alleged was for the purpose of “elevat[ing]” certain of the Defendants’ junior debt interests and decreasing their credit default swap exposure related to such debt.13 Thereafter, Cyrus sold all of its interests in certain subordinated unsecured notes (the “2016 SUNs”) to GSO (the “Cyrus Sale”), which the Plaintiff alleged was done with the knowledge that the Norske Board, acting under the Defendants’ direction, would repurchase the 2016 SUNs (the “GSO Transfer”) to the detriment of Norske ASA and its other creditors.14
  • The Defendants improperly influenced the Norske Board to issue certain new debt instruments as part of the 2016 restructuring and then “upstream” the cash proceeds from those issuances to redeem the 2016 SUNs with knowledge that this would render the Norske Enterprise unable to repay its other more senior debt at maturity.15

Cyrus and GSO each filed motions to dismiss, arguing, among other things, that the Cyrus Sale and the GSO Transfer are protected from avoidance under the Safe Harbor.16

The court held that the Safe Harbor did not apply to bar the Plaintiff’s Section 5-9 and Section 5‑5 claims.17 The court explained that the Safe Harbor is applicable where there is both (1) a qualifying transaction and (2) a qualifying participant. 18 In addition, a qualifying transaction must be “made by or to (or for the benefit of)” such qualifying participant.19 Because a qualifying transaction includes a “settlement payment” made “in connection with a securities contract,” the court found it appeared “beyond dispute” that the transactions at issue constituted qualifying transactions under the Safe Harbor.20 However, the Plaintiff disputed whether the Defendants were qualifying participants under the Safe Harbor.21 Cyrus argued that it and GSO were “financial participants” and, therefore, qualifying participants under the Safe Harbor. However, the court held that, because certain relevant facts were in dispute, the Defendants had not met their burden of demonstrating the same.22

In dicta, the court proceeded to analyze the scope of the Safe Harbor’s intentional fraud exception in the event the Safe Harbor were later determined to apply.23 In doing so, the court considered alternative readings of the following sections of the Bankruptcy Code: section 546(e) (the Safe Harbor), section 561(d) (which renders section 546(e) applicable to chapter 15 cases), and section 1521(a)(7) (which precludes a trustee in a chapter 15 case from requesting relief under section 548).24

The Plaintiff urged the court to adopt Reading 2, arguing that its claim was a foreign‑law fraudulent transfer claim sufficiently analogous to claims under section 548(a)(1)(A) and, thus, excepted from the Safe Harbor.25

The court looked to Fairfield Sentry, a 2020 decision rendered by the same court on this issue.26 In Fairfield Sentry, the court essentially adopted Reading 1 and rejected a foreign representative’s argument that its foreign law avoidance claims were excepted from the Safe Harbor.27 Additional background and analysis on the Fairfield Sentry series of cases can be found here.

The Norske court disagreed with the Fairfield Sentry court’s determination that section 546(e) protects transfers that would be avoidable under foreign laws analogous to section 548(a)(1)(A). Instead, the Norske court found that such provision bars state law claims analogous to section 548(a)(1)(A) claims.28 The Norske court reasoned that state law avoidance claims are barred because the Safe Harbor preempts those claims, not foreign law claims.29 Reiterating that section 561(d) provides that section 546(e) applies in a chapter 15 case “to limit avoidance powers to the same extent” as in a chapter 7 or 11 proceeding, the Norske court reasoned that Congress could have (i) barred the assertion of foreign law avoidance claims outright in chapter 15 cases or (ii) required that foreign statutes contain the same language as section 548(a)(1)(A)—but it did neither.30 The court further reasoned that interpreting section 561(d) to bar any exception to the Safe Harbor in a chapter 15 case would more broadly limit avoidance powers than in a case under chapter 7 or 11.31 Accordingly, the Norske court favored Reading 2.

The Norske court also disagreed with the Fairfield Sentry court’s implication that a foreign law avoidance claim that did not require proof of the intent to “hinder, delay, or defraud” could not be sufficiently analogous to a claim under section 548(a)(1)(A).32 The Norske court noted that section 561(d) does not impose any “substantially identical” language requirement for a foreign law avoidance claim to be excepted from the Safe Harbor, and cited other cases supporting the proposition “that claims that ‘have more in common with claims grounded in actual fraudulent intent’ are not barred by the safe harbor.”33 Accordingly, the court concluded that the inquiry into whether a foreign avoidance claim is sufficiently analogous to section 548(a)(1)(A) must be flexible and take into account both the applicable statutory language and the “broader context of the foreign law regime.”34 In doing so, the Norske court ultimately declined to adopt a “rigid rule” that would bar foreign law avoidance claims or require foreign statutes to contain virtually identical language to section 548(a)(1)(A) for the Safe Harbor’s exception to apply.35 According to the court, to do otherwise would be inconsistent with section 561(d), which makes the Safe Harbor applicable in a chapter 15 case “‘to limit avoidance powers to the same extent as’ (not to a broader extent than) ‘in a proceeding under chapter 7 or 11.’”36

After reviewing the applicable Norwegian statue, the court found that while the statute does not expressly require a showing of fraudulent intent, it is sufficiently analogous to section 548(a)(1)(A) to fall within the Safe Harbor’s exception if the transferor’s fraudulent intent was adequately alleged.37 Although the court determined that the Plaintiff had failed to plead its fraud claims with “particularity” as required by Federal Rule of Civil Procedure 9(b), the court accepted the Plaintiff’s representation that it could amend the complaint to allege facts demonstrating the applicable transferor acted with the intent ordinarily required by section 548(a)(1)(A), and thus granted the motions to dismiss but with leave to amend the complaint.38

Following the court’s decision, the Plaintiff filed an amended complaint and, after some motion practice, the GSO Defendants raised the Safe Harbor as an affirmative defense in their answer. As of the date hereof, the litigation remains pending.


The Norske case provides an alternative interpretation of the relationship among sections 546(e), 561(d), and 1521(a)(7). Unlike the Fairfield Sentry court’s interpretation of those provisions—‍see more here—the Norske court favored a more flexible approach focused on both a foreign avoidance statute’s text and broader context that results in a narrower scope of the Safe Harbor. Under the Norske court’s interpretation, foreign avoidance claims premised on intentional fraud that are sufficiently analogous to section 548(a)(1)(A) should not be protected by the Safe Harbor, even if such statutes do not contain language substantially identical to section 548(a)(1)(A). With the number of chapter 15 cases on the rise, it will be interesting to see whether courts will follow the more flexible Norske approach or the more rigid Fairfield Sentry approach under similar facts.