In re Petition of the Board of Directors of Compañia General de Combustibles S.A.

Sociedad Comercial del Plata, S.A. (SCP) (debtor) was an Argentine holding company that owned, among other entities, Compañia General de Combustibles S.A. (CGC) (debtor), which was an oil company, and Tren de la Costca (debtor), which was a transportation and entertainment company. On September 8, 2000, SCP, CGC, and Tren de la Costca all filed the Argentine equivalent of a bankruptcy petition, known as a concursos preventivos, in the federal commercial trial court in Buenos Aires, Argentina. In a concursos preventivos, the procedures were generally similar to a restructuring under Chapter 11. Reef Exploration, Inc. (Reef) and Hess Energy Trading Company LLC (Hess) (creditors), creditors of SCP and CGC, submitted claims to the Argentine court, but the Argentine court only admitted part of Hess’s claim, ruling that it could not admit Reef’s claim or Hess’s remaining claims without additional evidence. On December 28, the boards of directors of SCP and CGC filed an ancillary bankruptcy proceeding in United States bankruptcy court pursuant to § 304 of the Bankruptcy Code and moved for an order enjoining any action against SCP or CGC or their property in the United States. The United States bankruptcy court granted the motion on a preliminary basis. Reef and Hess argued that the injunction should not be continued under § 304(c), because they would not receive a distribution similar to what would be distributed under the Bankruptcy Code. Specifically, Reef and Hess argued that comity should not be given to Argentine law, because Argentine law did not include special protections for swap agreements similar to § 560 of the Bankruptcy Code. Whereas § 560 of the Bankruptcy Code allowed parties to a swap to terminate their agreement upon an event of bankruptcy, Argentine law gave the debtor 30 days to decide whether to continue executory contracts, such as swaps, during which time the debtor could not be penalized.