The Jurisdiction of Bankruptcy Courts to Grant Regulatory Concessions

The Hebrew University Law Review [Mishpatim], Vol. 40, p. 113 (2010) [in Hebrew]

Posted: 15 Dec 2013

See all articles by Yaad Rotem

Yaad Rotem

Ramat Gan Law School - “College of Law and Business

Date Written: 2010

Abstract

Financially distressed debtors often apply for regulatory concessions — i.e., to be relieved from an obligation or duty dictated by regulation. For example, in the 2005 case of ClubMarket, the Israeli Antitrust Authority was asked to approve a non-competitive merger, because one of the merging parties was financially distressed and faced liquidation. But what happens when the relevant Regulator (e.g., the Israeli Antitrust Authority) denies the petition for a regulatory concession? Is the bankruptcy court entrusted with jurisdiction to overturn the Regulator’s decision? A petition for a regulatory concession for a debtor under liquidation, reorganization, or personal bankruptcy proceeding raises two problems: The first concerns the identity of the regulator with which the jurisdiction is entrusted. The second problem concerns the manner in which the balance of interests is to be struck. Indeed, two interests collide: the interest of the public in denying the debtor’s petition and the interest of other communities whose fate is associated with the debtor's, and who naturally would like the debtor to be accorded the concession. Solving the last problem mandates a decision that is, for the most part, value-charged (for example, whose interest should prevail — that of the general public or that of the ClubMarket employees?) Thus, solving the problem of jurisdiction becomes all the more important. The current Article introduces the various contexts in which regulatory concessions are sought, in Israel and abroad, and offers a theoretical framework to solve the problem of jurisdiction.

The Article puts forward two arguments. First, the Israeli Supreme Court ruled in 2003, in the Torgeman case, that bankruptcy courts are not entrusted with jurisdiction to stay criminal proceedings against a company under liquidation. Although the methodology adopted by the Court in the Torgeman case is also applicable in other contexts where regulatory concessions are sought (e.g., in the context of taxation, securities regulation, environmental protection, etc.), Israeli bankruptcy courts have not turned to the Torgeman ruling, which was issued in the particular context of staying a criminal action, in order to define their jurisdiction with regard to other regulatory concessions (e.g., in the context of taxation). Secondly, the Torgeman ruling itself raises several difficulties. A detailed analysis of the relevant goals of the law leads to the conclusion that the rule set in the Torgeman case is rather simplistic, and that exceptions to this ruling ought to be formed. One such exception concerns the interpretation of “general jurisdiction rules,” such as Section 267 or 268 to the Companies Ordinance.

Suggested Citation

Rotem, Yaad, The Jurisdiction of Bankruptcy Courts to Grant Regulatory Concessions (2010). The Hebrew University Law Review [Mishpatim], Vol. 40, p. 113 (2010) [in Hebrew], Available at SSRN: https://ssrn.com/abstract=2367777

Yaad Rotem (Contact Author)

Ramat Gan Law School - “College of Law and Business ( email )

26 Ben-Gurion St.
Ramat Gan, 52275
Israel

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