Recent Decision Holds Bankruptcy Courts May Independently Grant Nonconsensual Third-Party Releases to Enforce Foreign Restructurings Under Chapter 15

Odebrecht’s RJ Plan was confirmed by a Brazilian court on March 7, 2025, as part of a court-supervised restructuring of the Odebrecht Group, one of Brazil’s largest private construction and engineering conglomerates. The RJ Plan effectuated a reorganization of more than $3 billion in liabilities, the creation of a new business unit with a strengthened capital structure, and the infusion of at least $120 million in new liquidity to support operations and future growth.

After the RJ Plan was approved in Brazil, the company sought recognition in the United States under chapter 15 of the Bankruptcy Code. Although the RJ Plan itself did not contain a nonconsensual third-party release, the UST argued that the proposed order granting recognition contained an impermissible limitation on liability for third parties and injunction provisions that were analogous to nonconsensual third-party releases. In relevant part, the proposed order provided as follows:

[A]ll persons and entities are permanently enjoined and restrained from (i) commencing or taking any action or asserting any claim, within the territorial jurisdiction of the United States, that is inconsistent with, in contravention with, or would interfere with or impede the administration, implementation and/or consummation of the RJ Plan, the Brazilian Confirmation Order or the terms of this Order; and (ii) taking any action against the Debtors or their property located in the territorial jurisdiction of the United States to recover or offset any debt or claims that are extinguished, novated, cancelled, discharged or released under the RJ Plan and the Brazilian Confirmation Order. No action may be taken within the territorial jurisdiction of the United States to confirm or enforce any award or judgment that would otherwise be in violation of this Order without first obtaining leave of this Court.

Odebrecht rejected the UST’s interpretation of the order and argued that it did not amount to a third-party release. It asserted, however, that even if the language in the proposed order did create a nonconsensual third-party release, those releases are permissible in chapter 15 cases.

The Bankruptcy Court’s Analysis
The Court overruled the UST’s objection, holding that the RJ Plan could be enforced under chapter 15 and that the terms of the order were appropriate. The Court explained that sections 1521 and 1507 of the Bankruptcy Code provide broad discretionary authority to issue “any appropriate relief” to assist in the enforcement of foreign proceedings, subject only to the principles of comity and the narrow public policy exception under section 1506. Although the Court expressed skepticism that the terms of the recognition order created nonconsensual third-party releases, it held that such releases would be appropriate in any event.

In reaching that conclusion, the Court distinguished the Supreme Court’s Purdue decision, emphasizing that Purdue addressed the limits of a bankruptcy court’s authority to approve nonconsensual third-party releases under section 1123(a)(6) of the Bankruptcy Code, which applies only in chapter 11 cases and imposes specific statutory constraints on plan confirmation. In contrast, chapter 15 operates as an ancillary proceeding focused on cooperation with foreign courts and the enforcement of foreign insolvency judgments. Chapter 15 grants broad discretionary authority under sections 1521 and 1507 to issue any appropriate relief, including enforcement of foreign plans that may include third-party releases, provided that such relief is consistent with principles of international comity and is not manifestly contrary to U.S. public policy. In this regard, the Odebrecht opinion follows the recent decision in In re Credito Real, S.A.B. de C.V., where the U.S. Bankruptcy Court for the District of Delaware held that a chapter 15 court may recognize, and give effect in the United States to, nonconsensual third-party releases contained in a foreign court’s order.

Odebrecht goes further, however. It holds that a bankruptcy court may issue an order containing nonconsensual third-party releases “whether or not those releases originate from a foreign court.” In other words, although in chapter 15 cases courts are most commonly asked to simply adopt a foreign court’s nonconsensual third-party release, Judge Glenn’s decision suggests that there may be circumstances where bankruptcy courts can enter a bespoke third-party release—for example, where enforcing a foreign restructuring plan in the United States would otherwise be undermined by litigation against parties central to the plan’s implementation.

Conclusions
This decision reaffirms that U.S. bankruptcy courts can and will enforce nonconsensual third-party releases granted in foreign insolvency proceedings when recognizing those proceedings under chapter 15. It also clarifies that Purdue does not limit the scope of relief available in ancillary proceedings involving foreign debtors. Companies, creditors and foreign representatives should be aware that chapter 15 continues to provide robust mechanisms to implement cross-border restructurings in the United States, including relief that may not be available in chapter 11 cases and which may not be part of the court order approving a non-U.S. restructuring.

(This is another in our series of client alerts related to international and cross-border insolvency issues.)