Category Archives: Bankruptcy

BRADENTON DeSoto Square Mall in Bradenton is set to be sold through a bankruptcy auction starting Oct. 11.

A bankruptcy judge in New York approved the sale Sept. 20 after a request by the lender, Rompsen US Master Mortgage, which had foreclosed on the property. The judges decision allows for bidders to make offers on the property for two days.

The judge will hold a hearing Oct. 20 to consider approving the sale.

DeSoto Square, which opened in 1973 and sits on 57.86 acres in Bradenton, closed in April after years of decline. Not long before that, its current owner, DeSoto Owners LLC, had filed for bankruptcy in an effort to buy time and restructure its finances.

In its initial bankruptcy filing, the owner claims the mall was at 40% occupancy at the time.

According to court papers, DeSoto Owners bought the mall, once a leading shopping destination in Manatee County, March 17, 2017 for $25.5 million with Rompsen providing the mortgage. Payments continued steadily for about the first year but the mall never generated the income projected, documents show.

In eventually went into default and on Jan. 20, 2020 a judgement of foreclosure in the amount of $29.3 million was issued.

A foreclosure salewas scheduled for Sept. 23, 2020. DeSoto Owner filed for bankruptcy the day before the sale.

At the time of the filing, DeSoto officials saidit did not believe it could restructure itself with the property continuing as a mall and said in court papers it wanted to redevelop the entire site into a mixed-use development.

For sale are the 57.86-acre property and 569,675-square-foot mall, which includes Hudsons Furniture and Firestone Complete Auto Care, according to an online listing for the property.

According to the listing, there are plans for the redevelopment in place that would call for a 128,000-square-foot retail lifestyle center, 30,000-square-foot grocery store and two apartment communities totaling 705 units.

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Shuttered mall heading to bankruptcy auction - Business Observer

What GAO Found

Chapter 11 bankruptcy allows a company (debtor) to restructure its debtso that it may continue to operateand generally retain its executives. Section 503(c) of the Bankruptcy Code (Code) restricts retention bonuses for executives and, to a lesser extent, executive and non-executive incentive bonuses during bankruptcy. For instance, to pay an executive a retention bonus, the Code requires the debtor to meet three requirements, including that the executive has another job offer at the same or greater compensation. Also, debtors must obtain court approval to pay employee bonuses during bankruptcya process that gives creditors an opportunity to raise objections. However, the Code generally does not govern executive retention bonuses paid before a bankruptcy filing (pre-bankruptcy bonuses).

Academics and attorneys GAO interviewed largely viewed Section 503(c) as less-than-effective because debtors can work around its restrictions on executive retention bonuses both before and during bankruptcy. For example, debtors can pay retention bonuses before filing (when there are generally no restrictions), or they can pay incentive bonuses during bankruptcy (that have fewer restrictions). Some stakeholders viewed Section 503(c) as overly restrictive, but others viewed it as helping to prevent abusive bonuses. Nearly all stakeholders GAO interviewed viewed pre-bankruptcy bonuses as problematic. For example, they said that these bonuses reduce the debtor estate's value for creditors but are awarded without notice to creditors or court approval.

Based on court dockets for the approximately 7,300 companies that filed for Chapter 11 bankruptcy in fiscal year 2020, GAO found the following:

According to some attorneys GAO interviewed, Section 503(c) makes it nearly impossible to award executives retention bonuses during bankruptcy, so debtors use pre-bankruptcy bonuses as a workaround. As noted above, GAO found that none of the 7,300 Chapter 11 debtors that filed in fiscal year 2020 requested executive retention bonuses during bankruptcy but 42 awarded such bonuses shortly before filing. This practice may undermine Section 503(c)'s restrictions and decrease the ability of creditors, U.S. Trustees, and the courts to prevent bonuses that are inconsistent with the section's requirements.

In response to potential abuses involving executive bonuses, Congress amended the Code in 2005 to restrict debtors in Chapter 11 from paying executives retention bonuses for staying through bankruptcy and, to a lesser extent, incentive bonuses to achieve performance targets. Recently, some large companies have paid their executives considerable bonuses during bankruptcy. House Report 116-455 included a provision for GAO to review Code provisions on bonuses and a selected number and amount of court-requested and approved bonuses in fiscal year 2020.

This report reviews (1) Bankruptcy Code provisions on employee bonuses, (2) selected stakeholder views on such provisions, and (3) employee bonuses awarded by companies before or after filing for bankruptcy in fiscal year 2020. GAO reviewed the Code, academic literature, and legal analyses; interviewed 12 academics, attorneys, and an organization selected for their bankruptcy expertise; and analyzed bankruptcy filings and related data using Westlaw Edge and other sources.

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Bankruptcy: Enhanced Authority Could Strengthen Oversight of Executive Bonuses Awarded Before a Bankruptcy Filing - Government Accountability Office

The 2021 water year ends on September30, and it was another hot, dry year in the western US, with almost the entire region in drought. Reservoirs vital for farms, communities and hydropower have fallen to dangerous lows.

The biggest blow came in August, when the USgovernment issued its first ever water shortage declaration for the Colorado River, triggering water use restrictions.

In response, farmers and cities across the Southwest are now finding new, often unsustainable ways to meet their future water needs. Las Vegas opened a lower-elevation tunnel to Lake Mead, a Colorado River reservoir where water levels reached unprecedented lows at 35% of capacity. Farmers are ratcheting up groundwater pumping. Officials in Arizona, which will lose nearly one-fifth of its river water allotment under the new restrictions, even floated the idea of piping water hundreds of miles from the Mississippi River.

These strategies conceal a more fundamental problem: the unchecked growth of water consumption. The Southwest is in an anthropogenic drought created by the combination of natural water variability, climate change and human activities that continuously widen the water supply-demand gap.

In the long run, this can lead to water bankruptcy, meaning water demand invariably exceeds the supply. Trying to manage this by cranking up water supply is destined to fail.

More than 7,000 miles away, Iran is grappling with water problems that are similar to the USSouthwests but more severe. One of the driest years in the past five decades, on the back of several decades of mismanaged water resources, brought warnings of water conflicts between Iranian provinces this year.

As environmental engineers and scientists one of us is also a former deputy head of Irans Department of Environment weve closely studied the water challenges in both drought-prone regions. We believe past mistakes in the USand Iran offer important lessons for future plans in the USSouthwest and other regions increasingly experiencing drought and water shortages.

As the supply of water from the Colorado River diminishes, Southwest farmers are putting more straws into already declining groundwater that accumulated over thousands to millions of years. But that is a short-term, unsustainable solution that has been tried across the USand around the globe with major consequences. The High Plains Aquifer and Californias Central Valley are just two examples.

Iran offers a case study in what can go wrong with that approach, as our research shows. The country nearly doubled its groundwater extraction points between 2002 and 2015 in an attempt to support a growing agricultural industry, which drained aquifers to depletion. As its water tables drastically declined, the groundwaters salinity increased in aquifers to levels that may no longer be readily suitable for agriculture.

As water-filled pores in the soil are drained, the weight of the overlying ground compresses them, causing the aquifers to lose their water holding capacity and accelerating land subsidence. Irans capital, Tehran, with more than 13mn residents, subsided more than 12 feet (3.7m) between 2003 and 2017. Similarly, some areas of California are sinking at a rate of up to 1 foot (0.3m) each year.

Another proposal in the Southwest has been to pipe in water from elsewhere. In May, the Arizona legislature urged Congress to initiate a feasibility study to bring Mississippi River water to replenish the Colorado River. But that, too, has been tried.

In Iran, multiple interbasin water transfer projects doubled the flow of the Zayandeh Rud, a river in the arid central part of the country. The inflow of water supported unsustainable growth, creating demand without enough water to support it. In dry years now, no one has enough water. Many people in Khuzestan the region supplying water to central Iran lost their livelihood as their farms dried out, wetlands vanished, and livestock died of thirst. People in central Iran also lost crops to the drought as incoming water was cut. Both regions saw protests turn violent this year.

California diverted water from the Eastern Sierra Nevada to support Los Angeles growth in the early 1900s, turning the once prosperous Owens Lake Valley into a dust bowl. Costs of mitigating dust storms there now exceed $2bn. Meanwhile, California needs more infrastructure and investment to meet its water demand.

Another project, the California Aqueduct, was constructed in the 1960s to transfer water from the Sacramento-San Joaquin Delta in Northern California to the Central Valley and southern parts of the state to support agriculture and some urban demand. This also did not close the water demand-supply gap, and it pushed economically and culturally important native fish species and ecological systems in the delta to the point of collapse.

As the continued influx of population into the USSouthwest raises water demand in the face of shrinking water supply, we have to wonder whether the Southwest is heading toward water bankruptcy.

While there is no easy solution, a number of actions are possible.

First, recognise that water shortages cannot be mitigated only by increasing water supply its also important to manage water demand.

There is great potential for water savings through efficient irrigation and precision agriculture systems, which could keep agriculture viable in the region.

Cities can save water by curbing outdoor water losses and excess water use, such as on ornamental lawns. Californians successfully reduced their water demand by more than 20% between 2015 and 2017 in response to severe drought conditions. Replanting urban landscapes with native drought-tolerant vegetation can help conserve water.

On the supply side, communities can consider nontraditional water sources, water recycling and reuse in all sectors of the economy, and routing runoff and floodwaters to recharge groundwater aquifers.

There are also emerging technological solutions that could boost water resources in some regions, including fog water collection, which uses sheets of mesh to capture moisture from fog, and desalination plants that turn seawater and saline groundwater into drinking water. One new desalination plant planned for Huntington Beach, California, is awaiting final approval. Environmental consequences of these measures, however, should be carefully considered.

The Southwest monsoon returned this summer after a record dry previous year and a half in the region, but it wasnt enough to end the drought there. Forecasts now suggest a high chance that a La Nina pattern will develop over the winter, meaning Southwest is likely in for another drier-than-normal start to 2022.

Iran is already in water bankruptcy, with demand exceeding supply. It will take a lot more than a wet year to alleviate its water shortages.

Mojtaba Sadegh, Assistant Professor of Civil Engineering, Boise State University; Ali Mirchi, Assistant Professor of Water Resources Engineering, Oklahoma State University; Amir AghaKouchak, Professor of Civil & Environmental Engineering, University of California, Irvine, and Kaveh Madani, Visiting Fellow, Yale University

This article is republished from The Conversation under a Creative Commons licence. Read the original article.

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Avoiding water bankruptcy in the drought-troubled Southwest: What the US and Iran can learn from each other - bne IntelliNews

The countys former ambulance service company will declare bankruptcy unless the Citrus County Commission allows it to keep some revenues after the Citrus County Fire Rescue takes over the service Oct. 2.

The county commission voted 3-2 earlier this month to end its contract with the private ambulance company and take over the service after Nature Coast EMS kept returning for additional financial help to keep it operating and give staff sorely needed raises.

Nature Coast EMS lawyer Jennifer Rey told the commission Tuesday that the Nature Coast board has been cooperative with county officials about the takeover but when the county takes over the service, Nature Coasts revenues will stop. Ray told commissioners that Nature Coast will still have some expenses, namely claims remaining of a year-long contract for health insurance for company employees, and without revenues, plans to file for bankruptcy after the transfer.

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Nature Coast is not in a position to fund those remaining costs, she said.

But there seems little interest among county commissioners to bail out Nature Coast after the transition.

Filing for bankruptcy is solely their decision, said Commissioner Jeff Kinnard of Nature Coast.

The contract with Nature Coast allows the county to take over the service and collect the revenue, he told the Chronicle. Any monies due Nature Coast will have to be sorted out by county staff and brought back to the commission for approval, he said.

The announcement of a bankruptcy doesnt affect my plan for the direction were going, he said.

Commissioner Holly Davis told the Chronicle she didnt see at this point why the commission might have any interest in sharing revenue with Nature Coast after the transfer.

My number one priority is the Citrus County residents, Davis said.

County Attorney Denise Dymond Lyn told the Chronicle she has not yet determined if the bankruptcy would affect the county or transfer.

As part of the original plan to fold the emergency transport business into the countys fire rescue department, the county board agreed to pay Nature Coast enough money to cover its operating expenses for the rest of September.

Most of Nature Coasts employees will transfer to the county fire rescue department. Nature Coast EMS Chief Scott Baxter previously told the commission that about half a dozen Nature Coast employees will remain with the company to help oversee the transition and wind down the private, non-profit company.

Rey said that without county commission help Nature Coasts board will file for bankruptcy after the transition, but will continue to help with the transition work.

Read more here:

Nature Coast EMS to face possible bankruptcy following handover of services to county - Citrus County Chronicle

U.S. courts have a long-standing tradition of recognizing orenforcing the laws and court rulings of other nations as anexercise of international "comity." It has been generallyunderstood that recognition of a foreign bankruptcy proceedingunder chapter 15 is a prerequisite to a U.S. court enforcing, underthe doctrine of comity, an order or judgment entered in a foreignbankruptcy proceeding or a provision in foreign bankruptcy lawapplicable to a debtor in such a proceeding.

A ruling recently handed down by the U.S. District Court for theSouthern District of New York directly challenges this principle,which has existed since chapter 15 was enacted in 2005. InMoyal v. Munsterland Gruppe GmbH & Co., 2021 WL1963899 (S.D.N.Y. May 17, 2021), the court dismissed litigationagainst a German company, finding that, under principles of comity,the lawsuit was stayed by operation of German law when the companyfiled for bankruptcy in Germany. The district court did so despitethe absence of any order issued by a U.S. bankruptcy courtrecognizing the German bankruptcy proceeding under chapter 15.

"Comity" is "the recognition which one nationallows within its territory to the legislative, executive orjudicial acts of another nation, having due regard both tointernational duty and convenience, and to the rights of its owncitizens or of other persons who are under the protection of itslaws." Hilton v. Guyot, 159 U.S. 113, 164 (1895).International comity has been interpreted to include two distinctdoctrines: (i) "legislative," or"prescriptive," comity; and (ii) "adjudicativecomity." Maxwell Comm'n Corp. v. SocitGnrale (In re Maxwell Comm'n Corp.), 93F.3d 1036, 1047 (2d Cir. 1996).

The former "shorten[s] the reach of a statute"-onenation will normally "refrain from prescribing laws thatgovern activities connected with another state when the exercise ofsuch jurisdiction is unreasonable." Official Comm. ofUnsecured Creditors of Arcapita Bank B.S.C.(C) v. Bahrain IslamicBank (In re Arcapita Bank B.S.C.(C)), 575 B.R. 229, 237(Bankr. S.D.N.Y. 2017).

"Adjudicative comity," or "comity amongcourts," is an act of deference whereby the court of onenation declines to exercise jurisdiction in a case that is properlyadjudicated in a foreign court. Because a foreign nation'sinterest in the equitable and orderly distribution of a foreigndebtor's assets is an interest deserving respect and deference,U.S. courts generally defer to foreign bankruptcy proceedings anddecline to adjudicate creditor claims that are the subject of suchproceedings. See Canada Southern Railway Co. v. Gebhard,109 U.S. 527, 548 (1883) ("the true spirit of internationalcomity requires that [foreign schemes of arrangement], legalized athome, should be recognized in other countries"); accord Inre Int'l Banking Corp. B.S.C., 439 B.R. 614, 624 (Bankr.S.D.N.Y. 2010) (citing cases).

Prior to 2005, as an exercise of comity, U.S. courts regularlyenforced stays of creditor collection efforts against a foreigndebtor or its U.S. assets issued in connection with foreignbankruptcy proceedings. See, e.g., Philadelphia Gear Corp. v.Philadelphia Gear de Mexico, S.A., 44 F.3d 187 (3d Cir. 1994)(deferring to Mexican bankruptcy proceeding); Badalament, Inc.v. Mel-O-Ripe Banana Brands, Ltd., 265 B.R. 732 (E.D. Mich.2001) (deferring to Canadian bankruptcy proceeding); LindnerFund, Inc. v. Polly Peck Int'l PLC, 143 B.R. 807 (S.D.N.Y.1992) (citing cases and dismissing litigation brought in U.S.against UK company that was debtor in UK insolvency proceedings);Cornfeld v. Investors Overseas Services, Ltd., 471 F.Supp. 1255 (S.D.N.Y. 1979) (deferring to Canadian bankruptcyproceeding), aff'd, 614 F.2d 1286 (2d Cir. 1979).

In many such cases, U.S. courts recognized and enforced thestays of foreign courts in granting relief in an "ancillaryproceeding" brought by the representative of a foreign debtorunder section 304 of the Bankruptcy Code-the repealed precursor tochapter 15 of the Bankruptcy Code. Section 304 expressly authorizeda U.S. bankruptcy court to enjoin the commencement or continuationof any action against a foreign debtor with respect to propertyinvolved in a foreign bankruptcy case. See, e.g., JP MorganChase Bank v. Altos Hornos de Mexico S.A. de C.V., 412 F.3d418 (2d Cir. 2005); Cunard S.S. Co. v. Salen Reefer Servs.AB, 773 F.2d 452 (2d Cir. 1985); Hoffman v. Joint OfficialLiquidators (In re Nat'l Warranty Ins. Risk RetentionGrp.), 306 B.R. 614 (B.A.P. 8th Cir.), aff'd, 384F.3d 959 (8th Cir. 2004).

However, an ancillary proceeding under section 304 was "notthe exclusive remedy for foreign debtors opposing actions by localcreditors against assets located in the United States."Hembach v. Quikpak Corp., 1998 WL 54737, *4 (E.D. Pa. Jan.8, 1998). The foreign representative could request that the U.S.court recognize foreign bankruptcy proceedings as a matter ofinternational comity, without seeking relief under section 304.See Interpool, Limited v. Certain Freights of the M/VS VentureStar, Mosman Star, Fjord Star, Lakes Star, Lily Star, 878 F.2d111 (3d Cir. 1989); Remington Rand Corporation-Delaware v.Business Sys. Inc., 830 F.2d 1260, 1267-68 (3d Cir. 1987)(section 304 "expresse[d] Congressional recognition of anAmerican policy favoring comity for foreign bankruptcy proceedings... [and was] not the exclusive source of comity"); In reEnercons Virginia, Inc., 812 F.2d 1469, 1471-72 (4th Cir.1987); see generally Collier on Bankruptcy("Collier") 1509.02 (16th ed. 2021) ("Thus,foreign representatives could, theoretically at least, try theirluck in a variety of courts, with failure in one not precluding asecond try in another.").

Prior to the enactment of chapter 15, many courts examinedwhether a foreign proceeding was "procedurally fair" anddid not violate U.S. law or public policy in assessing whether aU.S. court should defer to the proceeding under principles ofcomity. See, e.g., JP Morgan Chase Bank v. AltosHornos de Mexico, S.A. de C.V., 412 F.3d 418, 428 (2d Cir.2005); In re Artimm, S.r.L., 335 B.R. 149, 161 (Bankr.C.D. Cal. 2005).

The enactment of chapter 15 in 2005 changed the requirements forseeking recognition and enforcement in the United States of foreignbankruptcy court orders or laws impacting a foreign debtor or itsU.S. assets.

Under section 1515 of the Bankruptcy Code, a "foreignrepresentative" may file a petition in a U.S. bankruptcy courtseeking "recognition" of a "foreignproceeding." A "foreign representative" is definedin section 101(24) of the Bankruptcy Code as:

[A] person or body, including aperson or body appointed on an interim basis, authorized in aforeign proceeding to administer the reorganization or theliquidation of the debtor's assets or affairs or to act as arepresentative of such foreign proceeding.

A "foreign proceeding" is defined in section 101(23)of the Bankruptcy Code as:

[A] collective judicial oradministrative proceeding in a foreign country, including aninterim proceeding, under a law relating to insolvency oradjustment of debt in which proceeding the assets and affairs ofthe debtor are subject to control or supervision by a foreigncourt, for the purpose of reorganization or liquidation.

More than one bankruptcy or insolvency proceeding may be pendingwith respect to the same foreign debtor in different countries.Chapter 15 therefore contemplates recognition in the United Statesof both a "foreign main proceeding"-a case pending in thecountry where the debtor's center of main interests("COMI") is located (see 11 U.S.C. 1502(4))-and "foreign nonmain proceedings" pending incountries where the debtor merely has an "establishment"(see 11 U.S.C. 1502(5)).

Upon recognition of a foreign main proceeding, section 1520(a)provides that certain provisions of the Bankruptcy Codeautomatically come into force, including section 362, which imposesan automatic stay preventing creditor collection efforts withrespect to the debtor or its U.S. assets. If the bankruptcy courtrecognizes a foreign proceeding as either a main or nonmainproceeding, section 1521(a) authorizes the court to grant a broadrange of provisional and other relief designed to preserve theforeign debtor's assets or otherwise provide assistance to thecourt or other entity presiding over the debtor's foreignproceeding.

Section 1509(b) provides that, if a U.S. bankruptcy courtrecognizes a foreign proceeding, the foreign representative mayapply directly to another U.S. court for appropriate relief, and aU.S. court "shall grant comity or cooperation to the foreignrepresentative." Section 1509(c) accordingly specifies that aforeign representative's request for comity or cooperation fromanother U.S. court "shall be accompanied by a certified copyof an order granting recognition" under chapter 15.

If a U.S. bankruptcy court denies a petition for recognition ofa foreign proceeding, section 1509(d) authorizes the court to"issue any appropriate order necessary to prevent the foreignrepresentative from obtaining comity or cooperation" fromother U.S. courts. However, a foreign representative's failureto commence a chapter 15 case or to obtain recognition does notprevent the foreign representative from suing in a U.S. court"to collect or recover a claim which is the property of thedebtor." 11 U.S.C. 1509(f). Indeed, section 1509's"requirement of prior permission by way of recognition by abankruptcy court deals only with acts by a foreign representativewho needs the assistance of a court in the United States. Nothingin the statute requires prior judicial permission for acts that donot implicate matters of comity or cooperation by courts."In re Iida, 377 B.R. 243, 258 (B.A.P. 9th Cir. 2007).

These provisions reflects lawmakers' intention that chapter15 be the "exclusive door to ancillary assistance to foreign[restructuring or insolvency] proceedings," with the goal ofcontrolling such cases in a single court. Collier at 1509.03(quoting H.R. Rep. No. 109-31(I), 110 (2005) ("Parties wouldbe free to avoid the requirements of [chapter 15] and the expertscrutiny of the bankruptcy court by applying directly to a state orFederal court unfamiliar with the statutory requirements.... Thissection concentrates the recognition and deference process in oneUnited States court, ensures against abuse, and empowers a courtthat will be fully informed of the current status of all foreignproceedings involving the debtor.").

Therefore, unlike practice before the enactment of chapter 15,the vast majority of courts have held that a foreign representativemust comply with the requirements of chapter 15 to obtain thevarious forms of relief or assistance contemplated by the chapter,including a stay or dismissal of U.S. court proceedings against aforeign debtor or its assets. See Halo Creative Design Ltd. v.Comptoir Des Indes Inc., 2018 WL 4742066 (N.D. Ill. Oct. 2,2018); Oak Point Partners, Inc. v. Lessing, 2013 WL1703382 (N.D. Cal. Apr. 19, 2013); Orchard Enter. NY, Inc. v.Megabop Records Ltd., 2011 WL 832881 (S.D.N.Y. Mar. 4, 2011);Econ. Premier Assurance Co. v. CPI Plastics Grp., Ltd.,2010 WL 11561369 (W.D. Ark. June 7, 2010); Reserve Int'lLiquidity Fund, Ltd. v. Caxton Int'l Ltd., 2010 WL 1779282(S.D.N.Y. Apr. 29, 2010); Andrus v. Digital Fairway Corp.,2009 WL 1849981 (N.D. Tex. June 26, 2009); U.S. v. J.A. JonesConst. Grp., LLC, 333 B.R. 637 (E.D.N.Y. 2005); Iida v.Kitahara (In re Iida), 377 B.R. 243 (B.A.P. 9th Cir. 2007);In re Loy, 380 B.R. 154 (Bankr. E.D. Va. 2007).

However, a handful of U.S. courts have determined that chapter15 recognition is not necessary to enforce foreign bankruptcy orinsolvency court orders. For example, in In EMA Garp Fund v.Banro Corp., 2019 WL 773988 (S.D.N.Y. Feb. 21, 2019), thecourt dismissed litigation against a Canadian company and itsformer CEO, finding that, under principles of comity, the lawsuitwas barred by Canadian court orders approving the company'sCanadian bankruptcy proceeding and releasing all claims against thedefendants. The district court did so despite the absence of anyorder issued by a U.S. bankruptcy court recognizing the Canadianbankruptcy proceeding under chapter 15.

Notably, the district court wrote that "the fact thatDefendants did not file a recognition proceeding in [a] U.S.court" was "irrelevant" to its comity determination.2019 WL 773988, at *5 (citing Allstate Life Ins. Co. v. LingerGroup Ltd., 994 F.2d 996, 999 (2d Cir. 1993); Victrix S.S.Co., S.A. v. Salen Dry Cargo A.B., 825 F.2d 709, 714 (2d Cir.1987)). According to the district court, the defendants "wereunder no obligation to file anything in U.S. courts in order toearn [comity] for the Canadian courts." Id. (citingHilton, 159 U.S. at 164); see also OuiFinancing v. Dellar, 2013 WL 5568732 (S.D.N.Y. Oct. 9, 2013)(enforcing as a matter of comity a stay entered in a Frenchsafeguard proceeding with no mention of chapter 15); Bickertonv. Bozel S.A. (In re Bozel S.A.), 434 B.R. 86 (Bankr. S.D.N.Y.2010) (without mentioning section 1509(b), allowing a liquidatorappointed in the British Virgin Islands ("BVI")liquidation proceedings of a BVI company to seek relief in thechapter 11 case of its subsidiary).

As noted, if there is no foreign representative seeking theassistance of a U.S. court in enforcing an order entered in anon-U.S. bankruptcy proceeding, chapter 15 recognition is notnecessary. See generally Collier at 1509.02 (notingthat "courts regularly rule that chapter 15 recognition is nota prerequisite to grant comity to foreign proceedings on therequest of a party other than a foreign representative"). Forexample, in Trikona Advisers Ltd. v. Chugh, 846 F.3d 22(2d Cir. 2017), the U.S. Court of Appeals for the Second Circuitaffirmed a district court ruling giving collateral estoppel effectto the findings of a foreign insolvency court, even though nochapter 15 petition had been filed in the United States on behalfof the foreign debtor seeking recognition of its Cayman Islandswinding-up proceeding. According to the Second Circuit, because theparty seeking such relief was not a "foreignrepresentative" under chapter 15, the provisions of chapter 15simply did not apply, but the district court nonetheless did noterr in granting comity to the foreign insolvency court'sfactual findings. Accord Barclays Bank PLC v.Kemsley, 44 Misc. 3d 773 (N.Y. Sup. 2014) (chapter 15recognition was not necessary to enforce, at the request of anindividual debtor, a discharge order in a UK bankruptcy proceeding,even though a U.S. bankruptcy court previously denied the UKbankruptcy trustee's petition for chapter 15 recognition of thebankruptcy, because chapter 15's plain language applies only toa "foreign representative" such as a trustee).

In February 2019, David Moyal ("Moyal") suedMnster, Germany-based Mnsterland Gruppe GmBH & Co.KG ("MGKG") in N.Y. state court for breach of adistribution agreement. After the litigation was removed to federaldistrict court, MGKG agreed to the entry of a default judgmentbecause it lacked the resources to defend the U.S. action as wellas anticipated litigation to enforce the judgment in Germany.However, MGKG reserved the right to contest the amount of thedamages.

In March 2021, MGKG and its general partner filed a bankruptcyproceeding in a German court, which appointed an insolvencyadministrator for the debtors. The filing triggered an automaticstay of all litigation against MGKG under German law.

MGKG then filed a motion to dismiss or stay the U.S. districtcourt litigation due to the pending German bankruptcy proceeding.Moyal opposed the motion, arguing that, among other things: (i)MGKG's attorney lacked the authority to file the motion becausehe was stripped of any such authority upon the company'sbankruptcy filing; (ii) MGKG's insolvency administrator shouldhave filed a chapter 15 petition for the purpose of seekinginjunctive relief on the company's behalf; and (iii) Moyal didnot receive "formal notice" of the Germany bankruptcyproceeding.

The district court dismissed the litigation based uponprinciples of comity. In so ruling, Magistrate Judge Stewart D.Aaron applied the "procedural fairness" analysis commonlyused by U.S. courts prior to the enactment of chapter 15 in 2005.For support, he cited several pre-chapter 15 decisions addressingcomity.

Judge Aaron found that German insolvency laws "comport withdue process and fairly treat claims of [U.S.] creditors"(quoting Victrix, 825 F.2d at 714) because: (i) the Germancourt shared the U.S. policy of equal distribution of assets; (ii)German law mandated the issuance of a stay; and (iii) German law"makes no distinction between, and gives no preference to,claims by foreign or German creditors based on theirnationality." In addition, Judge Aaron rejected Moyal'sarguments that he received inadequate notice of the Germanbankruptcy proceeding and that MGKG's counsel lacked theauthority to file the motion. According to the judge, the factsbelied Moyal's inadequate notice claim, and MGKG's attorneywas still counsel of record at the time he filed the motion.

Notably, in a footnote, Judge Aaron wrote that"[Moyal's] suggestion that the insolvency [administrator]should have commenced a proceeding in U.S. bankruptcy court underChapter 15 of the Bankruptcy Code to seek a stay of this action inthe District Court is absurd and would fly in the face of comityprinciples." Moyal, 2021 WL 1963899, at *3 n.1(citing Collier at 1509.02 ("[C]ourts regularly rulethat chapter 15 recognition is not a prerequisite to grant comityto foreign proceedings on the request of a party other than aforeign representative.").

The district court's ruling in Moyal cuts againstthe grain on the question of whether chapter 15 recognition is aprerequisite for relief from U.S. courts on the basis of comity incases involving a foreign bankruptcy proceeding. As noted, the vastmajority of courts considering the question have ruled to thecontrary in keeping with the plain language and purpose of chapter15.

Interestingly, the cases relied upon by the district court inMoyal in concluding that chapter 15 recognition wasunnecessary were decided prior to the enactment of chapter 15. Bycontrast, the court does not discuss any of the plethora ofpost-enactment court rulings requiring chapter 15 recognition as aprerequisite to comity. Instead, Judge Aaron reasoned thatrecognition was unnecessary because no "foreignrepresentative" was seeking relief in connection with aforeign bankruptcy case.

The problem with this rationale is that MGKG was a debtor in aforeign bankruptcy proceeding and the relief sought-dismissal or aninjunction-was in furtherance of German law and the Germanbankruptcy. Like its attorney, who the court permitted to withdrawas counsel because he lost the authority to represent the companyas of the date it filed for bankruptcy, MGKG lacked the authorityto continue prosecuting the U.S. litigation notwithstanding thefact that MGKG filed the motion to dismiss or stay after the Germanproceeding was commenced. The German court vested sole authority torepresent MGKG in the insolvency administrator after MGKG'sbankruptcy filing. Accordingly, any relief as a form of assistanceto the German bankruptcy proceeding should have been sought by theinsolvency administrator, who was MGKG's "foreignrepresentative" within the meaning of section 101(24) of theBankruptcy Code and the only person with authority to represent thedebtor in the United States.

The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances.

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NY District Court Rules That Chapter 15 Recognition Not Required To Enforce Foreign Bankruptcy Injunction - Insolvency/Bankruptcy/Re-structuring -...

Armstrong Teasdale announced that Financial and Real Estate Services Partner Erin Edelman has been selected to lead the firms Restructuring, Insolvency and Bankruptcy practice. Edelman succeeds Partner Richard Engel, who was named Armstrong Teasdale General Counsel earlier this year.

In the role, Edelman will oversee a robust team of more than 30 attorneys in offices throughout the U.S. Attorneys in the Restructuring, Insolvency and Bankruptcy practice have appeared and practiced in virtually every federal jurisdiction in the U.S. as well as the U.K., and have been chosen to represent debtors, creditors and creditors committees in some of the largest and most complex bankruptcies and restructurings. Our team has experience working on a wide range of domestic and cross-border matters, including advisory, transactional and contentious work, with a particular focus on the automotive, food, manufacturing, financial services, real estate, oil and gas, and retail and leisure sectors.

Since joining the firm in 2016, Erin has been an incredible asset to firm clients through complex bankruptcies and multimillion-dollar litigation proceedings, said Partner Robert Klahr, who leads the firms Financial and Real Estate Services practice group. This leadership role provides a great opportunity for her to drive the practice forward and continue to sharpen the skill sets of our strong team.

Edelman regularly counsels clients in bankruptcy, commercial and real estate litigation matters. She represents the interests of debtors, secured lenders and unsecured creditors seeking to maximize their return through bankruptcy or out-of-court restructuring. Edelman handles a variety of complex transactions and litigation related to corporate restructuring, including defending and prosecuting preference and related litigation, negotiating and documenting capital and debt structures, and loan workouts and asset acquisitions and divestitures. Edelman has recently handled a number of high-profile Chapter 11 and post-bankruptcy proceedings, including for a specialty footwear retailer and its related debtor affiliates, as well as a major coal company.

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Partner Edelman to Lead Armstrong Teasdale's Restructuring, Insolvency and Bankruptcy Practice - News - ABL Advisor

Formula 1 flaunts 'their motorsport ladder'. Formula 2 and 3 were structured to lead talents to F1, but nothing could be further from the truth. In the end, it's all about the people who can help you, and the bag of money you bring. Guanyu Zhou will get a seat, and Oscar Piastri will not.

Formula 1 is the top of the motorsport pyramid, but the road to it is different for everyone. For years, all the different entry classes have had different names. Think about Formula 3000, GP2/GP3, the Formula Renault Series, DTM or the Word Sportcar Championship. F1, under the leadership of Ross Brawn, wanted to get rid of all these different classes, and have one clear path to Formula 1.

Although Formula 2 and 3 were not really inventions of the new leadership, they did boast that talents like Charles Leclerc, Lando Norris and George Russell came to the top via that route. They shone in the various classes on their way to the top and got their chance in F1. The question is, however, was this because of the model?

Sure Leclerc, Norris and Russell all did great in their route to Formula 1, but can you really attribute this to the new route of F1's leadership? Ferrari already picked up Leclerc in karting and guided him through all the junior classes. It was they who offered the young Monegasque a chance at Alfa Romeo, only to promote him to Ferrari just one year later.

The same goes for Norris and Russell, who were given a route by McLaren and Mercedes. Each went his own way but were guided by an F1 team. F1 might be happy with the promotion of these young drivers, but to call that the merit of the model was a bit much.

The fact that Nyck de Vries wasn't picked up by a Formula One team at the end of 2019 wasn't even that crazy. He needed several years in F2 to really compete for the title, so when he finally won the title in 2019, most teams had already dropped out. Williams chose the runner-up, Nicholas Latifi because he had a big bag of money.

So there you have it that the ladder of F1 is not always a success. However, at that time we didn't hear from the F1 management. There was nobody from the F1 management who helped De Vries to get a seat in F1. In the end, it is the teams who decide who they will hire, regardless of the results in the starting classes.

In 2021, however, the same scenario begins to unfold, but with a much bigger talent. Oscar Piastri is considered one of the biggest talents of the moment. The Australian impressed by winning the title in his first year in Formula 3 and is now doing the same again in F2. A great talent, but there is no place in Formula 1.

For 2022 there is only one seat left to give, and that is the seat next to Valtteri Bottas at Alfa Romeo. Antonio Giovinazzi is still in that seat, but according to various sources, the Italian is not the favourite for the seat. That would be Chinese Guanyu Zhou, who reportedly has a thirty million euro pocket and could make a particularly fine contribution for the small team.

With Zhou in the Alfa Romeo seat, a situation could arise where the F3 and F2 champions are out of the running. Piastri might want to give up the F2 title, which would allow him to stay active in F2 for at least another year. An unusual situation, which you don't hear about from the top of F1.

Where the top of F1 used to shout from the rooftops that the model was such a success with the breakthroughs of Leclerc, Russell and Norris, you now hear nobody about this awkward situation. It immediately shows the weakness of this whole model. In the end, the breakthrough of talent still depends on the ties with a team, or how big his bag of money is.

In Piastri's case, he seemed fine with Alpine. The French team has been showing off its training for years, and Cyril Abiteboul expressed years ago that the goal was to bring talent to F1. With the death of Anthoine Hubert, a great talent fell out of their training, but with Zhou and Piastri Alpine now has the number 1 and 2 from the F2 championship.

However, it now appears that the plan of Alpine is not so well thought out. Where talents of Ferrari, Mercedes and Red Bull can grow step by step to Formula 1, with even step possibilities in F1, Alpine has not taken their plan that far. Up to F2, the plan has been thought through, but how the talents get into F1 has not been thought through.

In fact, Alpine has already provided the current drivers with a new contract for 2022. In fact, Esteban Ocon has been contracted for the next three years. With Fernando Alonso at his side, there seems to be a duo for the coming years. Without a customer team to house their talents, you may wonder where Alpine sees their talents debuting in F1?

Where Zhou, with his bag of money and Chinese nationality, seems to be able to force a spot in F1, the biggest talent from Alpine's education falls by the wayside. Where is the help from Alpine now, and above all; Where is the help from Formula 1? If the champion of F3 and F2 doesn't get a place in F1, what do you have to do to climb the ladder of motorsport into F1?

It all goes to show that it's not about how well you perform in the entry-level classes, it's mainly about who you know and how much money you have. In training with Mercedes, Ferrari or Red Bull, Piastri would probably have been offered a place at Williams, Alfa Romeo or AlphaTauri by 2022. As a member of the Alpine academy, however, he is grabbing the wrong spot.

It would behove F1 to stick their necks out for once. If they really are that high up on their motorsport ladder, then the F2 champion should actually get a seat in F1. The last seat is available at Alfa Romeo, but that team is logically looking at Zhou's pennies and abilities as well. Let F1 and/or Alpine come up with a joint bid that gives Piastri his deserved seat. If not, that's simply the bankruptcy of the motorsport ladder and, of course, Alpine's education.

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Zhou shows the bankruptcy of the motor racing ladder and the Alpine academy - GPblog

The president of the European Central Bank (ECB), Christine Lagarde, put down on Friday the impact that a possible bankruptcy of the Chinese real estate giant Evergrande would have on the euro zone.

I have very present memories of the latest events in the Chinese stock market, which have had an impact around the world, but in Europe and, in the Eurozone in particular, direct exposure would be limited, said the French economist in an interview with CNBC.

At the moment, what we see is a China-focused impact and exposure, Lagarde added, while acknowledging that the ECB is closely watching the situation, given the interconnectedness of financial markets around the world.

The debts of the private conglomerate reach 305,000 million dollars.

A possible default would generate a sharp slowdown in the construction sector in China and cause repercussions on world markets.

Group president Xu Jiayin, which had one of the largest fortunes in the Asian country, stressed on Wednesday that his group must do everything possible to fulfill its commitments.

Asked about the risk of constant inflation in the euro zone, which in August exceeded the 2% target set by the ECB for the medium term, Lagarde said that she expected a return to much greater stability next year, since many of the causes of price increases are temporary.

It has a lot to do with energy prices, said the president of the European banking supervisor, although she added as another factor the increase in VAT in Germany, after the three-point decrease applied in the second half of 2020 to sustain consumption due to the covid-19 pandemic.

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Lagarde believes that the possible bankruptcy of Evergrande will have limited effects in the euro zone - Market Research Telecast

Purdue Pharma filed for bankruptcy with a more than $10 billion plan to settle claims that it fueled the U.S. opioid epidemic by illegally pushing sales of its addictive OxyContin painkiller. The company's headquarters in Stamford, Conn., is shown here in 2019. Victor J. Blue/Bloomberg/Getty Images hide caption

Purdue Pharma filed for bankruptcy with a more than $10 billion plan to settle claims that it fueled the U.S. opioid epidemic by illegally pushing sales of its addictive OxyContin painkiller. The company's headquarters in Stamford, Conn., is shown here in 2019.

A division of the Justice Department that serves as a watchdog over the federal bankruptcy system filed an appeal late Wednesday seeking to block the controversial Purdue Pharma bankruptcy plan.

William Harrington, who serves as U.S. trustee for the Justice Department, also filed documents requesting an "expedited stay" to prevent implementation of the settlement.

The deal, which Judge Robert Drain approved Sept. 1, granted sweeping immunity from opioid lawsuits to members of the Sackler family who own the drug company.

The Sacklers, who are not bankrupt, were granted releases from liability after agreeing to contribute roughly $4.3 billion of their private wealth to the deal.

Supporters of the settlement, including most state attorneys general, said it will avoid costly litigation while funding drug treatment programs over the next decade.

But throughout a two-week bankruptcy trial, and in court documents, the Justice Department repeatedly blasted releases from liability granted to the Sacklers as "unlawful" and "unconstitutional."

In an earlier filing, Harrington accused the Sacklers and their associates of using the bankruptcy system to avoid liability for "alleged wrongdoing in concocting and perpetuating for profit one of the most severe public health crises ever experienced in the United States."

The introduction of OxyContin in the 1990s is widely seen as one of the spurs of an opioid epidemic that has killed more than 500,000 people in the United States.

The Sacklers, who by their own reckoning earned more than $10 billion from opioid sales, have said repeatedly they did nothing wrong and acted ethically.

In new court documents filed Wednesday, attorneys for the Department of Justice signaled they are concerned some provisions of the Purdue Pharma bankruptcy plan might be implemented quickly, complicating an appeal.

"In seeking a stay pending appeal, the United States Trustee's objective is to preserve the status quo during the life of the appeal," the document said.

The Justice Department requested an expedited hearing within the next two weeks. The states of Maryland and Washington as well as Washington, D.C., also have filed appeals.

In approving the Purdue Pharma bankruptcy this month, the judge described it as the best possible resolution to a case involving more than 600,000 parties who say OxyContin harmed them.

"This is a bitter result," Drain said during his ruling on Sept. 1. "I believe that at least some of the Sackler parties have liability for those [opioid OxyContin] claims. ... I would have expected a higher settlement."

Purdue Pharma has twice pleaded guilty to federal crimes related to its marketing of OxyContin. The Sacklers who led the company said they did nothing criminal or unethical.

Under this deal, if it survives appeal, the Sacklers would again acknowledge no wrongdoing.

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The DOJ Moves To Block The Purdue Pharma Bankruptcy Deal That Shields The Sacklers - NPR

Kyoto The ancient capital of Kyoto has long been a tourist mecca, attracting domestic and international travelers to its World Heritage-designated temples, shrines and rock gardens. From the citys traditional geiko (geisha) quarter of Gion to Kinkakuji, the Golden Pavilion, Kyotos has few rival few cities anywhere in the world when it comes to cultural treasures.

For centuries, Kyoto, home of the emperor, was a forbidden city, inaccessible to the outside world. Foreign travelers passing through Japan in the 17th through the 19th centuries were not allowed to step foot in it. As late as the early 1870s, Westerners in Japans treaty ports such as Yokohama and Kobe were prohibited from visiting the city unless they had special permission which was rarely granted. One report, published in a 1918 history of the opening of Kobe Port, suggested that, until an 1872 international exhibition in Kyoto, no more than a dozen Westerners had ever seen it.

In the 19th century, the idea that Kyoto would someday become one of the worlds most popular tourist destinations with a highly developed infrastructure catering to international visitors would most likely have been dismissed as a fantasy. But by 2014, international media such as Travel +Leisure magazine were calling Kyoto the worlds best city to visit (an honor the city won again a year later).

The accolades led to tourists from around the world pouring into Kyoto, putting a strain on the citys infrastructure. New hotel chains sprang up like mushrooms, and new businesses catering to the suddenly booming tourist trade appeared almost overnight. Kimono-clad Mayor Daisaku Kadokawa played the role of cultural ambassador, popping up at international conferences to extoll Kyotos heritage and traditions and encouraging people to visit.

However, the good times hid a dark secret. Despite the fact Kyotos tourism industry was recording record profits, the city itself was going bankrupt.

An estimated 3.8 million tourists visited Kyoto in 2019, according to the citys municipal tourism office. | GETTY IMAGES

In June, the municipal tourism office announced only about 450,000 foreign tourists visited in 2020 an 88% drop compared to the 3.8 million who came in 2019. Hotel reservations for 2020 were down nearly 60% in 2020 compared to the previous year.

Then, in August, a grim-faced Kadokawa warned that Kyoto faced possible bankruptcy and drastic cuts in the city budget were needed over the next four years in order to prevent that. The restructuring plan for 2021-25 calls for trimming the bureaucracy by at least 550 people, raising the minimum age of those eligible for discount transportation services from 70 to 75, and cutting subsidies to day care workers. Kyoto has total debts of 860 billion and faces a 280 billion deficit by 2025.

Were facing a crisis situation and face the prospect of bankruptcy within a decade, Kadokawa said in mid-August, when he rolled out the proposal.

The city explained its reasons for focusing on these areas in particular. First, underperforming municipal subway lines that are 5.4 billion in debt. Second, the free or heavily discounted bus and rail passes granted to those over 70 could easily be covered years ago. But as the number of eligible older residents continues to rise, the financial burden has become too great.

Finally, the effort to turn Kyoto into Japans top choice for parents seeking good childhood services by subsidizing day care centers well beyond the national standard has left it short of funds, the city says. But even these explanations avoid the reality the city faces when trying to levy municipal taxes on its residents.

The suggested cuts under the four year plan are expected to save 160 billion enough to prevent the central government from taking over Kyotos finances. But Kadokawa did not address questions of whether more cuts would eventually be required.

It would be easy to blame the coronavirus pandemic and collapse in tourism last year on Kyotos current financial woes and sudden need to cut costs. However, the crisis goes much deeper.

Hotel reservations in Kyoto for 2020 were down nearly 60% in the first six months compared to the previous year, according to the citys municipal tourism office. | KYODO

Despite being a modern city with a population of around 1.5 million, Kyoto faces some unique challenges that greatly limit its ability to make up for financial losses by simply raising local taxes.

Some of these hurdles are due to legal reasons. In order to preserve the citys traditional atmosphere, local ordinances limit the height of buildings. Compared to other major Japanese cities, Kyoto has few modern highrise apartment or office buildings that would be subject to higher property taxes than traditional wooden buildings and machiya or newer, smaller structures that have to be constructed under the ordinances.

A second reason is demographics. About 10% of Kyotos residents are college students and about 28% are over 65. They usually pay no tax, or less tax, than working residents in their 20s through 50s.

But one of the biggest reasons is because none of Kyoto citys temples and shrines, which are legally registered religious corporations, are subject to property taxes. As Shoei Murayama, a visiting professor at Taisho University and former Kyoto city councilman, says, any attempt now by the mayor or city council to get around the property tax exemption with other forms of levies on temples and shrines to help raise revenue opens a can of historical worms.

Shoei Murayama, a visiting professor at Taisho University and former councilman, says Kyotos leaders need to face fiscal reality and accept new ways of generating revenue for the city to recover. | KYODO

In 1983, with no prior discussion by any committee, the city council approved an ordinance establishing the Kyoto Old Capital Tax. The 71 temples belonging to the Kyoto Buddhist Association, claiming that the tax was a violation of religious freedom, sued the city in Kyoto District Court, which ruled in favor of the city, Murayama says.

The tourist tax of 50 for adults and 30 for children targeted 37 temples and shrines.

What followed was two years of anger, standoffs and protests by the members of the association, which refused to pay. Some 24 major temples, including Kinkakuji and Kiyomizu, announced they were closing their doors to tourists.

Attempts by outsiders, including local business leaders, lawmakers and even reputed members of the yakuza to mediate between the mayor, who was determined to keep the tax, and the temples, who remained strongly opposed to it, failed.

The result was a two-year war of attrition between the city, which couldnt collect the taxes, and the temples, which, by closing, forfeited revenue. As the conflict wore on, however, a few temples, tired of the confrontation and in need of revenue, left the association and reopened, agreeing to pay the city. But the standoff finally ended when, in a deal that involved the mediation efforts of Kyocera founder Kazuo Inamori, the city agreed to abolish the tax in 1987.

In the end, the tax brought in a total of 35 billion, only a quarter of what the city originally predicted, Murayama says.

The result, however, was at least two decades of further distrust and bad blood between the temples and the city. Its a period nobody in Kyoto wants to remember, Murayama added. In a 2019 book on Kyoto tourism, he wrote that the battle created an image among Kyotoites of Dont mess with the white socks brigade referring to the socks worn by Buddhist monks and their allies who wield political influence behind the scenes.

Few tourists have visited iconic World Heritage sites such as the Kiyomizu temple in Kyoto over the past 18 months due to the ongoing global pandemic. | KYODO

Now, as Kyoto looks in the financial abyss, an idea proposed by Murayama, one he believes some temple priests would not oppose, is being discussed by members in the small, Kyoto-based political party Kyoto-to, Murayamas party when he served in the assembly.

Because of what happened with the Kyoto Old Capital Tax back in the 1980s, there would be great resistance to placing a similar obligatory tax today on temples today, says Risa Emura, a Kyoto city council member who leads the party. Rather than a legalized tax, a voluntary donation system could be introduced in the temples to help raise money.

Additional cuts and a political gesture from the top are also necessary, says former Osaka Gov., Mayor, and Nippon Ishin co-founder Toru Hashimoto. When he took over as Osaka governor in 2008, the prefecture had many of the same financial problems Kyoto has, spending money it didnt have on large salaries for civil servants and investing in projects that bled red ink.

Hashimotos solution was a combination of widespread cuts to the bureaucracy, the privatization of some municipal services and revoking the tax-exempt status of some prefectural-funded buildings, such as the Osaka Lawyers Association building. But Hashimoto also took drastic cuts in his own pay and bonuses. The prefectural budget cuts were hard and caused great anger and strong opposition within the prefectural bureaucracy, but he said they had to be done.

Kyoto should look at Osakas example of how the prefecture cut costs. Kadokawa can help rally public support for any cuts to Kyoto municipal services by first announcing he will make drastic cuts to his own salary and benefits package, followed by severe cuts to the bureaucracy, including salary cuts. Then he can say to the people, Im sacrificing and were cutting bureaucratic salaries across the board. But, very sorry, we may have to cut city services, Hashimoto said during a late August discussion about Kyotos problems on Yomiuri TV, a local Osaka television station.

Another time-tested way of generating municipal revenue raising local corporate taxes is not, Emura says, currently under discussion by city council members either.

But while Kyoto has a few world-renowned corporations such as Kyocera, Omron and, of course, Nintendo, its not a center of large tax-paying corporations such as Tokyo, Nagoya and Osaka.

Much of the current discussion in Kyoto and Kansai is how to revive Kyotos economy after the coronavirus pandemic subsides is on the promotion of sustainable tourism, rather than the mass, industrialized tourism that characterized the period from about 2013 to 2020. But given Kyotos need for massive amounts of new revenue in order to prevent financial collapse, that, too, has its risks.

A sudden return of the virus could once again keep tourists, especially abroad, from returning, while geopolitical tensions in East Asia could mean sudden drops in tourists from this region, who provided much tourism income to Kyoto a few years ago.

Prior to the pandemic, Kyoto Mayor Daisaku Kadokawa had been actively involved in extolling the citys heritage and encouraging people to visit. | KYODO

Sustainable tourism is fine, Emura and Murayama say. But its not enough and Kyoto, and the Kyoto mayor, need to consider how to attract other new businesses and create jobs.

A big problem is that many young people want to work in Kyoto, but they cant find a good job or career here. So theyre forced to move somewhere else to look for work, Emura says. There are a lot of restrictions on constructing high office buildings in many parts of Kyoto. But the area around Kyoto Station might be one place to be developed and attract new commercial investment.

But which businesses should the city spend its ever-declining resources on pursuing? Murayama says that, given the large number of universities in Kyoto, especially Kyoto University, businesses in IT, biotech research and other fields are the areas where the city should be focusing its efforts.

Kyoto is well known and has a good reputation abroad, Murayama says. If the mayor were to reach out to IT companies in places such as Boston, Seattle or northern California, there might be interest at companies such as Google in establishing a presence in Kyoto.

When asked in 2019 about the negative effects of overtourism, Kadokawa replied, somewhat testily, that Kyoto wasnt a tourist town, meaning that it was much more, a historical cultural center but also a modern city.

Now, facing financial ruin unless drastic and likely politically controversial cuts are made, the mayor and the citys residents must come to grips with financial problems and questions about Kyotos future that they avoided for many years.

Yet nobody expects Kyoto to actually end up bankrupt, forced to seek central government permission for everything it does and follow its financial restructuring orders.

Emura and Murayama are optimistic the needed cuts can be made, and the needed revenue can be found. However, it will require a city leadership willing to face fiscal reality and willing to accept new ways of thinking about and generating revenue to recover.

Thus Kyoto, the 1,200-year-old capital where old traditions and precedent are venerated and polite but seemingly indirect speech is considered a virtue, now faces the need for an urgent, frank exchange and rapid agreement on how to return to financial health.

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Kyoto is facing bankruptcy. What happens now? - The Japan Times