I must start with a confession; I have converted to Chapter 11. Theologically speaking, I am a practising US lawyer who strictly follows the dictates of the United States Code. Well, almost. After years of acting for banks, it has proved impossible to stop being sympathetic to secured creditors and to retain a fondness for the simple joys of a rapid receivership appointment.

This all came about following a decision to move to Davis Polk & Wardwell in New York in 2003, where I had the good fortune to be partner for three exciting years. I worked with a superb team of bankruptcy lawyers from whom I learned a great deal. I vividly recall a conversation with a senior workout banker shortly after my arrival in New York. He had recently endured a bad experience in the London market and was struggling to locate either the rescue culture of which I repeatedly spoke or a recognisable reorganisation regime. Despite my confident assertion that the UK system was flexible and effective, he was not at all persuaded that the UK system should be taken seriously.

I continued the debate in my head long after that discussion and, as I started to become more deeply involved with the Chapter 11 process, I began to appreciate just how powerful a vehicle it is for achieving a restructuring result when driven by the commerciallyminded and activist bankruptcy bench.

I had been closely involved with US bankruptcy proceedings while practising in London and before moving to Davis Polk in New York but there is, inevitably, a world of difference between being an observer, albeit an active one, and being a participant. Seeing things from inside the system gives you a very different perspective.

Over time I developed a clearer sense of what my banker friend was telling me and how the US approach involved a fundamentally different mindset and style. The fact the Chapter 11 system has traditionally been debtor-friendly and limits the rights and leverage of secured creditors is well known, but to understand how strong the debtor's position is in the US system compared with that of the UK, you need to see the full range of rights and powers given to a debtor.

The debtor has the benefit of a wide automatic stay covering all actions aimed at enforcing pre-bankrupcty claims, with certain limited exceptions, such as police or regulatory activity. It has plan exclusivity; in other words, it has the right initially to control the process for formulating and negotiating a plan of reorganisation. It has the power to assume or reject executory contracts and unexpired leases, including the ability to reject – disclaim, in UK terms – contracts that create quasi-property rights, such as options.

Contract termination rights conditioned on insolvency or the financial condition of the debtor – so called ipso facto clauses – in executory contracts and unexpired leases are invalidated. The debtor has the power to obtain post-petition financing and, in some circumstances, to grant security interests ranking ahead of existing mortgages and liens. It has the power to sell property free and clear of liens. There are also various limitations on the rights of secured creditors, including the invalidation of after-acquired property clauses as they relate to property acquired by the estate after the start of the bankruptcy.

The debtor also has what are known as 'cram down powers'. This is the ability, if certain detailed conditions are met, to confirm a plan despite the fact that a class of creditors has voted against it. This does not exist under UK law. Finally, there is the lower voting majority required to approve a plan. The Bankruptcy Code requires a vote of only two-thirds in amount – rather than the three-quarters in amount under the UK system – and a majority in number.

But it is not just the rights given to the debtor by the code that make a difference. There are also various institutional factors that are significant, including the litigation context, which is particularly important.

The code was drafted to promote negotiation among creditor and shareholder groups and contains provisions that give all interested parties some negotiating leverage, if sometimes only in the form of the ability to delay the ultimate confirmation of the plan. Bargaining in Chapter 11 cases takes place in the shadow of bankruptcy court litigation and Chapter 11 can often bring the process of negotiating the reorganisation into the courtroom.

These proceedings are conducted, at least to UK eyes, with considerable informality and are presided over by an assigned bankruptcy judge who sees the case from beginning to end. The judge's approval is needed for transactions outside the ordinary course of business and the judge sees it as an important part of his or her job to support the debtor and the promotion of a successful reorganisation.

One of the guiding principles of Chapter 11 is that it rewards parties that are actively involved in the process and that make it clear to other parties that they are prepared to protect their rights in the bankruptcy court if an acceptable deal cannot be negotiated. This explains why those who are used to the US system are so comfortable with taking disputes to court.

However, although a combination of the code and an activist court creates the conditions for a strong debtor-led procedure, important amendments to the code during the past decade have given added protection to a number of classes of creditors including aircraft financiers, commercial property owners, counterparties to financial contracts and landlords and suppliers. To some, this weakens the effectiveness of the process and undermines the rehabilitation principle.

These changes can be seen as compounding a trend for creditors to exert increasing control over the Chapter 11 process. This has been achieved through the use of tight covenants in post-petition financing documentation and the appointment of chief restruc-turing officers at the instigation of creditors. This has, in turn, led to increases in the frequency of sales of debtors' businesses during Chapter 11 to proceedings of shorter duration. There has also been an increase in the number of pre-packaged or pre-negotiated reorganisation plans (to reduce costs and damage to the debt-or's business). In addition, the continuing growth of claims trading brings experienced professionals who specialise in recapitalising distressed businesses to the negotiating table. These professionals tend to have strong views about the timetable for emergence from the case, management strategies and exit terms.

Most restructuring negotiations take place primarily between the senior and junior creditors. With hedge funds and other institutional investors acquiring senior debt, however, there can be inter-creditor tensions and bargaining within creditor classes, which can be difficult to resolve quickly.

Even in this somewhat diluted form Chapter 11 still has its critics. Many would say that its benefits come at too high a price. The costs are substantial both because of high legal and professional fees – in part because every document is turned into a pleading – and because of the amount of time and resources that need to be devoted to the proceeding. There are many who cite the reorganisation recidivists – the Chapter 22s and 33s who have filed for bankruptcy protection more than once – as evidence of the system's failure to achieve the results that its promoters proclaim as its raison d'etre. And there are many who point out that the decision-making process before different bankruptcy courts across the country can be rough and ready, making outcomes difficult to predict. A current topic of debate is the significance of valuation evidence in cases where a cram down of junior creditors is contested, and the problems caused by the unpredictability of judicial valuations.

In many respects, Chapter 11 has now evolved into a form of distressed M&A and a mechanism for effecting changes in corporate control. Both in theory and in practice, reorganisation is a change of control transaction involving a sale of the debtor's business to its creditors.

My US banker friend's implicit criticism of the UK model is that it limits restructuring options to either reschedulings that tinker with, rather than resolve, the debtor's problems or asset or business sales through the receivership mechanism. But this was always somewhat simplistic and is now rather outdated – in recent years US methodologies and models have found their way to Europe with the influx of experienced US bankers, investors and professionals and US funds. As a result there has been a major shift in thinking and practice and a desire in some quarters to replicate the style and methods of the Chapter 11 process. We have even seen US Supreme Court opinions being cited in skeleton arguments in recent litigation concerning contested schemes of arrangement.

While the reforms to the US system mentioned above have strengthened the rights of creditors, the UK's Enterprise Act 2002 has strengthened the administration regime by giving precedence to the concept of company rescue and weakening the position of secured creditors by eliminating their right to appoint an administrative receiver, except in exceptional circumstances.

So we now have some level of convergence. Local legal cultures remain resilient, however, and it is dangerous to assume that the two systems do, or can be made to, replicate one another. For example, there is a temptation for some to equate a scheme of arrangement with a Chapter 11 plan. However, the three sections of the Companies Act 1985 that regulate schemes are a long way away from the detailed provisions of the US Bankruptcy Code, even with the judge-made law supplementing the statute.

Nevertheless, I have little doubt that the US expatriate community will continue to reshape the landscape of European restructurings well into the future – with a little help from the Chapter 11 converts.

Nick Segal is a partner in the restructuring and insolvency group at Freshfields Bruckhaus Deringer.