INSOL INTERNATIONAL GLOBAL INSOLVENCY PRACTICE COURSE 2015

Transcription

1 INSOL INTERNATIONAL GLOBAL INSOLVENCY PRACTICE COURSE 2015 Module B, SESSION 11 San Francisco 19 March 2015 CROSS-BORDER COOPERATION: THE UK PERSPECTIVE Overview Professor Ian Fletcher University College London and South Square Chambers This session aims to provide a survey of the multi-layered provisions for cross-border cooperation and assistance that are currently to be found in English law. We trace the origins of the English approach from sources in eighteenth century common law, down to the most recent judicial pronouncements including significant judgments of the Privy Council in 2006 and 2014, of the House of Lords in 2008, and of the Supreme Court in To this still-evolving body of case law, legislation has added further layers of law, some of it internally-conceived, while more recently the external stimulus of the UNCITRAL Model Law has given rise to an additional framework of provisions. Finally, the supranational properties of European Union law have implanted an overarching regime for those cases which are within the scope of the EC/EU Regulation on Insolvency Proceedings. The important point to bear in mind is that while all these layers of law co-exist, and have application within their defined limits, there are some situations in which they overlap to an extent which allows the practitioner the luxury of choice of instrument for the particular task in hand. The toolbox on offer is unusually well stocked. (Note: cases and texts in bold type can be accessed on the website) 1. The Common Law Foundations: the internationalist tradition within English insolvency law (a) Early examples of cooperation at common law, including turnover of assets Solomons v. Ross (1764) 1 Hy.Bl. 131n; 126 E.R. 79 Odwin v. Forbes (1817) 1 Buck. 57 (PC) Re Kooperman [1928] W.N. 101, 72 Sol. Jo. 400 Waite v. Bingley (1882) 21 Ch.D.674 New Zealand Loan & Mercantile Agency Co. Ltd v. Morrison [1898] A.C. 349 (PC) 1

2 (b) Recognition of foreign liquidations and receiverships at common law. Fundamentally, the law of the corporate domicile is considered primarily competent to control the matter of dissolution of the company as a legal person. Cf. Re Blithman (1866) L.R.2 Eq. 23. Relevance of the State of incorporation theory as a means of determining the location of corporate domicile. Bank of Ethiopia v National Bank of Egypt [1937] 1 Ch. 513 Banco de Bilbao v Sancha [1938] 2 K.B. 176 (CA) Lazard Bros & Co. v Midland Bank Ltd. [1933] A.C. 289 (HL). Foreign receivers: English courts analogous approach to recognition and assistance: Macaulay v. Guaranty Trust Co. of New York (1927) 44 T.L.R. 99 Schemmer v. Property Resources Ltd [1975] Ch (c) Winding up of foreign companies by English courts Insolvency Act 1986, Part V (ss , esp. s.221). The evolving test of jurisdiction: place of business/carrying on of business/presence of assets/ proper connection / sufficient connection. A notable example of the possibilities for Praetorian jurisprudence (or judicial activism ) by the English courts. Limits of jurisdiction (forum non conveniens). N.B. amendment to I.A. s.221(4), made by S.I. 2002/1240, effective from 31 May 2002 in consequence of the EC Regulation on Insolvency Proceedings. Banque des Marchands de Moscou v Kindersley [1951] 1 Ch. 112 (CA) Re Azoff-Don Commercial Bank [1954] 1 Ch. 315 *Re Compania Merabello San Nicholas S.A. [1973] 1 Ch. 75 Re Allobrogia S.S. Co. [1978] 3 All E.R. 423 Re Eloc Electro-Optieck and Communicatie B.V.[1982] Ch. 43, [1981] 2 All E.R International Westminster Bank v Okeanos [1987] 3 All E.R. 137, [1987] B.C.L.C. 450 Re Real Estate Development Co. [1991] BCLC 210 Re International Tin Council [1987] Ch. 419 (Millett J), affd. (CA). [1989] Ch.309 *Re Latreefers Inc [2001] BCC 174 (Lloyd J, aff d CA) *Banco Nacional de Cuba v. Cosmos Trading Corp. [2000] BCC 910 (Neuberger J, aff d CA). ********* 2

3 [Extract] INSOLVENCY ACT 1986 Part V WINDING UP OF UNREGISTERED COMPANIES Meaning of unregistered company 220(1) For the purposes of this Part, the expression unregistered company includes any association and any company, with the exception of a company registered under the Companies Act 2006 in any part of the United Kingdom. Winding up of unregistered companies 221(1) Subject to the provisions of this part, any unregistered company may be wound up under this Act; and all the provisions of this Act about winding up apply to an unregistered company with the exceptions and additions mentioned in the following subsections (4) No unregistered company shall be wound up under this Act voluntarily, except in accordance with the EC Regulation. 221(5) The circumstances in which an unregistered company may be wound up are as follows (a) if the company is dissolved, or has ceased to carry on business, or is carrying on business only for the purpose of winding up its affairs; (b) if the company is unable to pay its debts; (c) if the court is of opinion that it is just and equitable that the company should be wound up. ************ (d) Concurrent bankruptcies/liquidations: main and ancillary proceedings Re English, Scottish and Australian Chartered Bank [1893] 3 Ch. 385 Re Commercial Bank of South Australia (1886) 33 Ch. D. 174 Re P. MacFadyen & Co. [1908] 1 K.B. 675 Re Bank of Credit and Commerce International SA (No.10) [1997] Ch.213; [1996] 4 All E.R. 796 (Scott V-C) 3

4 (e) Modern developments in judicial cooperation and assistance Main cases Cambridge Gas Transport Co v. Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] UKPC 26; [2007] 1 AC 508 (PC) McGrath v. Riddell, Re HIH Casualty and General Insurance Ltd [2008] UKHL 21; [2008] 1 WLR 852 (HL) *Rubin v. Eurofinance SA; New Cap Reinsurance Corporation v. A.E. Grant [2012] UKSC 46; [2012] 3 W.L.R HSBC Bank plc v. Tambrook Jersey Ltd [2013] EWCA Civ 576; [2014] Ch. 252 (CA) *Singularis Holdings Ltd v. PricewaterhouseCoopers [2014] UKPC 36 (10 November 2014) (PC) Stichting Shell Pensioenfonds v. Krys [2014] UKPC 41 (26 November 2014) (PC) Additional cases Felixstowe Dock and Railway Co. v U.S. Lines Inc. [1988] 2 All E.R. 77 Banque Indo-Suez v. Ferromet Resources Inc [1993] B.C.L.C. 112 Re Bank of Credit and Commerce International S.A. (No. 1) [1992] BCC 83; and (No. 2) [1992] BCC 715 Re Maxwell Communications Corporation plc (No.2), Barclays Bank plc v. Homan [1992] BCC 757 (Hoffmann J), affd CA [1992] BCC 767 Re Bank of Credit and Commerce International SA (No.10) [1997] Ch.213 (Scott V-C) (supra) Re Cenargo International plc (No.862 of 2003) 14 April 2003, Chancery Division, Lightman J (unreported) Re Lehman Brothers International Europe [2013] EWHC 1664 (Ch); [2014] BCC 132 (Richards J), at [15]-[17]. Further reading for this section: I.F. Fletcher: Insolvency in Private International Law, 2 nd Edn (2005), Chapters 1, 2 (pp ) and 3 (pp ). 2. Statutory reinforcement of cooperation: Insolvency Act 1986, s.426 Legislative antecedents of s.426. Its current content and scope. Text (as amended) 4

5 426. Co-operation between courts exercising jurisdiction in relation to insolvency (1) An order made by a court in any part of the United Kingdom in the exercise of jurisdiction in relation to insolvency law shall be enforced in any other part of the United Kingdom as if it were made by a court exercising the corresponding jurisdiction in that other part. (2) However, without prejudice to the following provisions of this section, nothing in subsection (1) requires a court in any part of the United Kingdom to enforce, in relation to property situated in that part, any order made by a court in any other part of the United Kingdom. (3) The Secretary of State, with the concurrence in relation to property situated in England and Wales of the Lord Chancellor, may by order make provision for securing that a trustee or assignee under the insolvency law of any part of the United Kingdom has, with such modifications as may be specified in the order, the same rights in relation to any property situated in another part of the United Kingdom as he would have in the corresponding circumstances if he were a trustee or assignee under the insolvency law of that other part. (4) The courts having jurisdiction in relation to insolvency law in any part of the United Kingdom shall assist the courts having the corresponding jurisdiction in any other part of the United Kingdom or any relevant country or territory. (5) For the purposes of subsection (4) a request made to a court in any part of the United Kingdom by a court in any other part of the United Kingdom or in a relevant country or territory is authority for the court to which the request is made to apply, in relation to any matters specified in the request, the insolvency law which is applicable by either court in relation to comparable matters falling within its jurisdiction. In exercising its discretion under this subsection, a court shall have regard in particular to the rules of private international law. (6) Where a person who is a trustee or assignee under the insolvency law of any part of the United Kingdom claims property situated in any other part of the United Kingdom (whether by virtue of an order under subsection (3) or otherwise), the submission of that claim to the court exercising jurisdiction in relation to insolvency law in that other part shall be treated in the same manner as a request made by a court for the purpose of subsection (4). (7) Section 38 of the Criminal Law Act 1977 (execution of warrant of arrest throughout the United Kingdom) applies to a warrant which, in exercise of any jurisdiction in relation to insolvency law, is issued in any part of the United Kingdom for the arrest of a person as it applies to a warrant issued in that part of the United Kingdom for the arrest of a person charged with an offence. (8) Without prejudice to any power to make rules of court, any power to make provision by subordinate legislation for the purpose of giving effect in relation to companies or individuals to the insolvency law of any part of the United Kingdom includes power to make provision for the purpose of giving effect in that part to any provision made by or under the preceding provisions of this section. (9) An order under subsection (3) shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament. (10) In this section insolvency law means 5

6 (a) in relation to England and Wales, provision extending to England and Wales and made by or under this Act or sections 1A, 6 to 10, 12 to 15, 19(c) and 20 (with Schedule 1) of the Company Directors Disqualification Act 1986 and sections 1 to 17 of that Act as they apply for the purposes of those provisions of that Act; (b) in relation to Scotland, provision extending to Scotland and made by or under this Act, sections 1A, 6 to 10, 12 to 15, 19(c) and 20 (with Schedule 1) of the Company Directors Disqualification Act 1986 and sections 1 to 17 of that Act as they apply for the purposes of those provisions of that Act, Part XVIII of the Companies Act or the Bankruptcy (Scotland) Act 1985; (c) in relation to Northern Ireland, provision made by or under the Insolvency (Northern Ireland) Order 1989 or the Company Directors Disqualification (Northern Ireland) Order 2002; (d) in relation to any relevant country or territory, so much of the law of that country or territory as corresponds to provisions falling within any of the foregoing paragraphs; and references in this subsection to any enactment include, in relation to any time before the coming into force of that enactment the corresponding enactment in force at that time. (11) In this section relevant country or territory means (a) any of the Channel Islands or the Isle of Man, or (b) any country or territory designated for the purposes of this section by the Secretary of State by order made by statutory instrument. (12) In the application of this section to Northern Ireland (a) for any reference to the Secretary of State there is substituted a reference to the Department of Economic Development in Northern Ireland; (b) in subsection (3) for the words another part of the United Kingdom and the words that other part there is substituted the words Northern Ireland ; (c) for subsection (9) there is substituted the following subsection (9) An order made under subsection (3) by the Department of Economic Development in Northern Ireland shall be a statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979 and shall be subject to negative resolution within the meaning of section 41(6) of the Interpretation Act (Northern Ireland) (13) Section 129 of the Banking Act 2009 provides for provisions of that Act to be insolvency law for the purposes of this section. (14) Section 165 of the Banking Act 2009 provides for provisions of that Act about bank administration to be insolvency law for the purposes of this section. Note: the following orders have been made pursuant to s.426(11)(b): (i) Co-operation of Insolvency Courts (Designation of Relevant Countries and Territories) Order 1986, S.I. 1986/2123, operative from 29 December The countries and territories scheduled to the Order are: Anguilla, Australia, the Bahamas, Bermuda, Botswana, Canada, Cayman Islands, Falkland Islands, Gibraltar, Hong Kong, Republic of Ireland, Montserrat, New Zealand, St.Helena, Turks and Caicos Islands, Tuvalu, and the Virgin Islands; (ii) Co-operation of Insolvency Courts (Designation of Relevant Countries) Order 1996, S.I.1996/253, designating South Africa and Malaysia with effect from 1 March 1996; 6

7 (iii) the similarly-named Order of 1998, S.I. 1998/2766, designating Brunei Darussalam with effect from 11 December Selected cases Re Dallhold Estates (U.K.) Pty. Ltd. [1992] BCC 394 (Chadwick, J) Re Bank of Credit and Commerce International SA (No.9) [1993] BCC 787 (Rattee, J) Hughes v. Hannover Ruckversicherungs AG [1997] 1 B.C.L.C. 497; [1997] BCC 921 (CA) Re Southern Equities Corpn, England v. Smith [2000] BCC 123, [2000] 2 WLR 1141 McGrath v. Riddell, Re HIH Casualty and General Insurance Ltd (supra) New Cap Reinsurance Corp Ltd v. Grant [2011] EWCA Civ 971; [2011] BCC 937 (CA), affirmed on other grounds by the Supreme Court: New Cap Reinsurance Corporation v. A.E. Grant [2012] UKSC 46; [2012] 3 W.L.R (supra). Further reading for this section: I.F.Fletcher: Insolvency in Private International Law, 2 nd Edn (2005), Chapter 4, pp The EU dimension: Council Regulation (EC) No. 1346/2000 on Insolvency Proceedings Refer to Module A, session 4 (The Hague). Further reading: I.F.Fletcher: Insolvency in Private International Law, 2 nd Edn (2005), Ch. 7; Supplement to Second Edition (2007), pp Enactment of the UNCITRAL Model Law in the UK: the Cross-Border Insolvency Regulations 2006 and 2007 A. Principal points of reference: Legislation - The Cross-Border Insolvency Regulations 2006, S.I. 2006/1030, in force from 4 April 2006 ( CBIR ) - The Cross-Border Insolvency Regulations (Northern Ireland) 2007, SRNI 2007/115, in force from 12 April 2007 ( CBIRNI ) - Consultation Paper issued on 22 August 2005, together with Summary of Responses and Government Reply, March 2006, can be viewed on the Insolvency Service website: 7

8 < v.uk/insolvencyprofessionandlegislation/con_doc_register/uncitralconsultationreponse.pdf> (accessed ). - UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment, adopted May 1997 ( the original text ) - Council Regulation (EC) No 1346/2000 of 29 May 2000 on Insolvency Proceedings ( the EC/EU Regulation ) - Insolvency Act 1986 (c.45) ( the principal Act ) - Insolvency Act 2000 (c.39); Enterprise Act 2002 (c.40), Part 10 ( the amending statutes ) Main cases - Re Stocznia Gdynia SA (Bud-Bank Leasing SP.ZO.O.) [2010] BCC 255 (Registrar Baister) - Re Stanford International Bank Ltd [2010] EWCA Civ 137; [2011] Ch. 33 (CA) - *Rubin v. Eurofinance SA [2012] UKSC 46; [2012] 3 W.L.R (SC), reversing [2010] EWCA Civ 895; [2011] Ch. 133 (CA) Additional cases - Re European Insurance Agency (unreported, September 7, 2006): UK High Court, Bristol Registry (HH Judge Weeks) - Re Phoenix Kapitaldienst GmbH [2008] BPIR 1082: UK High Court, Chancery Division (Registrar Jaques), aff d sub nom Schmitt v. Deichmann [2012] EWHC 62 (Ch); [2012] BCC 561 (Proudman J) - Re Rivkin, Warner v. Verfides [2008] EWHC 2609 (Ch); [2009] Bus. L.R. 500 (John Martin QC) - Swissair Schweizerische Luftverkehr-AG [2009] EWHC 2099 (Ch); [2010] BCC 667 (David Richards J) - Re Bernard L. Madoff Investment Securities LLC [2009] EWHC 442 (Ch); [2010] BCC 324 (Lewison J) - Re Samsun Logix Corporation [2009] EWHC 576 (Ch) (unreported, 12 March 2009) (Morgan J); further proceedings : [2009] EWHC 2304 (Ch); [2009] All ER (D) 96 (Aug) (Guy Newey QC) - Larsen v. Navios International Inc [[2011] EWHC 878 (Ch); [2012] BCC 353 (Norris J) - Re Chesterfield United Inc [2012] EWHC 244 (Ch); [2012] BCC 786 (Newey J) - Fibria Cellulose S/A v. Pan Ocean Co Ltd [2014] EWHC 2124 (Ch); [2014] WLR (D) 288 (Morgan J). Further reading 8

9 - I.F.Fletcher: Insolvency in Private International Law, 2 nd Edn (2005), Chapter 8, paras (pp ); Appendix IV (text of Model Law) (pp ); Supplement to Second Edition (2007), Part I (Text of the Cross-Border Insolvency Regulations 2006) (pp.1-82); Part II (Commentary to the CBIR 2006), paras (pp ). - I.F. Fletcher: Better Late than Never : the UNCITRAL Model Law enters into force in Great Britain, (2006) Insolvency Intelligence, Volume 19, No.6 (June), pp.86-93; and The UNCITRAL Model Law in the United Kingdom, (2007) Insolvency Intelligence, Volume 20, No.9 (November), pp Craig Montgomery: Keep Calm and Don t Submit the Supreme Court has its say on Recognition of Foreign Insolvency Proceedings, (2013) 26 Insolvency Intelligence, Issue 2, pp B. Scope of the 2006 enactment; interpretation (references are to CBIR unless otherwise indicated) CBIR: Great Britain only (i.e. England, Wales and Scotland): Reg. 2(1). CBIRNI: Northern Ireland only: Reg. 3(1). List of entities excluded from the scope of the Model Law in GB: Art.1(2) (13 categories). Legal geography : distinguish between England and Wales ; Great Britain ; the United Kingdom of Great Britain and Northern Ireland ; the British Islands (=UK + Isle of Man + Channel Islands): Interpretation Act 1978, Schedule 1. Explicit exclusion of interference with financial market contracts governed and regulated by primary and secondary legislation: Art.1(4). Interpretation: Art.2 (Definitions): (a) British insolvency law ; (b) British insolvency officeholder ; (e) establishment ; (f) foreign court ; (g) foreign main proceeding ; (h) foreign non-main proceeding ; (i) foreign proceeding ; (j) foreign representative ; (n) security ; (q) the law of Great Britain. Aids to interpretation: Reg. 2(2) ( without prejudice to any practice of the courts as to matters which may be considered apart from this paragraph ). General approach to interpretation: Art.8. Public policy exception: Art.6. Adequate protection principle: Art.22 (and 21(2)). C. Interaction with other bases of recognition and assistance The jig-saw puzzle now consists of the following pieces: 9

10 Principles developed at common law for the recognition of foreign insolvency proceedings and providing assistance to foreign office holders; The comprehensive regime of the EC Regulation, for cases to which it is applicable; The special statutory procedure under s.426 of the Insolvency Act 1986, for cases to which it is applicable; Recognition and assistance under the provisions of the Model Law as enacted for Great Britain. Note (1): Art. 3 of Sched. 1 to CBIR (= Art.3 of Sched. 1 to CBIRNI) provides that to the extent that the Model Law conflicts with any UK obligation under the EC Regulation on Insolvency Proceedings, the latter shall prevail; Regulation 3(2) of CBIR states that in the case of any conflict between any provision of British insolvency law and the Model Law, the latter shall prevail (cf. Reg.4(2) of CBIRNI). Note (2): Common law principles of recognition and assistance still evolving (see section 1(c) above): Cambridge Gas Transport Corp. v. The Official Committee of Unsecured Creditors (of Navigator Holdings plc) [2006] UKPC 26; [2007] 1 AC 508 (PC) (Lord Hoffmann). N.B. this decision has been subjected to a sustained barrage of judicial criticism by members of the Supreme Court/Privy Council in subsequent years: see the decisions of the Supreme Court in Rubin v. Eurofinance SA (supra) and of the Privy Council in Singularis Holdings Ltd v. PricewaterhouseCoopers (both supra). Consequently, the common law powers of assistance are far more circumscribed, as of 2015, than they were considered to be in the period between 2006 and 2012/14. D. Recognition of foreign proceedings and relief - Application for recognition must be made to the competent court: Arts.4, 15 (in England and Wales, the High Court, Chancery Division; in Scotland, the Court of Session; in Northern Ireland, the High Court, Chancery Division). - Appropriate forum concept: Art.4(2)(b), (3). - An application for recognition shall be decided upon at the earliest possible time (Art.17(3)). - While an application for recognition is awaiting decision, discretionary relief can be applied for under Art. 19 where it is urgently needed to protect the assets of the debtor or the interests of the creditors. - Recognition as a foreign main proceeding: Art.20 automatic stay, specially formulated for UK application to render it co-extensive with the stay which would arise in the case of an individual adjudicated bankrupt (or, in Scotland, one whose 10

11 estate has been sequestrated); or in the case of a corporate debtor, made the subject of a winding-up order under the Insolvency Act 1986 (Art.20(2)). Note that: A number of rights are exempted from the effects of the automatic stay by Art.20(3): (a) secured creditors can enforce rights over debtor s property; (b) repossession of goods subject to a hire purchase agreement (which includes conditional sale, chattel leasing and ROT); (c) rights under financial market contracts; (d) creditor s rights of set-off. Application can be made to court to lift, modify or terminate the stay (Art.20(6)). Court may act of its own motion. Stay does not prevent the exercise of the right to request or initiate the commencement of an insolvency proceeding under British/Northern Ireland insolvency law or the right to file claims in such a proceeding (Art.20(5)). - Discretionary relief (Art.21). Available at discretion of the court at the request of the foreign representative upon recognition of a foreign proceeding, whether as main or non-main. Note also: Power to order examination of witnesses (Art.21(1)(d)). Power to entrust administration or realisation of assets to foreign representative or another designated person (Art.21(1)(e)). Power to authorise turnover of assets located in GB/N.I. to the foreign representative, provided the interests of creditors in GB/N.I. are adequately protected (Art.21(2)). Power to enhance the scope and effects of the stay so that it equates with that which would be applicable in the case of a company in administration (Art.21(1)(g)). (Potential relevance in furtherance of multi-jurisdictional rescue of companies). N.B. in the Rubin decision (above, section 1(c)) the Supreme Court ruled that this article does not empower the British courts to enforce foreign judgments delivered in insolvency matters (paras , per Lord Collins). E. Treatment of claims - General principle of equality of treatment: Art.13(1). - Foreign revenue claims admissible unless subject to challenge on ground of penal characteristics, or on any ground generally applicable as a basis for the rejection of claims: Art.13(3). F. Transaction avoidance: Article 23 11

12 -Greatly expanded provision compared to Art.23 of the original UNCITRAL text. -Foreign representative has standing to invoke a number of specified statutory provisions for attacking prior transactions, including preferences, transactions at an undervalue, extortionate credit transactions, floating charges to secure past indebtedness, excessive pension contributions made by individual debtors, and transactions in fraud of creditors. Note: Special formulation of the criteria for determining the time which is to be regarded as the relevant time for the purposes of any hardening off periods associated with avoidance provisions: the date of the opening of the relevant foreign proceedings (Art.23(3)), determined according to the rule fixed by Art.23(4): in accordance with the law of the state in which the foreign insolvency proceeding is taking place, including any rule by virtue of which the foreign proceeding is deemed to have opened at an earlier time. On the significance of such relation-back rules of domestic insolvency law, see Re Eurofood IFSC Ltd, Case C-341/04, Judgment 2 May 2006 (ECJ) [2006] ECR I-3813; [2006] BCC 397; Opinion of Advocate-General Jacobs 27 September 2005, [2005] BCC 1021, paras Potential scope for forum-shopping by foreign representative? Note possibility that GB court may invoke doctrine of forum non conveniens, and the special significance of Arts. 2(q), 23(5). - Non-retrospective application of Article 23: the clawback remedies do not apply to any acts or transactions made or entered into before 4 April 2006 (GB) or 12 April 2007 (N.I.). - Note possibility of attacking pre-april 2006 transactions by opening a proceeding under British/Northern Irish insolvency law: Arts. 20(5), 23(8) (but the relevant time will consequently move forward in line with the normal domestic rule, which may mean that the hardening off period has expired). - Presumption of insolvency based on recognition of a foreign main proceeding (Art.31) can facilitate the opening of a proceeding under British insolvency law (but the overarching effects of the EC Regulation would preclude the opening of a proceeding in the case of a debtor whose COMI is in another EC Member State (other than Denmark) unless the debtor has an establishment in the UK). 12

13 G. Co-operation with foreign courts and foreign representatives - Arts follow the original text quite closely, BUT: Art.25 makes co-operation a matter of discretion for the British/N.I. court ( may co-operate to the maximum extent possible with foreign courts or foreign representatives ; Art.26 makes co-operation obligatory for a British/N.I. insolvency officeholder ( shall. co-operate to the maximum extent possible with foreign courts or foreign representatives ), but inserts the vital proviso that this shall be to the extent consistent with his other duties under the law of Great Britain (/Northern Ireland), in the exercise of his functions and subject to the supervision of the court. H. Commencement of a concurrent (territorial) proceeding after recognition of a foreign main proceeding - Art.28 follows the original text in declaring that the effects of the British/N.I. Proceeding in relation to the same debtor shall, insofar as the assets of the debtor are concerned, be restricted to assets that are located in Great Britain/N.I. and, to the extent necessary to implement co-operation and co-ordination under articles 25, 26 and 27, to other assets of the debtor that, under the law of Great Britain/N.I., should be administered in that proceeding. - Note the omission of the precondition embedded in the original text of Art.28 ( may be commenced only if the debtor has assets in this state ), thereby allowing the continued application of rules of jurisdiction based on sufficient connection with GB/N.I., short of a presence of assets (including rules of long-arm jurisdiction over individuals contained in s.265 of the Insolvency Act 1986, and the jurisdiction to wind up foreign companies as unregistered companies under Part V of the Act). I. Practice and procedure Sched. 2 (Procedural matters), para.2: Recognition application (Form ML1, Sched. 5); Sched. 2, para 3: Form and content of application; para 4: contents of affidavit in support; Sched. 2, paras 7-11: Application for relief. 13

14 J. Closing comment - The 2006 enactment for GB (and the corresponding enactment in 2007 for Northern Ireland) is the product of a prolonged, but necessary, process of assessment and consultation to determine the acceptable levels of implementation that are consistent with the maintenance of commercial certainty and established standards of judicial and professional practice. They amount to a positive step to improving international co-operation. But there are numerous divergences from the original UNCITRAL text: Caveat lector! 5. Case study Problem for discussion Mortadella Tankers Inc ("MT") is a company incorporated under the laws of Liberia. For all practical purposes, the company has no other relevant connection with Liberia. MT is massively insolvent and has numerous creditors world wide, but none of them are secured. No insolvency proceedings have yet been commenced anywhere. The company's only known asset consists of a large sum payable under an insurance policy on MT's only vessel, which has been lost at sea. The policy was taken out in London and the money is payable there. There is no indication that MT ever conducted its business from or within the United Kingdom, but two of its directors, Frank and Winston, are U.K. residents who live in circumstances of conspicuous affluence. You may further assume that: it can be shown that MT listed a Cayman Islands office as its operational headquarters, but that it merely served as an accommodation address. However, there are precedents to suggest that the court in Cayman would be willing to entertain a winding up petition based on the company's own act of listing it as its headquarters; MT's global business has actually been conducted from a rented office in the Port of Galveston, Texas, managed by a citizen of the U.K. resident there. The manager s salary has been paid from a bank account maintained by MT in the British Virgin Islands; one or more of the creditors regularly do business with MT in the U.S; 14

15 MT recently paid US$100,000 from a New York bank account to a creditor in London. For consideration and advice: Two groups of interested parties require advice in this case: (a) creditors of MT; and (b) the management of MT. The principal creditors of MT are concerned that if the insurance money is paid to the company it will be disposed of irretrievably. They seek your advice on possible courses of action which might be followed to safeguard the proceeds of the insurance policy and to seek to make Frank and Winston accountable for alleged misconduct of MT's corporate affairs. (You may assume that there is no prospect that such remedies could be obtained under the law of Liberia). They need to know where they might seek to open proceedings, what kind of proceedings those might be, and to what extent international judicial assistance could be available to maximise the effectiveness of the strategy to be followed. The management of MT need to know the defences and counter-arguments that may be invoked with a view to minimising their personal exposure to financial or other liability in consequence of the financial failure of MT, as well as any affirmative actions they might take to try to retain control of the company s assets and the situation generally. I.F.F. December