COMI, BANKRUPTCY TOURISM AND PROVING JURISDICTION*

Transcription

1 COMI, BANKRUPTCY TOURISM AND PROVING JURISDICTION* INTRODUCTION Recital 4 of the EC Regulation on Insolvency Proceedings No 1346/2000 (OJ L 160, ) states: It is necessary for the proper functioning of the internal market to avoid incentives for the parties to transfer assets or judicial proceedings from one Member State to another, seeking to obtain a more favourable legal position (forum shopping). Has this worked and why has the UK has become an insolvency paradise? THE EC REGULATION: SOME BASIC PRINCIPLES The courts of the Member State within the territory where the debtor s centre of main interests ( COMI ) is situated shall have the jurisdiction to open insolvency proceedings. In the case of a company or other legal person, the place of the registered office shall be presumed to be the COMI in the absence of evidence to the contrary (article 3(1), recitals 12 and 13). The COMI should correspond to the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties (recital 13). The law of the place where the main proceedings are opened (i.e. where the petition is presented 1 ) determines the conditions for the opening of those proceedings, their conduct and their conclusion (article 4). The judgment opening the proceedings produces the same effects in any other Member State as under the state of the opening of proceedings unless the EC Regulation provides otherwise, with the consequence that main proceedings * This is an updated version of a paper given to the Insolvency Lawyers Association in February 2009 by Marcia Shekerdemian (11 Stone Buildings) and Mr Registrar Baister

2 opened in one Member State can affect the rights creditors in a different Member State (art 17). The time of the opening of proceedings means the time at which the judgment opening proceedings becomes effective, whether it is a final judgment or not (art 2(f)). [T]o protect the diversity of interests, secondary proceedings may be opened to run in parallel with the main proceedings; secondary proceedings may be opened in the Member State where the debtor has an establishment 2. The effects of secondary proceedings are limited to the assets located in that state (recital 12 and art 3(2) and (4)). The opening of insolvency proceedings shall not affect the rights in rem of creditors or third parties in respect of tangible or intangible assets which are situated in the territory of another Member State (article 5). WHAT IS COMI? Only one COMI per debtor (Mr Registrar Jaques in Stojevic v OR [2007] BPIR 141 at para. 6) (see also HHJ Howarth in Skjevesland v Geveran Trading Company Ltd [2003] BPIR 924). No definition of COMI in the EC Reg in the case of individuals. In re Eurofoods IFSC Ltd (Case C-341/04) ([2006] 3 WLR 309), the ECJ, discussing Recital (13) said: The concept of the centre of main interests is peculiar to the Regulation. Therefore, it has an autonomous meaning and must therefore be interpreted in a uniform way, independently of national legislation The Virgos-Schmit report (on the original Convention on Insolvency Proceedings) is now universally accepted as an aid to interpretation of the EC Reg (see the European Court in re Eurofoods); see also Official Receiver v Stojevic, below). Paragraph 75 of Virgos-Schmit: 1 Re Staubitz-Schreiber [2006] ECR I-701 [2006] BPIR " Establishment shall mean any place of operations where the debtor carries out a nontransitory economic activity with human means and goods (art 2(h)).

3 The concept of centre of main interests must be interpreted as the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties. By using the term interests, the intention was to encompass not only commercial, industrial or professional activities, but also general economic activities, so as to include the activities of private individuals (eg consumers). The expression main serves as a criterion for the cases where those interests include activities of different types which are run from different centres. In principle, the centre of main interests will in the case of professionals be the place of their professional domicile and for natural persons in general, the place of their habitual residence.... Relevant interests : general economic ones, not emotional ones (see Chadwick LJ in Shierson v Vlieland-Boddy [2005] BPIR 1170) (also HHJ Howarth in Skjevesland v Geveran Trading Company Ltd [2003] BPIR 924). In the case of individuals, the COMI will be where the relevant interests are administered. Usually (but not invariably), the country of the debtor s habitual residence, unless he/she is a professional person, in which case it may be the place of his professional domicile, or his main place of business, if he/she is carrying on business in his/her own right (see the analysis in Stojevic at paras 34-36). Ascertainability, see para. 75 of Virgos-Schmidt: the debtor s visibility to potential creditors. Where can the creditors expect to find the debtor? See also HHJ McGonigal in re Daisytek-ISA Ltd [2004] BPIR 30. HOW TO DETERMINE COMI: CASE LAW Stojevic v Official Receiver ( ) [2007] BPIR 141 Mr Registrar Jaques that the true inquiry must be as to [the debtor s] habitual residence. On the facts it was now clear that S s COMI was in Austria. That was his place of 'habitual residence' within the meaning of para 75 of the Virgos-Schmit Report. Habitual residence and ordinary residence were very different and should not be confused Although S spent a considerable time in London, much of that time was spent in carrying out his duties as a shadow director of an English company. Being a company director and administering the affairs of that company does not equate to administering one s own economic interests

4 It would be wrong to equate S's indirect economic interests in the company with his own economic interests. (Applying Salamon v Salamon [1897] AC 22), the separate personality of the company had to be respected. S was not conducting business in his own right, even if he did control the company. The Registrar found an analogy in the Eurofoods case, in which the COMI of an Irish registered subsidiary of an Italian registered parent was under consideration: where a company carries on its business in the territory of the member state where its registered office is situated, the mere fact that its economic choices are or can be controlled by a parent company in another member state is not enough to rebut the presumption laid down by the Regulation. Note the potential difficulties which can arise as a consequence of the fundamental difference between the English legal system, which is adversarial, and the Continental legal system, which is inquisitorial Official Receiver v Eichler [2007] BPIR 1636 A UK bankruptcy order was made against E, a German doctor on the basis that his COMI was in England and Wales and that the proceedings were main proceedings. According to the affidavit and statement of affairs sworn in support of the petition, he was employed by a UK company and was working in the UK as a locum consultant for radiology and nuclear medicine, and was earning 500 per month. His services were contracted the company of which he had been a director (he had now resigned). He had no significant assets. He had only three creditors totalling 206,700. All three creditors were in Germany. There were no UK creditors. The sum due to the two principal creditors arose as a result of a judgment given against the debtor in proceedings brought in Germany. The Official Receiver applied to the court for directions as to whether or not the bankruptcy order should have been made on the basis that the debtor s centre of main interests was in fact in Germany. The OR claimed that E s COMI was in fact Germany, relying on the following i) The debts and the creditors were all in Germany; ii) E had moved to England in October 2006 and lived in temporary accommodation provided in connection with his employment. iii) His locum work was by its very nature temporary.

5 iv) E s wife continued to live in Germany. v) His earnings of 500 pcm. were a fiction. His services were contracted through a company of which he had been a director (he had now resigned); his wife remained a director, and the company was taking the benefit of his true earnings, leaving nothing for the Official Receiver to seek to attach by way of income payments. The set up was a sham to deprive creditors of money they might otherwise expect to go towards the payment of a dividend. vi) E had owned a property in Germany some time ago which had been transferred into his wife s name; proceedings to investigate and undo the effects of that transaction, if appropriate, could more conveniently be taken in Germany than from the UK. vii) The insolvency had arisen as a result of a judgment given against E in connection with his business affairs in Germany. viii) The conduct of the insolvency here, as opposed to in Germany, could be prejudicial to the creditors. E s response (inter alia) was that: (i) He had genuinely moved to this country to work here and remained working here and to that extent his UK address was a true address. (ii) The move was not temporary and there was no evidence to support the contention that it was such. In common with many EU qualified doctors, he had come here to work as he was entitled to (iii) Although his wife remained in Germany, but he spent more time here in connection with his work than he did in Germany. (iv) The arrangements by which his services were contracted were not a sham. In addition to giving him a wage, the company which employed him paid for his

6 accommodation and transport; it also arranged insurance, and there were other expenses which had to be covered. (v) His being here was not temporary, as his continued presence demonstrated. Held: (Chief Registrar Baister) E s COMI was here. E was free to change his COMI from Germany to the UK. E continued to work here and there was no basis on which to conclude that his presence here was purely temporary. it is also plain that his habitual residence, in the sense of the residence where he is most often to be found, is here To the extent that it may be relevant (which I doubt) it would also appear that his professional domicile is here if all the expression means is that it is the place where he is carrying on his profession at the present time The fact that E s debts were all in Germany was not a relevant factor. There was no evidence that Dr Eichler s creditors would be prejudiced. The Official Receiver or any trustee appointed would be obliged to investigate his affairs and realise any assets which may be available so as to pay a dividend to creditors irrespective of their location. Geographical convenience for the trustee was a matter which could properly be taken into account, either on consideration of the OR s application or when the court considers whether or not to open proceedings. It was not appropriate to take into account whether the basis on which Dr Eichler was employed was a sham. This could be investigated in an English insolvency more conveniently than it could be in a German one.

7 Even if it could be said that Dr Eichler s presence here was purely temporary that would not necessarily, of itself, prevent his centre of main interests from being here 3. There is no authority which establishes or even considers any minimum period of time which a person must spend in a Member State before it can be said to have become his COMI. A few days (or even a few weeks) would be unlikely to suffice because that would be at odds with conducting the administration of one s interests in a place on a regular basis (as well as being at odds with the idea of an habitual residence ) 4. MOVING COMI Chadwick LJ in Shierson v Vlieland-Boddy [2005] BPIR 1170 that there is nothing which prevents a debtor s centre of main interests from being changed from time to time. Mann J at first instance: I do not think that a deliberate attempt to remove oneself from the English jurisdiction is necessarily something undesirable or to be guaranteed against - since a centre of main interests can be changed, there is nothing necessarily wrong or sinister in making a choice to do it An individual debtor can easily move COMI 5. This has given rise to the increase in forum shoppers. For the Courts, the availability of COMI migration has generated three particular questions: 3 But what about the fact that E s wife lived in Germany? Compare the approach of Mr Registrar Jaques in Stojevic, who took into account the fact that S s wife continued to live in Vienna in concluding that S s COMI was in Austria: it would be very odd indeed if the debtor and his wife had different habitual residence, given that they lived together as man and wife, together with their children, until the children went to university abroad. 4 See also Re Ci4net.com Inc [2004] EWCH 1941 (Ch), HHJ Langan QC, COMI must have some element of permanence). 5 In the case of companies, it may now be harder, depending on the national law. See ECJ s decision in Cartesio Oktato és Szolgáltato Bt (C-210/06). Held: a national law restricting a company from moving its real seat to another EU Member State (where the company wished to retain its status as a company governed by the law of the Member State of incorporation) was not a restriction on the right of establishment and was therefore not contrary to EU law.

8 1. At what stage is COMI to be determined? (A question of law) 2. Is it ever too late to change COMI? (A question of law) 3. Is the particular change of COMI genuine or a sham? (A mixed question of fact and law). WHEN TO MOVE COMI? AND WHEN IS IT TOO LATE TO MOVE? UK Case Law Shierson v Vlieland-Boddy [2005] BPIR 1170 Held by the Court of Appeal: A debtor could move his centre of main interests. There is no principle of immutability. A debtor must be free to choose where he carries on those activities which fall within the concept of 'administration of his interests The debtor s COMI had to be established at the point that the Court is required to decide whether to open insolvency proceedings normally (where proceedings have been commenced by petition) at the hearing of the petition 6 ; In determining COMI, the Court should have regard not only to what the debtor has been doing, but also to what he is perceived, on an objective basis: It is important, therefore, to have regard not only to what the debtor is doing but also to what he would be perceived to be doing by an objective observer. And it is important, also to have regard to the need, if the centre of main interests is to be ascertainable by third parties, for an element of permanence. The court should be slow to accept that an established centre of main interests has been changed by activities which may turn out to be temporary or transitory He must be free to relocate his home and his business. And, if he has altered the place at which he conducts the administration of his interests on a regular basis - by choosing to carry on the relevant activities (in a way which is ascertainable by third parties) at another place - the court must recognise and give effect to that. 6 In Vlieland - Boddy, the CA was considering an application to serve out of the jurisdiction, hence the time for determining COMI was on the hearing of that application.

9 It is a necessary incident of the debtor's freedom to choose where he carries on those activities which fall within the concept of 'administration of his interests', that he may choose to do so for a self-serving purpose. In particular, he may choose to do so at a time when insolvency threatens. In circumstances where there are grounds for suspicion that a debtor has sought, deliberately, to change his centre of main interests at a time when he is insolvent, or threatened with insolvency, in order to alter the insolvency rules which will apply to him in respect of existing debts, the court will need to scrutinise the facts which are said to give rise to a change in the centre of main interests with that in mind. The court will need to be satisfied that the change in the place where the activities which fall within the concept of "administration of his interests" are carried on which is said to have occurred is a change based on substance and not an illusion; and that that change has the necessary element of permanence. (Emphasis supplied) the country in which a debtor s debts were incurred is not a relevant consideration in establishing where his centre of main interest might be 7. EC Case Law Re Staubitz-Schreiber (Case C-1/04) [2006] BPIR 510. S was in business as a sole trader in Germany until In April 2002 she moved to Spain to live and work there. She applied for a bankruptcy order in Wuppertal but the Amtsgericht refused to open the proceedings on the ground that there were no assets. The Landgericht dismissed her appeal against that order. She appealed to the Bundesgerichtshof which made a reference to the Grand Chamber of the European Court. The question for the ECJ for preliminary ruling was: Does the Court of the Member State which receives a request for the opening of insolvency proceedings still have jurisdiction to open insolvency proceedings if the debtor moves his or her [COMI] to the territory of another member state after filing the request, but before the proceedings are opened or does the court of that other Member State acquire jurisdiction?. Whilst upholding the right of a debtor to change his COMI, the ECJ ruled that Article 3.1 of the EC Regulation had to be interpreted as meaning that the court of the Member State, within the territory of which the debtor s COMI was situated at the time when she lodged her request 7 Compare the case law under section 265(1) and its predecessor, which continues to apply to non EC Regulation cases. Business debts in this jurisdiction will be sufficient to found jurisdiction, see Re Brauch [1978] Ch 316, Theophile v Solicitor General [1950] AC 186.

10 to open proceedings, retained jurisdiction to open them even if the debtor moved her COMI to the territory of another Member State after lodging proceedings but before they were opened. The Court held that the transfer of jurisdiction from the court originally seized of the proceedings to the Court of another Member State would be contrary to the objectives of the EC Reg, especially recital 4 (the avoidance of incentives for parties to transfer assets or judicial proceedings from one Member State to another). This objective could not be achieved if a debtor could move his COMI between Member States in the time between lodging his request for the opening of proceedings and the time of the delivery of judgment. SUBSTANCE OR ILLUSION? A question of fact and each case will be decided on its facts with evidence being called in the usual way. The threshold is substance not illusion, see Vlieland-Boddy, above. If facts are in dispute, the evidence must be tested in the usual way, with live evidence and cross examination, unless the untested evidence is plainly incredible. See Vlieland-Boddy, per Chadwick LJ at paras and 56, citing Rimer J in Long v Farrer & Co [2004] EWHC 1774 (Ch), [2004] BPIR 1218: It is by now familiar law that, subject to limited exceptions, the court cannot and should not [my emphasis] disbelieve the evidence of a witness given on paper in the absence of the cross-examination of that witness. RECENT DEVELOPMENTS The secretary of state for business, enterprise and regulatory reform sought the winding up in the public interest of a number of companies providing services to German bankrupts; and the official receiver has recently made a number of applications for the annulment of bankruptcy orders said to have been improperly obtained on debtors petitions. Many have gone uncontested but for a recent case that was contested see Re Mittelfellner [2009] BPIR forthcoming.

11 International Co-operation and Recognition An English Perspective Scope of paper The purpose of this short paper is to introduce the main provisions relating to international recognition and to illustrate some of the points which arise from them (a) from the perspective and personal experience of the writer (as a first instance insolvency judge) and (b) (at the other end of the judicial spectrum) by reference to a recent decision of the House of Lords. Introduction Whilst the insolvency law of England and Wales is sometimes perceived as parochial this is far from the case. As Ian Fletcher has noted 1, English law demonstrates a strong international tradition which can be traced back to the eighteenth and nineteenth centuries 2. Jabez Henry, the judge who presided over the court which originally decided Odwin v Forbes, went on to make two significant contributions to cross-border insolvency, first in the form of an account of the case 3, the second in the form of a pamphlet, Outline of Plan of an International Bankruptcy Code for the Commercial States of Europe, published at some time between 1823 and By the nineteenth century provisions for mutual aid were already in force 5. However, the Cork Committee suggested that the provision in force when it reported in 1982 (s. 122 Bankruptcy Act 1914) required improvement 6. This resulted in the provision which remains s. 426 Insolvency Act Since 1986 there have been two major legislative developments regarding international co-operation and recognition: the coming into force of (a) the EC Regulation on Insolvency Proceedings 2000 and (b) the Cross-Border Insolvency Regulations Bases of international recognition Section 426 Insolvency Act 1986 Section 426 provides: (4) The courts having jurisdiction in relation to insolvency law in any part of the United Kingdom shall assist the courts having the corresponding 1 Ian F Fletcher, Insolvency in Private International Law (Oxford, ) 2 Fletcher notes that in Solomons v Ross (1764) 1 Hy. Bl. 131n, 126 ER 76 the English court was prepared to rule that a foreign bankruptcy could have effect on the bankrupt s movable property within the jurisdiction of the court, whilst in Odwin v Forbes (1817) 1 Buck. 57 (PC) the Privy Council confirmed the judgment of the Court of Demerara and Essequibo that an English discharge had no force by reason of Dutch law provisions in force when the colony came into British possession, thus fettering the generally held universalist principle and giving effect to comity. 3 The Judgment of the Court of Demerara in the case of Odwin v. Forbes (1823) 4 For an account and commentary see K H Nadelmann, An International Bankruptcy Code: New Thoughts on an Old Idea (1961) 10/1 ICLQ p. 70 and David Graham, Discovering Jabez Henry: Cross-Border Insolvency Law in the 19 th Century (2001) Int. Insol. Rev. 10/2 p.153 and In Search of Jabez Henry: the Readership of Foreign Law (2005) Int. Insol. Rev. 14 p See s. 74 Bankruptcy Act See Chapter 49 of the Report entitled Extra-Territorial Aspects of Insolvency Law.

12 jurisdiction in any other part of the United Kingdom or any relevant country or territory 7. For the most recent and authoritative exploration of the issues raised by the section see McGrath v Riddell [2008] UKHL 21, [2008] BCC which also leads to the next (common law/inherent jurisdiction) basis. Common law Quite apart from s. 426 the UK courts have always been able to offer assistance relying on principles of judicial comity and the common law (see, for example, Cambridge Gas Transport Corp v The Official Committee of Unsecured Creditors of Navigator Holdings [2006] UKPC 26, [2006] BCC 962; Re Phoenix Kapitaldienst GmbH [2008] BPIR 1082; Mc Grath v Riddell (supra)). The EC Regulation on Insolvency Proceedings The EC Regulation on Insolvency Proceedings (No 1346/2000 of 29 May 2000) came into force on 31 May 2002 (Art. 47). It applies only to proceedings after that date and has no retrospective effect (Art 43). It has direct application as domestic law. It applies to all EU member states except Denmark. Chapter II deals with recognition which is automatic and without formality (see, for example, arts. 16(1), 17(1) and 19 9 ). By-passing recognition may be achieved by changing the debtor s centre of main interests (as to which see generally, for example, Re BRAC Rent-a-Car International 7 See materials for the full text of the section. 8 Re HIH Casualty & General Insurance Co Ltd; for an illuminating account of the different approaches taken to the case see Lord Neuberger MR, Insolvency, Internationalism and Supreme Court Judgments (lecture delivered to the Insolvency Lawyers Association, 8 November 2009). 9 Article 16 Principle 1. Any judgment opening insolvency proceedings handed down by a court of a Member State which has jurisdiction pursuant to Article 3 shall be recognised in all the other Member States from the time that it becomes effective in the State of the opening of proceedings. Article 17 Effects of recognition 1. The judgment opening the proceedings referred to in Article 3(1) shall, with no further formalities, produce the same effects in any other Member State as under this law of the State of the opening of proceedings, unless this Regulation provides otherwise and as long as no proceedings referred to in Article 3(2) are opened in that other Member State. Article 19 Proof of the liquidator's appointment The liquidator's appointment shall be evidenced by a certified copy of the original decision appointing him or by any other certificate issued by the court which has jurisdiction. A translation into the official language or one of the official languages of the Member State within the territory of which he intends to act may be required. No legalisation or other similar formality shall be required.

13 Inc [2003] 2 All ER 201, Re The Arena Corporation Ltd [2004] BPIR 375) and Re Salvage Association [2003] BCC 514; Geveran Trading Co Ltd v Skjevesland [2003] BPIR 73 & 924, Re a Bankrupt (No 136 of 2003) [2004] BPIR 415, Shierson v Vlieland-Boddy [2005] BCC 949; [2005] BPIR 1170, Re Staubitz-Schreiber (C1/04) [2006] ECR I-701, [2006] BPIR 510. Stojevic v. Official Receiver [2007] BPIR 141, Official Receiver v Eichler [2007] BPIR 1636 and Official Receiver v Mitterfellner [2009] BPIR 1075). For an example of a case by-passing the need for recognition see Re TXU Europe German Finance BV [2005] BCC 90, [2005] BPIR Consider also the mobility afforded to the societas europaea. The Cross-Border Insolvency Regulations 2006 The UNCITRAL Model Law on Cross-Border Insolvency took effect in Great Britain (England, Wales and Scotland but not Northern Ireland) on 4 April It was implemented by the Cross-Border Insolvency Regulations under power contained in s. 14 Insolvency Act Its aim is to promote international co-operation in the conduct of insolvency proceedings by facilitating the recognition of insolvency office-holders and providing access to the relevant courts. Broadly, it: enables a foreign court or foreign office-holder ( foreign representative ) to seek recognition of foreign proceedings in the UK; enables a foreign representative to seek direct access to the UK courts; enables creditors and other interested parties in a foreign state to request the commencement of or participate in British insolvency proceedings; provides a framework for international co-operation in international insolvency cases. The Model Law does not regulate questions of jurisdiction or choice of law in the way the EC Regulation on Insolvency Proceedings seeks to do. The Regulation contains and enacts the Model Law 12 ; regulates procedure in England and Wales 13 and Scotland 14 ; deals with notices to be delivered to the registrar of companies 15 ; and prescribes forms 16. For an example of flexible/creative use of the Regulations see Re Stocznia Gdynia SA High Court, Ch D, Co Ct 29 June 2009 (unrep.). 10 For discussion see W-G Ringe, Forum Shopping under the EU Insolvency Regulation (European Bus Org Rev (2008) 9, 579 ff.). 11 SI 2206/ Sch Sch Sch Sch Sch. 5

14 Dr St Ba 1 st

15 International Co-operation and Recognition An English Perspective Materials Section 426 Insolvency Act 1986 Part XVII Miscellaneous and General 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.

16 (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 (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 Part II of the Companies (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 are 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 about bank insolvency to be insolvency law for the purposes of this section.]

17 [(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.]

18 McGrath and others v Riddell and others [2008] UKHL 21 Company Winding up Distribution of company's property Principal liquidation in Australia Ancillary liquidation in England and Wales Australian law departing from general pari passu principle Whether court having power to direct English liquidators to remit proceeds of assets to Australian liquidators for distribution in accordance with Australian law Insolvency Act 1986, s 426. HOUSE OF LORDS LORDS, HOFFMANN, PHILLIPS, SCOTT, WALKER, NEUBERGER 11, 12 DECEMBER 2007, 9 APRIL APRIL 2008 J Sumption QC, S Mortimore QC and T Smith for the First Appellant G Vos QC and P Arden QC for the Second Appellant W Trower QC and J Goldring for the Respondents Norton Rose LLP; Clifford Chance LLP; Freshfields Bruckhaus Deringer LORD HOFFMANN: MY LORDS, [1] This appeal arises out of the insolvent liquidation of the HIH group of Australian insurance companies. On 15 March 2001 four of them presented winding up petitions to the Supreme Court of New South Wales. Some of their assets mostly reinsurance claims on policies taken out in London were situated in England. To realise and protect these assets, provisional liquidators were appointed in England. In Australia, the court has made winding up orders and appointed liquidators. The Australian judge has sent a letter of request to the High Court in London, asking that the provisional liquidators be directed, after payment of their expenses, to remit the assets to the Australian liquidators for distribution. The question in this appeal is whether the English court can and should accede to that request. The alternative is a separate liquidation and distribution of the English assets in accordance with the Insolvency Act [2] The English and Australian laws of corporate insolvency have a common origin and their basic principles are much the same. The general rule is that after payment of the costs of liquidation and the statutory preferred creditors, the assets are distributed pari passu among the ordinary creditors: see s 107 of the 1986 Act and s 555 of the Corporations Act 2001 (Cth). But Australia has a different regime for insurance companies. I need not trouble your Lordships with the details. It is sufficient to say that, in broad outline, it requires assets in Australia to be applied first to the discharge of debts payable in Australia (s 116(3) of the Insurance Act 1973 (Cth)) and the proceeds of reinsurance policies to be applied in discharge of the liabilities which were reinsured (s 562A of the Corporations Act 2001 (Cth)). It is agreed that if the English assets are sent to Australia, the outcome for creditors will be different from what it would have been if they had been distributed under the 1986 Act. Some creditors will do better and others worse. Approximate figures are given in para 17 of the judgment of the Chancellor in the Court of Appeal. Generally speaking, insurance creditors will be winners and other creditors will be losers. [3] The Australian court made its request pursuant to s 426(4) of the Insolvency Act 1986 The courts having jurisdiction in relation to insolvency law in any part of the

19 United Kingdom shall assist the courts having the corresponding jurisdiction in... any relevant country... [4] The Secretary of State has power under sub-s (11) to designate a country as relevant and has so designated Australia. Sub-section (5) describes the assistance which a UK court may give. A request from the court of a relevant country 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. [5] This provision was introduced into insolvency law in consequence of a recommendation in fairly general terms by the Cork Committee in 1982 (see Report of the Review Committee on Insolvency Law and Practice (Cmnd 8858) Ch 49.) The Committee drew attention to the inadequacy of the statutory provisions for international co-operation in personal bankruptcy and their complete absence in the law of corporate insolvency. [6] Despite the absence of statutory provision, some degree of international co-operation in corporate insolvency had been achieved by judicial practice. This was based upon what English judges have for many years regarded as a general principle of private international law, namely that bankruptcy (whether personal or corporate) should be unitary and universal. There should be a unitary bankruptcy proceeding in the court of the bankrupt's domicile which receives world-wide recognition and it should apply universally to all the bankrupt's assets. [7] This was very much a principle rather than a rule. It is heavily qualified by exceptions on pragmatic grounds; elsewhere I have described it as an aspiration: see Cambridge Gas Transportation Corpn v Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] UKPC 26, [2007] 1 AC 508, 517 at para 17, [2006] 3 All ER 829. Professor Jay Westbrook, a distinguished American writer on international insolvency has called it a principle of modified universalism : see also Professor Ian Fletcher, Insolvency in Private International Law (2nd ed 2005) at pp Full universalism can be attained only by international treaty. Nevertheless, even in its modified and pragmatic form, the principle is a potent one. [8] In the late nineteenth century there developed a judicial practice, based upon the principle of universalism, by which the English winding up of a foreign company was treated as ancillary to a winding up by the court of its domicile. There is no doubt that an English court has jurisdiction to wind up such a company if it has assets here or some other sufficient connection with this country: Re Drax Holdings Ltd Re InPower Ltd [2003] EWHC 2743 (Ch), [2004] 1 All ER 903, [2004] 1 WLR And in theory, such an order operates universally, applies to all the foreign company's assets and brings into play the full panoply of powers and duties under the Insolvency Act 1986 like any other winding up order: see Millett J in Re International Tin Council [1987] Ch 419, , [1987] 1 All ER 890, [1987] BCLC 272 The statutory trusts extend to [foreign] assets, and so does the statutory obligation to collect and realise them and to deal with their proceeds in accordance with the statutory scheme. [9] But the judicial practice which developed in such a case was to limit the powers and duties of the liquidator to collecting the English assets and settling a list of the creditors who sent in proofs. The court, so to speak, disapplied the statutory trusts and duties in relation to the foreign assets of foreign companies. This practice was based partly upon the pragmatic consideration that any foreign country which applied our own rules of

20 private international law would not recognise the title of an English ancillary liquidator to the company's assets. But it was also based upon the principle of universalism. In Re Matheson Brothers Ltd (1884) 27 Ch D 225, 32 WR 846, 51 LT 111 Kay J appointed a provisional liquidator, as in this case, to protect the English assets of a New Zealand company which was being wound up in New Zealand. He said, at pp : [What] is the effect of the winding up order which it is said has been made in New Zealand? This court upon principles of international comity, would no doubt have great regard to that winding up order and would be influenced thereby [but there was nevertheless jurisdiction to make a winding up order, and therefore to appoint a provisional liquidator, to protect the English assets]... I consider that I am justified in taking steps to secure the English assets until I see that proceedings are taken in the New Zealand liquidation to make the English assets available for the English creditors pari passu with the creditors in New Zealand. [10] It seems clear from the last sentence that Kay J envisaged the English assets being distributed in the New Zealand liquidation, provided that English creditors shared pari passu with New Zealand creditors. It was on the authority of this and similar statements in other cases that Sir Richard Scott V-C held in Re Bank of Credit and Commerce International SA (No 10) [1997] Ch 213, 247, [1996] 4 All ER 796, [1997] 1 BCLC 80 that an English court had power in an ancillary liquidation (provisional or final) to authorise the English liquidators to transmit the English assets to the principal liquidators. The basis for the practice could only be what Kay J called principles of international comity, the desirability of a single bankruptcy administration which dealt with all the company's assets. [11] It is this jurisdiction, reinforced by the provisions of s 426, which the Australian liquidators (supported by two Australian insurance creditors who stand to gain from the application of Australian law) invite the court to exercise. But David Richards J, in a judgment which carefully examined all the arguments and authorities, held that the jurisdiction did not extend to authorising the assets to be remitted to principal liquidators for distribution which was not pari passu but gave preference to some creditors to the prejudice of others. The Court of Appeal (Sir Andrew Morritt C, Tuckey and Carnwath LJJ) held that there was such a jurisdiction, which might be exercised if distribution in the country of the principal liquidation produced advantages for the non-preferred creditors which counteracted the prejudice they suffered. But the present case offered no such advantages. The appeal was therefore dismissed. [12] My Lords, I would entirely accept that there are no administrative savings to be gained from remitting the assets to Australia. In order to avoid delay in distributing the available assets, the English provisional liquidators and the Australian liquidators have co-operated in securing the approval of two alternative schemes of arrangement, one based on the outcome which would occur if all the assets were distributed according to Australian law and the other on the outcome of separate liquidations in England and Australia. Depending upon your Lordships' decision, one or the other will be carried into effect. All that remains is to press button A or button B. So the question is whether an order for remittal should be made, not to achieve any economies in the winding up, but simply because it is the right thing to do. Is it what principle and justice require? [13] The judge denied the existence of a power to order remittal to Australia on two grounds. The first was the absence of a power in the English court to disapply any part of the statutory scheme for the collection and distribution of the assets of an insolvent company. That included the provision in s 107 for pari passu distribution. The second was the weight of authority, in the specific context of an ancillary winding up, which laid emphasis upon the fact that the co-operation of the English court was given on the assumption that there would be a pari passu distribution in the principal liquidation.

21 [14] In my opinion there is force in both of these reasons but the judge carried them too far. There is no doubt that, at least until the passing of s 426, an English court and an English liquidator had no option but to apply English law to whatever they actually did in the course of an ancillary winding up. As Wynn-Parry J said of an ancillary winding up in Re Suidair International Airways Ltd [1951] Ch 165, 173, [1950] 2 All ER 920, 66 (pt 2) TLR 909 [T]his court sits to administer the assets of the South African company which are within its jurisdiction, and for that purpose administers, and administers only, the relevant English law... [15] Similarly Sir Richard Scott V-C decided in Re Bank of Credit and Commerce International SA (No 10) [1997] Ch 213 that in settling a list of creditors, the English court was bound to apply English law. It could not disregard r 4.90 of the Insolvency Rules 1986 (SI 1986/1925), which requires that the amount owing by the company to the creditor or vice versa shall be determined after setting off mutual debts against each other. [16] However, my noble and learned friend went further and directed the English ancillary liquidators not to remit the assets in their hands to the principal liquidators in Luxembourg (which did not recognise rights of set off) without making provision to ensure that the overall distributions to English creditors were in accordance with English law. [17] On the facts of the case I think, if I may respectfully say so, that the decision was correct. The mutual debts which were set off against each other appear to have been entirely governed by English law, which regards set off as a matter of substantial justice between the parties: see Forster v Wilson (1843) 13 LJ Ex 209, 12 M & W 191, 204, 152 ER The court of the principal winding up in Luxembourg had made it clear that it was going to apply its lex fori and disallow the set off, notwithstanding the close connection of the transactions with England. In the circumstances, I think that justice required that a remittal of the assets should have been qualified by a provision which ensured that the English set off was given effect. Luxembourg has not been designated a relevant country under s 426 and there was accordingly no jurisdiction to apply Luxembourg law, but, as at present advised, I think that even if there had been, I would not have thought it appropriate to do so. The mutual debts were too closely connected with England. [18] Where I respectfully part company with my noble and learned friend is in relation to the reason which he gave, and maintains in his speech in this appeal (which I have had the privilege of reading in draft) for deciding that he should not remit the assets to Luxembourg without protecting the position of creditors who had proved in England. In my opinion he was right to do so as a matter of discretion. But he says that he had no jurisdiction to do otherwise because creditors in an English liquidation (principal or ancillary) cannot be deprived of their statutory rights under English law. [19] In my opinion, however, the judicial practice to which I have referred and which my noble and learned friend approved in Re Bank of Credit and Commerce International SA (No 10) [1997] Ch 213 is inconsistent with the broad proposition that creditors cannot be deprived of their statutory rights under the English scheme of liquidation. The whole doctrine of ancillary winding up is based upon the premise that in such cases the English court may disapply parts of the statutory scheme by authorising the English liquidator to allow actions which he is obliged by statute to perform according to English law to be performed instead by the foreign liquidator according to the foreign law (including its rules of the conflict of laws.) These may or may not be the same as English law. Thus the ancillary liquidator is invariably authorised to leave the collection and distribution of foreign assets to the principal liquidator, notwithstanding that the statute requires him to perform these functions. Furthermore, the process of collection of assets will include, for

22 example, the use of powers to set aside voidable dispositions, which may differ very considerably from those in the English statutory scheme. [20] Once one accepts, as my noble and learned friend rightly accepted in Re Bank of Credit and Commerce International SA (No 10) [1997] Ch 213, that the logic of the ancillary liquidation doctrine requires that the court should have power to relieve an English ancillary liquidator from the duty of distributing the assets himself but can direct him to remit them for distribution by the principal liquidator, I think it must follow that those assets need not be distributed according to English law. The principal liquidator would have no power to distribute them according to English law any more than the English liquidator, if he were doing the distribution, would have power to distribute them according to the foreign law. [21] It would in my opinion make no sense to confine the power to direct remittal to cases in which the foreign law of distribution coincided with English law. In such cases remittal would serve no purpose, except some occasional administrative convenience. And in practice such a condition would never be satisfied. Almost all countries have their own lists of preferential creditors. These lists reflect legislative decisions for the protection of local interests, which is why the usual English practice is, when remittal to a foreign liquidator is ordered, to make provision for the retention of funds to pay English preferential creditors. But the existence of foreign preferential creditors who would have no preference in an English distribution has never inhibited the courts from ordering remittal. I think that the judge was inclined to regard these differences as de minimis variations which did not prevent the foreign rules from being in substantial compliance with the pari passu principle. But they are nevertheless foreign rules. The fact that the differences were minor might be relevant to the question of whether a court should exercise its discretion to order remittal. But any differences in the English and foreign systems of distribution must destroy the argument that an English court has absolutely no jurisdiction to order remittal because it cannot give effect to anything other than the English statutory scheme. [22] The other ground relied upon by the judge was based upon a number of statements by eminent judges (including Sir Richard Scott V-C in Re Bank of Credit and Commerce International SA (No 10)) to the effect that the object of an ancillary liquidation was to ensure that all the company's assets world-wide were made available for distribution pari passu to all its creditors. One example is the passage I have quoted from the judgment of Kay J in Re Matheson Brothers Ltd (1884) 27 Ch D 225 (see para 9 above) in which he said that he would continue the provisional liquidation until I see that proceedings are taken in the New Zealand liquidation to make the English assets available for the English creditors pari passu with the creditors in New Zealand. That, said David Richards J, showed that pari passu distribution in the principal liquidation was a sine qua non for the assistance of the ancillary liquidator. [23] In my opinion, however, such observations have to be read in their context. Kay J was plainly anxious to secure that English creditors were treated equally with New Zealand creditors. He never directed his mind to the question of whether it would matter if New Zealand law gave preferences on grounds unrelated to the residence or nationality of the creditor. And your Lordships have not been referred to any case in which this question has been considered. In my opinion the authorities relied upon by the judge do not justify limiting the court's jurisdiction. [24] It follows that in my opinion the court had jurisdiction at common law, under its established practice of giving directions to ancillary liquidators, to direct remittal of the English assets, notwithstanding any differences between the English and foreign systems of distribution. These differences are relevant only to discretion.

23 [25] Even on the question of whether the court should make the kind of provision for protecting rights of set off which Sir Richard Scott V-C made in Re Bank of Credit and Commerce International SA (No 10) [1997] Ch 213, much will depend upon the degree of connection which the mutual debts have with England. If the country of principal liquidation does not recognise bankruptcy set off and the mutual debts arise out of transactions in that country, it is hard to see why an English court should insist on rights of set off being preserved in respect of claims by the foreign creditors against assets which happen to be in England. The English court would be entitled to exercise its discretion by remitting the assets to the principal jurisdiction and leaving it to apply its own law. (Compare Re Paramount Airways Ltd [1993] Ch 223, discussing the discretion not to apply the English law on voidable dispositions). [26] It was submitted by the Appellants that the argument for the existence of such a jurisdiction under s 426 was even stronger, because it expressly gives the court power to apply the foreign insolvency law to the matter specified in the request. As Sir Andrew Morritt C said (at para 49), s 426 is itself part of the statutory scheme, no less than s 107. The court therefore has power to apply the Australian law of distribution. It may be that it does, but in my opinion that is not what a court directing remittal of the assets is doing. It is exercising its power under English law to direct the liquidator to remit the assets and leave their distribution to the courts and liquidators in Australia. It is they who apply Australian law, not the English ancillary liquidator. As Morritt LJ said in Hughes v Hannover Ruckversicherungs-Aktiengesellschaft [1997] 1 BCLC 497, 517, a court asked for assistance under s 426 may exercise its own general jurisdiction and powers as well as the insolvency laws of England and the corresponding laws of the requesting state. The power to direct the remittal of assets collected in an ancillary liquidation falls within the former category. [27] This point highlights, I think, the difference between my noble and learned friend Lord Scott and myself. In relying upon s 426, Lord Scott holds that a court which directs remittal of the English assets to the Australian principal liquidator is applying the insolvency law of Australia. My own view is that the order cannot be characterised in this way and that the court is exercising a power, established well before the 1986 Act, under the insolvency law of England. [28] The power to remit assets to the principal liquidation is exercised when the English court decides that there is a foreign jurisdiction more appropriate than England for the purpose of dealing with all outstanding questions in the winding up. It is not a decision on the choice of the law to be applied to those questions. That will be a matter for the court of the principal jurisdiction to decide. Ordinarily one would expect it to apply its own insolvency laws but in some cases its rules of the conflict of laws may point in a different direction. Section 426, on the other hand, extends the jurisdiction of the English court and the choice of law which it can make in the exercise of its own jurisdiction, whether original or extended. For example, s 426 can confer jurisdiction to make an administration order in respect of a foreign company when that jurisdiction is ordinarily confined to UK companies: Re Dallhold Estates (UK) Pty Ltd [1992] BCLC 621, [1992] BCC 394. Or it may enable the court to apply a foreign law when, as in Re Suidair International Airways Ltd [1951] Ch 165, it would otherwise be obliged to apply only English law, as in England v Smith [2001] Ch 419, [2000] 2 BCLC 21, [2000] 2 WLR 1141 (Australian law applied to examination of accountant connected with insolvent Australian company). But the present case involves neither an extension of the English jurisdiction or an application by the English court of a foreign law. [29] I therefore agree with the Court of Appeal that the court has jurisdiction, even if not for precisely the same reasons. But the Court of Appeal nevertheless decided that the jurisdiction should not be exercised because the outcome for some creditors would be worse than if the English assets were distributed according to English law. There was,

24 said Carnwath LJ at para 72, no rule of private international law or any other countervailing benefit which would require the court to disregard the principles applicable under English insolvency law. [30] I must respectfully disagree. The primary rule of private international law which seems to me applicable to this case is the principle of (modified) universalism, which has been the golden thread running through English cross-border insolvency law since the eighteenth century. That principle requires that English courts should, so far as is consistent with justice and UK public policy, co-operate with the courts in the country of the principal liquidation to ensure that all the company's assets are distributed to its creditors under a single system of distribution. That is the purpose of the power to direct remittal. [31] In the present case I do not see that it would offend against any principle of justice for the assets to be remitted to Australia. In some cases there may be some doubt about how to determine the appropriate jurisdiction which should be regarded as the seat of the principal liquidation. I have spoken in a rather old-fashioned way of the company's domicile because that is the term used in the old cases, but I do not claim it is necessarily the best one. Usually it means the place where the company is incorporated but that may be some offshore island with which the company's business has no real connection. The Council Regulation on insolvency proceedings ((EC) No 1346/2000 of 29 May 2000) uses the concept of the centre of a debtor's main interests as a test, with a presumption that it is the place where the registered office is situated: see art 3.1. That may be more appropriate. But in this case it does not matter because on any view, these are Australian companies. They are incorporated in Australia, their central management has been in Australia and the overwhelming majority of their assets and liabilities are situated in Australia. [32] It is true that Australian law would treat insurance creditors better and noninsurance creditors worse than English law did at the relevant time. But that seems to me no reason for saying that the Australian law offends against English principles of justice. As it happens, since the appointment of the provisional liquidators, English law has itself adopted a regime for the winding up of insurance companies which gives preference to insurance creditors: see reg 21(2) of the Insurers (Reorganisation and Winding Up) Regulations 2004 (SI 2004/353), giving effect to the European Parliament and Council Directive 2001/17/EC on the reorganisation and winding up of insurance companies. So English courts are hardly in a position to say that an exception to the pari passu rule for insurance creditors offends against basic principles of justice. [33] Furthermore, it seems to me that the application of Australian law to the distribution of all the assets is more likely to give effect to the expectations of creditors as a whole than the distribution of some of the assets according to English law. Policy holders and other creditors dealing with an Australian insurance company are likely, so far as they think about the matter at all to expect that in the event of insolvency their rights will be determined by Australian law. Indeed, the preference given to insurance creditors may have been seen as an advantage of a policy with an Australian company. [34] As for UK public policy, I cannot see how it would be prejudiced by the application of Australian law to the distribution of the English assets. There is no question of prejudice to English creditors as such, since it is accepted that although s 116(3) of the Insurance Act 1973 (Cth) gives creditors whose debts are payable in Australia a first call upon Australian assets, this provision will not in practice prejudice the interests of creditors in the English assets. Furthermore, if there were to be a separate liquidation of the English assets in England, all creditors would be entitled to prove. Those Australian (or other foreign) creditors who see an advantage in proving in England after bringing

25 into hotchpot their dividends in Australia would no doubt do so. But UK public policy does not require them to be afforded this facility. [35] The fact that there are assets in England is principally the result of the companies having placed their reinsurance business in the London market. For the purposes of deciding how the assets should be distributed, that seems to me an entirely adventitious circumstance. Indeed, it may not be to the advantage of London as a reinsurance market if the distribution of the assets of insolvent foreign reinsurance companies is affected by whether they have placed their reinsurance business in London rather than somewhere else. [36] In my opinion, therefore, this is a case in which it is appropriate to give the principle of universalism full rein. There are no grounds of justice or policy which require this country to insist upon distributing an Australian company's assets according to its own system of priorities only because they happen to have been situated in this country at the time of the appointment of the provisional liquidators. I would therefore allow the appeal and make the order requested by the Australian court. LORD PHILLIPS: MY LORDS [37] I have had the benefit of reading in draft your Lordships' speeches. They contain areas of common ground that result in the conclusion that this appeal should be allowed. I share those areas of common ground and agree with the result to which they lead. They are: i. Section 426(4) and (5) of the Insolvency Act 1986 give the court jurisdiction to accede to the request of the Australian Court and ii. On the facts of this case the court ought to accede to that request. [38] I had initially reservations about the second proposition. The business of insurance has certain special characteristics. These include the fact that, for a premium paid at the start of the contractual relationship the insurer undertakes obligations that may extend over a considerable future period. It is commonplace for countries to regulate insurance business under conditions that require insurers to demonstrate that they have adequate resources to meet such obligations before being authorised to enter into contracts of insurance. That is certainly the case in the United Kingdom. It appears also to be the case in Australia. [39] Where the law of a country requires an insurer to maintain assets, which may include rights under contracts of reinsurance, that are designed to protect policy holders who have taken out insurance within that country, one would normally expect the insolvency law of that country to afford priority to those policy holders in relation to such assets. In such circumstances, one would not expect rules of private international law or international comity to require the transfer of those assets to liquidators in another country who would not recognise such priority. [40] There are now in place in this jurisdiction Regulations which make special provision for distribution to creditors of insolvent insurance companies. These are the Insurers (Reorganisation and Winding-up) Regulations 2004, SI 2004/353, which

26 implement Directive 2001/17/EC of the European Parliament and of the Council of 19 March [41] These Regulations do not apply to the insolvencies with which this appeal is concerned because they were not in force when the provisional liquidators were appointed. Those insolvencies are, however, subject to Australian legislation whose overall effect will be, if the English assets are remitted to the Australian liquidators, that insurance and reinsurance creditors as a whole will benefit at the expense of other creditors. On the other hand insurance and reinsurance creditors whose liabilities are not in Australia will be worse off. This is not, however, the result of any special priority given to them under English law. [42] When considering the exercise of discretion under s 426(4) and (5) of the 1986 Act the following matters seem to me to be material: i) The companies in liquidation are Australian insurance companies. ii) Australian law makes specific provision for the distribution of assets in the case of the insolvency of such companies. iii) These do not conflict with any provisions of English law in force at the material time designed to protect the holders of policies written in England. iv) The policy underlying these provisions appears to accord with the policy of Regulations that have since been introduced in this jurisdiction. [43] These matters have persuaded me that it is in accordance with international comity and with the principle of universalism, as explained by my noble and learned friend Lord Hoffmann that the English court should accede to the request of the Australian liquidators. [44] These are my reasons for agreeing that this appeal should be allowed. I do not propose to stray from the firm area of common ground onto the controversial area of whether, in the absence of statutory jurisdiction, the same result could have been reached under a discretion available under the common law. LORD SCOTT: MY LORDS, INTRODUCTION [45] This appeal concerns the question whether the English assets of four insolvent Australian insurance companies, each of which is in compulsory liquidation in Australia and, in England, is under the control of provisional liquidators appointed by the High Court pursuant to a request made by the Australian liquidators, should in principle be remitted to the Australian liquidators for distribution in accordance with the Australian statutory scheme applicable to the liquidation of insolvent insurance companies, or should be retained in England and distributed in accordance with the English statutory scheme. Both David Richards J at first instance and the Court of Appeal (Sir Andrew

27 Morritt C and Tuckey and Carnwarth LJJ) held that an order for the remission of the English assets to the Australian liquidators could not, or should not, be made. The Australian liquidators and two of the Australian insurance creditors have appealed to this House. The Respondents are the provisional liquidators appointed by the High Court. The appeal depends on the answer to the question I have referred to, and the answer to that question depends, in my opinion on how s 426(4) and (5) of the Insolvency Act 1986 should be applied in a case such as this. The facts that have given rise to a need for an answer to the question are fully set out in 7 October 2005 judgment of David Richards J (paras 9 to 21) and the judgment of the Chancellor (paras 2 to 9). It is not necessary for me to do more than outline the nature of the problem that has arisen and sufficient of the details to explain why I, and I believe all your Lordships, have come to a different conclusion from that reached by the courts below. THE FACTS [46] The four insolvent companies were incorporated in Australia. They are conveniently referred to in the judgments below as HIH C & G, FAIG, WMG and FAII and I shall so refer to them (for their respective full corporate names, see para 10 of David Richards J's judgment). They are members of the HIH Group which, until its collapse in March 2001, was the second largest insurance group in Australia. Its corporate members, 274 in number, included eight companies that were licensed insurance companies in Australia. The four companies with which this appeal is concerned were among them but were authorised also, under the Insurance Companies Act 1982, to carry on insurance business in the United Kingdom, and did so, as well as carrying on business in Australia and elsewhere. The majority of the assets and liabilities of the four companies are located in Australia but each has significant assets and liabilities in England. The relative size of the assets and liabilities in each of these countries can be judged from the table set out in para 12 of David Richards J's judgment and, for convenience, repeated here. The figures are approximate, based on estimates as at 31 March 2005 and expressed in Australian $ millions. Assets HIH C&G FAIG FAII WMG Australia UK Total Liabilities Australia UK Elsewhere Total The figures demonstrate the great preponderance of Australian assets and Australian liabilities over those in the United Kingdom. [47] Winding up orders in respect of the four companies were made in Australia on 27 August 2001 (they had previously been in provisional liquidation). Petitions for windingup orders against the four companies in England had been presented on 24 July 2001 by a corporate member of the HIH Group that was a creditor of each of the companies. Those petitions remain pending but each of the companies is insolvent and, pursuant to letters of request issued by the Australian court on 10 September 2001, the High Court in England made orders appointing the Respondents joint provisional liquidators (and at the same time revoking a similar appointment that had been made before the presentation of the petitions). The orders appointing the provisional liquidators do not contain any provision permitting the remission of English assets to Australia.

28 [48] On 4 July 2005 the New South Wales Supreme Court issued a Letter of Request asking the High Court in England to assist the Australian liquidators by hearing and determining an application issued on the same day. The application asked the High Court to direct the provisional liquidators in England to pay over to the Australian liquidators:... all sums collected, or to be collected, by them in their capacity as English Provisional liquidators, after paying or providing for all proper costs, charges and expenses of the English Provisional Liquidators. This application, together with an application to the High Court by the provisional liquidators for directions, was heard by David Richards J and led to his judgment to which I have referred. He rejected the Australian liquidators' request for the direction above referred to. [49] It had been common ground that the way in which a winding-up of the four companies would be most satisfactorily achieved would be via a scheme of arrangement approved under s 411 of the Corporations Act 2001 in Australia and s 425 of the Companies Act 1985 in England. The schemes would need to reflect the priorities that would be applicable to the distribution of assets among creditors if the liquidations were to run their ordinary course (see para 4 of David Richards J's judgment). It was here that the problem which led to David Richards J's refusal to make the order for remission to Australia of the English assets arose. Australian law has certain statutory provisions relating to insurance companies which depart from the insolvency principle of a pari passu distribution of assets among unsecured creditors. It is necessary to describe the effect of those provisions. [50] Section 116(3) of the Australian Insurance Act 1973 provides that in the winding-up of a company authorised under the Act to carry on insurance business... the assets in Australia of the [company] shall not be applied in the discharge of its liabilities other than its liabilities in Australia unless it has no liabilities in Australia. The Australian courts have held that assets in Australia in s 116(3) means assets in Australia at the time of the winding-up (New Cap Reinsurance Corp v Faraday Underwriting (2003) 117 FLR 52 and Re HIH Casualty and General Insurance Ltd (2005) 215 ALR 562). It is common ground, therefore, that s 116(3) would not apply to assets transferred or remitted to Australia after the commencement of the winding-up. Moreover, in the New Cap Reinsurance case it was held that the principle of hotchpot applied in relation to s 116(3) so that creditors with liabilities in Australia who received distributions from the proceeds of assets in Australia would not be entitled to participate in a distribution of the proceeds of other assets until the same level of dividend had been paid on debts which were not liabilities in Australia. David Richards J held that s 116 did not constitute a bar to an order directing remission to Australia of the English assets of the four companies and there has been no cross-appeal on that point. [51] Section 562A of the Australian Corporations Act 2001 does, however, present a more substantial problem. The section is fully set out in para 44 of the judgment of David Richards J. It provides, in summary, that the re-insurance recoveries of an insurance company must be distributed, in priority to other creditors, to those creditors who have insurance claims against the company. It has been held by the High Court of Australia that the term contract of insurance in s 562A(1) includes a contract of reinsurance and that contract of re-insurance includes a contract of retrocession (Asset Insure Pty Ltd v New Cap Reinsurance Corporation Ltd (2006) 226 ALR 1). Accordingly, it is common ground that s 562A confers on all creditors of an insurance company with insurance and reinsurance claims priority over all other creditors in respect of re-insurance, including retrocession, recoveries. Moreover, s 562A(4) gives the court power, in relation to amounts received under a contract of re-insurance or retrocession, to confer further priority on a particular insurance or re-insurance creditor,

29 in... a manner that the Court considers just and equitable in the circumstances. Section 562A has no territorial limits. Its application is mandatory so far as Australian liquidators are concerned. And, in Re HIH Casualty and General Insurance Ltd (2005) 215 ALR 562 at 591 the Supreme Court of New South Wales held that the principles of hotchpot do not apply so as to require dividends received by a creditor under s 562A(3) or (4) to be brought into account by the creditor when proving against other assets of the insolvent insurance company. [52] By contrast, David Richards J held, and it was common ground before the Court of Appeal and not disputed before your Lordships, that, in a winding-up in England governed by English distribution rules, creditors who had received dividends under s 562A in Australia would have to bring them into account, by way of hotchpot, when claiming dividends in the English winding-up. [53] The approximate effect on creditors of the remission to Australia of the English assets, according to a table produced by the Australian liquidators and the English provisional liquidators (but not agreed by the Third and Fourth Appellants) is set out below. Type of creditor Company Anticipated Anticipated dividend (cents/a$) dividend (cents/a$) if there is no if there is remission of remission of English assets English assets Insurance/reinsurance HIH Creditors with liabilities in Australia WMG FAII Insurance/reinsurance HIH creditors with liabilities that are not liabilities in Australia WMG Other creditors with liabilities in Australia FAII HIH WMG FAII Other creditors with HIH liabilities that are not liabilities in Australia FAII According to the Agreed Statement of Facts and Issues (para 41) the Australian liquidators believe that the dividends receivable by the creditors of FAIG would be unaffected by the remission. [54] Following the judgment of David Richards J the proposed schemes of arrangement were redrafted. They have, as I understand it, been drafted on alternative footings, dependant on whether your Lordships dismiss this appeal and hold that David Richards J and the Court of Appeal were right to refuse to direct the remission of the English assets to Australia, or allow this appeal and hold that in principle the English assets ought to be remitted to Australia. These schemes of arrangement providing for alternative modes of distribution, I understand, have been approved both in Australia and in England. How

30 they will be implemented depends upon your Lordships' decision, first, whether the High Court has power to direct the remission of the English assets to Australia and, second, whether in the circumstances of this case that power should, in principle, be exercised. There are two possible sources of such a power. One, espoused by my noble and learned friend Lord Hoffmann, whose opinion I have had the advantage of reading in draft, is an inherent power in the court established not by statute but by previous judicial decisions. The other is s 426 of the Insolvency Act 1986, introduced into our law, as Lord Hoffmann has explained (para 5 of his opinion), in consequence of a recommendation by the Cork Committee in SECTION 426 [55] The section is headed co-operation between courts exercising jurisdiction in relation to insolvency and sub-ss (4) and (5) provide as follows: (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 sub-section (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. By the Co-operation of Insolvency Courts (Designation of Relevant Countries and Territories) Order 1986 (SI 1986/2123) Australia was designated a relevant country for the purposes of s 426. [56] David Richards J, in para 112 of his judgment, expressed the conclusion that:... in an English liquidation of a foreign company, the court has no power to direct the liquidator to transfer funds for distribution in the principal liquidation, if the scheme for pari passu distribution in that liquidation is not substantially the same as under English law. He said that he regarded that conclusion as an application of my reasoning in Re BCCI (No 10) [1997] Ch 213. I think, with respect, that that was a mistaken basis for his conclusion. My reasoning in Re BCCI (No 10) related only to the inherent power of the court. It had nothing to do with s 426. The BCCI (No 10) case was concerned with the question of remission of assets from England to Luxembourg, the country where BCCI had been incorporated and the seat of the principal liquidation. Luxembourg had not been designated a relevant country for the purposes of s 426. A letter of request under s 426, asking for the remission to Luxembourg of the assets held by the English liquidators, had not been, and could not have been, issued by the Luxembourg court to the High Court. The issue was whether the High Court had an inherent jurisdiction to authorise the English liquidators, conducting an ancillary liquidation in England, to remit assets to the liquidators conducting the principal liquidation and, if so, the scope of that inherent jurisdiction. It was common ground in Re BCCI (No 10) that the High Court had no statutory jurisdiction to remit the assets or to direct the liquidators to do so. [57] Although David Richards J expressed his conclusion as a lack of power to give the direction sought by the Australian liquidators, I think, reading his judgment as a whole, that he was not really taking a jurisdictional point but was concluding that it would not be right to direct a remission of assets in circumstances where the remission

31 would reduce the dividends that would have been recovered under the English scheme of insolvency distribution by those creditors who were not insurance creditors. That certainly was the approach of the Chancellor when the case reached the Court of Appeal. He said, in para 35 of his judgment that... the concept of 'assistance' should not be restrictively construed so as to limit the jurisdiction of the court and that the assistance that the New South Wales court had requested by its Letter of Request of 4 July 2005 did not fall outside the ambit of that concept. He concluded that if the Companies were in liquidation in England the Court in England would have jurisdiction to entertain a request under s 426 for directions to the liquidators in England to transfer the assets collected by them to the liquidators in the principal liquidation even though the result of such a transfer would be to interfere with the statutory scheme imposed on those assets by [the] Insolvency Act 1986 (para 50) With all of that I respectfully agree. The Chancellor went on to consider whether the High Court could properly give the requested direction. That, he thought, was the critical question (para 36). Again, I respectfully agree. [58] The reason why the Chancellor concluded that the court's power under s 426 to direct the provisional liquidators to remit the English assets to Australia ought not to be exercised appears from para 52 of his judgment. He held that, on the authority of Hughes v Hannover Ruckversicherungs-Aktiengesellschaft [1997] 1 BCLC 497 and England v Smith [2001] Ch 419, the court should comply with the Letter of Request issued by the Australian Court if it may properly do so and went on to say this That will involve a consideration of all the circumstances including whether the transfer sought will prejudice the creditors or any class of them and whether there would be other advantages sufficient to counteract such prejudice. In relation to the facts of this case it is quite clear that the transfer sought would prejudice all creditors of each of the Companies except FAIG and except Australian Insurance and Reinsurance Creditors of HIH, WMG and FAII and non-australian Insurance and Reinsurance Creditors of FAII. The advantage to the latter classes of creditor cannot counteract the prejudice suffered by all the other classes. Nor can those advantages and any benefit obtained from avoiding duplication enable the court to conclude that a transfer would be for the benefit of the estate as a whole. The last sentence in this citation was a response to a submission made by the Australian liquidators that the remission of the English assets should be directed if it would be for the benefit of the estate or the creditors as a whole (see para 51 of the Chancellor's judgment). [59] The Chancellor's reasoning does not, however, seem to me to explain why the identification of disadvantage to creditors other than the insurance and re-insurance creditors referred to should require the conclusion that the English assets should not be remitted to Australia. The exercise of the s 426 power so as to direct the remission of the assets to Australia would not constitute the disapplication of the English insolvency scheme. Section 426 is part of the English insolvency scheme. To hold that the power under the section to direct the remission of assets from the country where an ancillary liquidation is being conducted (England) to the country where the principal liquidation is being conducted (Australia) cannot be exercised if the effect would be to reduce the amount of dividends receivable in England by any class of creditors, or, I suppose, by any individual creditor, would be to deprive the section, at least in relation to remission of assets from an ancillary to a principal liquidation, of much of its intended potential to enable a single universal scheme for insolvency distribution to be achieved. If an ancillary liquidation is being conducted in England under an insolvency scheme that does not include s 426, eg where the country of the principal liquidation is not a United

32 Kingdom country and, has not been designated a relevant country or territory ; the position seems to me quite different. The English courts have a statutory obligation in an English winding-up to apply the English statutory scheme and have, in my opinion, in respectful disagreement with my noble and learned friend Lord Hoffmann, no inherent jurisdiction to deprive creditors proving in an English liquidation of their statutory rights under that scheme. I expressed that opinion in Re BCCI (No 10) and remain of that opinion. Luxembourg was not a relevant country or territory. Australia, however, is and, accordingly, s 426 is part of the statutory scheme applicable under the 1986 Act to these four Australian companies. I do not think it would be proper for the courts of this country, in reliance on an inherent jurisdiction, in effect to extend the benefits of s 426 to a country that had not been designated a relevant country or territory by the Secretary of State, and thereby to deprive some class of creditors of statutory rights to which they would be entitled under the English statutory insolvency scheme. There is no case law that supports the proposition that the inherent jurisdiction can be used so as to bring about such deprivation. [60] Indeed, the case law is to an entirely contrary effect. Vaughan Williams J in re English, Scottish and Australian Chartered Bank [1893] 3 Ch 385, 62 LJ Ch 825, 2 R 574 said at 394: One knows that where there is a liquidation of one concern the general principle is ascertain what is the domicile of the company in liquidation; let the court of the country of domicile act as the principal court to govern the liquidation; and let the other courts act as ancillary, as far as they can, to the principal liquidation. But although that is so, it has always been held that the desire to assist in the main liquidation the desire to act as ancillary to the court where the main liquidation is going on will not ever make the court give up the forensic rules which govern the conduct of its own liquidation. (My emphasis) In Re Suidair International Airways Ltd [1951] Ch 165 Wynn-Parry J, having cited the passage from the judgment of Vaughan-Williams J in re English, Scottish and Australian Chartered Bank cited above, said at 173: It appears to me that the simple principle is that this court sits to administer the assets of the South African company which are within its [ie the English court's] jurisdiction, and for that purpose administers, and administers only, the relevant English law; that is, primarily, the law as stated in the Companies Act 1948 looked at in the light, where necessary, of the authorities. If that principle be adhered to, no confusion will result. If it is departed from, then for myself I cannot see how any other result would follow than the utmost possible confusion. I cited these authorities, and others, in Re BCCI (No 10) [1997] 1 Ch 213 in coming to the conclusion at 246 that:... the ancillary character of an English winding up does not relieve an English court of the obligation to apply English law, including English insolvency law, to the resolution of any issue arising in the winding up which is brought before the court. [61] It is, of course, desirable as a general proposition that there should be one universally applicable scheme of distribution of the assets of an insolvent company. And it is also obvious that, in general, where a company is being wound-up not only in its place of incorporation but also in other countries where it carried on some of its business the winding-up process in the latter countries should be regarded as ancillary to the principal winding-up being conducted in the country of its incorporation. In such a case there is, therefore, a potential conflict between, on the one hand, the desirability of that general proposition and, on the other hand, the undesirability of the confusion to which

33 Wynn-Parry J referred in the Suidair case coupled with the obligation of English courts to accord to Claimant creditors in an English winding up the statutory rights to which they are entitled under English insolvency statutes. This conflict has been resolved by Parliament in enacting s 426. Section 426 has become part of the statutory scheme. But the resolution achieved by s 426 does not apply to all countries. It does not apply where the principal winding up is being conducted in a country which is neither part of the United Kingdom nor has been designated by the Secretary of State as a relevant country or territory. The proposition that the assistance and directions sought by the Australian court and the Australian liquidators in the present case could be given under an inherent power of the court without reliance on s 426(4) and (5) is, in my respectful opinion, unacceptable. It would mean that the assistance and directions could be given in relation to a winding up being conducted in a foreign country that had not been designated a relevant country or territory by the Secretary of State. It would constitute the usurpation by the judiciary of a role expressly conferred by Parliament on the Secretary of State. Moreover, the issue is one that does not arise in the present case. If the assistance and directions sought cannot, on a proper exercise of the court's discretion, be given pursuant to s 426(4) and (5), they could hardly be given as a proper exercise of the court's inherent power. Exactly the same considerations would come into play. And, as I understand it, your Lordships all agree that the directions sought should be given. [62] If the country of the principal winding up is a relevant country or territory for s 426 purposes and the liquidators in that country have requested English liquidators to remit to them the assets collected in England so that they (the principal liquidators) can, pursuant to the insolvency law of that country, implement a universal scheme of pari passu distribution to ordinary unsecured creditors, the request is one to which, in principle, the English liquidators ought, in my opinion, to accede. I agree, as I think is common ground, that the English liquidators should first discharge the debts of those creditors who, under the English insolvency scheme, are entitled to preferential payment. There may be other circumstances in which a refusal to remit assets pursuant to such a request might be justified. It has been suggested that a refusal would be justified if it would give rise to manifest injustice to a creditor. So indeed it might. But reliance simply on the fact that under the insolvency scheme applicable to the principal windingup there would be a significant class or classes of preferential creditors whose debts would not have priority under the English insolvency scheme is not, in my opinion, sufficient to justify a refusal. It would, in my opinion, as I hope I have made apparent, have been sufficient if the country of the principal winding up had not been a relevant country or territory for s 426 purposes. These four companies are Australian companies whose principal place of business, as well as their place of incorporation, was Australia. The Australian statutory scheme allows insurance and reinsurance creditors of insolvent insurance companies to be paid in priority to ordinary creditors. There is nothing unacceptably discriminatory or otherwise contrary to public policy in these statutory provisions. The general acceptability by English law standards of the Australian insolvency scheme is confirmed by the designation of Australia as a relevant country or territory for s 426 purposes. I can see no sufficient reason why the Australian liquidators' request for the remission of the English assets should not be acceded to. I would allow this appeal but repeat that I would do so on the footing that the power to accede to the Australian liquidators' request derives from s 426 and not from any inherent jurisdiction of the court. LORD WALKER: MY LORDS, [63] I have had the privilege of reading in draft the opinion of my noble and learned friend Lord Hoffmann. I am in full agreement with his opinion, which dispels several

34 obscurities on the authorities and clarifies the nature of the court's powers under s 426 of the Insolvency Act I too would allow this appeal and make the order requested by the Supreme Court of New South Wales. LORD NEUBERGER: MY LORDS, [64] This appeal concerns the English assets of four insolvent Australian insurance companies, in compulsory liquidation in Australia and in provisional liquidation in England, pursuant to the Australian liquidators' request. The question is whether those assets should be remitted to the Australian liquidators for distribution in accordance with the Australian insolvency regime, or whether they should be distributed here in accordance with the English insolvency regime. [65] Your Lordships all agree that the answer is that the assets should be remitted for distribution in accordance with the Australian insolvency regime, albeit that the Australian liquidators and the English provisional liquidators have very sensibly agreed what the practical consequences are to be in either case, as my noble and learned friend Lord Hoffmann explains in para 12 of his speech (which I have had the opportunity of seeing in draft), so that there will be no need for any formal remittal. However, there is disagreement as to the basis upon which the assets can be distributed in accordance with the Australian insolvency regime. Accordingly, I shall give my reasons for allowing the appeal, albeit that they can be expressed relatively shortly, as the relevant facts, statutory provisions, case law and the relevant principles are comprehensively covered in the preceding speeches. [66] The question I shall primarily address is whether the remittal of the English assets to the Australian liquidators for distribution in accordance with the Australian insolvency regime can be effected pursuant to the established judicial practice described in paras 8 and 9, or whether it can only be effected pursuant to s 426 of the Insolvency Act I have come to the conclusion that, while remittal of assets can be effected pursuant to established judicial practice, the power to do so where the distribution will not be in accordance with the English insolvency regime derives from s 426. [67] The main substantive features of the English insolvency regime in relation to unsecured creditors can be broadly summarised as follows. First, preferential creditors (listed in Sch 6 to the 1986 Act) enjoy priority on a pari passu basis as between themselves (sections 175 and 386 of the 1986 Act). Secondly, all other creditors rank behind them, also on a pari passu basis as between themselves (rule of the 1986 Rules). Thirdly, there is a mandatory set-off requirement (rule 4.90 of the 1986 Rules) as explained by Lord Hoffmann (albeit in a bankruptcy context) in Stein v Blake [1996] AC 243, [1995] 2 All ER 961, [1995] 2 BCLC 94. [68] As a matter of general principle, it seems to me that, at any rate in the absence of s 426(4) and (5), where a company is wound up in this country, its assets are held on terms that they must be applied in accordance with that statutory insolvency regime: see Ayerst v C & K (Construction) Ltd [1976] AC 167 at 176E to 177F, [1975] 2 All ER 537, [1975] 3 WLR 16. As Millett LJ put it in Mitchell v Carter [1997] 1 BCLC 673 at 686: the making of a winding-up order divests the company of the beneficial ownership of its assets which cease to be applicable for its own benefit. They become instead subject to a statutory scheme for distribution among the creditors and members of the company. [69] This principle applies in the case of an English liquidation of a foreign company. In particular, s 221(1) of the 1986 Act confirms that the provisions of that Act about winding up apply to unregistered companies, which includes foreign companies, in

35 the same way that they apply to English companies. That is confirmed by the judgment in Re International Tin Council [1987] Ch 419 at 446G-447B. As Millett J there explained, the application of the English insolvency regime applies in theory to all the assets of the foreign company, and in theory and practice to its assets within the jurisdiction. In the absence of a provision such as s 426, I therefore find it difficult to see on what basis an English court could have jurisdiction to disapply the English insolvency regime to assets in this jurisdiction of a company subject to a winding up order made by an English court. [70] Of course, in this case the companies have not been the subject of a winding up order in England, although winding-up petitions have been presented and provisional liquidators appointed. Further, as David Richards J said in para 184 of his judgment at first instance ([2005] EWHC 2125 Ch), there is a significant prospect that, in the absence of schemes of arrangement, winding-up orders would be made by the High Court in respect of each of the four companies. He went on to say, it was a principal function of the provisional liquidators to safeguard the assets of the companies for the benefit of those interested in their distribution in the event of a winding-up. Accordingly, he considered that he should not authorise them to do anything whose effect would be to undermine the proper working out of the statutory insolvency scheme which would be mandatory if winding-up orders were made. [71] That appears to me to be right. It seems clear that the companies are insolvent, and that the only reason that the English court has accepted jurisdiction is because the Australian courts have ordered them to be wound up because of their insolvency. Although no formal winding up orders have been made, provisional liquidators have been appointed ultimately because of the companies' insolvency. In those circumstances, I consider that the court's powers should not be more flexible or wider in connection with the remitting or distribution of assets than if formal winding up orders had been made. Accordingly, I approach the issue, as the parties and the courts below did, on that basis. [72] There appears to be no suggestion in any of the earlier authorities cited to your Lordships that the court, when exercising its jurisdiction to remit to another jurisdiction for distribution the assets of a company subject to a winding up order in this country, could authorise the distribution of those assets other than in accordance with the English insolvency regime. However, there are judicial observations which emphasise the mandatory nature of the English regime, although they are not directly concerned with the question of remittal, in relation to foreign insolvent companies. I have in mind the observations of Vaughan Williams J (whose decision was upheld by the Court of Appeal) in Re English Scottish and Australian Chartered Bank [1893] 3 Ch 385 at 394 and of Wynn-Parry J in Re Suidair International Airways Ltd [1951] Ch 165 at , as applied by Sir Richard Scott V-C, as he then was, in Re Bank of Credit and Commerce International SA (No 10) [1997] Ch 213 at 246D E. The relevant passages are quoted by my noble and learned friend, Lord Scott of Foscote (whose speech I have had the opportunity of seeing in draft) in para 60. [73] In paras 95 to 107 of his excellent judgment at first instance, David Richards J considered a number of cases in this jurisdiction, Canada and Australia, in which courts were invited to remit to foreign liquidators local assets of a foreign company which was being wound up. In all those cases, it was made clear that the court had to be satisfied that the foreign liquidators would distribute pari passu, in accordance with the domestic insolvency regime. Of course, it can be said that those cases merely emphasise the importance of the pari passu principle, but they appear to me to indicate that the courts concerned were seeking to ensure that the principles of their local insolvency regime were honoured.

36 [74] I accept that in no case where the court has been asked to exercise its power to remit assets to liquidators in another jurisdiction has it refused to do so on the grounds that the categories of preferential creditors, or other aspects, of that other jurisdiction's insolvency regime differed from those in this country. However, I do not consider that that argument goes anywhere, because, so far as I am aware, that point has not been raised in any case where the court has been invited to remit assets. Even if the court would have had power to remit in such circumstances at some point in the past, it seems to me that, absent s 426 of the 1986 Act, it would not have such power now. [75] I accept that, on this basis, the value of the English court's inherent ancillary liquidation power is very much more circumscribed than if it could effectively disapply, or authorise the disapplication of, the English insolvency regime. However, the fact that the English court has an inherent power to relieve an ancillary liquidator in this country from the duty of distributing the assets himself, and to order that the assets be remitted to be distributed by a foreign liquidator does not mean that it necessarily follows that those assets can then be distributed other than in accordance with the English insolvency regime. The fact that English assets are bound to be distributed in accordance with certain principles does not prevent the assets being passed to someone else so that they can be distributed in accordance with those principles, but it would prevent the passing on of those assets for distribution in accordance with different principles. If this is right, it means that the court's inherent power to remit assets is, I accept, of much more limited value than if the law were otherwise, but the power would nonetheless not be valueless: it could assist in achieving administrative convenience. [76] The notion that the court has inherent jurisdiction to remit English assets to liquidators in another jurisdiction on the basis that the insolvency regime of that jurisdiction would apply, seems to me to sit uneasily with the provisions of s 426(4) and (5), at least in relation to remittal of assets. The inherent jurisdiction to remit must be exercisable in relation to any other country whereas s 426 only applies to a relevant country or territory, ie one designated by the Secretary of State. If the courts had an inherent power to remit to a country with a different insolvency regime, either the courts could exercise that power in relation to a country which was not so designated, or s 426 impliedly restricts the inherent jurisdiction to designated states. The former possibility renders the significance of designation questionable in a case where remittal is sought; indeed it can be said to involve the inherent jurisdiction almost thwarting the statutory purpose. The latter possibility not only involves an implication as to the effect of s 426 which is not exactly obvious: it would mean that the inherent power (if it ever existed) had very little, if any, further purpose. [77] Accordingly, in agreement with Lord Scott, were it not for s 426, I would have been of the view that this appeal should be dismissed. [78] I should add that I agree with Lord Hoffmann when he says that the common law power to remit is about choice of jurisdiction, whereas s 426 is about choice of law, at least in relation to the present type of case. What s 426(5) says in terms is that an English court, to which an appropriate request is made, may apply... the insolvency law which is applicable by [the foreign court making the request]. Whether the English court does that in the present case by ordering the English provisional liquidators to distribute in accordance with the Australian regime, or whether it orders remittal of the assets to Australia in accordance with its common law powers, to enable the Australian liquidators to distribute in accordance with the Australian regime, is a decision for the English court in each case. However, the questions whether to remit assets to another country and whether to apply, or to permit the application of, the distribution law of that country are two different issues, although resolution of the latter question will no doubt often dictate the answer to the former question. I consider that the first of those questions is governed by the common law and the second is governed by s 426 of the 1986 Act.

37 [79] That leads me to the second aspect which I should deal with, namely the ultimate issue in this case: should the English court accede to the Australian liquidators' request to remit the English assets for distribution in accordance with the Australian insolvency regime? This aspect can be disposed of more quickly, as I agree with all your Lordships that this would be an appropriate case for remission of the English assets to Australia for distribution by the liquidators in accordance with Australian law. It is true that this will mean that some of the creditors will be worse off than under a distribution in accordance with the English insolvency regime, but, by the same token, it will mean that some of the creditors will be better off. That is almost inevitable where one applies any regime which differs in any way from the English regime. [80] More importantly, I do not consider that any fundamental principle of English insolvency law would be offended, or any unfairness would be perpetrated, by the application of the Australian insolvency regime. Under Australian law, preferential treatment is accorded to certain creditors of insurance companies, who would not have been given such treatment in English law. However, that does not in itself mean that the application of Australian regime should be rejected. Further, as my noble and learned friend, Lord Phillips of Worth Matravers (whose speech I have read in draft) points out, the companies are, and always have been, Australian insurance companies, and Australia has been designated as a relevant country or territory for s 426 purposes. Clearly the fact that Australia has been so designated cannot be the end of the matter, but it does indicate, at least in general terms, that the Secretary of State considers that the insolvency law of Australia is acceptable in principle in this jurisdiction. [81] More particularly, the notion of preferential creditors is, and long has been, part of our insolvency regime, and it is almost inevitable that different insolvency regimes will have slightly different categories of preferential creditors. It cannot be right that such differences should always, or (arguably) even frequently, be a bar to an order for remittal, as that would appear inconsistent with the purpose of s 426(4) and (5), especially in view of the slightly mystifying reference therein to the rules of private international law. The fact that the categories of preferential creditors have changed significantly in this jurisdiction more than once over the past fifteen years rather underlines the point. Further, there is nothing unreasonable or unfairly discriminatory in the application of the Australian statutory provisions with regard to preferential creditors in this case. On the contrary, as Lord Hoffmann and Lord Phillips point out in paras 32 and 40 respectively, since 2004 the English insolvency regime has now included preferential provisions for insurance companies which are very similar to the Australian regime. It is not as if the Australian regime would distribute assets between groups of unsecured creditors (whether preferential or not) other than on a pari passu basis, or has significantly different set-off rules from those which apply in this jurisdiction. [82] Accordingly, although I take the view that it would not have been open to an English court to make the order sought by the Australian liquidators in the absence of s 426(4) and (5) of the 1986 Act, I consider that a different answer is appropriate in light of s 426. David Richards J and the Court of Appeal ([2006] EWCA Civ 732) thought otherwise, but that was at least in part because they were constrained by the reasoning in Hughes v Hannover Ruckversicherungs-AG [1997] 1 BCLC 497 (much of which is unexceptionable as Lord Hoffmann and Lord Scott have said). [83] For these reasons, I too would allow this appeal.

38 EC Regulation on Insolvency Proceedings 2000 CHAPTER II RECOGNITION OF INSOLVENCY PROCEEDINGS Article 16 Principle 1. Any judgment opening insolvency proceedings handed down by a court of a Member State which has jurisdiction pursuant to Article 3 shall be recognised in all the other Member States from the time that it becomes effective in the State of the opening of proceedings. This rule shall also apply where, on account of his capacity, insolvency proceedings cannot be brought against the debtor in other Member States. 2. Recognition of the proceedings referred to in Article 3(1) shall not preclude the opening of the proceedings referred to in Article 3(2) by a court in another Member State. The latter proceedings shall be secondary insolvency proceedings within the meaning of Chapter III. Article 17 Effects of recognition 1. The judgment opening the proceedings referred to in Article 3(1) shall, with no further formalities, produce the same effects in any other Member State as under this law of the State of the opening of proceedings, unless this Regulation provides otherwise and as long as no proceedings referred to in Article 3(2) are opened in that other Member State. 2. The effects of the proceedings referred to in Article 3(2) may not be challenged in other Member States. Any restriction of the creditors' rights, in particular a stay or discharge, shall produce effects vis-à-vis assets situated within the territory of another Member State only in the case of those creditors who have given their consent. Article 18 Powers of the liquidator 1. The liquidator appointed by a court which has jurisdiction pursuant to Article 3(1) may exercise all the powers conferred on him by the law of the State of the opening of proceedings in another Member State, as long as no other insolvency proceedings have been opened there nor any preservation measure to the contrary has been taken there further to a request for the opening of insolvency proceedings in that State. He may in particular remove the debtor's assets from the territory of the Member State in which they are situated, subject to Articles 5 and The liquidator appointed by a court which has jurisdiction pursuant to Article 3(2) may in any other Member State claim through the courts or out of court that moveable property was removed from the territory of the State of the opening of proceedings to the territory of that other Member State after the opening of the insolvency proceedings. He may also bring any action to set aside which is in the interests of the creditors. 3. In exercising his powers, the liquidator shall comply with the law of the Member State within the territory of which he intends to take action, in particular with regard to procedures for the realisation of assets. Those powers may not include coercive measures or the right to rule on legal proceedings or disputes. Article 19

39 Proof of the liquidator's appointment The liquidator's appointment shall be evidenced by a certified copy of the original decision appointing him or by any other certificate issued by the court which has jurisdiction. A translation into the official language or one of the official languages of the Member State within the territory of which he intends to act may be required. No legalisation or other similar formality shall be required. Article 20 Return and imputation 1. A creditor who, after the opening of the proceedings referred to in Article 3(1) obtains by any means, in particular through enforcement, total or partial satisfaction of his claim on the assets belonging to the debtor situated within the territory of another Member State, shall return what he has obtained to the liquidator, subject to Articles 5 and In order to ensure equal treatment of creditors a creditor who has, in the course of insolvency proceedings, obtained a dividend on his claim shall share in distributions made in other proceedings only where creditors of the same ranking or category have, in those other proceedings, obtained an equivalent dividend. Article 21 Publication 1. The liquidator may request that notice of the judgment opening insolvency proceedings and, where appropriate, the decision appointing him, be published in any other Member State in accordance with the publication procedures provided for in that State. Such publication shall also specify the liquidator appointed and whether the jurisdiction rule applied is that pursuant to Article 3(1) or Article 3(2). 2. However, any Member State within the territory of which the debtor has an establishment may require mandatory publication. In such cases, the liquidator or any authority empowered to that effect in the Member State where the proceedings referred to in Article 3(1) are opened shall take all necessary measures to ensure such publication. Article 22 Registration in a public register 1. The liquidator may request that the judgment opening the proceedings referred to in Article 3(1) be registered in the land register, the trade register and any other public register kept in the other Member States. 2. However, any Member State may require mandatory registration. In such cases, the liquidator or any authority empowered to that effect in the Member State where the proceedings referred to in Article 3(1) have been opened shall take all necessary measures to ensure such registration. Article 23 Costs The costs of the publication and registration provided for in Articles 21 and 22 shall be regarded as costs and expenses incurred in the proceedings. Article 24 Honouring of an obligation to a debtor

40 1. Where an obligation has been honoured in a Member State for the benefit of a debtor who is subject to insolvency proceedings opened in another Member State, when it should have been honoured for the benefit of the liquidator in those proceedings, the person honouring the obligation shall be deemed to have discharged it if he was unaware of the opening of proceedings. 2. Where such an obligation is honoured before the publication provided for in Article 21 has been effected, the person honouring the obligation shall be presumed, in the absence of proof to the contrary, to have been unaware of the opening of insolvency proceedings; where the obligation is honoured after such publication has been effected, the person honouring the obligation shall be presumed, in the absence of proof to the contrary, to have been aware of the opening of proceedings. Article 25 Recognition and enforceability of other judgments 1. Judgments handed down by a court whose judgment concerning the opening of proceedings is recognised in accordance with Article 16 and which concern the course and closure of insolvency proceedings, and compositions approved by that court shall also be recognised with no further formalities. Such judgments shall be enforced in accordance with Articles 31 to 51, with the exception of Article 34(2), of the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, as amended by the Conventions of Accession to this Convention. The first subparagraph shall also apply to judgments deriving directly from the insolvency proceedings and which are closely linked with them, even if they were handed down by another court. The first subparagraph shall also apply to judgments relating to preservation measures taken after the request for the opening of insolvency proceedings. 2. The recognition and enforcement of judgments other than those referred to in paragraph 1 shall be governed by the Convention referred to in paragraph 1, provided that that Convention is applicable. 3. The Member States shall not be obliged to recognise or enforce a judgment referred to in paragraph 1 which might result in a limitation of personal freedom or postal secrecy. Article 26 (6) Public policy Any Member State may refuse to recognise insolvency proceedings opened in another Member State or to enforce a judgment handed down in the context of such proceedings where the effects of such recognition or enforcement would be manifestly contrary to that State's public policy, in particular its fundamental principles or the constitutional rights and liberties of the individual.

41 RE TXU EUROPE GERMAN FINANCE BV; RE TXU EUROPE IRELAND 1 [2005] BPIR 209 CourtChancery Division Mr Registrar Baister Judgment date29 October 2004 Liquidation Whether possible to wind up foreign company as a creditors voluntary liquidation Companies Act 1985, ss 378, 735(1) Insolvency Act 1986, ss 73(1), 84, 221 Insolvency Rules 1986, rr 0.03, 7.62 Insolvency Act 1986 (Amendment) (No 2) Regulations 2002 EC Regulation on Insolvency Proceedings 2000, Arts 1(1), 2(a), 3 Companies in the TXU group were incorporated in The Netherlands and the Republic of Ireland. On 22 October 2004, resolutions were passed purporting to wind up the companies under s 84 of the Insolvency Act 1986 (the 1986 Act). The liquidators sought orders under r 7.62 of the Insolvency Rules 1986 confirming the creditors voluntary winding up of each of the two companies. Held granting the orders sought (1) The centre of main interests for each of the two companies was in the UK. (2) By reason of the amendment to s 221(4) of the 1986 Act by the Insolvency Act 1986 (Amendment) (No 2) Regulations 2002, the statutory restriction on winding up a foreign company as an unregistered company by means of a voluntary winding up had gone. (3) By Arts 2(a) and 3(1) of the Council Regulation (EC) No 1346/2000 of 29 May 2000 on Insolvency Proceedings, there was jurisdiction to allow a company that has a main centre of interests in England to be wound up in England under creditors voluntary winding up. Re BRAC Rent-A-Car International Inc followed. Statutory provisions referred tostatutory provisions considered Companies Act 1985, ss 378, 735 Insolvency Act 1986, Part I, s 8, Part IV, ss 73, 84, 89, 221 Insolvency Rules 1986 (SI 1986/1925), rr 0.3, 7.62, Parts 1, 2, 4, 7 13 Insolvency Act 1986 (Amendment) (No 2) Regulations 2002 (SI 2002/1240), Arts 1(1), 2(a), 3(1), 4(1) Council Regulation (EC) No 1346/2000 of 29 May 2000 on Insolvency Proceedings (2000) OJ L 160/1 Case referred to BRAC Rent-A-Car International Inc, Re [2003] EWHC 128 (Ch), [2003] 1 WLR 1421, [2003] 2 All ER 201, [2003] 1 BCLC 470, ChD Laurence Elliott (solicitor) for the liquidators MR REGISTRAR BAISTER: [1] On 25 October 2004 I made orders pursuant to r 7.62 of the Insolvency Rules 1986 (the 1986 Rules) and the Council Regulation (EC) No 1346/2000 of 29 May 2000 on Insolvency Proceedings (2000) OJ L 160/1 (the EC Regulation) confirming the creditors voluntary winding up of the above named companies. Although it is common to make such orders without a hearing (see r 7.62(6)(a)), I declined to do so in these cases since the applications raised what appeared to me to be a novel question, namely [2005] BPIR 210

42 whether, following the coming into force of the EC Regulation, it was possible to wind up a foreign company as a creditors voluntary liquidation. Having heard argument on that question I made the orders sought but indicated that because the matter was of some importance to the applicant and was, perhaps, of wider significance, I would give full reasons for my decision that there was jurisdiction to make the orders sought. [2] The starting point is r 7.62 of the 1986 Rules which begins: Where a company has passed a resolution for voluntary (1) winding up, and no declaration under section 89 has been made, the liquidator may apply to court for an order confirming the creditors voluntary winding up for the purpose of the EC Regulation. The remainder of the rule deals with formal matters. The rule is in Chapter 10 of Part 7 of the third group of Parts. Rule 0.3 of the 1986 Rules provides: Parts 1, 2 and 4 of the Rules, and Parts 7 to 13 as they (1) relate to company insolvency, apply in relation to companies which the courts in England and Wales have jurisdiction to wind up. It follows that the jurisdiction to confirm a creditors voluntary winding up under r 7.62 can only arise in relation to a company which the court would have jurisdiction to wind up. [3] Section 73 of the Insolvency Act 1986 (the 1986 Act) describes the two modes of winding up recognised by English law: The winding up of a company, within the meaning given to (1) that expression by section 735 of the Companies Act, may be either voluntary (Chapters II, III, IV and V in this Part) or by the court (Chapter VI). Section 735 of the Companies Act 1985 defines a company as follows: In this Act (1) (a) company means a company formed and registered under this Act, or an existing company. (The definition of an existing company is not relevant for present purposes.) [4] The effect of s 73(1) of the 1986 Act and s 735(1) of the Companies Act 1985 would thus appear to be to limit jurisdiction to wind up under the former Act to companies formed and registered under the latter Act, ie English (and Welsh) companies. Thus, where I use the expression foreign company in this judgment I mean a company which has not been formed and registered under the Companies Act but one formed and registered, or incorporated, in another jurisdiction. [5] Voluntary winding up is governed by Chapter II of Part IV of the First Group of Parts of the 1986 Act. Part IV is headed Winding up of companies registered under the Companies Acts. Section 84 of Chapter II deals with the circumstances in which a company may be wound up voluntarily and provides, so far as is relevant: A company may be wound up voluntarily (1)

43 (a) [ ] ; (b) if the company resolves by special resolution that it be wound up voluntarily; (c) if the company resolves by extraordinary resolution to the effect that it cannot by reason of its liabilities continue its business and that it is advisable to wind up. The terms special resolution and extraordinary resolution have particular meanings in English law. They are defined by s 378 of the Companies Act [6] TXU Europe German Finance BV is a company incorporated in The Netherlands. TXU Europe Ireland 1 is a company incorporated in the Republic of Ireland. In the papers submitted in conjunction with the applications there appear resolutions said to have been passed on 22 October 2004 pursuant to s 84(1)(b) of the 1986 Act: That it has been proved to the satisfaction of this meeting that the Company cannot by reason of its liabilities continue its business and that the Company be wound up voluntarily. Included are also certificates appointing the applicant and two others as joint liquidators of each company. [7] The definition of company to which I have referred in para [3] above, the prerequisite to a voluntary winding up of a resolution of the kind referred to in para [5] above and the capacity (or otherwise) of a foreign company to pass such a resolution led me to doubt whether a creditors voluntary winding up of a foreign company was possible and thus whether the court had power to confirm such a winding up. It seemed to me that these were matters which required the court to make some investigation. I was strengthened in that view by the possibility contemplated by r 7.62(6)(a) of the application being dealt with at a hearing and by the fact that the rule contemplated the exercise of a discretion: subr (5) provides: On an application under this Rule the court may confirm the creditors voluntary winding up. (emphasis added) [8] In spite of the apparent restriction on the jurisdiction to wind up which flows from the provisions I have considered above, the English and Welsh courts have for some time had jurisdiction to wind up a foreign company as an unregistered company. That jurisdiction flows from Part V of the first group of Parts, and specifically s 221 of the 1986 Act. Until recently the jurisdiction was limited to compulsory winding up, since subs (4) provided: No unregistered company shall be wound up under this Act voluntarily. However, the subsection has been amended by the Insolvency Act 1986 (Amendment) (No 2) Regulations 2002 so as to replace the full stop by a comma and add the words: except in accordance with the EC Regulation. Thus the statutory restriction on winding up a foreign company as an unregistered company by means of a voluntary winding up has gone, as has any that might arise under r That

44 does not of itself, however, grant a jurisdiction to wind up voluntarily unless, it seems, the jurisdiction can be said to flow from the EC Regulation itself. [9] Article 3(1) of the EC Regulation provides: The courts of the Member State within the territory of which the centre of a debtor s main interests is situated shall have jurisdiction to open insolvency proceedings. In the case of a company or legal person, the place of the registered office shall be presumed to be the centre of its main interests in the absence of proof to the contrary. Article 2(a) defines insolvency proceedings as the collective proceedings referred to in Art 1(1) and listed in Annex A. Annex A includes creditors voluntary winding up (with confirmation by the court). [10] I had some concern about this since the court had no power to initiate a creditors voluntary winding up. It was the resolution that started the process. Mr Elliott submitted, however, that a purposive approach had to be taken when interpreting the EC Regulation. Such an approach, he contended, supported by authority, pointed against a narrow interpretation. [11] In support of that submission Mr Elliott refers, in his note submitted at the hearing, to the explanatory notes to the Insolvency Act 1986 (Amendment) (No 2) Regulations 2002, which indicate that the words added to s 221(4) of the 1986 Act were added to allow companies in relation to which the English courts could open proceedings under the EC Regulation to take advantage of the various procedures under the Act. He also relied on the commentary on s 221(4) of Professors Sealy and Milman in their Annotated Guide to the Insolvency Legislation (Sweet & Maxwell, 7th edn, 2004), in which the authors say: It will thus now be possible for (say) a company incorporated in Ireland which has its centre of main interests in England to be wound up in England under a creditors voluntary winding up. The administration of such a liquidation will presumably be governed by English law. (p 237) [12] Considerable assistance in support of this conclusion can be derived from the judgement of Lloyd J in Re BRAC Rent-A-Car International Inc [2003] EWHC 128 (Ch), [2003] 1 WLR 1421, [2003] BPIR 531. In that case the judge considered whether the English courts had jurisdiction to make an administration order in relation to a company incorporated outside a Member State but having its centre of main interests in a Member State. He was assisted in concluding that it had by an amendment made to s 8 of the 1986 Act by the addition of a new subs (7), which explicitly provided that an administration order could be made by virtue of Art 3 of the EC Regulation (unfortunately this has not been made so explicit in relation to voluntary liquidation). However, it is clear from para [9] of his judgment that this was not central to his reasoning, as he said: [2005] BPIR 213 This provision [s 8(7)] is, strictly speaking, unnecessary because the EC Regulation referred to has direct effect in all the Member States Accordingly, the question whether this court has jurisdiction to make an administration order in relation to a company requires reference to the regulation. In para [14] of his judgment he said that the question he had to decide turned on Art 3. In para [19] he said: Miss Hutton [counsel for judgment creditors who appeared on the application] showed me a commentary on the 1986 Act which refers to s 8(7) and to Art 3 of the regulation and says that it follows that an administration order may now be made against a company that is incorporated in another Member State, but which satisfies

45 the conditions of having the centre of its main interests in the United Kingdom, or, in the case of secondary proceedings, has an establishment here. Plainly that is correct. The commentary does not expressly consider whether the relevant jurisdiction extends to a company incorporated outside the Community but which satisfies the conditions. In para [24] he accepted a submission from counsel for the company that the EC Regulation gave jurisdiction to the courts of a Member State to open insolvency proceedings in relation to a company incorporated outside the Community, if the centre of the company s main interests was in that Member State. He concluded (para [31]): Thus, according to the literal reading of the Regulation, the only test for the application of the regulation in relation to a given debtor is whether the centre of the debtor s main interests is in a relevant Member State and not where a debtor which is a legal person is incorporated. This is supported by the purposive interpretation. For those reasons, I held that the regulation does give the courts of a Member State jurisdiction to open insolvency proceedings in relation to a corporate debtor incorporated in Delaware, such as the company, if the centre of the debtor s main interests is within the Member State, as is the case in this instance. [13] In the case of both companies with which I am concerned I am satisfied that the centre of main interests is in the UK. That is apparent from each company s sworn statement of affairs and is implicit in the statement at para 4 of the liquidator s application that the EC Regulation will apply and that the proceedings will be main proceedings which in turn is confirmed by his affidavit in support of each application. That, it seems to me, is sufficient to rebut the presumption created by Art 3(1) of the EC Regulation. [14] I conclude from the judgment of Lloyd J in Re BRAC Rent-A-Car International Inc [2003] EWHC 128 (Ch), [2003] 1 WLR 1421, [2003] BPIR 531 that that is sufficient to found jurisdiction. The thrust of his judgment (and of his concluding paragraph) is, in my view, general and is not limited by the fact that the company with which he was concerned was incorporated in a state other than a Member State. [15] Accordingly, on the basis that the EC Regulation has direct effect, that Art 3 gives jurisdiction to open insolvency proceedings, which may include a creditors voluntary winding up, and having regard to the judgment of Lloyd J in Re BRAC Rent-A-Car International Inc [2003] EWHC 128 (Ch), [2003] 1 WLR 1421, [2003] BPIR 531, I conclude that it is possible for there to be a creditors voluntary winding up of a foreign company. [16] It does not follow from the existence of that possibility, however, that there is no further problem. The possibility of a creditors voluntary winding up gives rise to another question, namely how a foreign company can pass the requisite resolution under s 84(1)(b) of the 1986 Act. It seemed to me that that was a relevant consideration for the exercise of discretion. [17] Mr Elliott told me that foreign law advice had been taken on the point and that that advice had been that such a resolution could be passed under both Dutch and Irish law. Indeed, I understand that the requirements of Dutch law are somewhat less stringent than their English law equivalent. Furthermore, Mr Elliott told me that inquiries had been made of the relevant equivalents of our registrar of companies who had confirmed that the winding up would be recognised in both The Netherlands and Ireland for the purpose of dissolution. [18] I raised another issue with Mr Elliott which in my view was important for the proper exercise of discretion, namely the manner in which the winding up of the companies would be conducted. As Mr Elliott rightly pointed out in his note, Art 4(1) of the EC Regulation provides that the law applicable to insolvency proceedings, save as otherwise provided, should be the that of the Member State within the territory of which the proceedings were opened. Thus both companies would be wound up under English law. I had two concerns about this. The first was practical: how, for example, was English insolvency law to be reconciled with any Dutch provisions (whether legislative or arising under the company s

46 statutes) that might otherwise govern its winding up? Secondly, in view of the fact that both companies centre of main interests had only moved to the UK earlier this year and that the statement of affairs of one of the companies disclosed liabilities to tax authorities both here and in another jurisdiction, how could I be sure that any winding up here was bona fide in the interests of all creditors and not designed, for example, to deprive, say, a foreign tax authority of a higher dividend that it might be able to secure in a domestic winding up? [19] Mr Elliott accepted my proposition that the liquidator had a duty to treat creditors fairly and properly and assured me that these problems had been addressed and that special measures were to be taken to see that the liquidations did not result in prejudice. I did not seek detailed information. I am content in this case, to which considerable thought appears to have been given by the liquidator and his advisors, to accept that assurance. In any event, the legislation contains ample safeguards which creditors can invoke to secure their rights. It may be that there will be cases in which the court will require, before making an order under r 7.62, evidence dealing more fully with the circumstances in which the UK has come to be or is said to be the centre of main interests of a foreign company and dealing with the question of creditors rights (for example whether any apparent forum shopping could undermine preferential rights of employees or some other class of creditor). It may even be that, in certain circumstances, expert foreign law evidence will be required by the court. There may also be occasions on which an application should be dealt with on notice to creditors or representative creditors. I am satisfied from what I have heard that these are not such cases. [20] There is another factor which goes to the exercise of discretion in these cases. That is that a related company is the subject of an administration order in this jurisdiction. That point may well not be decisive, but it seems to me that it is proper to take into account the likelihood that keeping all related matters under one roof could well result in a smoother administration of the affairs of all the connected or related companies and achieve consequential savings in costs. [21] Whilst the majority of applications for orders under r 7.62 are straightforward (so much so that subr (7) provides that a member of court staff may deal with them), these applications demonstrate that they can give rise to matters which demand proper consideration. The practice of this court is to refer all such applications to a registrar. In my view that should remain the practice. There may even be cases where an application should be referred to the judge. Solicitors Herbert Smith for the liquidators

47 STATUTORY INSTRUMENTS 2006 No INSOLVENCY COMPANIES INDIVIDUALS The Cross-Border Insolvency Regulations 2006 Made 3rd April 2006 Coming into force 4th April 2006 These Regulations are made in exercise of the powers conferred by section 14 of the Insolvency Act 2000[1]. In accordance with section 14(6) of that Act, the Lord Chancellor and the Scottish Ministers have agreed to the making of these Regulations. A draft of these Regulations has been laid before Parliament in accordance with section 14(5) of that Act and approved by a resolution of each House of Parliament. Accordingly, the Secretary of State makes the following Regulations: Citation, commencement and interpretation 1. (1) These Regulations may be cited as the Cross-Border Insolvency Regulations 2006 and shall come into force on the day after the day on which they are made. (2) In these Regulations "the UNCITRAL Model Law" means the Model Law on cross-border insolvency as adopted by the United Nations Commission on International Trade Law on 30th May UNCITRAL Model Law to have force of law 2. (1) The UNCITRAL Model Law shall have the force of law in Great Britain in the form set out in Schedule 1 to these Regulations (which contains the UNCITRAL Model Law with certain modifications to adapt it for application in Great Britain). (2) Without prejudice to any practice of the courts as to the matters which may be considered apart from this paragraph, the following documents may be considered in ascertaining the meaning or effect of any provision of the UNCITRAL Model Law as set out in Schedule 1 to these Regulations (a) the UNCITRAL Model Law; (b) any documents of the United Nations Commission on International Trade Law and its working group relating to the preparation of the UNCITRAL Model Law; and (c) the Guide to Enactment of the UNCITRAL Model Law

48 (UNCITRAL document A/CN.9/442)[2] prepared at the request of the United Nations Commission on International Trade Law made in May Modification of British insolvency law 3. (1) British insolvency law (as defined in article 2 of the UNCITRAL Model Law as set out in Schedule 1 to these Regulations) and Part 3 of the Insolvency Act 1986[3] shall apply with such modifications as the context requires for the purpose of giving effect to the provisions of these Regulations. (2) In the case of any conflict between any provision of British insolvency law or of Part 3 of the Insolvency Act 1986 and the provisions of these Regulations, the latter shall prevail. Procedural matters in England and Wales 4. Schedule 2 to these Regulations (which makes provision about procedural matters in England and Wales in connection with the application of the UNCITRAL Model Law as set out in Schedule 1 to these Regulations) shall have effect. Procedural matters in Scotland 5. Schedule 3 to these Regulations (which makes provision about procedural matters in Scotland in connection with the application of the UNCITRAL Model Law as set out in Schedule 1 to these Regulations) shall have effect. Notices delivered to the registrar of companies 6. Schedule 4 to these Regulations (which makes provision about notices delivered to the registrar of companies under these Regulations) shall have effect. Co-operation between courts exercising jurisdiction in relation to crossborder insolvency 7. (1) An order made by a court in either part of Great Britain in the exercise of jurisdiction in relation to the subject matter of these Regulations shall be enforced in the other part of Great Britain as if it were made by a court exercising the corresponding jurisdiction in that other part. (2) However, nothing in paragraph (1) requires a court in either part of Great Britain to enforce, in relation to property situated in that part, any order made by a court in the other part of Great Britain. (3) The courts having jurisdiction in relation to the subject matter of these Regulations in either part of Great Britain shall assist the courts having the corresponding jurisdiction in the other part of Great Britain. Disapplication of section 388 of the Insolvency Act Nothing in section 388 of the Insolvency Act 1986[4] applies to anything done by a foreign representative (a) under or by virtue of these Regulations; (b) in relation to relief granted or cooperation or coordination provided under these Regulations.

49 Gerry Sutcliffe Parliamentary Under Secretary of State for Employment Relations and Consumer Affairs, Department of Trade and Industry 3rd April 2006 I agree to the making of these Regulations 29th March 2006 Falconer of Thoroton, C The Scottish Ministers agree to the making of these Regulations Allan Wilson A member of the Scottish Executive 30th March 2006 Regulation 2(1) SCHEDULE 1 UNCITRAL MODEL LAW ON CROSS-BORDER INSOLVENCY 1. This Law applies where CHAPTER I GENERAL PROVISIONS Article 1. Scope of Application (a) assistance is sought in Great Britain by a foreign court or a foreign representative in connection with a foreign proceeding; or (b) assistance is sought in a foreign State in connection with a proceeding under British insolvency law; or (c) a foreign proceeding and a proceeding under British insolvency law in respect of the same debtor are taking place concurrently; or

50 (d) creditors or other interested persons in a foreign State have an interest in requesting the commencement of, or participating in, a proceeding under British insolvency law. 2. This Law does not apply to a proceeding concerning (a) a company holding an appointment under Chapter 1 of Part 2 of the Water Industry Act 1991[5] (water and sewage undertakers) or a qualifying licensed water supplier within the meaning of section 23(6) of that Act (meaning and effect of special administration order); (b) Scottish Water established under section 20 of the Water Industry (Scotland) Act 2002 (Scottish Water)[6]; (c) a protected railway company within the meaning of section 59 of the Railways Act 1993[7] (railway administration order) (including that section as it has effect by virtue of section 19 of the Channel Tunnel Rail Link Act 1996[8] (administration)); (d) a licence company within the meaning of section 26 of the Transport Act 2000[9] (air traffic services); (e) a public private partnership company within the meaning of section 210 of the Greater London Authority Act 1999[10] (public-private partnership agreement); (f) a protected energy company within the meaning of section 154(5) of the Energy Act 2004[11] (energy administration orders); (g) a building society within the meaning of section 119 of the Building Societies Act 1986[12] (interpretation); (h) a UK credit institution or an EEA credit institution or any branch of either such institution as those expressions are defined by regulation 2 of the Credit Institutions (Reorganisation and Winding Up) Regulations 2004[13] (interpretation); (i) a third country credit institution within the meaning of regulation 36 of the Credit Institutions (Reorganisation and Winding Up) Regulations 2004 (interpretation of this Part); (j) a person who has permission under or by virtue of Parts 4 or 19 of the Financial Services and Markets Act 2000[14] to effect or carry out contracts of insurance; (k) an EEA insurer within the meaning of regulation 2 of the Insurers (Reorganisation and Winding Up) Regulations 2004[15] (interpretation); (l) a person (other than one included in paragraph 2(j)) pursuing the activity of reinsurance who has received authorisation for that activity from a competent authority within an EEA State; or

51 (m) any of the Concessionaires within the meaning of section 1 of the Channel Tunnel Act 1987[16]. 3. In paragraph 2 of this article (a) in sub-paragraph (j) the reference to "contracts of insurance" must be construed in accordance with (i) section 22 of the Financial Services and Markets Act 2000 (classes of regulated activity and categories of investment); (ii) any relevant order under that section; and (iii) Schedule 2 to that Act (regulated activities); (b) in sub-paragraph (1) "EEA State" means a State, other than the United Kingdom, which is a contracting party to the agreement on the European Economic Area signed at Oporto on 2 May The court shall not grant any relief, or modify any relief already granted, or provide any co-operation or coordination, under or by virtue of any of the provisions of this Law if and to the extent that such relief or modified relief or cooperation or coordination would (a) be prohibited under or by virtue of (i) Part 7 of the Companies Act 1989[17]; (ii) Part 3 of the Financial Markets and Insolvency (Settlement Finality) Regulations 1999[18]; or (iii) Part 3 of the Financial Collateral Arrangements (No. 2) Regulations 2003[19]; in the case of a proceeding under British insolvency law; or (b) interfere with or be inconsistent with any rights of a collateral taker under Part 4 of the Financial Collateral Arrangements (No. 2) Regulations 2003 which could be exercised in the case of such a proceeding. 5. Where a foreign proceeding regarding a debtor who is an insured in accordance with the provisions of the Third Parties (Rights against Insurers) Act 1930[20] is recognised under this Law, any stay and suspension referred to in article 20(1) and any relief granted by the court under article 19 or 21 shall not apply to or affect (a) any transfer of rights of the debtor under that Act; or (b) any claim, action, cause or proceeding by a third party against an insurer under or in respect of rights of the debtor transferred under that Act.

52 6. Any suspension under this Law of the right to transfer, encumber or otherwise dispose of any of the debtor's assets (a) is subject to section 26 of the Land Registration Act 2002[21] where owner's powers are exercised in relation to a registered estate or registered charge; (b) is subject to section 52 of the Land Registration Act 2002, where the powers referred to in that section are exercised by the proprietor of a registered charge; and (c) in any other case, shall not bind a purchaser of a legal estate in good faith for money or money's worth unless the purchaser has express notice of the suspension. 7. In paragraph 6 (a) "owner's powers" means the powers described in section 23 of the Land Registration Act 2002 and "registered charge" and "registered estate" have the same meaning as in section 132(1) of that Act; and (b) "legal estate" and "purchaser" have the same meaning as in section 17 of the Land Charges Act 1972[22]. For the purposes of this Law Article 2. Definitions (a) "British insolvency law" means (i) in relation to England and Wales, provision extending to England and Wales and made by or under the Insolvency Act 1986[23] (with the exception of Part 3 of that Act) or by or under that Act as extended or applied by or under any other enactment (excluding these Regulations); and (ii) in relation to Scotland, provision extending to Scotland and made by or under the Insolvency Act 1986 (with the exception of Part 3 of that Act), the Bankruptcy (Scotland) Act 1985[24] or by or under those Acts as extended or applied by or under any other enactment (excluding these Regulations); (b) "British insolvency officeholder" means (i) the official receiver within the meaning of section 399 of the Insolvency Act 1986[25] when acting as liquidator, provisional liquidator, trustee, interim receiver or nominee or supervisor of a voluntary arrangement; (ii) a person acting as an insolvency practitioner within the meaning of section 388[26] of that Act but shall not include a person acting as an administrative receiver; and (iii) the Accountant in Bankruptcy within the meaning of

53 section 1 of the Bankruptcy (Scotland) Act 1985[27] when acting as interim or permanent trustee; (c) "the court" except as otherwise provided in articles 14(4) and 23(6)(b), means in relation to any matter the court which in accordance with the provisions of article 4 of this Law has jurisdiction in relation to that matter; (d) "the EC Insolvency Regulation" means Council Regulation (EC) No. 1346/2000 of 29 May 2000 on Insolvency Proceedings[28]; (e) "establishment" means any place of operations where the debtor carries out a non-transitory economic activity with human means and assets or services; (f) "foreign court" means a judicial or other authority competent to control or supervise a foreign proceeding; (g) "foreign main proceeding" means a foreign proceeding taking place in the State where the debtor has the centre of its main interests; (h) "foreign non-main proceeding" means a foreign proceeding, other than a foreign main proceeding, taking place in a State where the debtor has an establishment within the meaning of sub-paragraph (e) of this article; (i) "foreign proceeding" means a collective judicial or administrative proceeding in a foreign State, including an interim proceeding, pursuant to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganisation or liquidation; (j) "foreign representative" means a person or body, including one appointed on an interim basis, authorised in a foreign proceeding to administer the reorganisation or the liquidation of the debtor's assets or affairs or to act as a representative of the foreign proceeding; (k) "hire-purchase agreement" includes a conditional sale agreement, a chattel leasing agreement and a retention of title agreement; (l) "section 426 request" means a request for assistance in accordance with section 426 of the Insolvency Act 1986[29] made to a court in any part of the United Kingdom; (m) "secured creditor" in relation to a debtor, means a creditor of the debtor who holds in respect of his debt a security over property of the debtor; (n) "security" means (i) in relation to England and Wales, any mortgage, charge, lien or other security; and (ii) in relation to Scotland, any security (whether heritable or

54 moveable), any floating charge and any right of lien or preference and any right of retention (other than a right of compensation or set off); (o) in the application of Articles 20 and 23 to Scotland, "an individual" means any debtor within the meaning of the Bankruptcy (Scotland) Act 1985; (p) in the application of this Law to Scotland, references howsoever expressed to (i) "filing" an application or claim are to be construed as references to lodging an application or submitting a claim respectively; (ii) "relief" and "standing" are to be construed as references to "remedy" and "title and interest" respectively; and (iii) a "stay" are to be construed as references to restraint, except in relation to continuation of actions or proceedings when they shall be construed as a reference to sist; and (q) references to the law of Great Britain include a reference to the law of either part of Great Britain (including its rules of private international law). Article 3. International obligations of Great Britain under the EC Insolvency Regulation To the extent that this Law conflicts with an obligation of the United Kingdom under the EC Insolvency Regulation, the requirements of the EC Insolvency Regulation prevail. Article 4. Competent court 1. The functions referred to in this Law relating to recognition of foreign proceedings and cooperation with foreign courts shall be performed by the High Court and assigned to the Chancery Division, as regards England and Wales and the Court of Session as regards Scotland. 2. Subject to paragraph 1 of this article, the court in either part of Great Britain shall have jurisdiction in relation to the functions referred to in that paragraph if (a) the debtor has (i) a place of business; or (ii) in the case of an individual, a place of residence; or (iii) assets, situated in that part of Great Britain; or

55 (b) the court in that part of Great Britain considers for any other reason that it is the appropriate forum to consider the question or provide the assistance requested. 3. In considering whether it is the appropriate forum to hear an application for recognition of a foreign proceeding in relation to a debtor, the court shall take into account the location of any court in which a proceeding under British insolvency law is taking place in relation to the debtor and the likely location of any future proceedings under British insolvency law in relation to the debtor. Article 5. Authorisation of British insolvency officeholders to act in a foreign State A British insolvency officeholder is authorised to act in a foreign State on behalf of a proceeding under British insolvency law, as permitted by the applicable foreign law. Article 6. Public policy exception Nothing in this Law prevents the court from refusing to take an action governed by this Law if the action would be manifestly contrary to the public policy of Great Britain or any part of it. Article 7. Additional assistance under other laws Nothing in this Law limits the power of a court or a British insolvency officeholder to provide additional assistance to a foreign representative under other laws of Great Britain. Article 8. Interpretation In the interpretation of this Law, regard is to be had to its international origin and to the need to promote uniformity in its application and the observance of good faith. CHAPTER II ACCESS OF FOREIGN REPRESENTATIVES AND CREDITORS TO COURTS IN GREAT BRITAIN Article 9. Right of direct access A foreign representative is entitled to apply directly to a court in Great Britain. Article 10. Limited jurisdiction The sole fact that an application pursuant to this Law is made to a court in Great Britain by a foreign representative does not subject the foreign representative or the foreign assets and affairs of the debtor to the jurisdiction of the courts of Great Britain or any part of it for any purpose other than the application.

56 Article 11. Application by a foreign representative to commence a proceeding under British insolvency law A foreign representative appointed in a foreign main proceeding or foreign non-main proceeding is entitled to apply to commence a proceeding under British insolvency law if the conditions for commencing such a proceeding are otherwise met. Article 12. Participation of a foreign representative in a proceeding under British insolvency law Upon recognition of a foreign proceeding, the foreign representative is entitled to participate in a proceeding regarding the debtor under British insolvency law. Article 13. Access of foreign creditors to a proceeding under British insolvency law 1. Subject to paragraph 2 of this article, foreign creditors have the same rights regarding the commencement of, and participation in, a proceeding under British insolvency law as creditors in Great Britain. 2. Paragraph 1 of this article does not affect the ranking of claims in a proceeding under British insolvency law, except that the claim of a foreign creditor shall not be given a lower priority than that of general unsecured claims solely because the holder of such a claim is a foreign creditor. 3. A claim may not be challenged solely on the grounds that it is a claim by a foreign tax or social security authority but such a claim may be challenged (a) on the ground that it is in whole or in part a penalty, or (b) on any other ground that a claim might be rejected in a proceeding under British insolvency law. Article 14. Notification to foreign creditors of a proceeding under British insolvency law 1. Whenever under British insolvency law notification is to be given to creditors in Great Britain, such notification shall also be given to the known creditors that do not have addresses in Great Britain. The court may order that appropriate steps be taken with a view to notifying any creditor whose address is not yet known. 2. Such notification shall be made to the foreign creditors individually, unless (a) the court considers that under the circumstances some other form of notification would be more appropriate; or (b) the notification to creditors in Great Britain is to be by advertisement only, in which case the notification to the known foreign creditors may be by advertisement in such foreign newspapers as the British insolvency officeholder considers most appropriate for ensuring

57 that the content of the notification comes to the notice of the known foreign creditors. 3. When notification of a right to file a claim is to be given to foreign creditors, the notification shall (a) indicate a reasonable time period for filing claims and specify the place for their filing; (b) indicate whether secured creditors need to file their secured claims; and (c) contain any other information required to be included in such a notification to creditors pursuant to the law of Great Britain and the orders of the court. 4. In this article "the court" means the court which has jurisdiction in relation to the particular proceeding under British insolvency law under which notification is to be given to creditors. CHAPTER III RECOGNITION OF A FOREIGN PROCEDDING AND RELIEF Article 15. Application for recognition of a foreign proceeding 1. A foreign representative may apply to the court for recognition of the foreign proceeding in which the foreign representative has been appointed. 2. An application for recognition shall be accompanied by (a) a certified copy of the decision commencing the foreign proceeding and appointing the foreign representative; or (b) a certificate from the foreign court affirming the existence of the foreign proceeding and of the appointment of the foreign representative; or (c) in the absence of evidence referred to in sub-paragraphs (a) and (b), any other evidence acceptable to the court of the existence of the foreign proceeding and of the appointment of the foreign representative. 3. An application for recognition shall also be accompanied by a statement identifying all foreign proceedings, proceedings under British insolvency law and section 426 requests in respect of the debtor that are known to the foreign representative. 4. The foreign representative shall provide the court with a translation into English of documents supplied in support of the application for recognition. Article 16. Presumptions concerning recognition

58 1. If the decision or certificate referred to in paragraph 2 of article 15 indicates that the foreign proceeding is a proceeding within the meaning of sub-paragraph (i) of article 2 and that the foreign representative is a person or body within the meaning of sub-paragraph (j) of article 2, the court is entitled to so presume. 2. The court is entitled to presume that documents submitted in support of the application for recognition are authentic, whether or not they have been legalised. 3. In the absence of proof to the contrary, the debtor's registered office, or habitual residence in the case of an individual, is presumed to be the centre of the debtor's main interests. Article 17. Decision to recognise a foreign proceeding 1. Subject to article 6, a foreign proceeding shall be recognised if (a) it is a foreign proceeding within the meaning of sub-paragraph (i) of article 2; (b) the foreign representative applying for recognition is a person or body within the meaning of sub-paragraph (j) of article 2; (c) the application meets the requirements of paragraphs 2 and 3 of article 15; and (d) the application has been submitted to the court referred to in article The foreign proceeding shall be recognised (a) as a foreign main proceeding if it is taking place in the State where the debtor has the centre of its main interests; or (b) as a foreign non-main proceeding if the debtor has an establishment within the meaning of sub-paragraph (e) of article 2 in the foreign State. 3. An application for recognition of a foreign proceeding shall be decided upon at the earliest possible time. 4. The provisions of articles 15 to 16, this article and article 18 do not prevent modification or termination of recognition if it is shown that the grounds for granting it were fully or partially lacking or have fully or partially ceased to exist and in such a case, the court may, on the application of the foreign representative or a person affected by recognition, or of its own motion, modify or terminate recognition, either altogether or for a limited time, on such terms and conditions as the court thinks fit. Article 18. Subsequent information From the time of filing the application for recognition of the foreign proceeding, the foreign representative shall inform the court promptly of

59 (a) any substantial change in the status of the recognised foreign proceeding or the status of the foreign representative's appointment; and (b) any other foreign proceeding, proceeding under British insolvency law or section 426 request regarding the same debtor that becomes known to the foreign representative. Article 19. Relief that may be granted upon application for recognition of a foreign proceeding 1. From the time of filing an application for recognition until the application is decided upon, the court may, at the request of the foreign representative, where relief is urgently needed to protect the assets of the debtor or the interests of the creditors, grant relief of a provisional nature, including (a) staying execution against the debtor's assets; (b) entrusting the administration or realisation of all or part of the debtor's assets located in Great Britain to the foreign representative or another person designated by the court, in order to protect and preserve the value of assets that, by their nature or because of other circumstances, are perishable, susceptible to devaluation or otherwise in jeopardy; and (c) any relief mentioned in paragraph 1 (c), (d) or (g) of article Unless extended under paragraph 1(f) of article 21, the relief granted under this article terminates when the application for recognition is decided upon. 3. The court may refuse to grant relief under this article if such relief would interfere with the administration of a foreign main proceeding. Article 20. Effects of recognition of a foreign main proceeding 1. Upon recognition of a foreign proceeding that is a foreign main proceeding, subject to paragraph 2 of this article (a) commencement or continuation of individual actions or individual proceedings concerning the debtor's assets, rights, obligations or liabilities is stayed; (b) execution against the debtor's assets is stayed; and (c) the right to transfer, encumber or otherwise dispose of any assets of the debtor is suspended. 2. The stay and suspension referred to in paragraph 1 of this article shall be (a) the same in scope and effect as if the debtor, in the case of an individual, had been adjudged bankrupt under the Insolvency Act

60 1986[30] or had his estate sequestrated under the Bankruptcy (Scotland) Act 1985[31], or, in the case of a debtor other than an individual, had been made the subject of a winding-up order under the Insolvency Act 1986; and (b) subject to the same powers of the court and the same prohibitions, limitations, exceptions and conditions as would apply under the law of Great Britain in such a case, and the provisions of paragraph 1 of this article shall be interpreted accordingly. 3. Without prejudice to paragraph 2 of this article, the stay and suspension referred to in paragraph 1 of this article, in particular, does not affect any right (a) to take any steps to enforce security over the debtor's property; (b) to take any steps to repossess goods in the debtor's possession under a hire-purchase agreement; (c) exercisable under or by virtue of or in connection with the provisions referred to in article 1(4); or (d) of a creditor to set off its claim against a claim of the debtor, being a right which would have been exercisable if the debtor, in the case of an individual, had been adjudged bankrupt under the Insolvency Act 1986 or had his estate sequestrated under the Bankruptcy (Scotland) Act 1985, or, in the case of a debtor other than an individual, had been made the subject of a winding-up order under the Insolvency Act Paragraph 1(a) of this article does not affect the right to (a) commence individual actions or proceedings to the extent necessary to preserve a claim against the debtor; or (b) commence or continue any criminal proceedings or any action or proceedings by a person or body having regulatory, supervisory or investigative functions of a public nature, being an action or proceedings brought in the exercise of those functions. 5. Paragraph 1 of this article does not affect the right to request or otherwise initiate the commencement of a proceeding under British insolvency law or the right to file claims in such a proceeding. 6. In addition to and without prejudice to any powers of the court under or by virtue of paragraph 2 of this article, the court may, on the application of the foreign representative or a person affected by the stay and suspension referred to in paragraph 1 of this article, or of its own motion, modify or terminate such stay and suspension or any part of it, either altogether or for a limited time, on such terms and conditions as the court thinks fit.

61 Article 21. Relief that may be granted upon recognition of a foreign proceeding 1. Upon recognition of a foreign proceeding, whether main or non-main, where necessary to protect the assets of the debtor or the interests of the creditors, the court may, at the request of the foreign representative, grant any appropriate relief, including (a) staying the commencement or continuation of individual actions or individual proceedings concerning the debtor's assets, rights, obligations or liabilities, to the extent they have not been stayed under paragraph 1(a) of article 20; (b) staying execution against the debtor's assets to the extent it has not been stayed under paragraph 1(b) of article 20; (c) suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor to the extent this right has not been suspended under paragraph 1(c) of article 20; (d) providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor's assets, affairs, rights, obligations or liabilities; (e) entrusting the administration or realisation of all or part of the debtor's assets located in Great Britain to the foreign representative or another person designated by the court; (f) extending relief granted under paragraph 1 of article 19; and (g) granting any additional relief that may be available to a British insolvency officeholder under the law of Great Britain, including any relief provided under paragraph 43 of Schedule B1 to the Insolvency Act 1986[32]. 2. Upon recognition of a foreign proceeding, whether main or non-main, the court may, at the request of the foreign representative, entrust the distribution of all or part of the debtor's assets located in Great Britain to the foreign representative or another person designated by the court, provided that the court is satisfied that the interests of creditors in Great Britain are adequately protected. 3. In granting relief under this article to a representative of a foreign nonmain proceeding, the court must be satisfied that the relief relates to assets that, under the law of Great Britain, should be administered in the foreign nonmain proceeding or concerns information required in that proceeding. 4. No stay under paragraph 1(a) of this article shall affect the right to commence or continue any criminal proceedings or any action or proceedings by a person or body having regulatory, supervisory or investigative functions of a public nature, being an action or proceedings brought in the exercise of those functions. Article 22. Protection of creditors and other interested persons

62 1. In granting or denying relief under article 19 or 21, or in modifying or terminating relief under paragraph 3 of this article or paragraph 6 of article 20, the court must be satisfied that the interests of the creditors (including any secured creditors or parties to hire-purchase agreements) and other interested persons, including if appropriate the debtor, are adequately protected. 2. The court may subject relief granted under article 19 or 21 to conditions it considers appropriate, including the provision by the foreign representative of security or caution for the proper performance of his functions. 3. The court may, at the request of the foreign representative or a person affected by relief granted under article 19 or 21, or of its own motion, modify or terminate such relief. Article 23. Actions to avoid acts detrimental to creditors 1. Subject to paragraphs 6 and 9 of this article, upon recognition of a foreign proceeding, the foreign representative has standing to make an application to the court for an order under or in connection with sections 238, 239, 242, 243, 244, 245, 339, 340, 342A, 343, and 423 of the Insolvency Act 1986[33] and sections 34, 35, 36, 36A and 61 of the Bankruptcy (Scotland) Act 1985[34]. 2. Where the foreign representative makes such an application ("an article 23 application"), the sections referred to in paragraph 1 of this article and sections 240, 241, 341, 342, 342B to 342F, 424 and 425 of the Insolvency Act 1986[35] and sections 36B and 36C of the Bankruptcy (Scotland) Act 1985[36] shall apply (a) whether or not the debtor, in the case of an individual, has been adjudged bankrupt or had his estate sequestrated, or, in the case of a debtor other than an individual, is being wound up or is in administration, under British insolvency law; and (b) with the modifications set out in paragraph 3 of this article. 3. The modifications referred to in paragraph 2 of this article are as follows (a) for the purposes of sections 241(2A)(a) and 342(2A)(a) of the Insolvency Act 1986, a person has notice of the relevant proceedings if he has notice of the opening of the relevant foreign proceeding; (b) for the purposes of sections 240(1) and 245(3) of that Act, the onset of insolvency shall be the date of the opening of the relevant foreign proceeding; (c) the periods referred to in sections 244(2), 341(1)(a) to (c) and 343(2) of that Act shall be periods ending with the date of the opening of the relevant foreign proceeding; (d) for the purposes of sections 242(3)(a), (3)(b) and 243(1) of that Act, the date on which the winding up of the company commences or it enters administration shall be the date of the opening of the relevant

63 foreign proceeding; and (e) for the purposes of sections 34(3)(a), (3)(b), 35(1)(c), 36(1)(a) and (1)(b) and 61(2) of the Bankruptcy (Scotland) Act 1985, the date of sequestration or granting of the trust deed shall be the date of the opening of the relevant foreign proceeding. 4. For the purposes of paragraph 3 of this article, the date of the opening of the foreign proceeding shall be determined in accordance with the law of the State in which the foreign proceeding is taking place, including any rule of law by virtue of which the foreign proceeding is deemed to have opened at an earlier time. 5. When the foreign proceeding is a foreign non-main proceeding, the court must be satisfied that the article 23 application relates to assets that, under the law of Great Britain, should be administered in the foreign non-main proceeding. 6. At any time when a proceeding under British insolvency law is taking place regarding the debtor (a) the foreign representative shall not make an article 23 application except with the permission of (i) in the case of a proceeding under British insolvency law taking place in England and Wales, the High Court; or (ii) in the case of a proceeding under British insolvency law taking place in Scotland, the Court of Session; and (b) references to "the court" in paragraphs 1, 5 and 7 of this article are references to the court in which that proceeding is taking place. 7. On making an order on an article 23 application, the court may give such directions regarding the distribution of any proceeds of the claim by the foreign representative, as it thinks fit to ensure that the interests of creditors in Great Britain are adequately protected. 8. Nothing in this article affects the right of a British insolvency officeholder to make an application under or in connection with any of the provisions referred to in paragraph 1 of this article. 9. Nothing in paragraph 1 of this article shall apply in respect of any preference given, floating charge created, alienation, assignment or relevant contributions (within the meaning of section 342A(5) of the Insolvency Act 1986) made or other transaction entered into before the date on which this Law comes into force. Article 24. Intervention by a foreign representative in proceedings in Great Britain Upon recognition of a foreign proceeding, the foreign representative may, provided the requirements of the law of Great Britain are met, intervene in any proceedings in which the debtor is a party.

64 CHAPTER IV COOPERATION WITH FOREIGN COURTS AND FOREIGN REPRESENTATIVES Article 25. Cooperation and direct communication between a court of Great Britain and foreign courts or foreign representatives 1. In matters referred to in paragraph 1 of article 1, the court may cooperate to the maximum extent possible with foreign courts or foreign representatives, either directly or through a British insolvency officeholder. 2. The court is entitled to communicate directly with, or to request information or assistance directly from, foreign courts or foreign representatives. Article 26. Cooperation and direct communication between the British insolvency officeholder and foreign courts or foreign representatives 1. In matters referred to in paragraph 1 of article 1, a British insolvency officeholder shall to the extent consistent with his other duties under the law of Great Britain, in the exercise of his functions and subject to the supervision of the court, cooperate to the maximum extent possible with foreign courts or foreign representatives. 2. The British insolvency officeholder is entitled, in the exercise of his functions and subject to the supervision of the court, to communicate directly with foreign courts or foreign representatives. Article 27. Forms of cooperation Cooperation referred to in articles 25 and 26 may be implemented by any appropriate means, including (a) appointment of a person to act at the direction of the court; (b) communication of information by any means considered appropriate by the court; (c) coordination of the administration and supervision of the debtor's assets and affairs; (d) approval or implementation by courts of agreements concerning the coordination of proceedings; (e) coordination of concurrent proceedings regarding the same debtor. CHAPTER V CONCURRENT PROCEEDINGS

65 Article 28. Commencement of a proceeding under British insolvency law after recognition of a foreign main proceeding After recognition of a foreign main proceeding, the effects of a proceeding under British insolvency law in relation to the same debtor shall, insofar as the assets of that debtor are concerned, be restricted to assets that are located in Great Britain and, to the extent necessary to implement cooperation and coordination under articles 25, 26 and 27, to other assets of the debtor that, under the law of Great Britain, should be administered in that proceeding. Article 29. Coordination of a proceeding under British insolvency law and a foreign proceeding Where a foreign proceeding and a proceeding under British insolvency law are taking place concurrently regarding the same debtor, the court may seek cooperation and coordination under articles 25, 26 and 27, and the following shall apply (a) when the proceeding in Great Britain is taking place at the time the application for recognition of the foreign proceeding is filed (i) any relief granted under article 19 or 21 must be consistent with the proceeding in Great Britain; and (ii) if the foreign proceeding is recognised in Great Britain as a foreign main proceeding, article 20 does not apply; (b) when the proceeding in Great Britain commences after the filing of the application for recognition of the foreign proceeding (i) any relief in effect under article 19 or 21 shall be reviewed by the court and shall be modified or terminated if inconsistent with the proceeding in Great Britain; (ii) if the foreign proceeding is a foreign main proceeding, the stay and suspension referred to in paragraph 1 of article 20 shall be modified or terminated pursuant to paragraph 6 of article 20, if inconsistent with the proceeding in Great Britain; and (iii) any proceedings brought by the foreign representative by virtue of paragraph 1 of article 23 before the proceeding in Great Britain commenced shall be reviewed by the court and the court may give such directions as it thinks fit regarding the continuance of those proceedings; and (c) in granting, extending or modifying relief granted to a representative of a foreign non-main proceeding, the court must be satisfied that the relief relates to assets that, under the law of Great Britain, should be administered in the foreign non-main proceeding or concerns information required in that proceeding. Article 30. Coordination of more than one foreign proceeding

66 In matters referred to in paragraph 1 of article 1, in respect of more than one foreign proceeding regarding the same debtor, the court may seek cooperation and coordination under articles 25, 26 and 27, and the following shall apply (a) any relief granted under article 19 or 21 to a representative of a foreign non-main proceeding after recognition of a foreign main proceeding must be consistent with the foreign main proceeding; (b) if a foreign main proceeding is recognised after the filing of an application for recognition of a foreign non-main proceeding, any relief in effect under article 19 or 21 shall be reviewed by the court and shall be modified or terminated if inconsistent with the foreign main proceeding; and (c) if, after recognition of a foreign non-main proceeding, another foreign non-main proceeding is recognised, the court shall grant, modify or terminate relief for the purpose of facilitating coordination of the proceedings. Article 31. Presumption of insolvency based on recognition of a foreign main proceeding In the absence of evidence to the contrary, recognition of a foreign main proceeding is, for the purpose of commencing a proceeding under British insolvency law, proof that the debtor is unable to pay its debts or, in relation to Scotland, is apparently insolvent within the meaning given to those expressions under British insolvency law. Article 32. Rule of payment in concurrent proceedings Without prejudice to secured claims or rights in rem, a creditor who has received part payment in respect of its claim in a proceeding pursuant to a law relating to insolvency in a foreign State may not receive a payment for the same claim in a proceeding under British insolvency law regarding the same debtor, so long as the payment to the other creditors of the same class is proportionately less than the payment the creditor has already received. Regulation 4 SCHEDULE 2 PROCEDURAL MATTERS IN ENGLAND AND WALES Interpretation 1. (1) In this Schedule PART 1 INTRODUCTORY PROVISIONS

67 "the 1986 Act" means the Insolvency Act 1986[37]; "article 21 relief application" means an application to the court by a foreign representative under article 21(1) or (2) of the Model Law for relief; "business day" means any day other than a Saturday, a Sunday, Christmas Day, Good Friday or a day which is a bank holiday in England and Wales under or by virtue of the Banking and Financial Dealings Act 1971[38]; "CPR" means the Civil Procedure Rules 1998[39] and "CPR" followed by a Part or rule by number means the Part or rule with that number in those Rules; "enforcement officer" means an individual who is authorised to act as an enforcement officer under the Courts Act 2003[40]; "file in court" and "file with the court" means deliver to the court for filing; "the Gazette" means the London Gazette; "interim relief application" means an application to the court by a foreign representative under article 19 of the Model Law for interim relief; "main proceedings" means proceedings opened in accordance with Article 3(1) of the EC Insolvency Regulation and falling within the definition of insolvency proceedings in Article 2(a) of the EC Insolvency Regulation; "member State liquidator" means a person falling within the definition of liquidator in Article 2(b) of the EC Insolvency Regulation appointed in proceedings to which it applies in a member State other than the United Kingdom; "the Model Law" means the UNCITRAL Model Law as set out in Schedule 1 to these Regulations; "modification or termination order" means an order by the court pursuant to its powers under the Model Law modifying or terminating recognition of a foreign proceeding, the stay and suspension referred to in article 20(1) or any part of it or any relief granted under article 19 or 21 of the Model Law; "originating application" means an application to the court which is not an application in pending proceedings before the court; "ordinary application" means any application to the court other than an originating application; "practice direction" means a direction as to the practice and procedure of any court within the scope of the CPR; "recognition application" means an application to the court by a foreign representative in accordance with article 15 of the Model Law for an order recognising the foreign proceeding in which he has been appointed; "recognition order" means an order by the court recognising a proceeding the subject of a recognition application as a foreign main proceeding or foreign non-main proceeding, as appropriate; "relevant company" means a company within the meaning of section 735(1) of the Companies Act 1985[41] or an unregistered company within the meaning of Part 5 of the 1986 Act which is subject to a requirement imposed by virtue of section 690A[42], 691(1)[43] or 718[44] of the Companies Act 1985; "review application" means an application to the court for a modification or termination order;

68 "the Rules" means the Insolvency Rules 1986[45] and "Rule" followed by a number means the rule with that number in those Rules; "secondary proceedings" means proceedings opened in accordance with Articles 3(2) and 3(3) of the EC Insolvency Regulation and falling within the definition of winding up proceedings in Article 2(c) of the EC Insolvency Regulation; "territorial proceedings" means proceedings opened in accordance with Articles 3(2) and 3(4) of the EC Insolvency Regulation and falling within the definition of insolvency proceedings in Article 2(a) of the EC Insolvency Regulation. (2) Expressions defined in the Model Law have the same meaning when used in this Schedule. (3) In proceedings under these Regulations, "Registrar" means (a) a Registrar in Bankruptcy of the High Court; and (b) where the proceedings are in a district registry, the district judge. (4) References to the "venue" for any proceedings or attendance before the court, are to the time, date and place for the proceedings or attendance. (5) References in this Schedule to ex parte hearings shall be construed as references to hearings without notice being served on any other party, and references to applications made ex parte as references to applications made without notice being served on any other party; and other references which include the expression "ex parte" shall be similarly construed. (6) References in this Schedule to a debtor who is of interest to the Financial Services Authority are references to a debtor who (a) is, or has been, an authorised person within the meaning of section 31 of the Financial Services and Markets Act 2000[46] (authorised persons); (b) is, or has been, an appointed representative within the meaning of section 39 (exemption of appointed representatives) of that Act; or (c) is carrying on, or has carried on, a regulated activity in contravention of the general prohibition. (7) In sub-paragraph (6) "the general prohibition" has the meaning given by section 19 of the Financial Services and Markets Act 2000 and the reference to a "regulated activity" must be construed in accordance with (a) section 22 of that Act (classes of regulated activity and categories of investment); (b) any relevant order under that section; and (c) Schedule 2 to that Act (regulated activities). (8) References in this Schedule to a numbered form are to the form that bears that number in Schedule 5.

69 PART 2 APPLICATIONS TO COURT FOR RECOGNITION OF FOREIGN PROCEEDINGS Affidavit in support of recognition application 2. A recognition application shall be in Form ML 1 and shall be supported by an affidavit sworn by the foreign representative complying with paragraph 4. Form and content of application 3. The application shall state the following matters (a) the name of the applicant and his address for service within England and Wales; (b) the name of the debtor in respect of which the foreign proceeding is taking place; (c) the name or names in which the debtor carries on business in the country where the foreign proceeding is taking place and in this country, if other than the name given under sub-paragraph (b); (d) the principal or last known place of business of the debtor in Great Britain (if any) and, in the case of an individual, his usual or last known place of residence in Great Britain (if any); (e) any registered number allocated to the debtor under the Companies Act 1985; (f) brief particulars of the foreign proceeding in respect of which recognition is applied for, including the country in which it is taking place and the nature of the proceeding; (g) that the foreign proceeding is a proceeding within the meaning of article 2(i) of the Model Law; (h) that the applicant is a foreign representative within the meaning of article 2(j) of the Model Law; (i) the address of the debtor's centre of main interests and, if different, the address of its registered office or habitual residence, as appropriate; and (j) if the debtor does not have its centre of main interests in the country where the foreign proceeding is taking place, whether the debtor has an establishment within the meaning of article 2(e) of the Model Law in that country, and if so, its address. Contents of affidavit in support 4. (1) There shall be attached to the application an affidavit in support which shall contain or have exhibited to it

70 (a) the evidence and statement required under article 15(2) and (3) respectively of the Model Law; (b) any other evidence which in the opinion of the applicant will assist the court in deciding whether the proceeding the subject of the application is a foreign proceeding within the meaning of article 2(i) of the Model Law and whether the applicant is a foreign representative within the meaning of article 2(j) of the Model Law; (c) evidence that the debtor has its centre of main interests or an establishment, as the case may be, within the country where the foreign proceeding is taking place; and (d) any other matters which in the opinion of the applicant will assist the court in deciding whether to make a recognition order. (2) The affidavit shall state whether, in the opinion of the applicant, the EC Insolvency Regulation applies to any of the proceedings identified in accordance with article 15(3) of the Model Law and, if so, whether those proceedings are main proceedings, secondary proceedings or territorial proceedings. (3) The affidavit shall also have exhibited to it the translations required under article 15(4) of the Model Law and a translation in English of any other document exhibited to the affidavit which is in a language other than English. (4) All translations referred to in sub-paragraph (3) must be certified by the translator as a correct translation. The hearing and powers of court 5. (1) On hearing a recognition application the court may in addition to its powers under the Model Law to make a recognition order (a) dismiss the application; (b) adjourn the hearing conditionally or unconditionally; (c) make any other order which the court thinks appropriate. (2) If the court makes a recognition order, it shall be in Form ML 2. Notification of subsequent information 6. (1) The foreign representative shall set out any subsequent information required to be given to the court under article 18 of the Model Law in a statement which he shall attach to Form ML 3 and file with the court. (2) The statement shall include (a) details of the information required to be given under article 18 of the Model Law; and (b) in the case of any proceedings required to be notified to the court under that article, a statement as to whether, in the opinion of the foreign representative, any of those proceedings are main proceedings,

71 secondary proceedings or territorial proceedings under the EC Insolvency Regulation. (3) The foreign representative shall send a copy of the Form ML 3 and attached statement filed with the court to the following (a) the debtor; and (b) those persons referred to in paragraph 26(3). PART 3 APPLICATIONS FOR RELIEF UNDER THE MODEL LAW Application for interim relief affidavit in support 7. (1) An interim relief application must be supported by an affidavit sworn by the foreign representative stating (a) the grounds on which it is proposed that the interim relief applied for should be granted; (b) details of any proceeding under British insolvency law taking place in relation to the debtor; (c) whether, to the foreign representative's knowledge, an administrative receiver or receiver or manager of the debtor's property is acting in relation to the debtor; (d) an estimate of the value of the assets of the debtor in England and Wales in respect of which relief is applied for; (e) whether, to the best of the knowledge and belief of the foreign representative, the interests of the debtor's creditors (including any secured creditors or parties to hire-purchase agreements) and any other interested parties, including if appropriate the debtor, will be adequately protected; (f) whether, to the best of the foreign representative's knowledge and belief, the grant of any of the relief applied for would interfere with the administration of a foreign main proceeding; and (g) all other matters that in the opinion of the foreign representative will assist the court in deciding whether or not it is appropriate to grant the relief applied for. Service of interim relief application not required 8. Unless the court otherwise directs, it shall not be necessary to serve the interim relief application on, or give notice of it to, any person. The hearing and powers of court 9. On hearing an interim relief application the court may in addition to its powers under the Model Law to make an order granting interim relief under article 19 of the Model Law

72 (a) dismiss the application; (b) adjourn the hearing conditionally or unconditionally; (c) make any other order which the court thinks appropriate. Application for relief under article 21 of the Model Law affidavit in support 10. An article 21 relief application must be supported by an affidavit sworn by the foreign representative stating (a) the grounds on which it is proposed that the relief applied for should be granted; (b) an estimate of the value of the assets of the debtor in England and Wales in respect of which relief is applied for; (c) in the case of an application by a foreign representative who is or believes that he is a representative of a foreign non-main proceeding, the reasons why the applicant believes that the relief relates to assets that, under the law of Great Britain, should be administered in the foreign non-main proceeding or concerns information required in that proceeding; (d) whether, to the best of the knowledge and belief of the foreign representative, the interests of the debtor's creditors (including any secured creditors or parties to hire-purchase agreements) and any other interested parties, including if appropriate the debtor, will be adequately protected; and (e) all other matters that in the opinion of the foreign representative will assist the court in deciding whether or not it is appropriate to grant the relief applied for. The hearing and powers of court 11. On hearing an article 21 relief application the court may in addition to its powers under the Model Law to make an order granting relief under article 21 of the Model Law (a) dismiss the application; (b) adjourn the hearing conditionally or unconditionally; (c) make any other order which the court thinks appropriate. PART 4 REPLACEMENT OF FOREIGN REPRESENTATIVE Application for confirmation of status of replacement foreign representative 12. (1) This paragraph applies where following the making of a recognition order the foreign representative dies or for any other reason ceases

73 to be the foreign representative in the foreign proceeding in relation to the debtor. (2) In this paragraph "the former foreign representative" shall mean the foreign representative referred to in sub-paragraph (1). (3) If a person has succeeded the former foreign representative or is otherwise holding office as foreign representative in the foreign proceeding in relation to the debtor, that person may apply to the court for an order confirming his status as replacement foreign representative for the purpose of proceedings under these Regulations. Contents of application and affidavit in support 13. (1) An application under paragraph 12(3) shall in addition to the matters required to be stated by paragraph 19(2) state the following matters (a) the name of the replacement foreign representative and his address for service within England and Wales; (b) details of the circumstances in which the former foreign representative ceased to be foreign representative in the foreign proceeding in relation to the debtor (including the date on which he ceased to be the foreign representative); (c) details of his own appointment as replacement foreign representative in the foreign proceeding (including the date of that appointment). (2) The application shall be accompanied by an affidavit in support sworn by the applicant which shall contain or have attached to it (a) a certificate from the foreign court affirming (i) the cessation of the appointment of the former foreign representative as foreign representative; and (ii) the appointment of the applicant as the foreign representative in the foreign proceeding; or (b) in the absence of such a certificate, any other evidence acceptable to the court of the matters referred to in paragraph (a); and (c) a translation in English of any document exhibited to the affidavit which is in a language other than English. (3) All translations referred to in paragraph (c) must be certified by the translator as a correct translation. The hearing and powers of court 14. (1) On hearing an application under paragraph 12(3) the court may (a) make an order confirming the status of the replacement foreign representative as foreign representative for the purpose of proceedings under these Regulations;

74 (b) dismiss the application; (c) adjourn the hearing conditionally or unconditionally; (d) make an interim order; (e) make any other order which the court thinks appropriate, including in particular an order making such provision as the court thinks fit with respect to matters arising in connection with the replacement of the foreign representative. (2) If the court dismisses the application, it may also if it thinks fit make an order terminating recognition of the foreign proceeding and (a) such an order may include such provision as the court thinks fit with respect to matters arising in connection with the termination; and (b) paragraph 15 shall not apply to such an order. PART 5 REVIEWS OF COURT ORDERS Reviews of court orders where court makes order of its own motion 15. (1) The court shall not of its own motion make a modification or termination order unless the foreign representative and the debtor have either (a) had an opportunity of being heard on the question; or (b) consented in writing to such an order. (2) Where the foreign representative or the debtor desires to be heard on the question of such an order, the court shall give all relevant parties notice of a venue at which the question will be considered and may give directions as to the issues on which it requires evidence. (3) For the purposes of sub-paragraph (2), all relevant parties means the foreign representative, the debtor and any other person who appears to the court to have an interest justifying his being given notice of the hearing. (4) If the court makes a modification or termination order, the order may include such provision as the court thinks fit with respect to matters arising in connection with the modification or termination. Review application affidavit in support 16. A review application must be supported by an affidavit sworn by the applicant stating (a) the grounds on which it is proposed that the relief applied for should be granted;

75 (b) whether, to the best of the knowledge and belief of the applicant, the interests of the debtor's creditors (including any secured creditors or parties to hire-purchase agreements) and any other interested parties, including if appropriate the debtor, will be adequately protected; and (c) all other matters that in the opinion of the applicant will assist the court in deciding whether or not it is appropriate to grant the relief applied for. Hearing of review application and powers of the court 17. On hearing a review application, the court may in addition to its powers under the Model Law to make a modification or termination order (a) dismiss the application; (b) adjourn the hearing conditionally or unconditionally; (c) make an interim order; (d) make any other order which the court thinks appropriate, including an order making such provision as the court thinks fit with respect to matters arising in connection with the modification or termination. PART 6 COURT PROCEDURE AND PRACTICE WITH REGARD TO PRINCIPAL APPLICATIONS AND ORDERS Preliminary and interpretation 18. (1) This Part applies to (a) any of the following applications made to the court under these Regulations (i) a recognition application; (ii) an article 21 relief application; (iii) an application under paragraph 12(3) for an order confirming the status of a replacement foreign representative; (iv) a review application; and (b) any of the following orders made by the court under these Regulations (i) a recognition order; (ii) an order granting interim relief under article 19 of the Model Law; (iii) an order granting relief under article 21 of the Model Law;

76 (iv) an order confirming the status of a replacement foreign representative; and (v) a modification or termination order. Form and contents of application 19. (1) Subject to sub-paragraph (4) every application to which this Part applies shall be an ordinary application and shall be in Form ML 5. (2) Each application shall be in writing and shall state (a) the names of the parties; (b) the nature of the relief or order applied for or the directions sought from the court; (c) the names and addresses of the persons (if any) on whom it is intended to serve the application; (d) the names and addresses of all those persons on whom these Regulations require the application to be served (so far as known to the applicant); and (e) the applicant's address for service. (3) The application must be signed by the applicant if he is acting in person, or, when he is not so acting, by or on behalf of his solicitor. (4) This paragraph does not apply to a recognition application. Filing of application 20. (1) The application (and all supporting documents) shall be filed with the court, with a sufficient number of copies for service and use as provided by paragraph 21(2). (2) Each of the copies filed shall have applied to it the seal of the court and be issued to the applicant; and on each copy there shall be endorsed the date and time of filing. (3) The court shall fix a venue for the hearing of the application and this also shall be endorsed on each copy of the application issued under subparagraph (2). Service of the application 21. (1) In sub-paragraph (2), references to the application are to a sealed copy of the application issued by the court together with any affidavit in support of it and any documents exhibited to the affidavit. (2) Unless the court otherwise directs, the application shall be served on the following persons, unless they are the applicant (a) on the foreign representative; (b) on the debtor;

77 (c) if a British insolvency officeholder is acting in relation to the debtor, on him; (d) if any person has been appointed an administrative receiver of the debtor or, to the knowledge of the foreign representative, as a receiver or manager of the property of the debtor in England and Wales, on him; (e) if a member State liquidator has been appointed in main proceedings in relation to the debtor, on him; (f) if to the knowledge of the foreign representative a foreign representative has been appointed in any other foreign proceeding regarding the debtor, on him; (g) if there is pending in England and Wales a petition for the winding up or bankruptcy of the debtor, on the petitioner; (h) on any person who to the knowledge of the foreign representative is or may be entitled to appoint an administrator of the debtor under paragraph 14 of Schedule B1 to the 1986 Act[47] (appointment of administrator by holder of qualifying floating charge); and (i) if the debtor is a debtor who is of interest to the Financial Services Authority, on that Authority. Manner in which service to be effected 22. (1) Service of the application in accordance with paragraph 21(2) shall be effected by the applicant, or his solicitor, or by a person instructed by him or his solicitor, not less than 5 business days before the date fixed for the hearing. (2) Service shall be effected by delivering the documents to a person's proper address or in such other manner as the court may direct. (3) A person's proper address is any which he has previously notified as his address for service within England and Wales; but if he has not notified any such address or if for any reason service at such address is not practicable, service may be effected as follows (a) (subject to sub-paragraph (4)) in the case of a company incorporated in England and Wales, by delivery to its registered office; (b) in the case of any other person, by delivery to his usual or last known address or principal place of business in Great Britain. (4) If delivery to a company's registered office is not practicable, service may be effected by delivery to its last known principal place of business in Great Britain. (5) Delivery of documents to any place or address may be made by leaving them there or sending them by first class post in accordance with the provisions of paragraphs 70 and 75(1).

78 Proof of service 23. (1) Service of the application shall be verified by an affidavit of service in Form ML 6, specifying the date on which, and the manner in which, service was effected. (2) The affidavit of service, with a sealed copy of the application exhibited to it, shall be filed with the court as soon as reasonably practicable after service, and in any event not less than 1 business day before the hearing of the application. In case of urgency 24. Where the case is one of urgency, the court may (without prejudice to its general power to extend or abridge time limits) (a) hear the application immediately, either with or without notice to, or the attendance of, other parties; or (b) authorise a shorter period of service than that provided for by paragraph 22(1), and any such application may be heard on terms providing for the filing or service of documents, or the carrying out of other formalities, as the court thinks fit. The hearing 25. (1) At the hearing of the application, the applicant and any of the following persons (not being the applicant) may appear or be represented (a) the foreign representative; (b) the debtor and, in the case of any debtor other than an individual, any one or more directors or other officers of the debtor, including (i) where applicable, any person registered under Part 23 of the Companies Act 1985[48] as authorised to represent the debtor in respect of its business in England and Wales; (ii) in the case of a debtor which is a partnership, any person who is an officer of the partnership within the meaning of article 2 of the Insolvent Partnerships Order 1994[49]; (c) if a British insolvency officeholder is acting in relation to the debtor, that person; (d) if any person has been appointed an administrative receiver of the debtor or as a receiver or manager of the property of the debtor in England and Wales, that person; (e) if a member State liquidator has been appointed in main proceedings in relation to the debtor, that person; (f) if a foreign representative has been appointed in any other foreign proceeding regarding the debtor, that person;

79 (g) any person who has presented a petition for the winding up or bankruptcy of the debtor in England and Wales; (h) any person who is or may be entitled to appoint an administrator of the debtor under paragraph 14 of Schedule B1 to the 1986 Act (appointment of administrator by holder of qualifying floating charge); (i) if the debtor is a debtor who is of interest to the Financial Services Authority, that Authority; and (j) with the permission of the court, any other person who appears to have an interest justifying his appearance. Notification and advertisement of order 26. (1) If the court makes any of the orders referred to in paragraph 18(1)(b), it shall as soon as reasonably practicable send two sealed copies of the order to the foreign representative. (2) The foreign representative shall send a sealed copy of the order as soon as reasonably practicable to the debtor. (3) The foreign representative shall, as soon as reasonably practicable after the date of the order give notice of the making of the order (a) if a British insolvency officeholder is acting in relation to the debtor, to him; (b) if any person has been appointed an administrative receiver of the debtor or, to the knowledge of the foreign representative, as a receiver or manager of the property of the debtor, to him; (c) if a member State liquidator has been appointed in main proceedings in relation to the debtor, to him; (d) if to his knowledge a foreign representative has been appointed in any other foreign proceeding regarding the debtor, that person; (e) if there is pending in England and Wales a petition for the winding up or bankruptcy of the debtor, to the petitioner; (f) to any person who to his knowledge is or may be entitled to appoint an administrator of the debtor under paragraph 14 of Schedule B1 to the 1986 Act (appointment of administrator by holder of qualifying floating charge); (g) if the debtor is a debtor who is of interest to the Financial Services Authority, to that Authority; (h) to such other persons as the court may direct. (4) In the case of an order recognising a foreign proceeding in relation to the debtor as a foreign main proceeding, or an order under article 19 or 21 of the Model Law staying execution, distress or other legal process against the

80 debtor's assets, the foreign representative shall also, as soon as reasonably practicable after the date of the order give notice of the making of the order (a) to any enforcement officer or other officer who to his knowledge is charged with an execution or other legal process against the debtor or its property; and (b) to any person who to his knowledge is distraining against the debtor or its property. (5) In the application of sub-paragraphs (3) and (4) the references to property shall be taken as references to property situated within England and Wales. (6) Where the debtor is a relevant company, the foreign representative shall send notice of the making of the order to the registrar of companies before the end of the period of 5 business days beginning with the date of the order. The notice to the registrar of companies shall be in Form ML 7. (7) The foreign representative shall advertise the making of the following orders once in the Gazette and once in such newspaper as he thinks most appropriate for ensuring that the making of the order comes to the notice of the debtor's creditors (a) a recognition order; (b) an order confirming the status of a replacement foreign representative; and (c) a modification or termination order which modifies or terminates recognition of a foreign proceeding, and the advertisement shall be in Form ML 8. Adjournment of hearing; directions 27. (1) This paragraph applies in any case where the court exercises its power to adjourn the hearing of the application. (2) The court may at any time give such directions as it thinks fit as to (a) service or notice of the application on or to any person, whether in connection with the venue of a resumed hearing or for any other purpose; (b) the procedure on the application; (c) the manner in which any evidence is to be adduced at a resumed hearing and in particular as to (i) the taking of evidence wholly or in part by affidavit or orally; (ii) the cross-examination on the hearing in court or in chambers, of any deponents to affidavits;

81 (d) the matters to be dealt with in evidence. PART 7 APPLICATIONS TO THE CHIEF LAND REGISTRAR Applications to Chief Land Registrar following court orders 28. (1) Where the court makes any order in proceedings under these Regulations which is capable of giving rise to an application or applications under the Land Registration Act 2002[50], the foreign representative shall, as soon as reasonably practicable after the making of the order or at the appropriate time, make the appropriate application or applications to the Chief Land Registrar. (2) In sub-paragraph (1) an appropriate application is (a) in any case where (i) a recognition order in respect of a foreign main proceeding or an order suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor is made, and (ii) the debtor is the registered proprietor of a registered estate or registered charge and holds it for his sole benefit, an application under section 43 of the Land Registration Act 2002 for a restriction of the kind referred to in sub-paragraph (3) to be entered in the relevant registered title; and (b) in any other case, an application under the Land Registration Act 2002 for such an entry in the register as shall be necessary to reflect the effect of the court order under these Regulations. (3) The restriction referred to in sub-paragraph (2)(a) is a restriction to the effect that no disposition of the registered estate or registered charge (as appropriate) by the registered proprietor of that estate or charge is to be completed by registration within the meaning of section 27 of the Land Registration Act 2002 except under a further order of the court. PART 8 MISFEASANCE Misfeasance by foreign representative 29. (1) The court may examine the conduct of a person who (a) is or purports to be the foreign representative in relation to a debtor; or (b) has been or has purported to be the foreign representative in relation to a debtor.

82 (2) An examination under this paragraph may be held only on the application of (a) a British insolvency officeholder acting in relation to the debtor; (b) a creditor of the debtor; or (c) with the permission of the court, any other person who appears to have an interest justifying an application. (3) An application under sub-paragraph (2) must allege that the foreign representative (a) has misapplied or retained money or other property of the debtor; (b) has become accountable for money or other property of the debtor; (c) has breached a fiduciary or other duty in relation to the debtor; or (d) has been guilty of misfeasance. (4) On an examination under this paragraph into a person's conduct the court may order him (a) to repay, restore or account for money or property; (b) to pay interest; (c) to contribute a sum to the debtor's property by way of compensation for breach of duty or misfeasance. (5) In sub-paragraph (3) "foreign representative" includes a person who purports or has purported to be a foreign representative in relation to a debtor. PART 9 GENERAL PROVISION AS TO COURT PROCEDURE AND PRACTICE Principal court rules and practice to apply with modifications 30. (1) The CPR and the practice and procedure of the High Court (including any practice direction) shall apply to proceedings under these Regulations in the High Court with such modifications as may be necessary for the purpose of giving effect to the provisions of these Regulations and in the case of any conflict between any provision of the CPR and the provisions of these Regulations, the latter shall prevail. (2) All proceedings under these Regulations shall be allocated to the multitrack for which CPR Part 29 (the multi-track) makes provision, and accordingly those provisions of the CPR which provide for allocation questionnaires and track allocation shall not apply. Applications other than the principal applications preliminary 31. Paragraphs 32 to 37 of this Part apply to any application made to the

83 court under these Regulations, except any of the applications referred to in paragraph 18(1)(a). Form and contents of application 32. (1) Every application shall be in the form appropriate to the application concerned. Forms ML 4 and ML 5 shall be used for an originating application and an ordinary application respectively under these Regulations. (2) Each application shall be in writing and shall state (a) the names of the parties; (b) the nature of the relief or order applied for or the directions sought from the court; (c) the names and addresses of the persons (if any) on whom it is intended to serve the application or that no person is intended to be served; (d) where these Regulations require that notice of the application is to be given to specified persons, the names and addresses of all those persons (so far as known to the applicant); and (e) the applicant's address for service. (3) An originating application shall set out the grounds on which the applicant claims to be entitled to the relief or order sought. (4) The application must be signed by the applicant if he is acting in person or, when he is not so acting, by or on behalf of his solicitor. Filing and service of application 33. (1) The application shall be filed in court, accompanied by one copy and a number of additional copies equal to the number of persons who are to be served with the application. (2) Subject as follows in this paragraph and in paragraph 34, or unless the court otherwise orders, upon the presentation of the documents mentioned in sub-paragraph (1), the court shall fix a venue for the application to be heard. (3) Unless the court otherwise directs, the applicant shall serve a sealed copy of the application, endorsed with the venue of the hearing, on the respondent named in the application (or on each respondent if more than one). (4) The court may give any of the following directions (a) that the application be served upon persons other than those specified by the relevant provision of these Regulations; (b) that the giving of notice to any person may be dispensed with; (c) that notice be given in some way other than that specified in subparagraph (3).

84 (5) Subject to sub-paragraph (6), the application must be served at least 10 business days before the date fixed for the hearing. (6) Where the case is one of urgency, the court may (without prejudice to its general power to extend or abridge time limits) (a) hear the application immediately, either with or without notice to, or the attendance of, other parties; or (b) authorise a shorter period of service than that provided for by subparagraph (5); and any such application may be heard on terms providing for the filing or service of documents, or the carrying out of other formalities, as the court thinks fit. Other hearings ex parte 34. (1) Where the relevant provisions of these Regulations do not require service of the application on, or notice of it to be given to, any person, the court may hear the application ex parte. (2) Where the application is properly made ex parte, the court may hear it forthwith, without fixing a venue as required by paragraph 33(2). (3) Alternatively, the court may fix a venue for the application to be heard, in which case paragraph 33 applies (so far as relevant). Use of affidavit evidence 35. (1) In any proceedings evidence may be given by affidavit unless the court otherwise directs; but the court may, on the application of any party, order the attendance for cross-examination of the person making the affidavit. (2) Where, after such an order has been made, the person in question does not attend, his affidavit shall not be used in evidence without the permission of the court. Filing and service of affidavits 36. (1) Unless the court otherwise allows (a) if the applicant intends to rely at the first hearing on affidavit evidence, he shall file the affidavit or affidavits (if more than one) in court and serve a copy or copies on the respondent, not less than 10 business days before the date fixed for the hearing; and (b) where a respondent to an application intends to oppose it and to rely for that purpose on affidavit evidence, he shall file the affidavit or affidavits (if more than one) in court and serve a copy or copies on the applicant, not less than 5 business days before the date fixed for the hearing. (2) Any affidavit may be sworn by the applicant or by the respondent or by some other person possessing direct knowledge of the subject matter of the application.

85 Adjournment of hearings; directions 37. The court may adjourn the hearing of an application on such terms (if any) as it thinks fit and in the case of such an adjournment paragraph 27(2) shall apply. Transfer of proceedings within the High Court 38. (1) The High Court may, having regard to the criteria in CPR rule 30.3(2), order proceedings in the Royal Courts of Justice or a district registry, or any part of such proceedings (such as an application made in the proceedings), to be transferred (a) from the Royal Courts of Justice to a district registry; or (b) from a district registry to the Royal Courts of Justice or to another district registry. (2) The High Court may order proceedings before a district registry for the detailed assessment of costs to be transferred to another district registry if it is satisfied that the proceedings could be more conveniently or fairly taken in that other district registry. (3) An application for an order under sub-paragraph (1) or (2) must, if the claim is proceeding in a district registry, be made to that registry. (4) A transfer of proceedings under this paragraph may be ordered (a) by the court of its own motion; or (b) on the application of a person appearing to the court to have an interest in the proceedings. (5) Where the court orders proceedings to be transferred, the court from which they are to be transferred must give notice of the transfer to all the parties. (6) An order made before the transfer of the proceedings shall not be affected by the order to transfer. Transfer of proceedings actions to avoid acts detrimental to creditors 39. (1) If (a) in accordance with article 23(6) of the Model Law, the court grants a foreign representative permission to make an application in accordance with paragraph 1 of that article; and (b) the relevant proceedings under British insolvency law taking place regarding the debtor are taking place in the county court, the court may also order those proceedings to be transferred to the High Court. (2) Where the court makes an order transferring proceedings under subparagraph (1)

86 (a) it shall send sealed copies of the order to the county court from which the proceedings are to be transferred, and to the official receivers attached to that court and the High Court respectively; and (b) the county court shall send the file of the proceedings to the High Court. (3) Following compliance with this paragraph, if the official receiver attached to the court to which the proceedings are transferred is not already, by virtue of directions given by the Secretary of State under section 399(6)(a) of the 1986 Act, the official receiver in relation to those proceedings, he becomes, in relation to those proceedings, the official receiver in place of the official receiver attached to the other court concerned. Shorthand writers 40. (1) The judge may in writing nominate one or more persons to be official shorthand writers to the court. (2) The court may, at any time in the course of proceedings under these Regulations, appoint a shorthand writer to take down the evidence of a person examined in pursuance of a court order under article 19 or 21 of the Model Law. (3) The remuneration of a shorthand writer appointed in proceedings under these Regulations shall be paid by the party at whose instance the appointment was made or otherwise as the court may direct. (4) Any question arising as to the rates of remuneration payable under this paragraph shall be determined by the court in its discretion. Enforcement procedures 41. In any proceedings under these Regulations, orders of the court may be enforced in the same manner as a judgment to the same effect. Title of proceedings 42. (1) Every proceeding under these Regulations shall, with any necessary additions, be intituled "IN THE MATTER OF... (naming the debtor to which the proceedings relate) AND IN THE MATTER OF THE CROSS-BORDER INSOLVENCY REGULATIONS 2006". (2) Sub-paragraph (1) shall not apply in respect of any form prescribed under these Regulations. Court records 43. The court shall keep records of all proceedings under these Regulations, and shall cause to be entered in the records the taking of any step in the proceedings, and such decisions of the court in relation thereto, as the court thinks fit. Inspection of records 44. (1) Subject as follows, the court's records of proceedings under these Regulations shall be open to inspection by any person. (2) If in the case of a person applying to inspect the records the Registrar is

87 not satisfied as to the propriety of the purpose for which inspection is required, he may refuse to allow it. That person may then apply forthwith and ex parte to the judge, who may refuse the inspection or allow it on such terms as he thinks fit. (3) The decision of the judge under sub-paragraph (2) is final. File of court proceedings 45. (1) In respect of all proceedings under these Regulations, the court shall open and maintain a file for each case; and (subject to directions of the Registrar) all documents relating to such proceedings shall be placed on the relevant file. (2) No proceedings under these Regulations shall be filed in the Central Office of the High Court. Right to inspect the file 46. (1) In the case of any proceedings under these Regulations, the following have the right, at all reasonable times, to inspect the court's file of the proceedings (a) the Secretary of State; (b) the person who is the foreign representative in relation to the proceedings; (c) if a foreign representative has been appointed in any other foreign proceeding regarding the debtor to which the proceedings under these Regulations relate, that person; (d) if a British insolvency officeholder is acting in relation to the debtor to which the proceedings under these Regulations relate, that person; (e) any person stating himself in writing to be a creditor of the debtor to which the proceedings under these Regulations relate; (f) if a member State liquidator has been appointed in relation to the debtor to which the proceedings under these Regulations relate, that person; and (g) the debtor to which the proceedings under these Regulations relate, or, if that debtor is a company, corporation or partnership, every person who is, or at any time has been (i) a director or officer of the debtor; (ii) a member of the debtor; or (iii) where applicable, a person registered under Part 23 of the Companies Act 1985[51] as authorised to represent the debtor in respect of its business in England and Wales. (2) The right of inspection conferred as above on any person may be exercised on his behalf by a person properly authorised by him.

88 (3) Any person may, by leave of the court, inspect the file. (4) The right of inspection conferred by this paragraph is not exercisable in the case of documents, or parts of documents, as to which the court directs (either generally or specially) that they are not to be made open to inspection without the court's permission. An application for a direction of the court under this sub-paragraph may be made by the foreign representative or by any party appearing to the court to have an interest. (5) If, for the purpose of powers conferred by the 1986 Act or the Rules, the Secretary of State or the official receiver wishes to inspect the file of any proceedings under these Regulations, and requests the transmission of the file, the court shall comply with such request (unless the file is for the time being in use for the court's purposes). (6) Paragraph 44(2) and (3) apply in respect of the court's file of any proceedings under these Regulations as they apply in respect of court records. (7) Where these Regulations confer a right for any person to inspect documents on the court's file of proceedings, the right includes that of taking copies of those documents on payment of the fee chargeable under any order made under section 92 of the Courts Act 2003[52]. Copies of court orders 47. (1) In any proceedings under these Regulations, any person who under paragraph 46 has a right to inspect documents on the court file also has the right to require the foreign representative in relation to those proceedings to furnish him with a copy of any court order in the proceedings. (2) Sub-paragraph (1) does not apply if a copy of the court order has been served on that person or notice of the making of the order has been given to that person under other provisions of these Regulations. Filing of Gazette notices and advertisements 48. (1) In any court in which proceedings under these Regulations are pending, an officer of the court shall file a copy of every issue of the Gazette which contains an advertisement relating to those proceedings. (2) Where there appears in a newspaper an advertisement relating to proceedings under these Regulations pending in any court, the person inserting the advertisement shall file a copy of it in that court. The copy of the advertisement shall be accompanied by, or have endorsed on it, such particulars as are necessary to identify the proceedings and the date of the advertisement's appearance. (3) An officer of any court in which proceedings under these Regulations are pending shall from time to time file a memorandum giving the dates of, and other particulars relating to, any notice published in the Gazette, and any newspaper advertisements, which relate to proceedings so pending.

89 The officer's memorandum is prima facie evidence that any notice or advertisement mentioned in it was duly inserted in the issue of the newspaper or the Gazette which is specified in the memorandum. Persons incapable of managing their affairs introductory 49. (1) Paragraphs 50 to 52 apply where in proceedings under these Regulations it appears to the court that a person affected by the proceedings is one who is incapable of managing and administering his property and affairs either (a) by reason of mental disorder within the meaning of the Mental Health Act 1983[53]; or (b) due to physical affliction or disability. (2) The person concerned is referred to as "the incapacitated person". Appointment of another person to act 50. (1) The court may appoint such person as it thinks fit to appear for, represent or act for the incapacitated person. (2) The appointment may be made either generally or for the purpose of any particular application or proceeding, or for the exercise of particular rights or powers which the incapacitated person might have exercised but for his incapacity. (3) The court may make the appointment either of its own motion or on application by (a) a person who has been appointed by a court in the United Kingdom or elsewhere to manage the affairs of, or to represent, the incapacitated person; or (b) any relative or friend of the incapacitated person who appears to the court to be a proper person to make the application; or (c) in any case where the incapacitated person is the debtor, the foreign representative. (4) Application under sub-paragraph (3) may be made ex parte; but the court may require such notice of the application as it thinks necessary to be given to the person alleged to be incapacitated, or any other person, and may adjourn the hearing of the application to enable the notice to be given. Affidavit in support of application 51. An application under paragraph 50(3) shall be supported by an affidavit of a registered medical practitioner as to the mental or physical condition of the incapacitated person. Service of notices following appointment 52. Any notice served on, or sent to, a person appointed under paragraph 50 has the same effect as if it had been served on, or given to, the incapacitated person. Rights of audience

90 53. Rights of audience in proceedings under these Regulations are the same as obtain in proceedings under British insolvency law. Right of attendance 54. (1) Subject as follows, in proceedings under these Regulations, any person stating himself in writing, in records kept by the court for that purpose, to be a creditor of the debtor to which the proceedings relate, is entitled at his own cost, to attend in court or in chambers at any stage of the proceedings. (2) Attendance may be by the person himself, or his solicitor. (3) A person so entitled may request the court in writing to give him notice of any step in the proceedings; and, subject to his paying the costs involved and keeping the court informed as to his address, the court shall comply with the request. (4) If the court is satisfied that the exercise by a person of his rights under this paragraph has given rise to costs for the estate of the debtor which would not otherwise have been incurred and ought not, in the circumstances, to fall on that estate, it may direct that the costs be paid by the person concerned, to an amount specified. The rights of that person under this paragraph shall be in abeyance so long as those costs are not paid. (5) The court may appoint one or more persons to represent the creditors of the debtor to have the rights conferred by this paragraph, instead of the rights being exercised by any or all of them individually. If two or more persons are appointed under this paragraph to represent the same interest, they must (if at all) instruct the same solicitor. Right of attendance for member State liquidator 55. For the purposes of paragraph 54(1), a member State liquidator appointed in relation to a debtor subject to proceedings under these Regulations shall be deemed to be a creditor. British insolvency officeholder's solicitor 56. Where in any proceedings the attendance of the British insolvency officeholder's solicitor is required, whether in court or in chambers, the British insolvency officeholder himself need not attend, unless directed by the court. Formal defects 57. No proceedings under these Regulations shall be invalidated by any formal defect or by any irregularity, unless the court before which objection is made considers that substantial injustice has been caused by the defect or irregularity, and that the injustice cannot be remedied by any order of the court. Restriction on concurrent proceedings and remedies 58. Where in proceedings under these Regulations the court makes an order staying any action, execution or other legal process against the property of a debtor, service of the order may be effected by sending a sealed copy of the order to whatever is the address for service of the claimant or other party having the carriage of the proceedings to be stayed.

91 Affidavits 59. (1) Where in proceedings under these Regulations, an affidavit is made by any British insolvency officeholder acting in relation to the debtor, he shall state the capacity in which he makes it, the position which he holds and the address at which he works. (2) Any officer of the court duly authorised in that behalf, may take affidavits and declarations. (3) Subject to sub-paragraph (4), where these Regulations provide for the use of an affidavit, a witness statement verified by a statement of truth may be used as an alternative. (4) Sub-paragraph (3) does not apply to paragraphs 4 (affidavit in support of recognition application), 7 (affidavit in support of interim relief application), 10 (affidavit in support of article 21 relief application), 13 (affidavit in support of application regarding status of replacement foreign representative) and 16 (affidavit in support of review application). Security in court 60. (1) Where security has to be given to the court (otherwise than in relation to costs), it may be given by guarantee, bond or the payment of money into court. (2) A person proposing to give a bond as security shall give notice to the party in whose favour the security is required, and to the court, naming those who are to be sureties to the bond. (3) The court shall forthwith give notice to the parties concerned of a venue for the execution of the bond and the making of any objection to the sureties. (4) The sureties shall make an affidavit of their sufficiency (unless dispensed with by the party in whose favour the security is required) and shall, if required by the court, attend the court to be cross-examined. Further information and disclosure 61. (1) Any party to proceedings under these Regulations may apply to the court for an order (a) that any other party (i) clarify any matter which is in dispute in the proceedings; or (ii) give additional information in relation to any such matter, in accordance with CPR Part 18 (further information); or (b) to obtain disclosure from any other party in accordance with CPR Part 31 (disclosure and inspection of documents). (2) An application under this paragraph may be made without notice being served on any other party. Office copies of documents

92 62. (1) Any person who has under these Regulations the right to inspect the court file of proceedings may require the court to provide him with an office copy of any document from the file. (2) A person's right under this paragraph may be exercised on his behalf by his solicitor. (3) An office copy provided by the court under this paragraph shall be in such form as the Registrar thinks appropriate, and shall bear the court's seal. "The court" 63. (1) Anything to be done in proceedings under these Regulations by, to or before the court may be done by, to or before a judge of the High Court or a Registrar. (2) Where these Regulations require or permit the court to perform an act of a formal or administrative character, that act may be performed by a court officer. PART 10 COSTS AND DETAILED ASSESSMENT Requirement to assess costs by the detailed procedure 64. In any proceedings before the court, the court may order costs to be decided by detailed assessment. Costs of officers charged with execution of writs or other process 65. (1) Where by virtue of article 20 of the Model Law or a court order under article 19 or 21 of the Model Law an enforcement officer, or other officer, charged with execution of the writ or other process (a) is required to deliver up goods or money; or (b) has deducted costs from the proceeds of an execution or money paid to him, the foreign representative may require in writing that the amount of the enforcement officer's or other officer's bill of costs be decided by detailed assessment. (2) Where such a requirement is made, if the enforcement officer or other officer does not commence detailed assessment proceedings within 3 months of the requirement under sub-paragraph (1), or within such further time as the court, on application, may permit, any claim by the enforcement officer or other officer in respect of his costs is forfeited by such failure to commence proceedings. (3) Where, in the case of a deduction of costs by the enforcement officer or other officer, any amount deducted is disallowed at the conclusion of the detailed assessment proceedings, the enforcement officer or other officer shall forthwith pay a sum equal to that disallowed to the foreign representative for the benefit of the debtor.

93 Final costs certificate 66. (1) A final costs certificate of the costs officer is final and conclusive as to all matters which have not been objected to in the manner provided for under the rules of the court. (2) Where it is proved to the satisfaction of a costs officer that a final costs certificate has been lost or destroyed, he may issue a duplicate. PART 11 APPEALS IN PROCEEDINGS UNDER THESE REGULATIONS Appeals from court orders 67. (1) An appeal from a decision of a Registrar of the High Court in proceedings under these Regulations lies to a single judge of the High Court; and an appeal from a decision of that judge on such an appeal lies, with the permission of the Court of Appeal, to the Court of Appeal. (2) An appeal from a decision of a judge of the High Court in proceedings under these Regulations which is not a decision on an appeal made to him under sub-paragraph (1) lies, with the permission of that judge or the Court of Appeal, to the Court of Appeal. Procedure on appeals 68. (1) Subject as follows, CPR Part 52 (appeals to the Court of Appeal) and its practice direction apply to appeals in proceedings under these Regulations. (2) The provisions of Part 4 of the practice direction on Insolvency Proceedings supporting CPR Part 49 relating to first appeals (as defined in that Part) apply in relation to any appeal to a single judge of the High Court under paragraph 67, with any necessary modifications. (3) In proceedings under these Regulations, the procedure under CPR Part 52 is by ordinary application and not by appeal notice. PART 12 GENERAL Notices 69. (1) All notices required or authorised by or under these Regulations to be given must be in writing, unless it is otherwise provided, or the court allows the notice to be given in some other way. (2) Where in proceedings under these Regulations a notice is required to be sent or given by any person, the sending or giving of it may be proved by means of a certificate by that person that he posted the notice, or instructed another person (naming him) to do so. (3) A certificate under this paragraph may be endorsed on a copy or

94 specimen of the notice to which it relates. "Give notice" etc. 70. (1) A reference in these Regulations to giving notice, or to delivering, sending or serving any document, means that the notice or document may be sent by post. (2) Subject to paragraph 75, any form of post may be used. (3) Personal service of a document is permissible in all cases. (4) Notice of the venue fixed for an application may be given by service of the sealed copy of the application under paragraph 33(3). Notice, etc. to solicitors 71. Where in proceedings under these Regulations a notice or other document is required or authorised to be given to a person, it may, if he has indicated that his solicitor is authorised to accept service on his behalf, be given instead to the solicitor. Notice to joint British insolvency officeholders 72. Where two or more persons are acting jointly as the British insolvency officeholder in proceedings under British insolvency law, delivery of a document to one of them is to be treated as delivery to them all. Forms for use in proceedings under these Regulations 73. (1) The forms contained in Schedule 5 to these Regulations shall be used in, and in connection with, proceedings under these Regulations. (2) The forms shall be used with such variations, if any, as the circumstances may require. Time limits 74. (1) The provisions of CPR Rule 2.8 (time) apply, as regards computation of time, to anything required or authorised to be done by these Regulations. (2) The provisions of CPR rule 3.1(2)(a) (the court's general powers of management) apply so as to enable the court to extend or shorten the time for compliance with anything required or authorised to be done by these Regulations. Service by post 75. (1) For a document to be properly served by post, it must be contained in an envelope addressed to the person on whom service is to be effected, and pre-paid for first class post. (2) A document to be served by post may be sent to the last known address of the person to be served. (3) Where first class post is used, the document is treated as served on the second business day after the date of posting, unless the contrary is shown. (4) The date of posting is presumed, unless the contrary is shown, to be the date shown in the post-mark on the envelope in which the document is

95 contained. General provisions as to service and notice 76. Subject to paragraphs 22, 75 and 77, CPR Part 6 (service of documents) applies as regards any matter relating to the service of documents and the giving of notice in proceedings under these Regulations. Service outside the jurisdiction 77. (1) Sections III and IV of CPR Part 6 (service out of the jurisdiction and service of process of foreign court) do not apply in proceedings under these Regulations. (2) Where for the purposes of proceedings under these Regulations any process or order of the court, or other document, is required to be served on a person who is not in England and Wales, the court may order service to be effected within such time, on such person, at such place and in such manner as it thinks fit, and may also require such proof of service as it thinks fit. (3) An application under this paragraph shall be supported by an affidavit stating (a) the grounds on which the application is made; and (b) in what place or country the person to be served is, or probably may be found. False claim of status as creditor 78. (1) Rule (false claim of status as creditor, etc) shall apply with any necessary modifications in any case where a person falsely claims the status of a creditor of a debtor, with the intention of obtaining a sight of documents whether on the court's file or in the hands of the foreign representative or other person, which he has not under these Regulations any right to inspect. (2) Rule and Schedule 5 of the Rules shall apply to an offence under Rule as applied by sub-paragraph (1) as they apply to an offence under Rule The Gazette 79. (1) A copy of the Gazette containing any notice required by these Regulations to be gazetted is evidence of any fact stated in the notice. (2) In the case of an order of the court notice of which is required by these Regulations to be gazetted, a copy of the Gazette containing the notice may in any proceedings be produced as conclusive evidence that the order was made on the date specified in the notice. Regulation 5 SCHEDULE 3 PROCEDURAL MATTERS IN SCOTLAND

96 Interpretation 1. (1) In this Schedule PART 1 INTERPRETATION "the 1986 Act" means the Insolvency Act 1986[54]; "article 21 remedy application" means an application to the court by a foreign representative under article 21(1) or (2) of the Model Law for remedy; "business day" means any day other than a Saturday, a Sunday, Christmas Day, Good Friday or a day which is a bank holiday in Scotland under or by virtue of the Banking and Financial Dealings Act 1971[55]; "the Gazette" means the Edinburgh Gazette; "main proceedings" means proceedings opened in accordance with Article 3(1) of the EC Insolvency Regulation and falling within the definition of insolvency proceedings in Article 2(a) of the EC Insolvency Regulation; "member State liquidator" means a person falling within the definition of liquidator in Article 2(b) of the EC Insolvency Regulation appointed in proceedings to which it applies in a member State other than the United Kingdom; "the Model Law" means the UNCITRAL Model Law as set out in Schedule 1 to these Regulations; "modification or termination order" means an order by the court pursuant to its powers under the Model Law modifying or terminating recognition of a foreign proceeding, the sist, restraint or suspension referred to in article 20(1) or any part of it or any remedy granted under article 19 or 21 of the Model Law; "recognition application" means an application to the court by a foreign representative in accordance with article 15 of the Model Law for an order recognising the foreign proceeding in which he has been appointed; "recognition order" means an order by the court recognising a proceeding the subject of a recognition application as a foreign main proceeding or foreign non-main proceeding, as appropriate; "relevant company" means a company within the meaning of section 735(1) of the Companies Act 1985[56] or an unregistered company within the meaning of Part 5 of the 1986 Act which is subject to a requirement imposed by virtue of section 690A[57], 691(1)[58] or 718[59] of the Companies Act 1985; "review application" means an application to the court for a modification or termination order. (2) Expressions defined in the Model Law have the same meaning when used in this Schedule. (3) References in this Schedule to a debtor who is of interest to the Financial Services Authority are references to a debtor who

97 (a) is, or has been, an authorised person within the meaning of section 31 of the Financial Services and Markets Act 2000[60] (authorised persons); (b) is, or has been, an appointed representative within the meaning of section 39 (exemption of appointed representatives) of that Act; or (c) is carrying, or has carried on, a regulated activity in contravention of the general prohibition. (4) In sub-paragraph (3) "the general prohibition" has the meaning given by section 19 of the Financial Services and Markets Act 2000 and the reference to a "regulated activity" must be construed in accordance with (a) section 22 of that Act (classes of regulated activity and categories of investment); (b) any relevant order under that section; and (c) Schedule 2 to that Act (regulated activities). (5) References in this Schedule to a numbered form are to the form that bears that number in Schedule 5. PART 2 THE FOREIGN REPRESENTATIVE Application for confirmation of status of replacement foreign representative 2. (1) This paragraph applies where following the making of a recognition order the foreign representative dies or for any other reason ceases to be the foreign representative in the foreign proceedings in relation to the debtor. (2) In this paragraph "the former foreign representative" means the foreign representative referred to in sub-paragraph (1). (3) If a person has succeeded the former foreign representative or is otherwise holding office as foreign representative in the foreign proceeding in relation to the debtor, that person may apply to the court for an order confirming his status as replacement foreign representative for the purpose of proceedings under these Regulations. (4) If the court dismisses an application under sub-paragraph (3) then it may also, if it thinks fit, make an order terminating recognition of the foreign proceeding and (a) such an order may include such provision as the court thinks fit with respect to matters arising in connection with the termination; and (b) paragraph 5 shall not apply to such an order.

98 Misfeasance by a foreign representative 3. (1) The court may examine the conduct of a person who (a) is or purports to be the foreign representative in relation to a debtor, or (b) has been or has purported to be the foreign representative in relation to a debtor. (2) An examination under this paragraph may be held only on the application of (a) a British insolvency officeholder acting in relation to the debtor, (b) a creditor of the debtor, or (c) with the permission of the court, any other person who appears to have an interest justifying an application. (3) An application under sub-paragraph (2) must allege that the foreign representative (a) has misapplied or retained money or other property of the debtor, (b) has become accountable for money or other property of the debtor, (c) has breached a fiduciary duty or other duty in relation to the debtor, or (d) has been guilty of misfeasance. (4) On an examination under this paragraph into a person's conduct the court may order him (a) to repay, restore or account for money or property; (b) to pay interest; (c) to contribute a sum to the debtor's property by way of compensation for breach of duty or misfeasance. (5) In sub-paragraph (3), "foreign representative" includes a person who purports or has purported to be a foreign representative in relation to a debtor. Preliminary and interpretation 4. (1) This Part applies to PART 3 COURT PROCEDURE AND PRACTICE (a) any of the following applications made to the court under these Regulations

99 (i) a recognition application; (ii) an article 21 remedy application; (iii) an application under paragraph 2(3) for an order confirming the status of a replacement foreign representative; (iv) a review application; and (b) any of the following orders made by the court under these Regulations (i) a recognition order; (ii) an order granting interim remedy under article 19 of the Model Law; (iii) an order granting remedy under article 21 of the Model Law; (iv) an order confirming the status of a replacement foreign representative; or (v) a modification or termination order. Reviews of court orders where court makes order of its own motion 5. (1) The court shall not of its own motion make a modification or termination order unless the foreign representative and the debtor have either (a) had an opportunity of being heard on the question, or (b) consented in writing to such an order. (2) If the court makes a modification or termination order, the order may include such provision as the court thinks fit with respect to matters arising in connection with the modification or termination. The hearing 6. (1) At the hearing of the application, the applicant and any of the following persons (not being the applicant) may appear or be represented (a) the foreign representative; (b) the debtor and, in the case of any debtor other than an individual, any one or more directors or other officers of the debtor, including (i) where applicable, any person registered under Part 23 of the Companies Act 1985[61] as authorised to represent the debtor in respect of its business in Scotland; (ii) in the case of a debtor which is a partnership, any person who is a member of the partnership;

100 (c) if a British insolvency officeholder is acting in relation to the debtor, that person; (d) if any person has been appointed an administrative receiver of the debtor or as a receiver or manager of the property of the debtor, that person; (e) if a member State liquidator has been appointed in main proceedings in relation to the debtor, that person; (f) if a foreign representative has been appointed in any other foreign proceeding regarding the debtor, that person; (g) any person who has presented a petition for the winding up or sequestration of the debtor in Scotland; (h) any person who is or may be entitled to appoint an administrator of the debtor under paragraph 14 of Schedule B1 to the 1986 Act[62] (appointment of administrator by holder of qualifying floating charge); (i) if the debtor is a debtor who is of interest to the Financial Services Authority, that Authority; and (j) with the permission of the court, any other person who appears to have an interest justifying his appearance. Notification and advertisement of order 7. (1) This paragraph applies where the court makes any of the orders referred to in paragraph 4(1)(b). (2) The foreign representative shall send a certified copy of the interlocutor as soon as reasonably practicable to the debtor. (3) The foreign representative shall, as soon as reasonably practicable after the date of the order, give notice of the making of the order (a) if a British insolvency officeholder is acting in relation to the debtor, to him; (b) if any person has been appointed an administrative receiver of the debtor or, to the knowledge of the foreign representative, as a receiver or manager of the property of the debtor, to him; (c) if a member State liquidator has been appointed in main proceedings in relation to the debtor, to him; (d) if to his knowledge a foreign representative has been appointed in any other foreign proceeding regarding the debtor, that person; (e) if there is pending in Scotland a petition for the winding up or sequestration of the debtor, to the petitioner; (f) to any person who to his knowledge is or may be entitled to appoint an administrator of the debtor under paragraph 14 of Schedule B1 to

101 the 1986 Act (appointment of administrator by holder of qualifying floating charge); (g) if the debtor is a debtor who is of interest to the Financial Services Authority, to that Authority; and (h) to such persons as the court may direct. (4) Where the debtor is a relevant company, the foreign representative shall send notice of the making of the order to the registrar of companies before the end of the period of 5 business days beginning with the date of the order. The notice to the registrar of companies shall be in Form ML 7. (5) The foreign representative shall advertise the making of the following orders once in the Gazette and once in such newspaper as he thinks most appropriate for ensuring that the making of the order comes to the notice of the debtor's creditors (a) a recognition order, (b) an order confirming the status of a replacement foreign representative, and (c) a modification or termination order which modifies or terminates recognition of a foreign proceeding, and the advertisement shall be in Form ML 8. Registration of court order 8. (1) Where the court makes a recognition order in respect of a foreign main proceeding or an order suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor being heritable property, the clerk of the court shall send forthwith a certified copy of the order to the keeper of the register of inhibitions and adjudications for recording in that register. (2) Recording under sub-paragraph (1) or (3) shall have the effect as from the date of the order of an inhibition and of a citation in an adjudication of the debtor's heritable estate at the instance of the foreign representative. (3) Where the court makes a modification or termination order, the clerk of the court shall send forthwith a certified copy of the order to the keeper of the register of inhibitions and adjudications for recording in that register. (4) The effect mentioned in sub-paragraph (2) shall expire (a) on the recording of a modification or termination order under subparagraph (3); or (b) subject to sub-paragraph (5), if the effect has not expired by virtue of paragraph (a), at the end of the period of 3 years beginning with the date of the order.

102 (5) The foreign representative may, if recognition of the foreign proceeding has not been modified or terminated by the court pursuant to its powers under the Model Law, before the end of the period of 3 years mentioned in subparagraph (4)(b), send a memorandum in a form prescribed by the Court of Session by act of sederunt to the keeper of the register of inhibitions and adjudications for recording in that register, and such recording shall renew the effect mentioned in sub-paragraph (2); and thereafter the said effect shall continue to be preserved only if such memorandum is so recorded before the expiry of every subsequent period of 3 years. Right to inspect court process 9. (1) In the case of any proceedings under these Regulations, the following have the right, at all reasonable times, to inspect the court process of the proceedings (a) the Secretary of State; (b) the person who is the foreign representative in relation to the proceedings; (c) if a foreign representative has been appointed in any other foreign proceeding regarding the debtor, that person; (d) if a British insolvency officeholder is acting in relation to the debtor, that person; (e) any person stating himself in writing to be a creditor of the debtor to which the proceedings under these Regulations relate; (f) if a member State liquidator has been appointed in relation to a debtor which is subject to proceedings under these Regulations, that person; and (g) the debtor to which the proceedings under these Regulations relate, or, if that debtor is a company, corporation or partnership, every person who is, or at any time has been (i) a director or officer of the debtor, (ii) a member of the debtor, or (iii) where applicable, a person registered under Part 23 of the Companies Act 1985 as authorised to represent the debtor in respect of its business in Scotland. (2) The right of inspection conferred as above on any person may be exercised on his behalf by a person properly authorised by him. Copies of court orders 10. (1) In any proceedings under these Regulations, any person who under paragraph 9 has a right to inspect documents in the court process also has the right to require the foreign representative in relation to those proceedings to furnish him with a copy of any court order in the proceedings. (2) Sub-paragraph (1) does not apply if a copy of the court order has been

103 served on that person or notice of the making of the order has been given to that person under other provisions of these Regulations. Transfer of proceedings actions to avoid acts detrimental to creditors 11. If, in accordance with article 23(6) of the Model Law, the court grants a foreign representative permission to make an application in accordance with paragraph (1) of that article, it may also order the relevant proceedings under British insolvency law taking place regarding the debtor to be transferred to the Court of Session if those proceedings are taking place in Scotland and are not already in that court. PART 3 GENERAL Giving of notices, etc 12. (1) All notices required or authorised by or under these Regulations to be given, sent or delivered must be in writing, unless it is otherwise provided, or the court allows the notice to be sent or given in some other way. (2) Any reference in these Regulations to giving, sending or delivering a notice or any such document means, without prejudice to any other way and unless it is otherwise provided, that the notice or document may be sent by post, and that, subject to paragraph 13, any form of post may be used. Personal service of the notice or document is permissible in all cases. (3) Where under these Regulations a notice or other document is required or authorised to be given, sent or delivered by a person ("the sender") to another ("the recipient"), it may be given, sent or delivered by any person duly authorised by the sender to do so to any person duly authorised by the recipient to receive or accept it. (4) Where two or more persons are acting jointly as the British insolvency officeholder in proceedings under British insolvency law, the giving, sending or delivering of a notice or document to one of them is to be treated as the giving, sending or delivering of a notice or document to each or all. Sending by post 13. (1) For a document to be properly sent by post, it must be contained in an envelope addressed to the person to whom it is to be sent, and pre-paid for either first or second class post. (2) Any document to be sent by post may be sent to the last known address of the person to whom the document is to be sent. (3) Where first class post is used, the document is to be deemed to be received on the second business day after the date of posting, unless the contrary is shown. (4) Where second class post is used, the document is to be deemed to be received on the fourth business day after the date of posting, unless the contrary is shown.

104 Certificate of giving notice, etc 14. (1) Where in any proceedings under these Regulations a notice or document is required to be given, sent or delivered by any person, the date of giving, sending or delivery of it may be proved by means of a certificate by that person that he gave, posted or otherwise sent or delivered the notice or document on the date stated in the certificate, or that he instructed another person (naming him) to do so. (2) A certificate under this paragraph may be endorsed on a copy of the notice to which it relates. (3) A certificate purporting to be signed by or on behalf of the person mentioned in sub-paragraph (1) shall be deemed, unless the contrary is shown, to be sufficient evidence of the matters stated therein. Forms for use in proceedings under these Regulations 15. (1) Forms ML 7 and ML 8 contained in Schedule 5 to these Regulations shall be used in, and in connection with, proceedings under these Regulations. (2) The forms shall be used with such variations, if any, as the circumstances may require. Regulation 6 SCHEDULE 4 NOTICES DELIVERED TO THE REGISTRAR OF COMPANIES Interpretation 1. (1) In this Schedule "the 1985 Act" means the Companies Act 1985[63]; "electronic communication" means the same as in the Electronic Communications Act 2000[64]; "Model Law notice" means a notice delivered to the registrar of companies under paragraph 26(6) of Schedule 2 or paragraph 7(4) of Schedule 3. (2) Expressions defined in the Model Law or Schedule 2 or 3, as appropriate, have the same meaning when used in this Schedule. (3) References in this Schedule to delivering a notice include sending, forwarding, producing or giving it. Functions of the registrar of companies 2. (1) Where a Model Law notice is delivered to the registrar of companies in respect of a relevant company, the registrar shall enter a note in the register relating to that company. (2) The note referred to in sub-paragraph (1) shall contain the following particulars, in each case as stated in the notice delivered to the registrar

105 (a) brief details of the court order made; (b) the date of the court order; and (c) the name and address for service of the person who is the foreign representative in relation to the company. Registrar of companies to whom notices to be delivered 3. (1) References in Schedules 2 and 3 to the registrar of companies in relation to a relevant company shall be construed in accordance with the following provisions. (2) The notices which a relevant company is required to deliver to the registrar of companies shall be delivered (a) to the registrar for England and Wales if the company has a relevant presence in England and Wales, and (b) to the registrar for Scotland if the company has a relevant presence in Scotland, and if the relevant company has a relevant presence in both parts of Great Britain, the notices shall be delivered to both registrars. (3) For the purposes of this paragraph a "relevant presence" means (a) in the case of a company within the meaning of section 735(1) of the 1985 Act, its registered office, (b) in the case of an unregistered company within the meaning of Part 5 of the 1986 Act which is subject to a requirement imposed by virtue of section 690A of the 1985 Act[65], a branch, (c) in the case of an unregistered company within the meaning of Part 5 of the 1986 Act which is subject to a requirement imposed by virtue of section 691(1)[66] of the 1985 Act, an established place of business, and (d) in the case of an unregistered company within the meaning of Part 5 of the 1986 Act which is subject to a requirement imposed by virtue of section 718[67] of the 1985 Act, a principal place of business. Delivery to registrar of notices 4. (1) Electronic communications may be used for the delivery of any Model Law notice, provided that such delivery is in such form and manner as is directed by the registrar. (2) Where the Model Law notice is required to be signed, it shall instead be authenticated in such manner as is directed by the registrar. (3) If a Model Law notice is delivered to the registrar which does not comply with the requirements of these Regulations, he may serve on the person by whom the notice was delivered (or, if there are two or more such persons, on any of them) a notice (a non-compliance notice) indicating the

106 respect in which the Model Law notice does not comply. (4) Where the registrar serves a non-compliance notice, then, unless a replacement Model Law notice (a) is delivered to him within 14 days after the service of the noncompliance notice, and (b) complies with the requirements of these Regulations or is not rejected by him for failure to comply with those requirements, the original Model Law notice shall be deemed not to have been delivered to him. Enforcement of foreign representative's duty to give notice to registrar 5. (1) If a foreign representative, having made default in complying with paragraph 26(6) of Schedule 2 or paragraph 7(4) of Schedule 3 fails to make good the default within 14 days after the service of a notice on the foreign representative requiring him to do so, the court may, on an application made to it by any creditor, member, director or other officer of the debtor or by the registrar of companies, make an order directing the foreign representative to make good the default within such time as may be specified in the order. (2) The court's order may provide that all costs of and incidental to the application shall be borne by the foreign representative. Rectification of the register under court order 6. (1) The registrar shall remove from the register any note, or part of a note (a) that relates to or is derived from a court order that the court has declared to be invalid or ineffective, or (b) that the court declares to be factually inaccurate or derived from something that is factually inaccurate or forged, and that the court directs should be removed from the register. (2) The court order must specify what is to be removed from the register and indicate where on the register it is and the registrar shall carry out his duty under sub-paragraph (1) within a reasonable time of receipt by him of the relevant court order. SCHEDULE 5 Schedule 2, paragraph 73 and Schedule 3, paragraph 15 FORMS [ ]

107 EXPLANATORY NOTE (This note is not part of the Regulations) On 30th May 1997 the United Nations Commission on International Trade Law ("UNCITRAL") adopted the text of a model law on cross-border insolvency, which was approved by a resolution of the United Nations General Assembly on 15th December These Regulations give effect to the model law in Great Britain. Regulation 2 of the Regulations provides that the UNCITRAL model law shall have the force of law in Great Britain in the form set out in Schedule 1 to the Regulations (the Model Law) and provides that in interpreting the Model Law the courts can have regard to other documents including the Guide to Enactment of the Model Law published by UNCITRAL (ISBN ). The model law and Guide may be accessed at Chapter I of the Model Law contains General Provisions (articles 1 to 8). Article 1 sets out the scope of application of the Model Law, which may apply in a number of cross-border situations, and also lists certain bodies to which the Model Law does not apply. Article 3 of the Model Law clarifies that Council Regulation (EC) No. 1346/2000 of 29th May 2000 on Insolvency Proceedings prevails over the Model Law. Chapter II (articles 9 to 14) relates to the access of foreign representatives and creditors to courts in Great Britain and their rights to participate in an insolvency proceeding in Great Britain. Chapter III of the Model Law deals with recognition of foreign proceedings and relief. Articles 15 to 17 set out criteria for determining whether a foreign proceeding is to be recognised and, if so whether as a foreign main proceeding or as a foreign non-main proceeding (see articles 16, 17 and definitions in article 2). Articles 19 to 21 set out the effects of recognition and the relief available to a foreign representative. The relief accorded upon recognition of a foreign main proceeding is listed in article 20(1). Article 21 of the Model Law provides for the court to grant discretionary relief for the benefit of any recognised foreign proceeding, whether main or non-main. Urgently needed relief may be granted by the court on an interim basis pending a decision on recognition (article 19). Chapter IV of the Model Law provides for the British courts and British insolvency officeholders to cooperate with foreign courts or foreign representatives in the areas covered by the Model Law (articles 25 to 27). Chapter V of the Model Law (articles 28 to 32) provides for the coordination of a British insolvency proceeding and a foreign proceeding concerning the same debtor and facilitates coordination between two or more foreign proceedings concerning the same debtor. Schedule 2 to the Regulations sets out procedural matters in relation to proceedings under the Model Law in England and Wales. Parts 2 to 5 of the

108 Schedule contain details of the form and content of specified applications under the Model Law and Part 6 sets out more detailed procedural requirements in respect of those applications. Part 7 of Schedule 2 provides for applications to be made in appropriate cases to the Chief Land Registrar in connection with court orders under the Regulations. Part 8 provides for a summary remedy against foreign representatives guilty of misfeasance. Parts 9 to 12 contain general provision as to court procedure and practice and appeals in connection with proceedings under the Regulations, costs and other general matters. Schedule 3 of the Regulations sets out miscellaneous procedural matters in relation to proceedings under the Model Law in Scotland. Schedule 4 makes provision in relation to notices delivered to the registrar of companies under the Regulations. Schedule 5 contains forms prescribed for use in connection with proceedings under the Regulations. A full regulatory impact assessment has not been produced for this instrument as it has a negligible impact on the costs of business. Notes: [1] 2000 c. 39. [2] A United Nations Publication, ISBN [3] 1986 c. 45. [4] Section 388 is amended by section 11 of the Bankruptcy (Scotland) Act 1993 (c. 6), section 4 of the Insolvency Act 2000 (c. 39), S.I. 1994/ /2708 and 2002/1240. [5] 1991 c. 56, section 23(6) was amended by the Water Act 2003 (c. 37), Schedule 8, paragraphs 2 and 8(1) and (6). [6] 2002 asp 3. [7] 1993 c. 43; relevant amendments to section 59 are made by the Railways Act 2005 (c. 14), Schedule 13, Part 1 and S.I. 2005/3050. [8] 1996 c. 61. [9] 2000 c. 38. [10] 1999 c. 29. [11] 2004 c. 20; there are amendments to section 119 which are not relevant to these Regulations. [12] 1986 c. 53. [13] S.I. 2004/1045. [14] 2000 c. 8.

109 [15] S.I. 2004/353, to which there are amendments not relevant to these Regulations. [16] 1987 c. 53. [17] 1989 c. 40, amended by the Bank of England Act 1998 (c. 11), Schedule 5, paragraph 48, the Enterprise Act 2002 (c. 40), Schedule 17, paragraphs 44 to 47, S.I. 1991/880, 1992/1315, 1998/1748, 2001/3649 and 2001/3929. [18] S.I. 1999/2979, relevant amendments are made by S.I. 2000/2952, 2001/3929, 2002/765 and 2003/2096. [19] S.I. 2003/3226. [20] 1930 c. 25. [21] 2002 c. 9. [22] 1972 c. 61; there are amendments to section 17 which are not relevant to these Regulations. [23] 1986 c. 45. [24] 1985 c. 66. [25] Section 399 was amended by the Enterprise Act 2002 (c. 40), Schedule 23, paragraphs 1 and 14. [26] Section 388 was amended by section 11 of the Bankruptcy (Scotland) Act 1993 (c. 6), section 4 of the Insolvency Act 2000 (c. 39), S.I. 1994/2421, 2002/2708 and 2002/1240. [27] Section 1 was amended by the Scotland Act 1998 (c. 46), Schedule 8, paragraph 22. [28] Council Regulation (EC) 1346/2000, OJ No. L160, p. 1. [29] Relevant amendments are made to section 426 by the Insolvency Act 2000 (c. 39), Schedule 4, paragraph 16. [30] 1986 c. 45. [31] 1985 c. 66. [32] Schedule B1 was inserted by the Enterprise Act 2002 (c. 40), section 248(2) and Schedule 16. [33] 1986 c. 45; sections 238 and are amended by the Enterprise Act 2002 (c. 40), Schedule 17, paragraphs 9, 25 and and, in the case of section 245, Schedule 26; sections 339 and 423 are amended by the Civil Partnership Act 2004 (c. 33), Schedule 27, paragraphs 119 and 121; section 342A was inserted by the Welfare Reform and Pensions Act 1999 (c. 30), section 15. [34] 1985 c. 66; section 34 is amended by the Civil Partnerships Act 2004 (c. 33), Schedule 28, paragraph 35, section 35 is amended by the Welfare Reform and Pensions Act 1999, Schedule 12, paragraphs 67 and 68 and section 36A is substituted by the Welfare Reform and Pensions Act 1999, section 16.

110 [35] Sections 240, 241 and 424 are amended by the Enterprise Act 2002, Schedule 17, paragraphs 9, 26, 27 and 36 and, in the case of section 240, Schedule 26; sections 241 and 342 are amended by the Insolvency (No. 2) Act 1994 (c. 12), sections 1 and 2; sections 342B 342F were inserted by the Welfare Reform and Pensions Act 1999, section 15 and Schedule 12, paragraphs 70 and 71. [36] Sections 36B and 36C are substituted by the Welfare Reform and Pensions Act 1999, section 16. [37] 1986 c. 45. [38] 1971 c. 80. [39] S.I. 1998/3132, relevant amendments are made by S.I. 1999/1008, 2000/221, 2000/2092, 2001/256, 2001/1769, 2001/2792, 2001/4015, 2002/2058, 2002/3219, 2003/1242, 2003/2113, 2003/3361, 2004/1306, 2004/2072, 2004/3419 and 2005/2292. [40] 2003 c. 39. [41] 1985 c. 6. [42] Section 690A was inserted by S.I. 1992/3179. [43] As amended by S.I. 2000/3373 and 2002/912. [44] As amended by the Statute Law (Repeals) Act 2004 (c. 14) and S.I. 2001/1228. [45] S.I. 1986/1925, as amended by S.I. 1987/1919, 1989/397, 1991/495, 1993/602, 1995/586, 1999/359, 1999/1022, 2001/763, 2002/1307, 2002/2712, 2003/1730, 2004/584, 2004/1070 and 2005/527. [46] 2000 c n46#n46 [47] Schedule B1 was inserted by the Enterprise Act 2002 (c. 40), section 248(2) and Schedule n47#n47 [48] 1985 c. 6. [49] S.I. 1994/2421, to which there are amendments not relevant to these Regulations. [50] 2002 c. 9. [51] 1985 c. 6. [52] 2003 c. 39; section 92 is amended by the Constitutional Reform Act 2005 (c. 4), Schedule 11, paragraph 4 (from a day to be appointed) and Schedule 4, paragraphs 308 and 345. [53] 1983 c. 20. [54] 1986 c. 45. [55] 1971 c. 80. [56] 1985 c. 6.

111 [57] Section 690A was inserted by S.I. 1992/3179. [58] As amended by S.I. 2000/3373 and 2002/912. [59] As amended by the Statute Law (Repeals) Act 2004 (c. 14) and S.I. 2001/1228. [60] 2000 c. 8. [61] 1985 c. 6. [62] Schedule B1 was inserted by the Enterprise Act 2002 (c. 40), section 248(2) and Schedule 16. [63] 1985 c. 6. [64] 2000 c. 7. [65] 1985 c. 6; section 690A was inserted by S.l. 1992/3179. [66] As amended by S.I. 2000/3373 and 2002/912. [67] As amended by the Statute Law (Repeals) Act 2004 (c. 14) and S /1228.

112 IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION COMPANIES COURT Nos & of 2009 IN THE MATTER OF STOCZNIA GDYNIA SA AND IN THE MATTER OF STOCZNIA SCZCECINSKA NOWA SP. ZO.O. AND IN THE MATTER OF THE CROSS-BORDER INSOLVENCY REGULATIONS 2006 Royal Courts of Justice Strand, London, WC2A 2LL Before: Mr Registrar Baister Date: 29 June 2009 BUD-BANK LEASING SP. ZO. O. Applicant Mr Glen Davis (instructed by Middleton Potts) for the Applicant Hearing date: 22 June Approved Judgment I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.... MR REGISTRAR BAISTER