Apcoa scheme of arrangement: Convening hearing gives firm but considered go-ahead for English Scheme of Arrangement following change in governing law

Update 2 February 2024 in Tele Columbus AG, Re (Re Companies Act 2006) [2024] EWHC 181 (Ch) Hildyard J (with references to many of the cases discussed here and elsewhere on the blog) and for creditors meeting purposes only, gives a cautious OK for England and Wales jurisdiction for a scheme of a company incorporated in Germany, based and operating there with no office or operations or public “face” in E&W.

Postscript 3 May 2023 A Codere-type form of extreme forum shopping was sanctioned by Leech J in AGPS Bondco Plc, Re [2023] EWHC 916 (Ch); the Court’s jurisdiction was unsuccessfully challenged on the basis that the Issuer Substitution was ineffective or invalid as a matter of German law. Update 24 January 2024 that judgment has been successfully appealed as I report here.

Postscript January 2016 in Re Codere Finance (UK) Ltd [2015] EWHC 3778 (Ch)  the High Court at an earlier stage had expressed its concern at the ‘extreme forum shopping going on (creating a special purpose vehicle with COMI in England but no prior connection to the territory; a Luxembourg company had issued notes governed by New York law. It then acquired an “off-the-shelf” English company, which acceded to the notes as a co-issuer. The English company then promulgated a scheme to discharge the notes) however for reasons expertly summarised by Iain White, Newey J eventually sanctioned. (The application was made by Codere Finance (UK) Ltd., an English incorporated subsidiary of Codere SA, a Spanish company. Codere SA is the ultimate parent of a group of companies that carries on business by way of gaming and similar activities in Latin America, Italy and Spain. Codere SA’s shares are listed on a number of Spanish stock exchanges). Update 14 September 2020 forum shopping was again referred to in a 2020 scheme application by Codere ( [2020] EWHC 2441 (Ch) and sanction in Codere Finance 2 (UK) Ltd, Re Companies Act 2006 [2020] EWHC 2683 (Ch)– and likewise not considered to be too big an obstacle. Jurisdiction was accepted on the basis of domicile in England: A4 BIa grounds, linked to A8, the anchor ‘defendant’ mechanism.

Postscript July 2015 Forum shopping possibilities were further expanded in [2015] EWHC 2151 (Ch) Van Gansewinkel, which had the additional peculiarity that the only territorial link with England was the establishment of (only) one creditor there (full disclosure: I was the expert heard on the Belgian side of recognition and enforcement).

Postcript 8 May 2015 in DTEK, a challenge was made by one disgruntled creditor to the change of governing law from New York law to English law. However reportedly this challenge was withdrawn in the nick of time, leaving this point as far as I am aware at this stage unaddressed by the English courts. (Not that in my view that change ought to be problematic). (Update 11 June: judgment is now available here).

Postscript 25 November 2014. Hildyard J’s judgment in both convening and sanction hearings was released 19 November 2014, [2014] EWHC 3849 (Ch), with leave to appeal granted. (Hearing at the CA is scheduled for December 2014).

The title of this piece is as considered as Hildyard J’s approval of the application for an order to convene scheme meetings for the purpose of considering, and if thought fit approving, schemes of arrangement, nine in all, pursuant to Part 26 of the Companies Act 2006, in a scheme of arrangement relating to the Apcoa group of companies.

At the time of writing Bailii did not yet feature a transcript of the hearing however I have a copy for those interested. Hildyard J aptly lists the potential booby traps given the international context of the case (the Scheme Companies comprise two English incorporated companies, a holding company and another company incorporated in Germany, and five other subsidiaries incorporated elsewhere in Europe): jurisdiction under English private international law (not all companies having COMI in England); related to this, establishment of jurisdiction only following a change on governing law of the initial finance agreements, approved by a majority but not all creditors; and, as a related pre-condition to English approval, the likelihood of recognition and enforcement of the Scheme, once adopted, elsewhere in the EU (full disclosure: I was the expert heard on the Belgian side of recognition and enforcement).

The application to convene hearings was approved, justifiably. Schemes of arrangement are, arguably, excluded from the Insolvency Regulation. Recognition and enforcement much facilitated by the Brussels I Regulation. The one big sticky point in any future challenge is likely to be the change in governing law which enabled English jurisdiction in the first place. This was not sub judice in the current proceedings and the scheme at this stage is not opposed by any of the creditors.

Apcoa is not insolvent; it is being restructured. The case highlights the relevance of the ongoing amendments to the Insolvency Regulation. (At the time of writing waiting for first reading by Council; not likely to appear any time soon, given the European elections). The jury is out (and case-law increasing; see e.g. Zlomrex International) whether it would be better for Schemes of Arrangement to be included in the Annex to the Insolvency Regulation. In my view cover by Brussels I is much preferred.

No doubt to be continued.

Geert.