Forum shopping alive and well outside the EU Insolvency Regulation. High Court (Bankruptcy) in Kekhman.

In Kekhman, the High Court (Kekhman) refused to reverse an earlier decision establishing jurisdiction for personal bankruptcy. COMI was not in the EU- the Insolvency Regulation therefore does not apply. Jurisdiction was upheld even though the applicant had only been personally been in the UK for one or two days.

Applicant argued pro jurisdiction mainly on the basis of

(a) the absence of a personal bankruptcy regime in the Russian Federation;

(b) the availability of assets in the jurisdiction (£200,000 which was to be made available to the official receiver);

(c) connection to the jurisdiction in the form of contractual English law/jurisdiction provisions;

(c) the opinion of a Russian lawyer, that the courts of the Russian Federation would recognise the bankruptcy;

(d) the fact that an English bankruptcy would allow for the investigation of Mr Kekhman’s affairs and an orderly realisation of Mr Kekhman’s assets for the benefit of his creditors as opposed to realisation on a first come first served basis;

(e) the promise that Mr Kekhman would cooperate with the official receiver and any trustee appointed;

(f) the prospect of Mr Kekhman’s financial rehabilitation.

Personal presence has long been withheld as sufficient ground for jurisdiction in England.

Section 265 Insolvency Act 1986 now provides

“Conditions to be satisfied in respect of debtor. (1) A bankruptcy petition shall not be presented to the court (…) unless the debtor(a) is domiciled in England and Wales, (b) is personally present in England and Wales on the day on which the petition is presented, or (c) at any time in the period of 3 years ending with that day (i) has been ordinarily resident, or has had a place of residence, in England and Wales; or (ii) has carried on business in England and Wales’.

Once jurisdiction has so been established, the Court has discretion to confirm or refuse jurisdiction in the case at issue, on the basis of relevant authority in case-law (and further instruction in the Act).

Baister CR reviewed precedent at length (including recent case-law on schemes of arrangement in the English courts) and held pro jurisdiction. Where his arguments are mostly likely to catch attention is his review of forum shopping, good and bad: The authorities, and in particular the corporate ones, demonstrate that the courts here are prepared to countenance what is in reality forum shopping, albeit of a positive, by which I mean a legitimate, kind’ (at 104).  There is no suggestion in this case that the bankruptcy order was sought for an improper purpose (…) beyond, the Applicants would say, Mr Kekhman’s seeking to avoid the harsh consequences of Russian law (much as it might be said the companies in the two scheme cases [i.e. schemes of arrangement, GAVC] mentioned above sought to avoid the potential consequences for them of the lack of a scheme jurisdiction in their respective countries). (at 110) Rather, it seems to me that Mr Kekhman has come to this jurisdiction to fill a lacuna in the laws of the country where he is domiciled and resides. Many of the cases we have looked at, though primarily, I accept, in the corporate realm, indicate that the courts here have often been content to assist in such circumstances (at 111).

Russian assets can still be gone after by the Banks in Russia, using Russian law. English will be credited to them by the English courts using English law.

A refreshing defence of forum shopping which in my view unfairly has been utterly blacklisted in the Insolvency Regulation.

Geert.

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