Windhorst v Levy. The High Court on the narrow window to refuse a Member State judgment under Brussels Ia, which subsequently got caught up in insolvency.

Windhorst v Levy [2021] EWHC 1168 (QB) has been in my in-tray a little while. The court was asked to consider whether registration of a German judgment under Brussels Ia should be set aside when the judgment debt in question was subsequently included within a binding insolvency plan, which is to be recognized in E&W pursuant to the European Insolvency Regulation  – EIR 1346/2000 (not materially different on this point to the EIR 2015). Precedent referred to includes Percival v Moto Novu LLC.

Appellant argues the registration order should be set aside as the initial 2003  judgment is no longer enforceable, having been waived as part of a binding insolvency plan, which came into effect by order of a German court on 31 August 2007 (“the Insolvency Plan”), and which this court is bound to recognize under the Insolvency Regulation.

In CJEU C-267/97 Coursier v Fortis Bank SA (held before the adoption of the EIR) it was held that enforceability of a judgment in the state of origin is a precondition for its enforcement in the state in which enforcement is sought. However that judgment then at length discussed what ‘enforceability’ means, leading to the Court holding that it refers solely to the enforceability, in formal terms, of foreign decisions and not to the circumstances in which such decisions may in practice be executed in the State of origin. This does not require proof of practical enforceability. The CJEU left  it to ‘the court of the State in which enforcement is sought, in appeal proceedings brought under [(now) Brussels Ia], to determine, in accordance with its domestic law including the rules of private international law, the legal effects of a decision given in the State of origin in relation to a court-supervised liquidation.’

The respondent contends that, applying the test laid down in Coursier v Fortis, the 2003 Judgment plainly remains enforceable in formal terms under German law.

The judge, at 52 ff, refers ia to CJEU Prism Investments and Salzgitter to emphasise the very narrow window for refusal of recognition, and holds [56] that the German judgment clearly is still formally enforceable in Germany (where enforcement is nota bene only temporarily stayed pending appeal proceedings). The effects of the German insolvency plan, under German law, are not such that the 2003 judgment has become unenforceable [58].

The request for a stay of execution is also denied, seeing as the appellant chose not to pursue a means available to it under German law and before the German courts, to seek a stay (it would have required it to put down the equivalent sum as court security).

Geert.

EU Private International Law, 3rd ed. 2021, 2.560 ff, 5.141 ff.

Emerald Pasture. The High Court on on actions ‘related to’ insolvency (Gourdain; vis attractiva concursus) and jurisdiction for E&W courts post Brexit.

In Emerald Pasture Designated Activity Company & Ors v Cassini SAS & Anor [2021] EWHC 2010 (Ch) there is an interesting split between pre and post Brexit applicable EU rules, with BIa not engaged yet the EU insolvency rules firmly in the picture.

Claimants Emerald are lenders, and first defendant Cassini is the borrower, under a senior facilities agreement dated 28 March 2019 (the SFA). The SFA is governed by English law and has an exclusive jurisdiction clause in favour of the English courts. Cassini is subject a French ‘Sauvegarde’) opened on 22 September 2020. This is a form of debtor-in-possession safeguard proceeding for a company in financial difficulties that wishes to propose a restructuring plan to its creditors. Sauvegarde is included in the proceedings that are subject to the Recast European Insolvency Regulation 2015/848. Parties are seemingly in agreement that the EIR 2015 continues to apply in the UK in respect of the Sauvegarde, because it was commenced prior to 31 December 2020, Brexit date.

Cassini contest jurisdiction, arguing that the claim derives from and is closely linked to the Sauvegarde and thus falls within A6(1) EIR, the so-called vis attractiva concursus which reads

“The courts of the Member State within the territory of which insolvency proceedings have been opened in accordance with Article 3 shall have jurisdiction for any action which derives directly from the insolvency proceedings and is closely linked with them, such as avoidance actions.”

This Article is the result of CJEU case-law such as Gourdain , Seagon , German Graphics , F -Tex.

Zacaroli J unfortunately repeats the suggested dovetail between BIa and the EIR, referring to CJEU Nickel & Goeldner.

As the judge notes [24] the application of A6(1) has not been made easier by the CJEU blurring the distinction between the conditions – with reference to Bobek AG in NK v BNP Paribas Fortis NV (on the Peeters /Gatzen suit).

Emerald argue that the question is whether the action itself derives from the insolvency proceeding. They contend that since the action is for declaratory relief in respect of a contract, its source is the common rules of civil and commercial law. Cassini focus on the issue raised by the action. They contend that since the only matter in issue in the action is whether the rights to information under the SFA are overridden by the Sauvegarde – and the principles of French insolvency law that govern the Sauvegarde – the real matter in issue concerns the effects of the insolvency proceedings so that the action falls within A6(1).

The judge [45] after discussion and assessment of the authorities (incl   ING Bank NV v Banco Santander SA ) discussed by both parties, decides against vis attractiva concursus. He holds that the legal basis for the declarations sought remains the SFA, and thus the rules of civil and commercial law, notwithstanding that the only issue which the court would be required to determine is the impact of French insolvency law on the obligations under the SFA. The question which the declarations are designed to answer, it is held, is the enforceability of the contractual rights.

On that basis, the exclusive choice of court clause grants E&W courts jurisdiction, under English common law (as it would have done under BIa, given the judge’s finding on vis attractiva).

If the claim goes ahead (one images appeal may be sought), the French insolvency proceedings will not have lost their relevance. Cassini argue on that issue [12 ff] that since the characteristic performance of the SFA is the loan of funds, which has already occurred, the SFA is not a “current contract” and as a result of French law, is no longer enforceable. Only the underlying debt subsists, they argue, which must be paid by way of dividends in the French insolvency proceedings. That argument, one assumes, will bump into further obstacles.

Geert.

EU Private International Law, 3rd ed, 2021, para 5.76 ff.

 

DTEK Energy: Grounds for the Rome I issue of Schemes of Arrangement to be heading for the Court of Appeal.

In DTEK Energy BV, Re [2021] EWHC 1551 (Ch) Norris J yesterday expanded on his reason to sanction this scheme of arrangement of a Dutch corporation. I had referenced an earlier DTEK scheme in my post here. The judge firstly pointed out the straddle position of the E&W courts, in assessing the sanction of the scheme from the jurisdictional point of view: [30]:

for the purposes of testing whether the Judgments Regulation presented a jurisdictional bar to the English Court exercising jurisdiction over EU domiciled scheme members or creditors it was assumed to apply (and an appropriate gateway identified). But for the purposes of testing international effectiveness it was not assumed to apply, and the English Courts looked for expert evidence which demonstrated alternative bases.

He also points out [31] what I have repeatedly mentioned: the analysis was never extensive, for the schemes tended eventually to be unopposed. Summary of the default position is done [31] with reference to Van Gansewinkel (in which I acted as one of the experts) seeing as, like DTEK, it involved recognition and enforcement in The Netherlands.

At [37], importantly, the judge refers to a report produced by Prof. Dr. Christoph Paulus and Prof. Dr. Peter Mankowski as to the likelihood of the recognition of the Bank Scheme by EU Member States. They seemingly are of opinion that the Bank Scheme would be given effect in every Member State by virtue of Art 12(1)(d) Rome I. This provides that the law applicable to a contract (in the instant case, English law) shall govern the various ways of extinguishing obligations: and that rule covers all modes of extinguishing obligations (including those operating against dissentient creditors). At [38] this conclusion is said to have been supported by a number of relevant E&W precedents (all of which  I have reported on the blog; see eg Lecta Paper) however these all merely scratched the surface.

Gazprombank however oppose this conclusion and refer in support to a report produced (I have not seen it) by Dr Peters (sic; it’s Prof Dr Niek Peters) for the Dutch situation and, at [44] by Mr Vorkas for the Cypriot situation. Both question the opposability of the scheme to recalcitrant creditors in light of amended choice of law. I have not studied the issue in the detail these reports have, and I have not seen any of them. However my own view on this is that there is certainly merit in what is here the opponents’ input:  the position of certain English schemes under Rome I is really quite vulnerable.

At [41] the judge on balance sides with the Paulus /Mankowiski report for ‘it is common ground that I cannot decide between the rival Dutch views’ (later repeated for the Cypriot report). I do not think that is necessarily correct, or at least it deserves some discussion: Brussels Ia may not be retained EU law yet Rome I is, therefore this is arguably not an issue of ‘foreign law’ (and certainly not ‘Dutch law’).  

Conclusion [46]: If sanctioned, the Bank Scheme will certainly be effective as regards 95% of Energy’s creditors. There is a reasonable prospect that the sole dissentient creditor will be unable to mount any challenge to it. Even in the event of a challenge, uncontested evidence demonstrates that the Bank Scheme will be effective in the jurisdiction in which operations are undertaken and assets located.

Seeing as this is one of the first times the BIa and particularly the Rome I situation is discussed in greater detail, I do hope this case is heading for the Court of Appeal.

Geert.

EU Private International Law, 3rd ed. 2021, para 5.35 ff.

WWWRT v Tyshchenko. Interesting if contestable engagement with Brussels IA’s Article 34’s forum non-light regime.

In WWRT Ltd v Tyshchenko & Anor [2021] EWHC 939 (Ch) and following an earlier Worldwide Freezing Order, Bacon J engages with Article 34 Brussels Ia’s forum non conveniens ‘light’ regime.

The proceedings are brought by WWRT ltd against Mr Serhiy Tyshchenko and his ex-wife, Mrs Olena Tyshchenko. The claim is founded on an allegation that the Defendants carried out an extensive fraud on the Ukrainian bank, JSC Fortuna Bank during which time the bank was (it is claimed) ultimately owned by Mr Tyshchenko. The bank was subsequently declared insolvent and was liquidated, in the course of which a package of its assets, including the disputed loans, was sold to Ukrainian company Star Investment One LLC.  Star in turn sold those rights and assets to WWRT in March 2020. WWRT’s case is that following those two assignments it has now acquired the rights to bring the claim relied upon in the present proceedings, which is one in tort under Article 1166 of the Ukrainian Civil Code.

In current proceedings, defendants contest jurisdiction, on the basis of 3 alternative grounds:

Firstly, the principle of ‘modified universalism’ (which I have discussed ia here) which should ground a stay under common law so as to prevent WWRT from bypassing the Ukrainian insolvency proceedings. The suggestion is that CJEU Owusu did not deal with a potential stay to allow the judge in one EU Member State to stay proceedings so as to support insolvency proceedings in another Member State. Bacon J held [57], in my view justifiably, that even if indeed the CJEU in Owusu did not specifically deal with this issue, its reasoning (particularly the insistence on predictability and legal certainty) extends to the current scenario. Insolvency proceedings may well (and indeed clearly) fall outside BIa’s scope, however the claim at issue is one in tort, which falls squarely within it. At 62 ff he discusses obiter that even if such stay would have been theoretically possible, he would not have exercised his discretion to grant it.

Secondly, at 89 ff, a stay by analogy with A34 BIa. It is seemingly common ground between the parties and the judge that the bankruptcy exclusion in A1 BIa precludes the express application of A34 if the pending action in the third State is in the nature of bankruptcy or insolvency proceedings. Support is found in Baker J’s views in BB Energy. This is not a settled issue. Neither is much discussion, pro or contra, of the in my view unjustifiable finding of reflexive application of A28 Lugano in JSC Commercial Bank v Kolomoisky [2019] EWCA Civ 1708. The more sound rejection of an A34 stay in the case at issue  in my view lies in the judge’s obiter finding at 95 that the proceedings in E&W are not ‘related’ to those in the Ukraine.

Thirdly, a more straightforward argument of lack of domicile of one of the defendants in the UK, hence room for a forum non conveniens stay. This argument was in fact dealt with first, at 38 ff, with Bacon J  holding on the basis of a pattern of settled residence that domicile was in fact established. At 98 ff he holds obiter that even if A4 hence BIa had not been engaged, he would not have allowed a stay on forum non grounds.

In conclusion, the freezing orders were continued.

Geert.

EU Private International Law, 3rd ed 2021, para 2.539 ff

Oeltrans Befrachtungsgesellschaft v Frerichs: the CJEU on the reach of lex contractus as a shield against the lex concursus’ pauliana (avoidance action).

Update 28 April 2021 see Giles Cuniberti’s critique of the implications of A13 EIR (contract law trumps insolvency law) here.

In C-73/20 Oeltrans Befrachtungsgesellschaft v Frerichs the CJEU held yesterday – no AG Opinion had been requested.

Applicant ZM has been the liquidator in the insolvency of Oeltrans Befrachtungsgesellschaft, established in Germany. Insolvency proceedings had been opened in April 2011. The Oeltrans group includes Tankfracht GmbH, also established in Germany. An inland waterway contract (a charter party) existed between Tankfracht and Frerich, established in the Netherlands, under which Tankfracht owed Frerich EUR 8 259.30. Frerich was to transport goods by vessel for Tankfracht from the Netherlands to Germany. In November 2010, Oeltrans paid Frerich the sum owed by Tankfracht,  ‘on the order of Tankfracht’. The application does not give any detail as to the circumstances of that ‘order’.

The liquidator seeks the repayment of that sum on the basis of the lex concursus, German law, insolvency pauliana. Frerichs contend that on the basis of A16 European Insolvency Regulation (‘EIR’) 2015 (in fact, the A13 almost identical version of the EIR 2000), such as applied ia in C-54/16 Vinyls Italia), Dutch law, the charter party’s lex contractus per the Rome I Regulation, shields it from the German Pauliana.

The core question is whether the impact of that lex contractus extends to payments made by third parties. In technical terms: whether effective contractual performance by third parties, is part of A12(1)b Rome I’s concept of ‘performance’ of the contract being within the scope of the lex contractus.

The CJEU, referring to Lutz and Nike, confirms the restrictive scope of A16 EIR. At 31-32 however it upholds the effet utile of A16, which as ia confirmed in Vinyls Italia, is to protect the legitimate expectations of a party contracting with a counterparty who subsequently enters insolvency proceedings, that the contract will continue to be governed by the lex contractus, not the lex concursus. ‘Performance’ per A12 Rome I is held to include performance by a third party. Many scholarly sources support the same conclusion, and e.g. Plender and Wilderspin, as well as McParland refer in support to the Guiliano-Lagarde report to the Rome Convention. I realise the CJEU does not refer to scholarly sources yet surely it could have referred to the Giuliano-Lagarde report to shore up its conclusions so succinctly formulated.

Geert.

EU Private International Law, 3rd ed. 2021, para 3.98, paras 5.132 ff.

COMI for natural persons and the EIR. The High Court unconvincingly in Lin v Gudmondsson.

Lin v Gudmundsson & Ors [2021 EWHC 820 (Ch) is an application to annul the bankruptcy of Mr Gudmundsson by his ex-wife. She argues inter alia that the bankruptcy order should not have been made because England was not Mr Gudmundsson’s COMI.

At 54, Briggs J (presumably so led by counsel) oddly holds that the EU Insolvency Regulation (‘EIR’) 2015/848 only defines COMI in its recital 13. Odd, for that was the case under the previous Regulation, 1346/2000, not the current one which does define COMI in the text of the Regulation proper (Article 3(1) – see Heading 4 of my overview here). However that issue is of minor importance for the real hesitation I have with the judgment is

that the judge despite the EIR’s specific instruction that COMI needs to be determined proprio motu, retreats to the default adversarial nature of common law proceedings and defers to the claimant’s concession ‘that even if the court were to find that Mr Gudmundsson did not have his COMI in England and Wales it should not exercise its discretion to annul the bankruptcy order’ [57]; and

that the judge resorts to section 265(2) of the Insolvency Act 1986’s jurisdictional anchor (“in the period of three years ending with the day on which the petition is presented …a place of residence in England and Wales”) instead of the autonomous concept of ‘habitual residence’ in the Regulation. The meaning of that concept was recently discussed by the CJEU in C-253/19 Novo Banco.

Geert.

EU Private International Law, 3rd ed 2021, Chapter 5, para 5.95.

Gategroup: A seminal and questionable judgment on gatekeeping viz restructuring ‘Plans’ under the Lugano Convention, Insolvency Regulation.

Update 7 May 2021 in follow-up judgment [[2021] EWHC 775 (Ch)], the judge calls the case one of ‘good forum shopping’ per Codere, points to expert evidence on Swiss Law (by professor Rodrigo Rodriguez, seemingly supporting the suggestion Lugano’s insolvency exception applies [24]; Rodrigo did point to an issue with third party effect, which led to an amendment of the Plan) and Luxembourg law (by Philippe Hoss), both essentially confirming enforceability in Switserland and Luxembourg.

Zacaroli J this morning held in Gategroup Guarantee Ltd, Re [2021] EWHC 304 (Ch) on whether ‘part 26A’ English restructuring ‘Plans’ (see my review of ia Deep Ocean) are within the scope of the Lugano Convention’s insolvency exception (Lugano rather than Brussels Ia was engaged).

He held they are (hence: excluded from Lugano), leading to neutralisation of an exclusive choice of court agreement in the relevant bonds, and making the courts of England and Wales have jurisdiction despite this choice of court.

Oddly Kaupthing was not referred to. Neither was Enasarco.

The judge relied unconvincingly in my view on the dovetail discussion (most recently discussed by me viz Alpine Bau) under the Brussels IA Recast and the EU Insolvency Regulation (‘EIA’)- neither of course applicable to the UK anymore, as indeed is the case for the Lugano Convention.

All in all this is a case in which the  reasoning has a potentially long term impact. The claim form in this case was issued on 30 December 2020. As such, by reason of Regulation 92(1), (2)(d) and (3) of the Civil Jurisdiction and Judgment (Amendment) (EU Exit) Regulations 2019, the Lugano Convention continues to apply.

The Plan Company was incorporated on 8 December 2020 as a wholly owned subsidiary of gategroup Holding AG (the ‘Parent’, a company incorporated in Switzerland. At [55] , if Lugano applies to applications under Part 26A, then the Plan Company accepts that by reason of A23(1) Lugano and the exclusive jurisdiction clause in favour of the courts of Zurich in the Bonds, this court has no jurisdiction. That acceptance is made notwithstanding that the Deed Poll contains a non-exclusive jurisdiction clause in favour of the courts of England. The Plan Company acknowledges that since the purpose of the Plan is to effect amendments to the terms of the Bonds, the exclusive jurisdiction clause in the Bonds is engaged.

The usual modus operandi of assuming application of Brussels Ia arguendo (see viz schemes of arrangement most recently KCA Deutag and viz Plans Deep Ocean and Virgin) did not fly here for as noted the Plan Company accepts that the exclusive jurisdiction clause in favour of the Zurich courts is a complete bar to this court assuming jurisdiction if the Lugano Convention applies (in the preceding cases the point need not be decided, since jurisdiction under BIa could be established arguendo as in none of them was there adversarial argument on the point).

At 70 Justice Zacaroli introduces effectively an amicus curiae by Kirkland & Ellis, opposing the view that the insolvency exception applies.

At 73 ff a first point is considered: Part 26A Plans have not been notified under the EIA Annex. This refers to the so-called dovetailing between Brussels Ia, Lugano and the EIR. The suggestion is that if a procedure is not listed in Annex A EIR, it is conclusively not an insolvency proceeding and “that is the end of the matter” because the dovetailing principle leads inexorably to the conclusion that it falls within the Recast (‘and thus within the Lugano Convention’  [73]). At 82 the judge incidentally is under the impression that the older, heavier procedure of amendment by (EP and Council) Regulation applies – which it no longer does since the EIR 2015.

I have since long submitted that there is no such dovetail. It is also clear that there cannot be identity of interpretation between the Lugano Convention’s insolvency exception and the Brussels regime given that non-EU Lugano States are not part of the EIR. The judge confirms as much at 81 and at 91 ff  and, in a first approach, revisits the principles of modified universalism and the origin of the insolvency exception in particular in the Jenard report. He holds at 103 that the ratio behind the insolvency exception in the Rapport Jenard is the same as the ratio behind Plans, hence that the exception applies.

In a second (presumably subsidiary) approach, the judge queries whether proceedings under Part 26A comply with the abstract requirements for an ‘insolvency’ procedure under of A1(1) EIR and finds at 133 that they do. I am really not convinced by the relevance of that analysis. He includes at 134 ff an argument that the Dutch ‘WHOA’ (Wet homologatie onderhands akkoord) proceedings are to be included in Annex A. Again I am not convinced that serves much purpose. Member States populate the Annex and a Member State proposal for inclusion is not checked against A1(1) EIR.

Conclusion on the jurisdictional issue at 137: ‘proceedings under Part 26A are within the bankruptcy exclusion in the Lugano Convention. This court accordingly has jurisdiction notwithstanding the exclusive jurisdiction clause in the Bonds.’

A most relevant judgment, on which the issues are not at all clear. Expect appeal lest the restructuring timing has made this nugatory – settling these issues would most certainly be welcome.

Geert.

EU private international law, 3rd ed. 2021, paras 2.73 ff (2.81 ff in particular) and 5.35 ff.

ING v Banco Santander. Deferring to extensive discussion of national law on the insolvency exception, and a bit too rich a pudding on privity of choice of court.

The critical point in Monday’s judgment in  ING Bank N.V. & Anor v Banco Santander S.A. [2020] EWHC 3561 (Comm), an application for lack of jurisdiction, is whether this is a case about claims which a syndicate of eight lenders, including ING, had against Marme Inversiones 2007 S.L.U (“Marme”) under a loan agreement and related swap agreements (together “the Marme Agreements”) which were entered into between the lenders and Marme in September 2008, or whether it is about the effect of the ongoing liquidation of Marme in Spain on those claims. The Defendant Applicant says the latter, the Claimant Respondents say the former.

Of note is that on 2 January 2020, Sorlinda, whose agreements are at issue, merged into Santander. As a consequence of the merger, Santander assumed all of Sorlinda’s rights and liabilities.

At 4 Cockerill J summarises ‘the field of battle’ (at 4) as follows:

Santander contends that the court should refuse to exercise jurisdiction or order a stay because:

i) The claim falls within the EU Insolvency Regulation on insolvency proceedings (the “Insolvency Regulation”) and is excluded from the scope of the recast Regulation (EU) No. 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the “Brussels Regulation”) pursuant to Article 1(2)(b) of the Brussels Regulation.

ii) Even if the Claim does not fall within the exception under Article 1(2)(b), ING cannot rely upon Article 25 of the Brussels Regulation.

iii) As a matter of Spanish law, ING has not established that Sorlinda became liable to ING for Marme’s liabilities.

iv) There are in any event grounds for the Court to refuse to exercise its jurisdiction and/or to order a stay.

ING contends that:

i) The bankruptcy/winding up exclusion in Article 1(2)(b) of the Brussels Regulation does not apply. The Claim is between two solvent entities in relation to contractual payment obligations under the Marme Agreements, and has no effect on Marme or any of its other creditors. The Claim does not derive directly from Marme’s winding up nor is it closely connected with that winding up.

ii) The question of whether or not Santander is bound by the Marme Agreements is a question of English law having appropriate regard to the effect of the relevant “assumption” of Marme’s obligations by Sorlinda (now Santander) as a matter of Spanish law.

iii) There is (at least) a good arguable case that as a consequence of the “assumption” Santander has a direct liability to ING under the Marme Agreements which are subject to the exclusive jurisdiction of the English courts.

iv) There are no grounds for the Court to refuse to exercise its jurisdiction and/or to order a stay. (GAVC underlining)

She holds that the jurisdictional challenge succeeds on the A25 BIa point, and also on the Insolvency Regulation point. The other grounds (assumption in Spanish Law and case management stay) would have failed.

Arguments in essence concern Brussels Ia’s insolvency exception. Per CJEU Gourdain, an action is related to bankruptcy only if it derives directly from the bankruptcy and is closely linked to proceedings for realising the assets or judicial supervision. Valach and F-Tex is CJEU authority also discussed.

In general, it is the closeness of the link between a court action and the insolvency proceedings that is decisive for the purposes of deciding whether the insolvency exclusion is applicable (CJEU German Graphics). In the absence of substantive EU insolvency law, the CJEU does not push an autonomous interpretation of the concept and defers largely to national insolvency law.

Whether the action is within the scope of BIa therefore requires examination of the national laws at issue, and that is done at length (featuring ia prof Virgós,  whose expert report clearly impressed Mrs Justice Cockerill).

Core of the decision on the insolvency exception, is at 197:

..the nature of the claim is one which is defined by something which took place in the liquidation, and the dispute effectively cannot be expressed without reference to the conduct of the liquidation. Although there is no challenge to the validity of the liquidator’s actions, the proceedings do necessarily require a consideration of the ambit of those powers and the ambit of actions done as part of those powers. The question of to what extent Sorlinda assumed the relevant liability can only be answered by looking at the deal which was struck in the context of the Liquidation Plan (governed by Spanish insolvency law) and the statutory insolvency framework.

The claim is not covered by BIa. English courts do not have jurisdiction over it.

Article 25 BIa is discussed first in fact, at 113 ff. However I would have thought (although Cockerill J suggest quite the reverse) that the A25 arguments must be obiter, with the insolvency exception findings logically coming first. This may be at issue when this judgment is appealed and /or referred to later.

On A25, ING must demonstrate a good arguable case either as to succession to choice of court, or as to specific consent. It was clear that the latter was not established hence discussion focused on novation /succession.  Authority discussed was of course Refcomp, Coreck Maritime, Tilly Russ etc.

This section of the judgment does not have the same clarity as the discussion on insolvency. Much reference is made to the relevance of either Spanish or English law on the issue of privity of choice of court, however this seems to be mostly done with reference to those laws being potential lex contractus (of the underlying contract). Even if the issue is not completely dealt with autonomously by EU law (which is arguable; and would have ended reference to any national laws), discussion of national law arguably should be to lex fori prorogati per the new rule in Brussels Ia (even a putative lex fori prorogati). At any rate, no succession or novation is established.

Something to clear out in my head over the end of year break.

This was most probably my last posting for the year.

Merry Christmas, everyone, and Guten Rutsch. Be safe, and remember this nice thought.

 

Geert.

European Private International Law, 3rd ed., 2021, Heading 2.2.3.1 (2.73 ff) and Heading 2.2.10.7 (2.355 ff).

 

KCA Deutag throws contractual commitment not to oppose into the scheme of arrangement jurisdictional mix.

KCA Deutag UK Finance PLC, Re (In the Matter of the Companies Act 2006) [2020] EWHC 2977 (Ch) is in most part a classic scheme of arrangement sanctioning hearing, with the scheme proposed by a UK-incorporated company with COMI undisputedly there, too. See a range of posts on the blog for the classic jurisdictional analysis.

What is slightly out of the ordinary is the contractual commitment by the creditors not to oppose the scheme in foreign jurisdictions.  Snowden J, at 33:

In this case, two things give me that comfort. The first is that there was an overwhelming vote by Scheme Creditors in favour, and a very large number of such creditors entered into a lock-up agreement which bound them contractually to support the Scheme and not to do anything to undermine it. It is very difficult to see how such creditors who contractually agreed to support the Scheme and/or who voted in favour could possibly be allowed to take action contrary to the Scheme in any foreign jurisdiction, and the number and financial interests of those who did not vote in favour is comparatively very small indeed. That alone is sufficient to demonstrate to me that the Scheme is likely to have a substantial international effect and that I would not be acting in vain if I were to sanction it.

I would intuitively have felt quite the opposite, although detail is lacking (e.g. was the commitment given as a blank cheque before the details of the scheme were known): such contractual commitment even if valid under (presumably; no details are given) English law as the lex contractus of the commitment, could serve to undermine international effectiveness. For I would not be surprised if creative counsel on the continent could find a range of laws of lois de police or ordre public character, to try and object to contractual commitment to sign away the right to oppose.

Geert.

(Handbook of) EU Private International Law, 2nd edition 2016, Chapter 2, Chapter 5. Third edition forthcoming February 2021.

Restructuring tourism and Virgin Atlantic. The first application of England’s new Restructuring Plan leaves the jurisdictional issue hanging.

Update 12 May 2021 Snowden J ([2021] EWHC 1246 (Ch)) has now also sanctioned the scheme.  He noted [316] the unchallenged expert evidence suggesting likely recognition in jurisdictions with non-UK guarantors of the Senior Facilities Agreement (SIN, AUS, IT) and also those whose law governs small number of lease guarantees (SP, PORT). This does not of course rule out future circumstances where such evidence may be challenged, depending I imagine on the nature of the cram-down (eg re ownership of shares).

I flagged [2020] EWHC 2191 (Ch) Virgin Atlantic (the plan in the meantime has been sanctioned in [2020] EWHC 2376 (Ch)) in an update of my earlier post on the Colouroz Investment Scheme of Arrangement.

Restructuring practitioners have been justifiably excited by this new addition to England’s regulatory competition in restructuring tourism.

In my many posts on Schemes of Arrangements (see in particular Apcoa with the many references to later cases in that post; and Lecta Paper), I have summarised the modus operandi: no firm decision on jurisdiction under Brussels Ia is made (it is by no means certain but scheme creditors have so far not taken much of a swipe seeing as they tend to accept the attraction of the debtor company continuing as  a going concern following the use of an English scheme). If at least one of the creditors is domiciled in England, it is considered sued and a defendant per Article 4 Brussels Ia. Other, non-England domiciled creditors are then pulled into English jurisdiction using the one anchor defendant per Article 8(1). Trower J extends that assumption to Restructuring Plans at 58 ff:

      1. It is now well-established that an application for sanction of a Part 26 scheme is a civil or commercial matter and the reasoning seems to me to apply with equal force to a Part 26A restructuring plan. However, it has never been completely determined whether the rule laid down in Article 4(1) of the Regulation, that any person domiciled in an EU member state must (subject to any applicable exception) be sued in the courts of that member state, also applies to a Part 26 scheme, although the matter has been referred to and debated in a number of cases.
      1. In the present case, I shall adopt the usual practice of assuming without deciding that Chapter II and, therefore, Article 4 of the Recast Judgments Regulation applies to these proceedings on the basis that Plan Creditors are being sued by the company and that they are defendants, or to be treated as defendants, to the application to sanction the scheme. If, on the basis of that assumption, the court has jurisdiction because one of the exceptions to Article 4 applies, then there is no need to determine whether the assumption is correct and I will not do so.
      1. In the present case, the Company relies on the exception provided for by Article 8 of the Recast Judgments Regulation. By Article 8, a defendant who is domiciled outside a member state may be sued in that member state provided that another defendant in the same action is domiciled there and provided that it is expedient to hear the claims against both together to avoid risk of irreconcilable judgments resulting in separate proceedings. The consequence of this is that if sufficient scheme creditors are domiciled in England then Article 8(1) confers jurisdiction on the English court to sanction a scheme affecting the rights of creditors domiciled elsewhere in the EU, so long as it is expedient to do so, which it normally will be (see, for example, Re DTEK Finance Plc [2017] BCC 165 and [2016] EWHC 3563 (Ch) at the convening and sanctioning stages).
    1. and concluding at 61
      1. In the present case, the evidence is that at least one Plan Creditor from each class is domiciled in the jurisdiction. Perhaps most importantly, so far as in terms of Trade Plan Creditors, it is 90 out of 168. In my view, this is amply sufficient to ensure that the requirements of Article 8 are satisfied.’

Article 25 BIa jurisdiction is obiter dismissed at 62 for not all creditors have credit arrangements subject to English choice of court.

Restructuring Plans do have features which differ from Schemes of Arrangement and some of those do trigger different considerations at the recognition and enforcement level than have hitherto been the case for Schemes.

Geert.

(Handbook of) EU Private International Law, 2nd edition 2016, Chapter 2, Chapter 5. Note: 3rd of the Handbook is forthcoming (February 2021).