Posts Tagged Insolvency

New Look: Application of the good old rules for schemes of arrangements, with some doubt over the substantial effects test.

In [2019] EWHC 960 (Ch) New Look Secured Issuer and New Look Ltd, Smith J at H applies the standing rules on jurisdiction over the scheme and other companies which I also signalled in Algeco and Apcoa (with further reference in the latter post). Against the scheme companies jurisdiction is straightforward: they are England incorporated.  Against the scheme creditors, English courts apply the jurisdictional test viz the Brussels I Recast (‘a’) Regulation arguendo: if it were to apply (which the English Courts have taken no definitive stance on), would an English court have jurisdiction? Yes, it is held: under Article 8 (anchor defendants). (Often Article 25 is used as argument, too).

At 48 Smith J signals the ‘intensity’ issue: ‘In some cases it has been suggested that it may not be enough to identify a single creditor domiciled in the United Kingdom, and that the court should consider whether the number and size of creditors in the UK are sufficiently large: see Re Van Gansewinkel Groep[2015] EWHC 2151 (Ch) at [51]); Global Garden Products at [25]; Re Noble Group Ltd [2018] EWHC 3092 (Ch) at [114] to [116].’ Smith J is minded towards the first, more liberal approach: at 49. He refers to the liberal anchoring approach in competition cases, both stand-alone (think Media Saturn) and follow-on (think Posten /Bring v Volvo, with relevant links there).

At 51 he also discusses the ‘substantial effects’ test and classifies it under ‘jurisdiction’:

As well as showing a sufficient jurisdictional connection with England, it is also necessary to show that the Schemes, if approved, will be likely to have a substantial effect in any foreign jurisdictions involved in or engaged by the Schemes. This is because the court will generally not make any order which has no substantial effect and, before the court will sanction a scheme, it will need to be satisfied that the scheme will achieve its purpose: Sompo Japan Insurance Inc v Transfercom Ltd, [2007] EWHC 146 (Ch); Re Rodenstock GmbH[2011] EWHC 1104 (Ch) at [73]-[77]; Re Magyar Telecom BV[2013] EWHC 3800 (Ch) at [16].’ 

This is not quite kosher I believe. If, even arguendo, jurisdiction is established under Brussels Ia, then no ‘substantial effects’ test must apply at the jurisdictional stage. Certainly not vis-a-vis the scheme companies. Against the scheme creditors, one may perhaps classify it is a means to test the ‘abuse’ prohibition in Article 8(1)’s anchor mechanism.

A useful reminder of the principles. And some doubt re the substantial effects test.

Geert.

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

 

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CeDe Group v KAN. Bobek AG on the intricate applicable law provisions of the Insolvency Regulation (here: concerning set-off).

Bobek AG opined end of May in C-198/18 CeDe Group v KAN. I am posting a touch late for well, readers will know I have not been fiddling my thumbs. The Opinion concerns the lex causae for set-off in accordance with the (2000) Insolvency Regulation – provisions for which have not materially changed in the current version of the EIR (Regulation 2015/848). At stake are Articles 4 cq 6 and 7 cq 9 in the two versions of the Insolvency Regulation.

The liquidator of PPUB Janson sp.j. (‘PPUB’), a Polish company the subject of insolvency proceedings in Poland, lodged before the Swedish courts an application against CeDe Group AB (‘CeDe’), a Swedish company, claiming payment for goods delivered under a pre-existing contract between PPUB and CeDe, which is governed by Swedish law. In the course of those proceedings, CeDe claimed a set-off in respect of a larger debt owed to it by PPUB. The liquidator had previously refused that set-off within the framework of the Polish insolvency proceedings. During the course of the procedure before the Swedish courts, PPUB’s liquidator assigned the claim against CeDe to another company, KAN sp. z o.o. (‘KAN’), which subsequently became insolvent. However, KAN’s liquidator refused to take over the claim at issue, with the result that KAN (in insolvency) is now party to the litigation

The Supreme Court, Sweden) doubts the law applicable to such a set-off claim. Before the referring court, KAN claimed that the set-off claim should be heard under Polish law, whereas CeDe submitted that that issue should be examined under Swedish law. Both of course reverse-engineered their arguments to support opposing views.

The Advocate General in trademark lucid style navigates the facts and issues (not helped by the little detail seemingly given by the referring court). Complication is of course that the general Gleichlauf rule of the EIR is repeatedly tempered by ad hoc regimes for specific claims or claimants. Like the Commission, Bobek AK focuses on the Regulation’s stated aim (recital 26 of the 2000 EIR; recital 70  in the 2015 EIR) of having the set-off regime fulfill its role as a guarantee for international commercial transactions: at 74: ‘adopting an approach focused on the concrete outcomes produced by the respective applicable laws in conflict in a given case, the test to be applied must zero in on the specific solution that would be arrived at by the law applicable to the main claim’.

An Opinion very much soaked in commercial reality.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.7.

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Ema Garp Fund v Banro Corp: Chapter 15 and international comity.

Chapter 15 is the typical entry gate for a foreign insolvency practitioner to engage in US bankruptcy proceedings – it is also the general jurisdictional gateway for US courts viz international insolvencies, COMI and insolvency tourism discussions etc. By way of example see Norton Rose’s 2017 overview here.

In Ema Garp Fund v. Banro Corp., Case No. 18-01986 Law360 summarise the outcome as it stands (I understands motion to appeal has been filed) as follows: ‘Canada’s Banro Corp. won’t face a suit in New York federal court alleging the mining company lied to investors about its operations in the Democratic Republic of Congo after a judge ruled (..) that those claims were resolved last year in bankruptcy proceedings in Canada.’

Kelly Porcelli excellently reviews the issues here, with justified emphasis on comity considerations – I am happy to refer.

One for the comparative litigation ledger.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.5, Heading 5.6.

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Zetta Jet: COMI, time of filing, forum shopping, ordre public in insolvency. A comparative law Fest in Singapore.

An interesting comparison may be made between [2019] SGHC 53 Re Zetta Jet Pte Ltd and [2018] EWHC 2186 (Ch) Videology on which I reported here. Both concern recognition of foreign main (or not) proceeding under of the UNCITRAL Model Law on Cross-Border Insolvency (“the Model Law”). Zetta Jet came to me courtesy of my former student Filbert Lam, and has now also been analysed to great effect by Tan Meiyen and colleagues here.

The judgment is a master class on COMI determination, but also on comparative legal analysis re time of filing etc.: best read judgment and Tan’s note for oneself. Of particular note are

  • the expression of sympathy by Aedit Abdullah J for forum shopping in insolvency law; compare also with Ocean Rig, and Kekhman; here this took the particular form of following the US approach to selecting the date on which the application for recognition is filed, as relevant to COMI determination (friendlier to forum shopping than the EU’s and England’s date of commencement of the foreign insolvency proceedings);
  • the emphasis on the basket of criteria required to identify COMI;
  • the narrow approach to ordre public despite Singaporean court order having been defied; yet also the relevance of the fact that these orders post defiance had been varied.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.6.1 et al.

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Assignment and applicable law. First reading of the EC’s proposal.

A former dean of ours reportedly once suggested that the last thing one should do with something urgent, is tackle it immediately. I have had a draft post on the EC’s assignment proposals in my ledger since 20 March 2018. Colleagues in private law (prof Matthias Storme, too) had already flagged the issues with the applicable law proposal COM(2018) 96 in particular. Now the need for a separate post has been overtaken by Alexander Hewitt’s excellent overview here, following EP first reading.

No more needs to be said.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 3.

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Court confirms: tortious suit brought by liquidator (‘Peeters /Gatzen’) is covered by Brussels I Recast.

I am hoping to catch-up with my blog backlog this week, watch this space. I’ll kick off with the Court of Justice last week confirming in C–535/17 NK v BNP Paribias Fortis that the Peeters /Gatzen suit is covered by Brussels I Recast. Citing similar reasons as Bobek AG (whose Opinion I reviewed here), the Court at 34 concludes that the ‘action is based on the ordinary rules of civil and commercial law and not on the derogating rules specific to insolvency proceedings.’

This reply cancelled out the need for consideration of many of the issues which the AG did discuss – those will have to wait for later cases.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.4.1, Heading 5.7.

 

 

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Ordre Public in Bankruptcy. The Dutch Supreme Court confirms non-recognition of Yukos liquidation order.

The Dutch Supreme Court late in January has confirmed the lower court’s decision (see my report here) in Yukos, not to recognise the Russian liquidation order of 1 August 2006 regarding OAO Yukos Oil Company. The decision to recognise or not evidently is based on residuary Dutch conflict of laws (the Insolvency Regulation is not engaged).

At 4.1.3 the Supreme Court emphasises that the principle of mutual trust does not apply, as it would do between EU jurisdictions. It then does not perform the entire ordre public exercise from scratch, rather assesses whether the lower court properly carried out said analysis (as befits its role as a Supreme Court). Which it finds, the Court of Appeals did. Its ordre public check did not in the abstract test Russian court proceedings, rather tested whether the precise conduct of all involved parties led to use of the judicial system in a way which compromises the core Dutch legal order (see for more detail on that, my earlier post).

Textbook ordre public.

Geert.

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