Posts Tagged Insolvency
Update 20 August 2019 For an Irish approval of a scheme of arrangement with extensive US links see Re Ballantyne RE Plc & the Companies Act 2014  IEHC 407, reported here.
The Nyrstar business was created on 31 August 2007 by combining the zinc and lead
smelting and alloying operations of Zinifex Limited and Umicore NV/SA. Nyrstar is a global multi-metals business, with a market leading position in zinc and lead, and growing positions in other base and precious metals. It is one of the world’s largest zinc smelting companies based on production levels. The Nyrstar business has mining, smelting and other operations located in Europe, the Americas and Australia and employs approximately 4,200 people. The ultimate group Parent is incorporated in Belgium and has corporate offices in Zurich, Switzerland.
Its debt is now being restructured using an English scheme of arrangement, with a variety of new companies being formed as corporate vehicles for same. Readers of the blog will not be surprised: this is a classic example of regulatory (restructuring) competition, which I regularly report on the blog (most recently: New Look, with further references there).
In  EWHC 1917 (Ch) re NN2 Newco limited and Politus BV, Norris J applies the now estblished jurisdictional test, with one or two points of attention. Against the scheme company jurisdiction is straightforward: this is England incorporated. Against the scheme creditors, English courts apply the jurisdictional test viz the Brussels Ia Regulation arguendo: if it were to apply (which the English Courts have taken no definitive stance on), would an English court have jurisdiction?
At 11: viz the Notes:
They are now governed by English law (in place of New York law). Clause 12.06 of the governing Indenture now reads:- “The courts of England and Wales shall have jurisdiction to settle any disputes that arise out of or in connection with the Indenture, the Notes and the Guarantees, and accordingly any legal action or proceedings arising out of or in connection with the Indenture the Notes and the Guarantees (“Proceedings”) may be brought in such courts. The courts of England and Wales shall have exclusive jurisdiction to settle any Proceedings instituted by [NNH or NN2]… in relation to any Holder or the Trustee on behalf of the Holders (“Issuer Proceedings”). [NNH and NN2], each of the Guarantors, the Trustee and each Holder (each, “a Party”) irrevocably submit to the jurisdiction of such courts and agree that the courts of England and Wales are the most appropriate and the most convenient courts to settle Issuer Proceedings and accordingly no party shall argue to the contrary. Notwithstanding the foregoing, this section 12.06 shall not limit the rights of… each of the Holders to institute any Proceedings against [NNH and NN2] in any other court of competent jurisdiction, nor shall the taking of Proceedings in one or more jurisdictions preclude the taking of proceedings in any other jurisdiction….”
This is an asymmetric jurisdiction clause. The English Courts have jurisdiction over all disputes and the parties agree that they are the most convenient forum and submit to the jurisdiction of the English courts. NNH and NN2 are bound to use the English courts if they sue the Holder of a Note, because the English courts have exclusive jurisdiction in such a case. But the Holder of a Note can also sue NNH and NN2 in any Court that otherwise has jurisdiction, so the English courts have a non-exclusive jurisdiction in such a case.
The original governing law of the Existing Bonds was English law. But the holders voted to amend the jurisdiction clause in the Trust Deed to provide: “The courts of England and Wales shall have exclusive jurisdiction to settle any disputes that arise out of or in connection with the Trust Deed and the Bonds, and accordingly any legal action or proceedings arising out of or in connection with the Trust Deed and the Bonds (“Proceedings”) may be brought in such courts. [NNV and NN2] and the Trustee (in its own capacity as such and on behalf of the Bondholders) irrevocably submit to the jurisdiction of such courts and waive any objection to Proceedings in such courts whether on the ground of venue or on the ground that the Proceedings have been brought in an inconvenient forum. Notwithstanding the foregoing, Belgian courts have exclusive jurisdiction over matters concerning the validity of decisions of the Board of Directors of NNV of the general meeting of shareholders of NNV and of the general meeting of Bondholders.”
This is a symmetrical jurisdiction clause with a “carve out” for specific proceedings.”
At 18 ff the details of the scheme are outlined. It involves Trafigura financial instruments, Trafigura now being Nyrstar’s controlling shareholder. At 31 ff jurisdiction is discussed. There is no abusive forum shopping (per Codere; which I reference here). The usual Article 8 and Article 25 routes are discussed. With respect to Article 25, the English jurisdiction clauses in the Existing Notes and the Politus Facility are asymmetric; however Norris J at 41 (with reference to authority) does not see that as an obstacle seeing as Article 25 covers both symmetric and asymmetric choice of court.
A final hurdle is whether any order sanctioning the scheme is likely to be effective or whether it is apparent even at this stage that the scheme will not be recognised in other relevant jurisdictions even if sanctioned: this will eventually be settled at the sanctioning hearing however Norris J already indicates that it is unlikely that expert evidence will yield surprising (objectionable) results.
Scheme meetings may therefore be convened.
(Handbook of) EU Private International Law, 2nd edition 2016, Chapter 2, Chapter 5.
The wealth in Paul Holgate v Addleshaw Goddard (Scotland). Intra-UK conflicts, the Gourdain insolvency exception; anchoring; forum contractus; and a stay on forum non conveniens grounds.
In  EWHC 1793 (Ch) Paul Holgate v Addleshaw Goddard (Scotland) the claim is for damages for breach of contract, negligence and/or breach of fiduciary duty in connection with and arising out of the defendant’s acceptance and performance (and/or non-performance) of instructions to act as solicitor for and to advise Arthur Holgate & Son Limited (then in administration, now in liquidation) in relation to a dispute between the Company and Barclays Bank.
The application concerns the allocation of jurisdiction within the UK. The rival forums are England and Scotland. The claim is not time-barred in England, but may, at least in part, be time-barred in Scotland, where the relevant period of ‘prescription’ (the Scottish equivalent of ‘limitation’) is 5 years.
The Civil Jurisdiction and Judgments Act 1982 allocates jurisdiction within the devolved regions of the UK and, for civil and commercial matters, has opted to apply the (now) Brussels I Recast Regulation mutatis mutandis. At issue is first of all the insolvency exception of Brussels Ia (extended here as noted to the UK Act) interpreted per CJEU C-133/78 Gourdain: at 4:””[I]t is necessary, if decisions relating to bankruptcy and winding-up are to be excluded from the scope of the [Brussels] Convention, that they must derive directly from the bankruptcy or winding-up, and be closely connected with the proceedings for the liquidation des biens or the règlement judiciaire .” (Reference to the French procedure given the French origins of the case). This provision of course in the meantime has a mirror image in the Insolvency Regulation known as the vis attractiva concursus: the forum concursus can hear not just the very insolvency action but also those closely connected to it. CJEU C-111/08 SCT Industri v Alpenblume also features heavily in the discussion.
(Note Clark M makes the oft-repeated mistake of suggesting Brussels Ia and Insolvency Regulation dovetail. I have emphasised on various occasions that they do not).
Following discussion, at 50 Clark M holds that the claim does not relate to the internal management, of the administration or the conduct of the Joint Administrators (JAs) of the insolvency: the defendant’s purely advisory role meant it was not responsible for either of these. This is insufficient for the claim to be “closely linked” to the administration.
Next is the application of the anchor proceedings: these, too, follow EU language and precedent entirely and at 79ff Clark M discusses the interesting question whether a claim providing the anchor, issued after the claim which anchors unto it, is capable of conferring jurisdiction. He held that it does, provided the other requirements of the anchor provisions are satisfied: in particular the desirability of avoiding irreconcilable judgments. The sequence of claims did lead to some procedural oddity which could however be rectified and there was no suggestion of abuse.
At 89 ff follows discussion of the forum contractus: ‘place of performance of the obligation in question’. At 129 Master Clark concedes that the relevant statutory instrument deliberately did not instruct this part of the UK’s residual rules to be interpreted in line with EU rules, however given the exact same wording, there is no reason for not doing so. At 132 follows then the oddity of the consequences of CJEU De Bloos (and now the language of the Regulation) with respect to ‘the obligation in question’: the determination of the principal obligation is carried out by analysing the particulars of claim. He finds at 136 that the Company’s complaints flow essentially from the primary complaint that the defendant was in breach of its fiduciary duty by continuing to advise and act for the Company (and not advising it that it could not properly do so), thereby putting the Bank’s interests (and its interests) before those of the Company. At 139: the place of performance of that obligation, is held to be in England.
Finally, forum non conveniens is briefly discussed and the right forum held to be England.
Quite a jurisdictional goodie bag.
(Handbook of) EU Private International Law, 2nd ed. 2016, much of Chapter 2.
New Look: Application of the good old rules for schemes of arrangements, with some doubt over the substantial effects test.
In  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,  EWHC 2151 (Ch) at ); Global Garden Products at ; Re Noble Group Ltd  EWHC 3092 (Ch) at  to .’ 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,  EWHC 146 (Ch); Re Rodenstock GmbH,  EWHC 1104 (Ch) at -; Re Magyar Telecom BV,  EWHC 3800 (Ch) at .’
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.
(Handbook of) EU Private International Law, 2nd edition 2016, Chapter 5.
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.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.7.
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.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.5, Heading 5.6.
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  SGHC 53 Re Zetta Jet Pte Ltd and  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.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.6.1 et al.
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.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 3.