Restructuring

Contributed by Sally Willcock
In Rubin and Ors v (1) Eurofinance SA (2) Adrian Roman (3) Justin Roman and (4) Nicholas Roman, 2010 EWCA Civ 895 (“Eurofinance”) the English Appeal Court has recently enforced as a judgment of the English Court a U.S. judgment obtained in actions under sections 547 and 548 of the Bankruptcy Code brought in a U.S. bankruptcy court pursuant to the terms of an approved chapter 11 plan.  How principles of cross-border insolvency develop across jurisdictions is, of course, of increasing importance to creditors in view of the marked increase of insolvency and restructuring cases involving significant cross-border elements.

Eurofinance represents an important step in the development of English cross-border insolvency principles.  It also demonstrates that English law principles on recognition of foreign judgments appear to be developing along similar lines to U.S. bankruptcy court jurisprudence as illustrated recently by the case of Metcalfe & Mansfield Alternative Investments , et al Case No. 09-16709 (MG) (Bankr. S.D.N.Y. Jan. 5, 2010).  In Metcalfe, the U.S. bankruptcy court gave effect to a Canadian restructuring plan that affected third party rights in a manner that the objecting party argued went beyond provisions of U.S. bankruptcy law that the bankruptcy court would have jurisdiction to implement. 
In the earlier English House of Lords case of McGrath v Riddell [2008] UKHL 21 (aka HIH Insurance), the English Law Lords were divided on the issue of whether the English Court had jurisdiction under common law to give effect to a foreign insolvency law, where the foreign insolvency law differed from English insolvency law provisions.  The court, however, was able to side-step the issue by deciding the case on the basis of separate statutory powers under S426 Insolvency Act 1986, which could be invoked in that case, leaving open the issue of what the result would be in a case in which S426 Insolvency Act 1986 does not apply.  S426 Insolvency Act 1986 only applies where the courts or the insolvency office holder concerned are from certain designated (largely former Commonwealth) countries and cannot be invoked by the U.S. bankruptcy court or a U.S. foreign representative for lack of statutory designation.  In Eurofinance, significantly, the English Court of Appeal endorsed the line of cross-border insolvency jurisprudence championed by Lord Hoffman in HIH Insurance in which he opined,

‘The primary rule of private international law…. is the principle of (modified) universalism, which has been the golden thread running through English cross-border insolvency law since the eighteenth century.  That principle requires that English courts should, so far as is consistent with justice and UK public policy, co-operate with the courts in the country of the principle liquidation to ensure that all the company’s assets are distributed to its creditors under a single system of distribution.’

Further detail of the Eurofinance case appears in the attached article ‘Eurofinance: Carving its own Character. Further Steps along the Road to Developing Cross-border Insolvency Law Principles.’  In essence, the English Appeal Court in Eurofinance held that English common law principles relating to the recognition and enforcement of foreign judgments that applied in the case of ordinary civil proceedings did not apply where the judgments in question were characterized as bankruptcy proceedings.  In the case of bankruptcy proceedings, the English Court has discretion to give effect to a foreign insolvency judgment and would likely do so where its provisions largely replicated insolvency law provisions.
In Eurofinance, the parties agreed that the U.S. avoidance provisions upon which the U.S. judgment was founded were broadly equivalent to English statutory transaction avoidance provisions.  The Eurofinance Court, by endorsing the Hoffman LJ line of reasoning, implicitly acknowledged that its jurisdiction to recognize and give effect to foreign insolvency proceedings was not limited to those cases in which a similar outcome could have been obtained under domestic English insolvency law provisions, but was rather a power that the court has a broader discretion to apply.
An application has been made by the Respondents to Eurofinance to the Supreme Court for permission to appeal against the decision of the Court of Appeal, and the outcome of that application is not yet known.