English Judgment Concerning Cross-Border Insolvency And Creditors' Rights

Key points

Automatic stays on proceedings are imposed by Article 20 of the UNCITRAL Model Law (and mirrored in s.130(2) IA 1986) The case reinforces the principle that automatic stays are designed to avoid the unnecessary expenditure of assets otherwise available for distribution amongst creditors The facts

The liquidation of a Gibraltar company, Lemma, had been recognised in the UK and consequently, pursuant to Article 20 of the UNCITRAL Model Law, an automatic stay on English proceedings had been imposed. At first instance, the Appellant had applied to lift the automatic stay on proceedings so that he might bring a claim against Lemma for an indemnity under an insurance policy which resulted in costs having been incurred during resultant disciplinary proceedings. The insurance policy had designated England as the jurisdiction for arbitration.

The judge at first instance dismissed his application, holding that the claim was not covered by the terms of the insurance policy and, even if he had been convinced that his claim was seriously arguable, declined to exercise his discretion to lift the automatic stay.

Decision

The appeal was dismissed.

Justice Patten found that there was no 'claim' as defined by the policy during the relevant period. Further, the appellant could...