Cross-Border Insolvency: Privy Council Slam The Door On Bermuda’s Modified Universalism Approach

The Judicial Committee of the Privy Council (Lords Neuberger, Mance, Clarke, Collins and Sumption) has delivered an important judgment (1) about the jurisdiction of the Bermuda court to assist foreign liquidators by ordering the production of documents and information by persons in Bermuda and (2) defining the common law powers of assistance to foreign liquidators.

The interplay (or conflict) between the decisions of the Privy Council and the UK Supreme Court in the following cases has been a source of great debate and litigation in the world of cross-border insolvency: Cambridge Gas v Navigator [2007] 1 AC 508, Rubin v Eurofinance [2012] UKSC 46 and Al Sabah v Grupo Torras [2005] 2 AC 333. The Privy Council has now provided some clarity to this area of the law.

In summary:

1. The Bermuda court has no general jurisdiction under the Companies Act or at common law to wind up foreign companies that do not conduct business in Bermuda. To this end, holding shares in Bermuda is not "conducting business";

2. "Modified Universalism" is part of the common law and there is a common law power to assist foreign liquidators, inter alia, by ordering the production of documents and information. However, this power has the following limits:

1. Firstly, it is available only to assist the officers of a foreign court of the relevant insolvency jurisdiction or equivalent public officers. It is not available to assist a members' voluntary winding up that is not conducted by or on behalf of an officer of the court.

2. Secondly, it is a power of assistance. It exists for the purpose of enabling courts to surmount the problems posed for a world-wide winding up of the company's affairs by the territorial limits of each court's powers. It is not available to enable office-holders to do something which they could not do even under the law by which they were appointed.

3. Thirdly, it is available only when it is necessary for the performance of the office-holder's functions.

4. Fourthly, the power is subject to the limitation set out in Re African Farms Ltd, HIH and Rubin, namely that such an order must be consistent with the substantive law and public policy of the assisting court, in this case that of Bermuda.

The Facts

PricewaterhouseCoopers ("PwC") is a Bermuda exempted partnership with its registered office in Bermuda. It is a different legal entity to the PricewaterhouseCoopers Bermuda auditing firm. Through its Dubai branch, PwC audited two Cayman companies, Saad...