Focus On Cross-Border Bankruptcies - A Tale Of Two Comis: Kemsley v Barclays Bank Plc And In re Kemsley

The world is getting smaller. The number of people who hop from country to country throughout their lives is increasing. Inevitably, when a jet-setting life becomes financially troubled, bankruptcy and other court proceedings are likely to be similarly international. Two cases involving the same parties were heard in both the High Court in London and the US Bankruptcy Court for the Southern District of New York. See Kemsley v Barclays Bank Plc & Ors [2013] EWHC 1274 (Ch) (15 May 2013), 2013 WL 1904308, and In re Kemsley, 489 B.R. 346 (Bankr. S.D.N.Y. 2013). The judges were aware of the parallel cases, but each decided the questions before him on their own merits without reference to the judgment of the other court. These cases (and the complementary judgments) have application beyond the narrow confines of one individual's bankruptcy because they revolve around the US/UK trading axis. The UK ruling reflects the English High Court's unwillingness to interfere in the affairs of another jurisdiction without exceptional cause (with some discussion of what such cause might be). The US decision represents yet another ruling by a US bankruptcy court examining the relevant time frame for establishing "center of main interests" ("COMI") and "establishment" for purposes of granting recognition of a foreign bankruptcy proceeding under chapter 15 of the US Bankruptcy Code.

It Was the Best of Times . . .

Paul Kemsley ("K") was a British high-net-worth individual whose businesses in England had collapsed in 2009. One of his creditors was Barclays Bank PLC ("Barclays"), which had given K an unsecured loan. After the businesses failed, K and his family moved first to Florida and then to New York City. In 2012, the couple became estranged, and in June of that year, K's wife and family returned to the UK while K remained in the US. K was declared bankrupt in the UK in March 2012. The UK court determined that K's COMI (under the EC Insolvency Regulation, Council regulation (EC) No 1346/2000 of 29 May 2000) was in the UK because K was physically present in England at the time of the bankruptcy filing and because he resided there within three years of the presentation of the petition. K was discharged from his bankruptcy one year after the filing, in March 2013, and all debts, including the loan from Barclays, were also discharged.

It Was the Worst of Times . . .

Just before K was declared bankrupt in the UK, Barclays commenced proceedings under the loan...