In Pursuit of Universality in Cross-Border Insolvency

Originally published August 2010

Keywords: cross border insolvency, foreign judgments, insolvency proceedings, English law trust, US consumer protection, Eurofinance

The Court of Appeal1 has ruled that foreign judgments in insolvency proceedings may be enforced by the English courts at common law, and that the ordinary principles which may prevent the enforcement of foreign judgments do not apply to insolvency judgments where the action from which the foreign judgment arises is integral to the collective nature of the insolvency proceedings.

Facts

The appellant receivers (the "Receivers") were appointed to an English law trust which had its centre of main interest in the US (the "Trust"). The respondent trustees (who were resident in England) used the Trust to operate, through a BVI corporation, a dubious scheme in the US from which they benefited financially. The scheme was challenged under US consumer protection legislation. In light of the prospect of further costly legal actions against the Trust Chapter 11 bankruptcy proceedings in the US were commenced in relation to both Eurofinance and the Trust. In seeking to implement a joint liquidation plan in the Chapter 11 proceedings the Receivers were appointed as the legal representatives of the Trust by the US Bankruptcy Courts, with the power to prosecute all causes of action against potential defendants and obtain relief. This relief included "the enforcement of judgments of the New York Bankruptcy Court against persons residing or owning property in Great Britain."

The Receivers commenced actions against the respondents in New York using powers afforded to them under the avoidance provisions of Chapter 11 to recover money paid by the Trust to the respondents (similar to preference and undervalue transaction claims in England)(the "Adversary Proceedings"). The respondents elected not to submit to the jurisdiction of the New York court and not to participate in the proceedings. Default and summary judgment was entered in the US court against the respondents and the Receivers applied to the English court under the Cross-Border Insolvency Regulations 2006 ("CBIR") to (i) recognise the proceedings in the New York Bankruptcy Court in respect of the Trust as a "foreign main proceeding"2 and (ii) enforce against the Respondents the judgment in the Adversary Proceedings as a judgment of the English court.

At first instance the High Court granted recognition under the CBIR to the New York...

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