UK Supreme Court Rules On Cross-Border Insolvencies

The UK Supreme Court has handed down its judgment in the joined cases of Rubin and another v Eurofinance SA and others and New Cap Reinsurance Corporation (in liquidation) and another v A E Grant and others [2012] UKSC 46. (24 October 2012).

These decisions had been eagerly awaited by the UK's restructuring and insolvency community. The appeals took place in the context of assisting foreign courts to enforce money judgments closely related to insolvency. Previous cases on cross-border insolvencies had seemed to indicate a steady trend in the UK towards a 'universalist' approach to cross-border insolvencies in which foreign court decisions taken in insolvency proceedings, were recognised and given effect in the UK, even where this took them beyond the scope of any existing statute or case law. This appeared to be consistent with a broader international trend towards the administration of multinational insolvencies by a leading court applying a single bankruptcy law. However, in light of this latest decision, the high water mark in the UK at least appears to already have been reached and the waters are receding.

In Eurofinance, the court of appeal had earlier recognised proceedings brought under Chapter 11 in a US bankruptcy court, and held that certain judgments relating to preferential payments were enforceable in England against English resident judgment debtors. The court found that English common law permitted the enforcement of those aspects of the US judgment against the judgment debtors, even though the judgment would not be enforceable against them under the English rules of private international law, in this case because the defendants had not submitted to the jurisdiction of the relevant US court.

In New Cap, the liquidator of the Australian claimant brought proceedings in Australia in respect of a voidable transaction (a preference) against a defendant based in England. The defendant took no part in the preference proceedings and the Australian court made an order against it. The Australian insolvency proceedings were subsequently recognised in the UK and the judgment obtained against the defendant was enforced by the English court under section 426 of the Insolvency Act 1986 despite the absence of in personam jurisdiction over the defendant. Section 426 allows courts of certain designated non-UK jurisdictions to request assistance including for the transfer of assets from an English insolvency estate into foreign insolvency...