Cross Border Restructuring and Insolvency Update - August 2015

Re Van Gansewinkel Groep BV and others [2015] EWHC 2151 (Ch)

The English High Court was asked to sanction schemes of arrangement in relation to a group of companies incorporated and carrying on business in the Netherlands and Belgium, with questions arising as to whether the Court had jurisdiction under the Recast Brussels Regulation (EU 1215/2015) ("the Regulation").

Van Gansewinkel Groep ("VGG"), a group of companies incorporated and carrying on business in the Netherlands and Belgium, sought sanction from the English High Court in relation to schemes of arrangements for each of the group companies, the schemes having been approved by the vast majority of creditors. VGG had no centre of main interest, establishment or significant assets in England.

The Court had to consider whether it had jurisdiction to sanction the schemes. VGG submitted that the Court had jurisdiction due to exclusive jurisdiction clauses in favour of England and Wales in a Facility Agreement and other documents. Mr Justice Snowden rejected this argument, as this was not a clause by which any of the scheme creditors submitted to the jurisdiction of the English Court, and although the facilities were for benefit of creditors, they provided that only VGG could submit to the jurisdiction of the English Court.

A second argument, following Re Rodenstock GmbH [2011], was that creditors were 'defendants' to the application for sanction, within the scope of article 8(1) of the Regulation. Article 8(1) states that a person domiciled in one member state, who is one of a number of defendants, may also be sued in another member state where any one of them are domiciled, provided that the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.

In Re Rodenstock, more than 50% of the creditors were domiciled in England.

Mr Justice Snowden found that, as some creditors were domiciled in England, the High Court had jurisdiction to hear the application. He stated that there was no requirement that there be more than 50% by value of creditors as per Re Rodenstock, so long as the value of their claim was not immaterial, it would be sufficient to bring within article 8. He further clarified that the domicile of a single creditor could be sufficient to allow the Court to exercise jurisdiction if their claim was not immaterial. As a result, Mr Justice Snowden found that the Court did have jurisdiction and granted sanction of the schemes.

In doing so, however, Mr Justice Snowden criticised the application in that VGG had failed to raise the issue of jurisdiction in sufficient depth at the initial hearing seeking permission to convene the meetings to approve the schemes. Although arguments were contained in the skeleton argument, the Judge was not invited to determine the question of jurisdiction at the convening hearing, nor were creditors notified that jurisdiction was relevant. He stated that if proponents of a scheme intend to raise a jurisdictional issue for determination at the convening state, they should indicate that and give proper details in the Practice Statement letter notifying creditors of the convening hearing, and should very clearly bring the issue to the attention of the Judge at that hearing, allowing him to give a reasoned judgment on the point. ? ??

Re MF Global UK Ltd [2015] EWHC 2319 (Ch)

The English High Court has considered the extra-territorial application of the Court's powers under sections 236 and 237(3) of the Insolvency Act 1986. The decision, which will not be welcomed by office holders, reaffirms the position in Re Tucker [1990] CH 148, and settles any potential uncertainty caused by the recent decision of Jetivia v Bilta [2015] UKSC 23.

MF Global UK Ltd ("MF Global") had been party to trades which were closed out by the Respondents, LCH Clearnet SA ("LCH France") and LCH Clearnet Limited ("LCH UK") (together "the Respondents") after MF Global went into Special Administration. This led to MF Global suffering substantial losses and subsequently the English Administrators applied to the High Court for an order under s236 and s237(3) of the Insolvency Act (IA) 1986 that an officer of LCH France should produce documents and a witness statement relating to the closing out process or, in the alternative, an order that the English Court should issue a request for the French Court to examine an officer of LCH France and request the provision of all relevant documentation under Regulation (EC) 1206/2001 ("the Evidence Regulation").

LCH France, which was incorporated and carried on business in France, opposed the application on grounds that the Court did not have jurisdiction under s236 and s237(3). Alternatively, it submitted that, if the Court did have jurisdiction, it should not exercise it to make the order in the circumstances. The Respondents relied on the Court of Appeal's decision in Re Tucker where the Judge held that no order could be made against a Respondent who was resident in Belgium under s25 of the Bankruptcy Act (BA) 1914 as the provision did not have extra-territorial effect.

The Administrators sought to rely on authorities concerning the extra-territorial application of other IA provisions, including Re Seagull Manufacturing Co Ltd [1993] Ch 345 and the recent Supreme Court decision in Jetivia SA v Bilta. However, despite opining that in the absence of direct authority "there would be a good deal to be said" for concluding that s236 and s237(3) could have extra-territorial effect, the Judge considered that the Court of Appeal's binding interpretation of s25 BA 1914 in Re Tucker would apply given s236 had substantially similar wording to the predecessor and therefore no order could be made against LCH France.

In the alternative, the Administrators sought an order under the Evidence Regulation, making clear that the purpose of the request for information was to investigate the close-outs and to consider whether there would be grounds to bring proceedings against LCH France. The Court found that it is a pre-requisite of a request under the Evidence Regulation that the evidence is intended for "use in judicial proceedings, commenced or contemplated, which will result in a decision" and in this instance the requirement was not satisfied.

Whilst LCH UK accepted the English Court had jurisdiction to make an order under s236, it submitted that the Court should not exercise its discretion in the circumstances. To make the order, the Court had to be satisfied there was something that required investigation and, in this case, the application was founded on a discrepancy in prices which the Judge felt did not warrant the making of the order sought.

Short Stories

Personal Insolvency law in Ireland gets a facelift

The Personal Insolvency (Amendment) Act 2015 was signed into law in Ireland on 28 July 2015. The Act includes provision for the Circuit Court to review Personal Insolvency Arrangements ("PIAs") which are rejected by creditors, and to make an order imposing the PIA if it is considered fair and equitable to do so. The idea is to prevent banks from having an effective veto over PIAs as previously there was no mechanism for review available to borrowers. Other key changes include an increase in the qualifying debt threshold for Debt Relief Notices from ?20,000 to ?35,000, and further powers have been given to the Irish Insolvency Service, including supervisory powers and an increased focus on promoting awareness and understanding of personal insolvency and bankruptcy.

German law firm ordered to return ?4.5 million fees for restructuring advice

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