In the recent case of Re Greensill Bank AG, the High Court helpfully clarified that, following Brexit, EEA credit institutions may apply for recognition of foreign insolvency proceedings under the UNCITRAL Model Law as enacted in England & Wales by the Cross-Border Insolvency Regulations 2006 (the Model Law). The court also considered and granted further requests of a foreign representative in the spirit of continuing mutual assistance between the UK and the Members States post-Brexit.
Greensill Bank AG is a German commercial bank ("the Bank") which specialised in providing factoring services, and is part of the Greensill Group. Its holding company, Greensill Capital Pty Limited, recently entered liquidation in Australia (following on from its high profile administration in March 2021).
Due to the financial distress of the group, on 3 March 2021 Germany's financial regulator, the Federal Financial Supervisory Authority, imposed a ban on disposals of assets or payments by the Bank and applied to the court in Germany to commence insolvency proceedings against it. Proceedings were opened by the court on 16 March 2021 and Dr. Michael C. Frege was appointed as Insolvency Administrator ("the Applicant").
The Applicant sought recognition in England & Wales of his appointment in order to secure the Bank's assets located within the jurisdiction, including collection accounts controlled by third parties which are believed to be beneficially owned by the Bank.
In addition to the usual test under Article 17 of the Model Law, the court was faced with another issue, namely whether in light of Article 1(2)(h), the Applicant could apply for recognition under the Model Law in respect of a credit institution.
The matter came before Insolvency and Companies Court Judge Prentis on 31 March 2021.
Position of an EEA credit institution under the Model Law
Pursuant to Article 1(2)(h), the Model Law does not apply to a proceeding concerning:
"a UK credit institution or an EEA credit institution or any branch of either such institution as those expressions are defined by regulation 2 of the Credit Institutions (Reorganisation and Winding Up) Regulations 2004” (2004 Regs)
Firstly, the court found that the Bank fell within the definition of an EEA credit institution under regulation 2 of the 2004 Regs.
However, the Judge then noted that the Credit Institutions and Insurance Undertakings Reorganisation and Winding Up (Amendment) (EU Exit) Regulations 2019 (2019 Regs) had revoked reg 2 of the 2004 Regs, containing the definition of an EEA credit institution.
The 2019 Regs essentially distinguishes the position in relation to proceedings opened before and after the expiry of the transition period on 31 December 2020, and provides transitional provisions. As regulation 2 was revoked upon Brexit, the exclusion of the Model Law for EEA credit institutions is now only of relevance where the transitional provisions apply because those proceedings benefit from automatic recognition in England & Wales.
Transitional provisions did not apply to the Bank, as its proceedings commenced in March 2021, so there was no automatic recognition but the Judge concluded that proceedings in relation to EEA credit institutions could be recognised as foreign proceedings under the Model Law post Brexit.
Requirements under Article 17 of the Model Law
The court was satisfied that the German proceedings were foreign proceedings based on the Applicant's evidence confirming that they had immediate effect and meant that the Bank had no control over its assets (which had vested in the Applicant) and that all creditors were required to prove in the insolvency proceedings.
The court also confirmed that the Applicant was a foreign representative within the meaning of Article 2(j) of the Model Law on the basis of the decision of the court in Germany and a certificate of the Applicant’s appointment which were both put before the court.
The Judge noted that further requirements were met and that the Article 6 of the Model Law which provides that the an action can be refused on a public policy basis does not apply on the facts.
The court also granted the Applicant's request to entrust the administration or realisation of all the debtor's assets located in Great Britain to the Applicant.
This decision provides helpful clarification that insolvency proceedings of EEA credit institutions can be recognised as foreign proceedings in England & Wales post-Brexit – a position was previously uncertain due to the exclusion of an EEA credit institution from the scope of the Model Law and following the introduction of the 2019 Regs. Judge Prentis confirmed that the exclusion now only applies to the proceedings opened before 31 December 2020 as these proceedings continue to benefit from the automatic recognition.
This case also demonstrates the supportive approach of the English courts to foreign proceedings post-Brexit and provides comfort that the courts will continue to provide assistance to foreign representatives. It is hoped that similar approach will be taken by the courts of the Member States.