PJSC Bank Finance and Credit (the Bank) entered provisional administration in Ukraine in September 2015 and went into liquidation in December the same year.
It appeared, following investigations, that the Bank may have had involvement in a multi-million dollar fraud leading to funds being sent overseas to various entities.
The Deposit Guarantee Fund of Ukraine (DGFU), the government body responsible for winding-up of operations of insolvent banks, was automatically appointed as liquidator on the day the National Bank of Ukraine decided to revoke the Bank’s licence and commence liquidation. Subsequently, DGFU appointed Ms Groshova, who was considered a “leading bank liquidation professional”, as an authorised person and delegated most of the liquidation powers to her.
The DGFU and Ms Groshova (the Applicants) had issued an application to recognise the Bank’s foreign liquidation in England & Wales under the UNCITRAL Model Law as enacted by the Cross-Border Insolvency Regulations 2006 (the Model Law) as they believed that several entities within the jurisdiction held assets relating to the Bank’s alleged fraud.
The Court’s Decision
The matter came before Insolvency and Companies Court Judge Catherine Burton on 29 April 2021.
Among the usual considerations, in coming to its decision, the court considered the following elements of the Model Law:
For the Bank’s liquidation to be recognised it was required to fall under the definition of Article 2(j) of the Model Law being a “foreign proceeding”.
It was noted that the Model Law was intended to apply in only some types of insolvency. The requirement of “collective” insolvency proceedings given by the Model Law’s Guide to Enactment and Interpretation was based on achieving a coordinated and global solution to all stakeholders within the insolvency proceedings, rather than to be used simply as a method to collect sums for a particular group of creditor. The guide goes on to state that a main consideration is whether, substantially, all assets and liabilities are dealt with in that proceeding.
The Applicants claimed that the Bank’s liquidation was a collective process because all of the Bank’s creditors were entitled to claim in the liquidation and each claim would be met from any available funds.
Judicial or Administrative
The court went on to consider whether the collective proceeding was “judicial or administrative” where “the assets and affairs or the debtor are subject to control by a foreign court”. The court found that the definition of “foreign court” provided by Article 2(e) of the Model Law did include non-judicial authorities. This was also the case in Re Sanko Steamship Co Ltd  EWHC 1031 (Ch) in which it was commented that a foreign proceeding can be recognised where the control or supervision is undertaken by a non-judicial administrative body.
In this case, one of the Applicants was the DGFU who had control of all of the assets and the liquidation. Its role was to perform special functions including the withdrawal of insolvent banks and the liquidation of these banks.
The court found that the Bank’s liquidation was “administrative” because the Bank was subject to the DGFU’s control, being an official body independent from the government and public authorities which had no right to interfere in the exercise of its functions and therefore should for the purposes of Article 2(j) be considered a “foreign court”.
The court also considered whether the Applicants were “foreign representatives” which is defined in Article 2(j) as a person or body authorised in a foreign proceedings to administer the reorganisation or liquidation of the debtor’s assets or affairs.
The court was satisfied that both Applicants were authorised to administer the Bank’s liquidation and therefore they met the definition of “foreign representative” and on that basis they had standing for the recognition application.
This is one of the first cases dealt with by the courts to recognise a foreign liquidation where appointed liquidators have very different powers. The decision is further evidence of the English courts flexible and supportive approach in providing assistance to foreign representatives. It is this approach and the significant helpful case law that makes the UK a key jurisdiction for cross border insolvencies and restructures.