Vol 19 (2022) - Issue 1

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Gibbs Expansion in Prosafe Further Erodes Universalism in CrossBorder Insolvency?

Synopsis
Lord Hoffman’s 'golden thread' of modified universalism in cross border insolvency in the HIH case in 2008 has obviously unravelled a little since and it would seem that the decision of Lord Ericht at first instance in the Outer House of the Scottish Court of Session in Chang Chin Fen v Cosco Shipping (Qidong) Offshore Ltd [2021] CSOH 94 ('Prosafe') has unravelled it a little further.
Antony Gibbs & Sons v La Societe Industrielle et Commercial des Metaux (1890) LR 25 QB 399 ('Gibbs') has obviously been a modification of universally effective insolvency ever since it decided over 130 years ago that a foreign release of an English obligation would not be recognised in England and Prosafe appears to have expanded the application of Gibbs a little. The significant features of Prosafe seem to be as follows:
1) Gibbs has been reinforced as a part of Scots law.
2) Gibbs’ effect as a substantive choice of law rule relating to the discharge of obligations on insolvency has been applied by the courts of a different jurisdiction from the law governing the obligation rather than the courts of the jurisdiction of the law governing the obligation refusing to recognise its discharge under another law.
3) The application of Gibbs in OJSC International Bank of Azerbaijan [2018] EWCA CIV 2802 ('Azerbaijan') to prevent a stay under the Cross-Border Insolvency Regulations 2006 ('CBIR') of action on an English law obligation purported to be discharged by completion of a foreign insolvency scheme has been extended to prevent what might have been a temporary stay under the CBIR pending imminent conclusion of a foreign insolvency scheme in which the objecting creditor might theoretically still have participated.
4) Gibbs appears to have been applied to ensure Scottish assets may be attached in future rather than to prevent the discharge of the obligation on which such an attachment might take place, being assets relative to which foreign proceedings might have been separately recognised under the CBIR and being an attachment that could not take place until action had been taken (in England) to enforce the obligation on which attachment might proceed.
5) The court would have granted the stay relative to another creditor refusing to participate in the foreign proceedings but not appearing in the Scottish proceedings to object to the stay along with the objecting creditor who did appear in the Scottish proceedings.