Vol 7 (2010) - Issue 2

Article preview

The Remit of English Asset Realisations to a Foreign Liquidator: In the matter of SwissAir Schweizerische Luftverkehr- Aktiengesellschaft [2009] EWCH 2099 (Ch)

Introduction

The recent decision of In the matter of SwissAir Schweizerische Luftverkehr-Aktiengesellschaft reaffirmed the common law principle that the courts in England and Wales have the power to order the remittal of assets realised by an English liquidator to a principal foreign liquidation where there is a provision for a pari passu distribution under the relevant local law. This case sheds light on certain dicta in the decision of McGrath and others v Riddell and others (more commonly known as Re HIH) concerning this common law principle.
Mr Justice David Richards referred to the following three ways in which an order for the remittal of English asset realisations to a foreign liquidator can be made:

(i) Section 426 of the Insolvency Act 1986 (as amended) (the 'Act') allows a court in any 'relevant country' or territory to apply to the UK courts for assistance in concurrent insolvency proceedings. This section gives the UK courts a statutory power to make orders to assist 'relevant' foreign insolvency proceedings, such as making an order for the remittal of assets to a foreign liquidator.

(ii) The Cross-Border Insolvency Regulations 2006 (the 'Regulations') came into force on 1 April 2006 and adopted the UNCITRAL Model Law on Cross- Border Insolvency (the 'Model Law') into British domestic law. The Model Law expressly authorises the court to order the remittal of assets to a foreign insolvency proceeding where these proceedings have been recognised. Article 21.1 of the Model Law provides that:

'Upon the recognition of a foreign proceeding, whether main or non-main, the court may, at the request of the foreign representative, entrust the distribution of all or part of the debtor’s assets located in Great Britain to the foreign representative or another person designated by the court, provided that the court is satisfied that the interests of creditors in Great Britain are adequately protected.'

(iii) The common law principle established in a long line of authorities in England and other Commonwealth jurisdictions grants the court the power to make an order in instances where the distribution in the foreign insolvency proceeding is distributed amongst unsecured creditors on a pari passu basis.