Vol 10 (2013) - Issue 3

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Recognition of Foreign Insolvency Proceedings: The Continuing Saga: A Recent Isle of Man Development

In the recent decision by the Isle of Man Deemster in Interdevelco v Waste2Energy (10 October 2012, High Court of Justice of the Isle of Man: Case Ref. CHP/2012/56) it was shown that the issues concerning assistance with regard to foreign insolvency proceedings are very much alive and kicking despite the claims that the recent Supreme Court decision in Rubin v EuroFinance [2012] UKSC 46 has in some thwarted what was being seen as a welcome common law embracing of judicial assistance in this area.
It is perhaps best to remind oneself what Rubin did and did not do. There is no doubt that the judgment of the Supreme Court has not met with universal approval amongst insolvency lawyers and practitioners. The Court of Appeal’s decision in that case, and indeed in the related case with which it was concerned, namely New Cap Reinsurance Corporation v A E Grant had suggested ever greater judicial cooperation in multi-jurisdiction insolvency cases. The fact remains however that despite certain views of the majority, in particular those of Lord Collins in the Supreme Court, Rubin and New Cap both remain effectively the principal binding authorities on the recognition of judgments in this area. To that extent at least it could perhaps be conceded that the perceived harmful effects of Rubin are perhaps not as extreme as might otherwise be feared.
Both cases in the Rubin litigation concern the recognition in England of foreign judgments, in particular, those obtained in default of appearance by officeholders seeking to attack and impeach antecedent transactions. The central question before the Supreme Court was to what extent there could be any relaxation of more traditional approaches to default judgments in the context of insolvency proceeding related judgments.
This article is not concerned with Rubin but nonetheless, certain basic principles need to be kept in mind. Classic conflict of law rules in English law postulate four cases in which a foreign court can be taken have assumed jurisdiction to recognise a judgment in personam capable of enforcement in England. Primarily, they are where there is active participation on the part of the person against whom judgment is rendered, or some form of submission by that person. The position is, again in the context of classic conflict of law rules, quite different in relation to judgments in rem. In those cases, the critical issue is whether or not, and if so to what extent, the property was within the jurisdiction of the foreign court.
The Rubin litigation concerned the extent to which these well entrenched principles should be departed from, and if so, to what extent. At the heart of the claim in Rubin and indeed at the heart of all similar cases, including the recent Isle of Man decision, is the contention made by progressive insolvency law scholars that since insolvency proceedings constitute or reflect collective proceedings out of which there can be said to be a benefit which can enure to creditors generally, the classic division of judgments in personam and judgments in rem should be dispensed with in this particular context. Pausing there, one can see why the Supreme Court at least speaking through the authoritative voice of Lord Collins, had difficulties with the ramifications of that approach. The difficulties stem from the fact that it is in turn not easy to find some binding and universal principle of law which can be said to apply to the wide variety of claims that can arise in and out of an insolvency. A very simple and self evident illustration is enough to show the vast conceptual difference between on the one hand a claim brought by a liquidator against a debtor to enforce a pre-existing right, and on the other, the power of the liquidator to unwind antecedent transactions under the more classic claw-back provisions contained in, for example, section 238 and following of the English Insolvency Act 1986.
As is well known, English law now provides a variety of mechanisms whereby recognition and assistance can be afforded to a foreign insolvency proceeding. There is first the EC Regulation on insolvency proceedings, i.e. the Insolvency Regulation as it is commonly called. There is in addition the UNCITRAL Model Law and Cross-Border Insolvency now embodied within the UK Cross-Border Insolvency Regulations 2006 (the 2006 Regulations) and there is by way of a third statutory or formal procedure, section 426 of the Insolvency Act itself. On top of the three co-existent regimes, there is the common law.