Vol 11 (2014) - Issue 2

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Bluecrest Mercantile BV v Vietnam Shipbuilding Industry Group & others [2013] EWHC 1146 (Comm)

Summary
In Bluecrest Mercantile BV v Vietnam Shipbuilding Industry Group & others [2013] EWHC 1146 (comm) the High Court of England and Wales considered whether the court has jurisdiction to order a stay of proceedings brought by a creditor against a debtor to recover debt, pending the implementation of a scheme of arrangement between the debtor and its creditors.
The court held that it did have jurisdiction to order the stay of proceedings under its case management powers in Rule 3.1(2)(f) of Part 3 of the UK Civil Procedure Rules (The Court’s Case Management Powers).
The court’s discretion to grant the requested stay on proceedings pending the implementation of a scheme of arrangement was to be exercised in 'special circumstances'. On the facts, this test was satisfied as there was a reasonable prospect of a scheme of arrangement being successfully implemented by the debtor. Accordingly, the court ordered a limited stay on proceedings until the court hearing to convene a meeting of creditors to vote on the proposed scheme of arrangement had taken place.

Background
A scheme of arrangement is a process under the English Companies Act 2006 (the 'Act') which allows a company to agree a compromise or arrangement with its creditors (or any class of them) or its members. In order for a scheme of arrangement to be passed, it requires the approval of a majority in number, that represent three-quarters in value, of each class of creditor or member. If such approval is obtained, the scheme will bind all of the relevant classes of creditors or members (whether or not they voted for the scheme).
In addition, the scheme of arrangement needs to be court sanctioned, specifically by (a) the Companies Court, following an application for permission to summon a meeting of the relevant class(es) of creditors or members; and (b) a further hearing at which the court will decide whether the scheme of arrangement is sufficiently fair and equitable to be sanctioned.
Schemes of arrangement are often used as a restructuring tool by both English and non-English companies (where the non-English company is deemed to have a 'sufficient connection' with England). Although schemes of arrangement are used in restructurings, the process does not provide for an automatic moratorium on enforcement of claims by creditors of the relevant debtor company and as such does not provide the debtor with protection against claims pending implementation of a scheme of arrangement.

Facts
On 24 May 2007, Vietnam Shipbuilding Industry Group ('Vinashin'), a Vietnamese state-owned company, entered into a facility agreement (the 'Facility Agreement') with Credit Suisse AG (Singapore branch) and other lenders pursuant to which a USD 600 million unsecured loan (the 'Loan') was provided to Vinashin. The Loan was repayable in ten instalments on certain dates between December 2010 and June 2015. The Facility Agreement was governed by English law and subject to the non-exclusive jurisdiction of the English courts.