Vol 11 (2014) - Issue 3

Article preview

Comity, COMI and Anti-Suit Injunctions: Kemsley before the English and US Courts

I. Kemsley: background
The personal bankruptcy of a once prominent English businessman paved the way for two decisions showing the interplay of the English and US courts in considerations of comity, the UNCITRAL Model Law on Cross-Border Insolvency, and the centre of main interests ('COMI').
Paul Zeital Kemsley ('Kemsley') moved to the US with his family in 2009 after the collapse of his business. The family resided in Boca Raton, Beverly Hills, and New York, until Kemsley’s wife moved back to the UK with their children in June 2012. Kemsley filed for bankruptcy in London (the 'English Proceeding') under the Insolvency Act 1986 ('IA 1986') on 13 January 2012. Kemsley’s bankruptcy petition was based on his physical presence in England at that time, and on having had a place of residence in England within three years of presentation. The High Court of Justice (the 'English Court') declared Kemsley a bankrupt on 26 March 2012, and shortly thereafter, two trustees were appointed in the English Proceeding. Barclays Bank PLC ('Barclays'), a major creditor in the English Proceeding, sued Kemsley on 1 March 2012 in state court in New York and Florida, broadly seeking relief and remedies relating to a breach of a loan agreement to collect on a personal loan of GBP 5 million advanced to Kemsley. In response, Kemsley sought to stop Barclays on two fronts. First, on 21 August 2012, Kemsley’s bankruptcy trustee (the 'Foreign Representative') filed a chapter 15 petition with the United States Bankruptcy Court for the Southern District of New York (the 'US Court'), seeking recognition of the English Proceeding as foreign main proceeding, and, in the alternative, as foreign non-main proceeding. The chapter 15 case was filed, in part, to stay Barclays’ proceedings against Kemsley in the US. Second, after the filing of the chapter 15 petition but before recognition, Kemsley sought an anti-suit injunction against Barclays in the English Proceeding.
The decisions of the English Court and the US Court were issued on 8 and 11 March and 22 March 2013, respectively.

II. Kemsley: the English perspective
The decision of Mr Justice Roth in Kemsley v Barclays Bank plc [2013] EWHC 1274 (Ch) is useful from an English perspective in two principal regards: it confirms the general 'comity' or 'deference' principle which now appears to be the primary regulating factor relating to the grant of anti-suit injunctions (at least in relation to insolvency proceedings), and provides (for the first time) consideration of the role and relevance of COMI and the Model Law to the grant of anti-suit relief.

The comity principle
When should an English Court grant an anti-suit injunction so as to restrict a creditor from taking steps in a foreign forum which are inconsistent, or potentially inconsistent, with the English insolvency regime commenced by or against a debtor? The answer, according to Mr Justice Roth, and consistent with prior jurisprudence, is rarely if ever.
Mr Kemsley sought injunctive relief against Barclays on two bases. First, that Barclays, if it continued proceedings in the US, would obtain an advantage over other creditors as compared to the equitable pari passu distribution of assets contemplated by the English bankruptcy process. Second, that Barclays (if it obtained a US judgment which would remain enforceable for 20 years) would avoid and undermine the operation of the debtor’s discharge from liability, which discharge was said to be a core element of the English bankruptcy regime.
Barclays conceded at the hearing that it would transfer any recoveries to the bankruptcy estate, subject to deduction of costs and expenses, such that the first basis for the application fell away. The second therefore became the principal focus for the application.