Vol 12 (2015) - Issue 2

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Re Pan Ocean [2014] EWHC 2124

Introduction
As more and more companies have an international presence the English Courts have had to deal with crucial cross-border issues in the context of insolvency. The international insolvency arena has developed considerably over the past few decades such that it is no longer necessary to have individual liquidations in every country that international companies operate in. The most significant advancement in this area was the development of the UNCITRAL Model law (the 'Model Law') which is implemented in England and Wales through the Insolvency (Cross-Border) Regulations 2006 ('CBIR').
In Pan Ocean Morgan J was asked to determine the breath of the relief that would be granted by the English Courts upon recognition of a foreign insolvency proceeding. In this regard the Court had to grapple with the interpretation and application of the CBIR. In particular, Morgan J had to determine the scope of the relief that may be granted by the English Courts under Article 21 on the recognition of a foreign insolvency proceeding.

Factual background
Pan Ocean is a shipping company incorporated under the laws of the Republic of Korea (the 'Company'). On 25 June 2013, the Company went into an insolvency process known as rehabilitation in Korea. The rehabilitation proceedings were recognised in England as the 'foreign main proceeding' under Article 17 of Schedule 1 to CBIR by Warren J. The administrator was the 'foreign representative' pursuant to CBIR (the 'Administrator').
Prior to entry into the rehabilitation process the Company had entered into a contract with Fibria Celulose S/A ('Fibria') a Brazilian company for the carriage of goods (the 'Contract'). The contract is governed by English law. By clause 28 of the Contract Fibria had the right to terminate the contract by reason of the Korean insolvency process in relation to the Company (i.e. an ipso facto clause) Clause 28 is valid and enforceable under English law (see Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd [2012] AC 383) but not under the law of Korea and other laws, for example in the United States. The Company had terminated other contracts with Fibria but did not wish to terminate the Contract.

Issues that the Court had to deal with
The Court had to deal with two issues: (1) whether the power under Article 21(1)(a) enabled the Court to restrain Fibria from serving a notice of termination pursuant to Clause 28 of the Contract; and (2) whether, by virtue of the phrase 'any appropriate relief ' in Article 21, the Court was in any event empowered to make an order restraining Fibria from serving such notice as a result of the application of Korean law to invalidate Clause 28.