Vol 14 (2017) - Issue 3

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Schemes of Arrangement – Part Two

Introduction
This is the second of a two-part article on schemes of arrangement. Part 1 discussed a number of key themes that have emerged from recent scheme cases. This article focuses on the jurisdiction of English courts in relation to cross-border schemes. Jurisdictional issues come into particular focus where a scheme is proposed by a foreign company (especially so where the relevant debt is also non-English), however, they also arise for an English company when some of its creditors are foreign entities.


Popularity of schemes
As discussed in Part 1, the English scheme remains a popular international restructuring tool. A scheme gives a company considerable flexibility as to which of its creditors are to be compromised as well as the ambit of the arrangement to be reached. In the absence of genuine alternatives to schemes in Europe (or, at least, analogous processes which, for now, are sufficiently established), schemes have been, and continue to be, the most popular European restructuring tool of choice. This has seen a number of foreign companies, particularly since the 2008 credit crunch, come to England to propose a scheme to restructure their indebtedness. As the nature of financing arrangements and companies’ operations become increasingly global, it is almost inevitable that most large-scale restructurings and schemes will have a cross-border element. This can be due to either the scheme company or some of the creditors being non-English entities, although in many circumstances it is likely to involve both. It is in this context that the question of whether the English court has jurisdiction becomes relevant. In practice, these issues are most acute where the scheme company is a foreign company, although they also arise when there are non-English creditors.