Vol 14 (2017) - Issue 3

Article preview

Ronelp Marine Ltd & Others v STX Offshore & Shipbuilding Co. Ltd [2016] EWHC 2228 (Ch)

Introduction
This case is an example of the Court lifting the automatic stay on proceedings under the Cross-Border Insolvency Regulations 2006 ('CBIR'), and allowing an English Commercial Court action, i.e. an unsecured claim, to continue on the basis of exceptional factors.


Background
Where foreign insolvency proceedings are recognised by the English Court under the CBIR as foreign main proceedings, there is an automatic stay on other proceedings against the insolvent company (article 20(1)(a), schedule 1, CIBR). The Court can, however, modify or terminate this stay under article 20(6), Schedule 1, CBIR.
In an earlier recent decision, Seawolf Tankers Inc and another v Pan Ocean Co. Ltd [2015] EWHC 1500 (Ch), the Court held that the test it had to apply when deciding whether to lift the automatic stay under the CBIR was the test applicable to the lifting of a stay in administration proceedings. Although, oddly, that decision is not referred to in the instant case (which also concerned Korean insolvency processes).


Facts
STX Offshore & Shipbuilding Co. Ltd ('STX') was a Korean shipbuilding company with a registered office in London. It had given an English law governed (performance bond) guarantee in respect of its wholly-owned Chinese subsidiary, also a shipbuilder, in relation to the construction of five ships that the subsidiary had contracted to build. The shipbuilding contracts were also governed by English law. The subsidiary entered into Chinese insolvency proceedings and the ships were not built.
The various buyers of the ships ('the Buyers') commenced proceedings in Commercial Court in London against STX under the guarantee in January 2015. STX filed a defence which included that the shipbuilding contracts were illegal and unenforceable. The illegality argument was based on a sideletter between the parties to the shipbuilding contracts which had the effect of reducing the price by $6 million for each ship from the price stated in the contracts. STX argued that this was intended to mislead third parties as to the true price payable for the ships.
The Commercial Court gave directions for the conduct of the litigation but, some 14 months after the litigation commenced, STX itself entered into rehabilitation proceedings in Korea. The effect was to stay litigation against STX, as the Korean administrator duly obtained recognition of the Korean rehabilitation proceedings under CBIR, and the Court granted an automatic stay that no legal process could be continued against STX except with the consent of the Korean administrator or the permission of the Court. The Buyers applied to the English Court to lift the stay in order to continue the Commercial Court proceedings against STX.