Vol 7 (2010) - Issue 5

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Eurofinance: Carving its own Character. Further Steps along the Road to Developing Cross-border Insolvency Law Principles

Introduction and Overview
The long-awaited decision of the Court of Appeal in Rubin and Ors v (1) Eurofinance SA (2) Adrian Roman (3) Justin Roman and (4) Nicholas Roman 2010 EWCA Civ 895, handed down just before the summer recess, represents a further step forward in the development of cross-border insolvency law, an area of jurisprudence which has only recently been acknowledged by the judiciary to be in an 'arrested state of development.'
The issues which the Appeal Court was asked to consider by the time of the conclusion of the appeal hearing had considerably narrowed from those before the High Court. The respondents did not challenge the High Court decision recognising the receivers, Messrs Rubin and Lan, as the foreign representatives of chapter 11 proceedings (comprising foreign main proceedings) filed by a trust entity, The Consumers Trust ('TCT'). The issue as to whether TCT was an 'insolvent corporate entity', given that under English law as a trust it did not enjoy the status of a separate legal entity, had therefore fallen away. The questions which remained in issue were as to whether separately issued adversary proceedings, brought in the US Bankruptcy Court pursuant to the terms of an approved chapter 11 plan, should be recognised as part and parcel of the foreign insolvency proceedings. If they were so recognised, the parties also disagreed whether a money judgment obtained in the adversary proceedings could (and should) be enforced as a judgment of the English Court. The respondents to the adversary proceedings had not submitted to the jurisdiction of the US Bankruptcy Court in relation to the adversary proceedings.
At the appeal stage the applicants sought orders to enforce only those parts of the judgment in the adversary proceedings which represented the elements of their claims brought pursuant to transaction avoidance provisions under the US Bankruptcy Code (ss 547 and 548). The US bankruptcy provisions were accepted by the parties to bear striking similarity to the transaction avoidance provisions available under the Insolvency Act 1986.
In a single judgment the Appeal Court found on both issues in favour of the applicant receivers after concluding that the adversary proceedings were part and parcel of the US bankruptcy proceedings and, applying nascent common law principles, held that the ordinary common law rules for enforcing foreign judgments in personam do not apply to bankruptcy proceedings. As was acknowledged by the parties, had the judgments in the adversary proceedings been characterised as ordinary in personam claims, they would not have been capable of enforcement because the respondents had not submitted to the jurisdiction of the US Court. The Appeal Court then went on to hold that the judgment obtained in the adversary proceedings should in the circumstances, again applying common law principles, be enforced against the respondents as a judgment of the English Court, having noted that the US transaction avoidance provisions were 'integral to and are central to the collective nature of bankruptcy and are not merely incidental procedural matters.'
The Court of Appeal left open the question (as unnecessary to be determined for the purposes of the case) of the extent to which the English Court can give assistance to foreign representatives recognised under the Cross-border Insolvency Regulations 2006 ('CBIR') pursuant to powers contained in those regulations.
Inevitably, the Eurofinance decision has added vigour to the debate concerning the extent to which the English Court can give assistance to foreign insolvency office holders, whether under the common law or the CBIR.