Vol 9 (2012) - Issue 1

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Lornamead Acquisitions Limited v Kaupthing Bank HF [2011] EWHC 2611 (Comm)

Introduction

A dispute having arisen between Lornamead Acquisitions Limited ('Lornamead') and the insolvent Icelandic bank, Kaupthing Bank HF ('Kaupthing'), Lornamead commenced proceedings in the English Commercial Court seeking various declarations as to the correct interpretation of a series of inter-related agreements (which were subject to English jurisdiction clauses) between Lornamead and Kaupthing, in particular to the effect that these agreements had the effect of discharging or otherwise bringing to an end any liabilities Lornamead may have had to Kaupthing under various 'Hedging Confirmations', which were expressed to be subject to the exclusive jurisdiction of the Reykjavik court.

Thereafter Kaupthing issued an application for an order that (i) Lornamead’s claim be struck out or stayed on the basis of Article 116 of the Icelandic Bankruptcy Act (No 21/1991) ('the Icelandic Bankruptcy Act') and Regulation 5(1) of the Credit Institutions (Reorganisation and Winding Up) Regulations 2004 (''the 2004 Regulations'); (ii) insofar as necessary in light of (i) a declaration that the English Court has no jurisdiction over Lornamead’s claim under Article 17 of the Lugano Convention or otherwise; and/or (iii) an order that the Court should not exercise any jurisdiction which it may have and/or should stay the proceedings on forum non conveniens and/or on case management grounds.

On 16 and 17 February 2011 Gloster J heard argument in relation to Kaupthing’s application. At the conclusion of that hearing she reserved judgment.

The decision in Rawlinson

Thereafter, but before Gloster J handed down her judgment, on 26 March 2011 Burton J handed down judgment in another case, Rawlinson & Hunter Trustees SA v Kaupthing Bank HF [2011] EWHC 566 (Comm). In that case trustees holding interests on behalf of the Tchenguiz family had commenced proceedings against Kaupthing in the English courts seeking substantial sums for, inter alia, alleged fraudulent misrepresentation and other claims relating to contracts which contained exclusive jurisdiction clauses in favour of the English courts. Kaupthing applied for a stay of those proceedings on the basis that the insolvency proceedings in Iceland had effect in England by virtue of Regulation 5(1) of the 2004 Regulations.

Burton J dismissed Kaupthing’s application holding that (i) In July 2010, when the proceedings were commenced, Kaupthing had not been subject to an EEA insolvency measure within the meaning of the 2004 Regulations because the regime to which Kaupthing was then subject was neither a ‘reorganisation measure’ nor 'winding up proceedings' with the meaning of the same; (ii) Kaupthing only became the subject of such an insolvency measure on the making of the winding up order by the Icelandic court on 22 November 2010, by which time the proceedings had already been commenced so that under Article 32 of Directive 2001/24/EC on the reorganisation and winding up of credit institutions ('the 2001 Directive') the effect of that measure was to be determined by English law, as the law of the place where the proceedings were pending; and (iii) under English law, the effect of Article 17 of the Lugano Convention was that the English court had exclusive jurisdiction.

In light of Burton J handing down his judgment in Rawlinson on 13 and 14 June 2011 a further hearing of Kaupthing’s application in respect of the claim brought by Lornamead was convened before Gloster J, at which the question of whether she should follow the decision in Rawlinson.


Issue 1: Should the decision in Rawlinson be followed?

Logically the first issue which Gloster J was called on to decide was therefore whether she should follow Rawlinson and apply Burton J’s decision that Kaupthing was not subject to an EEA insolvency measure within the meaning of the 2004 Regulations in May 2010, when Lornamead commenced its proceedings.