Vol 9 (2012) - Issue 6

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A Shift Away from ‘Modified Universalism’: The Supreme Court’s Decision in New Cap and Rubin

The Supreme Court has handed down its joint decision in the appeals of New Cap Reinsurance Corporation Ltd (in liquidation) and another v A E Grant and others ('New Cap') and Rubin and others v Eurofinance SA ('Rubin').
The Supreme Court (majority of 4:1, Lord Clarke dissenting) held that claims to recover money by insolvency officeholders should only be capable of being brought in the jurisdiction where the defendant, and not the debtor, is based, unless the defendant submits to the jurisdiction of the relevant insolvency court pursuant to the usual rules of private international law. Insolvency proceedings do not constitute a separate category of claim with their own jurisdictional rules which are distinct from private international law and which would allow for recognition and enforcement at common law on a more liberal basis.
The Supreme Court's decision represents a significant shift away from the principle of '(modified) universalism' in cross border insolvency to which we have grown accustomed in recent years. That principle (being the idea that there should, so far as possible, be a single insolvency proceeding in the jurisdiction in which the debtor is based which is then recognised elsewhere, thus providing a uniform approach to the debtor's creditors and assets wherever they are located) was driven by a notion of 'fairness'. The way the Supreme Court saw it, to give effect to the principle, the court would be adopting a more liberal rule for the recognition and enforcement of judgments in foreign insolvency proceedings for the avoidance of transactions than is provided for under the usual rules of private international law. As a matter of policy, the Supreme Court did not agree that, in the interests of universalism, there should be a different approach in insolvency proceedings.

The appeals
The two appeals concerned whether (and, if so, in what circumstances) an order or judgment of a foreign court in proceedings to set aside antecedent transactions would be recognised and enforced in England and Wales.
The insolvency officeholders in both cases argued that the judgments were insolvency judgments and therefore the approach set out in Cambridge Gas should be followed. The defendants were neither present in the foreign country nor did they regard themselves as having submitted to the jurisdiction and they argued that the judgments were in personam and that the usual rules of private international law applicable to in personam judgments should be followed. Therefore the Supreme Court had to consider whether the usual rules of private international law should be applied in deciding whether the foreign judgments could be enforced or whether insolvency proceedings constituted a separate category of claim with their own jurisdictional rules.