Vol 9 (2012) - Issue 6

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International Insolvencies: Moving Away from a Common Approach

International insolvencies are not a new phenomenon. From at least the mid-1700s, the English courts have been asked to recognise insolvency proceedings initiated in foreign jurisdictions and in so doing, reach a different decision than might otherwise be reached as a matter of English law. In the modern era when most large enterprises conduct their businesses in several jurisdictions, the English court is increasingly called upon to assist foreign insolvency processes. That assistance can range from staying proceedings brought in England to permitting the remission of English assets (or their proceeds) to the foreign jurisdiction for distribution to creditors.
Within the last century, the assistance provided by the English courts has in many cases been possible as a result of treaties with other states and uniform legislation enacted in each of them. The basis of these international instruments is often reciprocity so that the courts in, for example, the Commonwealth and the EU will assist the English court where the English courts would also assist Commonwealth and EU courts. As a result, English law now includes a variety of legislative means by which insolvency proceedings in foreign states might be assisted, including under section 426 of the Insolvency Act 1986 (the 'IA 1986'), the UNCITRAL Model Law on Cross-Border Insolvency (the 'Model Law') and Council Regulation (EC) No. 1346/2000 on insolvency proceedings (the 'EU Regulation'). The English courts also have power to recognise certain foreign judgments at common law.
Given the long history of international insolvencies, it is surprising that the breadth of the English courts' jurisdiction to assist foreign insolvency processes has only infrequently attracted guidance from the appellate courts. However, in its recent judgment in Rubin v Eurofinance; New Cap Reinsurance Corpn. v Grant [2012] UKSC 46, the Supreme Court carefully considered how far the English court should go to recognise or enforce a judgment made in connection with foreign insolvency proceedings and, in doing so, directly addressed the tension between competing policy interests. While the Supreme Court acknowledged that in many circumstances it is advantageous for the courts in a single jurisdiction to deal with all matters connected with the insolvency of a company with its main interests in that jurisdiction (the 'principle of universalism'), the Court decided that the English courts should not (in the absence of legislation) go so far as to enforce a judgment made in foreign insolvency proceedings against an English party that was not present in nor had submitted to the foreign court.
In this article, we examine the practical consequences of the Supreme Court's decision before considering certain problem cases where the English law position remains unclear, including where the insolvent party and its creditor have agreed that any dispute between them should be subject to the courts of England and Wales.

1.The facts in Rubin
In December 2007, English receivers of a trust that had gone into US Chapter 11 bankruptcy proceedings in New York commenced proceedings in the New York court against, amongst others, three individuals resident in England (the 'Romans'). In those proceedings, the receivers asserted that the trust should be permitted to recover payments that it had made to the Romans prior to the onset of insolvency.