Vol 10 (2013) - Issue 1

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Enforcement of Foreign Insolvency Judgments: A Missed Opportunity?

In two conjoined appeals, Rubin v. Eurofinance S.A. ('Rubin') and New Cap Reinsurance Corporation v. A E Grant ('New Cap'), the Supreme Court of the United Kingdom was required to consider the circumstances in which a judgment of a foreign court in insolvency avoidance proceedings will be recognised and enforced in England. In the leading judgment, Lord Collins (with whom Lords Walker and Sumption agreed) identified the issue as being whether, as a matter of policy and in the interests of the universality of insolvency proceedings, the court should devise a rule for the recognition and enforcement of judgments in insolvency proceedings which is more expansive, and more favourable to liquidators, trustees in bankruptcy and other insolvency officeholders, than the traditional common law rule. The traditional rule he was referring to is now encapsulated in Rule 43 of Dicey, Morris and Collins on the Conflict of Laws (15th edn) and is to the effect that a judgment in personam will not be capable of enforcement or recognition unless the judgment debtor was present in the foreign jurisdiction at the time the proceedings were instituted, or has otherwise submitted to the jurisdiction of the foreign court (either by agreement or appearance).
The cases of Rubin and New Cap presented the Supreme Court with a timely opportunity to address the approach of English law to the interplay between the principles of cross border insolvency and the traditional conflict of laws rules governing the recognition and enforcement of foreign judgments. The answer it gave was somewhat disappointing.
The salient facts can be briefly stated as follows. In Rubin the insolvency officeholders, having been recognised in England as foreign representatives of a trust ('TCT') which was subject to Chapter 11 proceedings in New York, sought to enforce in England an insolvency judgment of the US Bankruptcy Court for the Southern District of New York. The judgment was given in adversary proceedings in the Chapter 11, and included causes of action in respect of transactions at an undervalue and preferences arising under the US Bankruptcy Code. In the Court of Appeal and the Supreme Court (but not at first instance), the officeholders only sought enforcement of those parts of the judgment which were based on state and federal avoidance laws. None of the defendants was present in the US at the time the adversary proceedings were commenced and the judgments were given in default of their appearance. However, two of the defendants had had a role in initiating the Chapter 11 proceedings, because they had been involved in an application to the English court for the original appointment of the officeholders as English receivers of TCT for the purposes of causing it to obtain protection under Chapter 11.
In New Cap, the insolvency officeholders sought to enforce in England a judgment of the Supreme Court of New South Wales concerning a preference given to a Lloyd’s syndicate during the period of 6 months prior to the date on which administrators were first appointed in Australia. The syndicate was not present in Australia at the time the preference proceedings were instituted, nor did it enter an appearance in those proceedings, in any event to the extent that would warrant a conclusion that it had submitted to the jurisdiction of the Australian court in the preference proceedings looked at in isolation. The syndicate did, however, participate in the New Cap insolvency proceedings more generally by submitting proofs of debt and by attending and voting at creditors’ meetings.