Vol 10 (2013) - Issue 5

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Passport Renewed: Extension of Rescue Proceedings to Foreign Companies under Section 426 of the Insolvency Act 1986

Introduction
The cross-border position in the United Kingdom is a patchwork quilt, formed of a number of different elements. The more recent additions, the UNCITRAL Model Law on Cross-Border Insolvency 1997 and the European Insolvency Regulation 2000, now account for most of the reported cross-border cases. There is a much older domestic statutory framework for crossborder cooperation, however, whose latest incarnation is section 426 of the Insolvency Act 1986 (‘section 426’). The ancestry of this text can be traced back to 19th century statutory provisions on the reciprocal enforcement of orders given by courts within the United Kingdom as well as a requirement of assistance to and by other British courts, a term which referred in practice to the courts in the then British Empire (and later those in the Commonwealth). These provisions were designed to co-ordinate proceedings and enabled the courts within the Empire/Commonwealth to request other courts to assist in the management of proceedings within their own jurisdiction, the making of an order being deemed sufficient authority to enable the other court to exercise the jurisdiction it would if the matter were before it for consideration. Although the source of these texts was originally the law of bankruptcy (or personal) insolvency, the consolidation of provisions relating to bankruptcy and corporate insolvency procedures in the same Act in 1986 offered the occasion for consideration of whether the cooperation provision, if carried forward, should apply to both types of insolvency.
Observations in the Cork Report, which formed the working background for consideration of the reform of insolvency law, in its chapter on extra-territorial aspects of insolvency law provide some of the reasoning for this position. The report notes the aim of extra-territorial jurisdiction as being the avoidance of conflict and confusion in cases of concurrent jurisdiction, the obtaining of recognition and enforcement by other courts of orders as well as reciprocity in recognition and enforcement where this would not be repugnant to domestic concepts of public policy. The statutory provisions then in existence were criticised insofar as they were ill fitted by their use of outmoded definitions to modern commercial reality, although the co-operation provisions were highlighted as affording a flexible framework for assistance. It was desirable, according to the report, that this assistance should include the situation of corporate insolvency and be extended as far as possible to other countries on the basis of reciprocity.