Vol 12 (2015) - Issue 1

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The Universe of Insolvency Cooperation and the Primeo Directive

Introduction
This is an interesting time in cross-border insolvency, certainly insofar as judicial cooperation at common law is concerned. There has been a patient, incremental and continuous development over the centuries since cases featuring foreign connexions first started appearing before the courts in England and Wales, mostly in the context of business insolvencies (of trading partnerships and, later, of commercial companies). As a result, the common law has made it possible to achieve a number of things to render assistance in crossborder matters and to make the task of administering a debtor’s estate easier across frontiers. Although the common law sourced much of its power to assist in the inherent jurisdiction of the courts, the developments in the case law have also been underpinned by principled approaches to comity, including reliance on theories of unity and universality as espoused by the judges.
The first step in such cases was usually to recognise the existence of foreign proceedings and the office-holder’s capacity as representative of the estate and/or acting in the shoes of the debtor. In that light, recognition also followed naturally in relation to the office-holder’s title to assets and/or entitlement to pursue debts/claims owed to the estate. Where they deemed it desirable, the courts have also assisted in the procedural management of foreign proceedings by issuing orders requiring the examination of debtors or third parties as well as the production of any relevant documents within the jurisdiction. Taking the view, usually on grounds of unity and/or universality, that management of the debtor’s estate may be more appropriate in foreign proceedings, the courts have also assisted by restraining actions by creditors within the local jurisdiction where such actions would conflict with the proper administration of the estate elsewhere. Giving support to the idea of a single efficient insolvency procedure, the courts have also authorised stays or discharges of local proceedings. This is especially so where the courts view foreign proceedings as the natural home for the administration of the debtor’s estate. In this light, the courts have also mandated the remittance of funds for the purposes of overseas proceedings and given effect to a reconstruction scheme voted on by the creditors in another jurisdiction.
Furthering the types of assistance developed at common law, the courts also developed at an early stage the doctrine of ancillary assistance. In the case of personal insolvencies, assistance was predicated on the basis of the principle of mobilia sequuntur personam, which largely meant that one set of bankruptcy proceedings would be organised, wherever the debtor was viewed to have taken up domicile. These would then recognised elsewhere, with all other courts assisting by the making of any necessary orders. In the case of corporate entities, however, adherence to the principle that the law of the state of incorporation also governed the dissolution of the company meant that only one court would usually have jurisdiction. This could be inconvenient, given that the debtor company might have business and activities elsewhere which needed careful management, ideally by means of a formal procedure. Courts thus evolved a principle, by which they enabled the opening of liquidations, termed 'ancillary' or assisting, so as to deal with issues that could not simply be solved by the making of orders subsequent to recognition applications.