The law lords have paved the way for foreign liquidators to seize UK assets in cross-border insolvency disputes.

The UK’s highest court took the step partly to prevent valuable assets being kept out of the reach of creditors when companies salt away holdings in offshore subsidiaries.

Law lords backed the idea that the UK should co-operate with other jurisdictions ‘as much as possible’ so the assets of insolvent companies based abroad are given to creditors under an umbrella system.

Distressed asset managers and hedge funds are set to benefit because of the bargaining power gained by having all of an insolvent company’s assets pooled in one place.

The House of Lords made the watershed decision in response to a liquidation case involving Australian company HIH Insurance. The company collapsed in 2001, with HIH holding reinsurance contracts written out of London. Law Lords have now said that these assets should be sent to Australia for distribution under Australian insolvency law.

‘The ruling may shift the starting point for how UK courts consider international insolvency proceedings,’ Radford Goodman, a lawyer at Norton Rose said.