It’s a small world, the saying goes. But for the insolvency practitioner it
just got smaller, thanks to a recent Court of Appeal judgment.
The ruling means that foreign insolvency practitioners can pursue assets here
in the UK in a way that was impossible before.
The big question is whether UK practitioners will increasingly find
themselves in conflict with their opposite numbers from other countries.
Many in the profession believe the application of the ruling is limited.
Others see opportunities in the decision.
The limited application of the ruling stems from the type of insolvency
involved in this particular case. It involved UK-based receiver, David Rubin
& Partners, which successfully pursued the assets of collapsed UK trust
Eurofinance (see box) via the US courts.
The US courts backed the claim, and Rubin then sought enforcement through the
UK courts. This was eventually supported by the Court of Appeal – in so doing
the court potentially opened the door to an increase in overseas insolvency
practitioners pursuing assets in the UK.
On this assignment there was no US-UK insolvency-practitioner conflict which
meant Rubins was able to follow the assets unhindered by foreign insolvency
practioners persuing the same assets.
The Court of Appeal ruling could therefore only apply, observers believe, in
However, many insolvencies involve a conflict. A good example is the running
battle between Nigel Hamilton-Smith of Vantis, tasked to pursue assets of Allen
Stanford on behalf of Antiguan creditors with Ralph Janvey, the receiver
representing US creditors. The two locked horns in regular court battles over
who could claim assets around the world.
Industry experts believe Janvey would not be able to use the Eurofinance
ruling to access assets in the UK precisely because the Stanford affair was a
Chris Laughton, deputy president of INSOL Europe, a European association of
IPs, believes the domestic courts would favour UK IPs in a clash with foreign
counterparts. The reason, he says, is precisely because the Court of Appeal
ruling applies only where there are no competing IPs from different
jurisdictions involved in turf wars. “UK courts won’t go against UK IPs,” said
But Eurofinance does mean that where there is no conflict, we are likely to
see foreign IPs on UK soil. But, this is viewed as a potential benefit to the UK
Louise Brittain, a partner at Deloitte specialising in international asset
tracing, said foreign insolvency representatives will need the expertise of UK
experts in order to pursue assets.
However, Brittain said it is unlikely UK practitioners would be treated the same
For example, if a UK IP needed to pursue assets in America they are
technically able to obtain an enforcement order through the US regulation
Chapter 15. In practice, these are difficult to obtain, or implement, and can
rack up enormous costs while sapping the time of administrators.
Recognising this as a problem, the United Nations created the UN Commission
on International Trade Law (UNCITRAL). It incorporated a legislative guide on
insolvency law to reduce inconsistencies in local laws.
The Court of Appeal case is the first time the UNCITRAL rules have been put
into effect, despite being in existence since April 2006.
The UN commissioned a working group to look at UNCITRAL which in April this
year announced it had received various recommendations on how to improve the
legislation. It is due to meet in December and then again in April next year.
Meanwhile, the Court of Appeal ruling is being digested by the UK profession.
David Steinberg, a partner in restructuring and insolvency at law firm Clifford
Chance, said it would have to wait to see if the ramifications of the ruling
“blossoms” into a more permanent spirit of co-operation across all
Breaking into Britain
The Court of Appeal case began in a New York court with receivers Rubin
& Lan seeking permission to pursue the British directors of Eurofinance for
money owed to the company’s creditors. This was granted. However, receiver David
Rubin tried and failed to obtain UK court enforcement to pursue them.
Refusing to accept no as an answer he went to the Court of Appeal where the
decision was overturned. Residing judge Justice Ward labeled the appeal ruling
as an “inevitable and desirable development”.
Until this clarification, jurisdictions outside the UK were powerless to
retrieve assets and liabilities from British directors of companies.
“Until this judgment the UK was perhaps behind other countries on the concept
of universalism and the judge brought it to where it should be,” said Chris
Laughton, deputy president of INSOL Europe, the European association of
restructuring and insolvency professionals.
Justice Ward said the three Eurofinance directors “took their chance that it
would be difficult to bring proceedings here”.
He added that they were fully aware of the claims being brought against them
in New York and after taking advice chose not to participate in the proceedings
as it was likely they would not be “attacked” in the UK.
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