The Supreme Court has stopped short of implementing a universal approach to insolvency matters in its ruling in Rubin v Eurofinance.
The case was about whether Chapter 11 bankruptcy proceedings could be recognised in the UK (23 April 2012) and involved trust company Eurofinance, which was domiciled in London but traded substantially in the US, where the majority of its creditors were based.
It was believed that if the court found that foreign rulings could be enforced in England and Wales it would have reinforced London’s position as a leading international dispute resolution centre, particularly with bankruptcy cases, but at the same time could have opened up UK businesses to the uncertainties of court decisions overseas (21 May 2012).
However, handing down today’s ruling Supreme Court Justice Lord Collins said: “The court did not agree that, in the interests of the universality of bankruptcy and similar procedures, there should be a more liberal rule for judgments given in foreign insolvency proceedings for the avoidance of transactions.”
Chadbourne & Parke partner John Verrill, who acted for receiver David Rubin, was seeking legal precedent with the way insolvencies of failing multi-national groups are litigated.
Verrill was attempting to establish a streamlined process by which to unravel “nefarious practices” without the need for separate trials in every jurisdiction. Verrill admitted that the judgment was “a big blow” and came as a surprise following decisions in precurser cases such as Cambridge Gas’.
But Collins SCJ added: “Such a change would not be an incremental development of existing principles but a radical departure from substantially settle law.”
Devi Shah, joint head of restructuring, banking and insolvency, at Mayer Brown, who acted for respondent New Cap Reinsurance Corp said: “[The] grounds on which the Supreme Court reached its decision is a blow to the development of a ‘universalist’ approach to cross-border insolvency proceedings in the UK.
“Rather than enabling a liquidator of an insolvent multinational group to start one set of proceedings in one jurisdiction, enforceable around the world, the court’s decision has left liquidators needing to bring a number of proceedings in different jurisdictions, with the local courts potentially reaching different decisions on the same facts.
“This decision has the benefit of certainty for international defendants, but at the expense of increased international cooperation in multinational insolvencies.”
The legal line-up
For the appellant Eurofinance: XXIV Old Buildings’ Marcus Staff, instructed by Brown Rudnick partner Patrick Elliot.
For the appellant AE Grant & Ors: South Square’s Robin Knowles QC and Blair Leahy, instructed by Edwards Wildman partner David Kendall.
For the respondent Rubin & Lan: South Square’s Robin Dicker QC and Tom Smith, instructed by Chadbourne & Parke partner John Verrill.
For the respondent New Cap Reinsurance: South Square’s Gabriel Moss QC and Barry Isaacs QC, instructed by Mayer Brown partner Devi Shah
For intervenor Irving H Picard: Blackstone Chambers’ Pushpinder Saini QC and Adrian Briggs leading Shaheed Fatima of the same set alongside South Square’s Ian Fletcher and Stephen Robins, instructed by Taylor Wessing partner Nick Moser for Irving H Picard as trustee in respect of the consolidated liquidation of the business of Bernard L Madoff Investment Securities LLC and Bernard L Madoff.