A universalist approach

As Rubin v Eurofinance gets underway in the Supreme Court, Nick Moser highlights why it could represent a milestone in the promotion of international trade

Nick Moser
Nick Moser

The Supreme Court hearing of the appeals in Rubin v Eurofinance started today and the ramifications of the outcome should not be underestimated.

The case is already a conjoined appeal – the appeal of New Cap Re is being heard at the same time – and there are no fewer that three interveners, including Irving Picard, the trustee of the Bernard Madoff Investment Securities liquidation.

While the sums at stake are, Madoff aside, relatively small, the stellar counsel line up indicates the importance of the case. South Square’s Gabriel Moss QC, Robin Knowles QC, Robin Dicker QC and XXIV Old Buildings’ Marcus Staff are leading for the various parties. The Madoff intervention is led by Blackstone Chambers’ Pushpinder Saini QC, Professor Adrian Briggs and Shaheed Fatima, and South Square’s Professor Ian Fletcher and Stephen Robins.

The significance of the case bites on various levels.  On one hand, it has a very narrow focus on the ability of a foreign bankruptcy trustee to enforce a judgment obtained in a foreign court against a party in England who has taken no part in the proceedings.  The Court of Appeal said that it should, which, if upheld by the Supreme Court, changes over 100 years of protectionist private international law. 

The traditional position has been that an in personam judgment of a foreign court is not enforceable by the English court under English common law, unless the judgment debtor submitted in some way to the jurisdiction of the foreign court. Recent cases, culminating in Rubinin the Court of Appeal, have changed this. The courts have carved out a separate class of judgment – those deriving from bankruptcies – which are treated differently.  It will be for the Supreme Court in Rubin to decide whether this approach should now remain the law.

There is a wider view, which looks at the effect of a Rubin approach on the recognition of foreign bankruptcy trustees in the various jurisdictions that are in effect bound by the judgments of the Supreme Court: the Cayman Islands, BVI, Gibraltar.

The line of authorities that has led to Rubin in the Court of Appeal are consistent in their approval of a ’universalist’ approach to cross-border insolvencies. Universalism reacts against the current position, which can lead to each jurisdiction in which an insolvent debtor’s assets are situated dealing with those assets and the local creditors in accordance with local rules. This leads to inevitable inconsistencies between the pay-out of a creditor in Country A as against a creditor in Country B. 

Why should there be a difference when they have transacted with the same company, but happen to be in different countries?  European countries have, by treaty, taken a great leap towards harmonisation of their insolvency laws with the EC Regulation on Insolvency. Beyond the borders of Europe, various countries have signed up to the UNCITRAL Model Law on Cross-Border Insolvency, including the US and UK, meaning that between those (few) countries there is a degree of harmonisation. 

Should Rubin be upheld by the Supreme Court there will be a move towards a tipping point where so many of the world’s major economic powers are prepared for the give and take of a universalist approach to insolvency, that to sit on the outside would be economically disadvantageous.

Which leads to the widest view, that a universalist approach has just the positive impact on international trade that is needed in times of recession because the certainty that comes with universalism could well reduce the cost of credit for companies struggling to refinance their borrowings. The more predictable the outcome of an insolvency, the easier it is for banks to price the risk of a loan at the outset – which has the effect of encouraging competition and efficiencies. 

The case being heard this week in the Supreme Court could well, therefore, be seen as a milestone in the promotion of international trade.

Nick Moser is head of restructuring and corporate recovery at Taylor Wessing and counsel for Irving Picard, trustee of the estate of Bernard Madoff Investment Securities