Corporate insolvency – schemes of arrangement – foreign insolvent company – practice – jurisdiction
The court considered the practice and substantive issues regarding its jurisdiction to sanction schemes of arrangement for six foreign insolvent companies. The Dutch and Belgian companies had no establishment, COMI, or significant assets in England, but some of their creditors were domiciled in England and the finance documents affected by the schemes had English law and jurisdiction clauses.
As to practice, the court stated that if scheme proponents intend to raise a jurisdiction issue at the convening hearing, the letter to creditors under Practice Statement (Companies: Schemes of Arrangements) [2002] 1 WLR 1345 should flag this issue and give proper details of the arguments. If they wish the judge to decide the jurisdiction issue at the convening hearing, they should bring this to the judge’s attention, who can give a reasoned judgment or at least ensure that his reasoning is recorded in the order made.
On substantive matters, the court considered whether its scheme jurisdiction under Part 26 of the Companies Act 2006 was affected by the Insolvency Regulation (Regulation 1346/2000) or the Judgments Regulation 1215/2012. Whilst it did not have jurisdiction under the Insolvency Regulation, following other first instance cases this did not limit the court’s scheme jurisdiction.
Regarding the Judgments Regulation, the court reviewed the authorities on whether Chapter II of the Regulation applied to schemes at all but did not resolve the issue. Instead, assuming that the Chapter II of the Regulation did apply, it held that it did have jurisdiction under art.8(1) because at least one creditor was domiciled in England and it was expedient to hear the matter in relation to all other creditors together. The court also considered whether its orders approving the schemes would be recognised in the Netherlands and Belgium. The court sanctioned the schemes for all six companies.
The court’s clarification of the practice to be followed where jurisdictional issues arise is welcome and should ensure that such issues are properly ventilated at an early stage. The judgment’s review and discussion of the applicable principles on jurisdiction is also a helpful reminder of the issues that may arise.
