Venture Lietzenburger Strabe Holdco, Re [2024] EWHC 468 (Ch) would appear to heed my prediction once I reviewed AGPS BondCo (“Strategic Worth Capital Options Grasp Fund LP & Ors v AGPS BondCo PLC (Re AGPS BondCo PLC) [2024] EWCA Civ 24) right here: that the English jurisdictional foundation for schemes of association and restructuring plans for companies with out English anchor previous to the restructuring, is much less sure than court docket observe steered.
Previous to AGPS Bondco and as I report in lots of posts which readers can discover utilizing the ‘scheme of association’, within the occasion of a non-E&W included debtor whose debt was being restructured, the basic approach is to insert a newly included English firm in its place obligor or co-obligor of debt owed by a international firm with a purpose to have interaction the jurisdiction of the English court docket. That approach in itself has not modified, however the court docket’s pretty prepared acceptance of jurisdiction arguendo is now coming below some stress.
As I reported previously, the arguendo approach’s clean using by the courts first if all was assisted by the final absence of problem by collectors. Even these not fully satisfied of the financial soundness of the restructuring at problem would ultimately quit opposition when push got here to shove. Additional, pre-Brexit the belief {that a} scheme or a plan could be readily recognised throughout the EU as a ‘judgment’ below Brussels Ia, regardless of query marks over the soundness of that ia viz the definition of ‘judgment’ and the appliance of BIa’s ‘insolvency’ exception, equally lubricated passage by the courts. Submit Brexit and absent UK Lugano membership, issues haven’t essentially modified from the content material perspective; nonetheless they’ve actually modified from the notion perspective.
Within the case at problem, Richards J refers to AGPS Bondco and discusses COMI shift of the Plan company at size [69] ff.
The plan firm having its COMI in E&W is likely one of the jurisdictional routes accessible. The Insolvency (Modification) (EU Exit) Laws 2019 are the primary port of name, and Re Swissport Holding Worldwide SARL [2020] EWHC 3556 (Ch) (unreported), which I flagged in my dialogue of Barings v Galapagos right here is the lead judgment referred to on the rules of COMI. One of many points in Barings is the query of ‘permanency’ of COMI transfer, an pressing problem in Barings however maybe much less instantly regarding in present case (the choose does briefly handle it [85]).
The choose having determined that COMI was certainly positioned in E&W then [86] ff mentioned whether or not this transfer of COMI might need been in breach of Luxembourg legislation. The construction of this evaluation isn’t fully clear. Whether or not COMI moved in breach of relevant lex societatis isn’t in itself I’d recommend related to the COMI transfer itself and certainly this isn’t how the choose appears to method it. One assumes his evaluation on this level is a part of his consideration of whether or not the courts at Luxembourg would recognise the Plan, alongside [103] ff the place the potential of unique Luxembourg jurisdiction is taken into account. Consideration together with by the consultants is product of CJEU C-723/20 Galapagos BidCo Sarl, with the choose ultimately by a slender margin deciding that the view is to be most popular that Lux courts wouldn’t think about themselves to have such jurisdiction.
On recognition correct (once more I’m not fairly positive of the construction right here). [112] ff think about the Re DTEK Vitality BV take a look at, with consideration particularly of the COMI transfer as fraude à la loi /fraus (moreover within the type of fraude au jugement) and on stability the choose holds that it’s unlikely that the LUX courts would object on ordre public grounds (ia given EU legislation’s acceptance of COMI transfer for restructuring functions.
The identical ordre public take a look at below German legislation with an vital Brexit consequence [125]: “Each consultants agree that an English judgment sanctioning the Plan could be recognised in Germany provided that the Plan Firm’s COMI is in England on the time of any order sanctioning the Plan. With out that, the German courts wouldn’t settle for that the English courts have jurisdiction for the needs of s343 of the InsO.” I’m not an professional on German legislation nevertheless it appears prima facie implicit in that opinion {that a} Plan must be thought of an insolvency and certainly [125] ff follows that dialogue. Right here the judgment takes an fascinating flip with [130] the presence of cross-class cram-down in an English Plan resulting in professional inspiratio an Annex A EU Insolvency Regulation notified German process, StaRUG, in implementation of EU Directive 2019/1023 on Preventive Restructurings (the “Restructuring Directive”), the Plan being thought of one in insolvency.
Think about the competing causes:
Professor Thole’s causes for concluding that the Plan could be recognised and given impact to in Germany might be summarised as follows:
i) The Plan is analogous in nature to a StaRUG. StaRUGs fall throughout the record of “insolvency proceedings” set out in Annex A.
ii) Proceedings set out in Annex A are “insolvency proceedings” for the needs of the InsO. In official commentaries on German home laws, the German legislature has acknowledged that, in deciding whether or not non-EU proceedings represent “insolvency proceedings”, it’s useful to contemplate their similarities with proceedings listed in Annex A.
iii) Because the Plan is just like a StaRUG, which falls inside Annex A, a German court docket would seemingly conclude that an order sanctioning the Plan could be an order in “insolvency proceedings” for the needs of the InsO.
iv) That conclusion isn’t altered by the accepted indisputable fact that the Plan doesn’t cope with all of the Plan Firm’s collectors (similar to skilled advisers). The requirement for “collective proceedings” is current by advantage of the truth that the Plan offers with the rights of the Plan Firm’s monetary collectors. That conclusion is supported by a comparability with StaRUGs which likewise don’t must cope with the claims of all collectors.
v) Accordingly, the Plan could be enforced and recognised below the phrases of the InsO.
- Professor Skauradszun’s causes for reaching a opposite conclusion might be summarised as follows:
i) German authorized literature categorises plans below Half 26A as “preventive restructuring frameworks” that are the province of the StaRUG Act fairly than the InsO. Accordingly, a German court docket would think about that the query whether or not the Plan must be recognised and enforced in Germany must be answered by reference to the StaRUG Act, fairly than by reference to the InsO.
ii) The StaRUG Act doesn’t present for preventive restructuring frameworks of a non-EU member state to be recognised or enforced in Germany. There’s, due to this fact a “hole” in German home laws which implies that non-EU “preventive restructuring frameworks” are inherently incapable of being recognised in Germany. Since Germany has a civil legislation custom, the courts wouldn’t search to fill that hole by adopting a strained interpretation of the idea of “insolvency proceedings” in order to allow the Plan to be recognised below the InsO. Reasonably, a German court docket would look to the legislature to fill the hole if it noticed match.
iii) The Plan falls exterior the definition of “insolvency proceedings” within the InsO making use of orthodox rules of interpretation which aren’t affected by any want to fill a perceived hole within the laws. That’s as a result of the Plan lacks the requisite aspect of “collectivity” to fulfill the definition.
iv) The truth that the Plan is just like procedures (similar to a StaRUG) listed in Annex A isn’t related. Whereas German laws does certainly keep in mind similarities with EU insolvency proceedings, the InsO solely requires a comparability to be made with proceedings listed within the EU Insolvency Regulation prior to it being recast in 2015. The German court docket wouldn’t apply an “at all times talking” doctrine of statutory interpretation to “replace” these references to incorporate Annex A of the Insolvency Regulation Recast.
These are fascinating positions and in the long run the choose sides by a really slender margin with the previous.
Additional consideration of the plan then result in the choose suggesting quite a lot of amendments however for the needs of the weblog, the findings on jurisdiction and recognition are as intensive as they’re thrilling.
Geert.
EU Non-public Worldwide Legislation, 4th ed. 2024, 5.35 ff.
