Cross-border insolvency and the Golden Thread - the latest case and its appeal
02 May 2013
The Golden Thread has been referred to in several recent cases, including by the English Supreme Court in the well known case of Rubin v. Eurofinance SA; New Cap Reinsurance Corp Limited v. Grant  UK SC 46. This case examined the effect of enforcement of foreign insolvency avoidance procedures on liabilities of home-based defendants and turned on whether they had submitted to the foreign court proceedings or insolvency process.
On 12 April 2013, the Golden Thread was also referred to in HSBC v. Tambrook Jersey Limited  EWHC 866 (Ch). However, in that case the High Court of England and Wales rejected a request under section 426 of the Insolvency Act 19861 by the Royal Court of Jersey for assistance. The request was for a Jersey registered company to be placed in English administration instead of a Jersey bankruptcy procedure. The company had its Centre of Main Interest ('COMI') in Jersey. Almost all of its assets and most of its creditors (in number although not value) were in England. The English Court held that it had no jurisdiction to assist as, in the absence of an insolvency procedure in Jersey (existing or contemplated), the English Court would not be "assisting" the Jersey Court as the Jersey Court had no further function to perform and none was contemplated. Therefore the request fell outside the ambit of the statute. In other respects, the Court indicated it would have been likely to have granted the application as it was in the interests of the secured creditor and the company generally.
It was noted that a number of similar successful applications for assistance had been received and accepted by the English courts in the past, although none appear to have considered this point.
This interpretation of 'assist' appeared unduly restrictive where the relevant section is designed to encourage co-operation between courts. One effect of the High Court's judgment might have been to encourage a multiplicity of cross-border court procedures which the Golden Thread seeks to avoid.
In the event, however, the applicant appealed to the English Court of Appeal and the appeal was heard and allowed on 1 May 2013. Detailed reasons are to follow, given the importance of the point at issue.
This is welcome news in that it restores the practice, well established over the last 11 years, of Jersey companies seeking English administration, in appropriate circumstances, to avoid a Jersey bankruptcy procedure. It will also be welcomed by a broader audience, namely lawyers and insolvency practitioners in the many countries and territories designated under section 426 of the Insolvency Act 1986, whose courts may need to seek insolvency assistance from the English courts in circumstances where no formal bankruptcy procedure is being conducted or is contemplated in the requesting jurisdiction.
The line of Jersey and Isle of Man cases where requests for assistance have successfully been accepted by the English court and cross-border assistance generally and universality in particular are discussed in 'Jersey Insolvency and Asset Tracking' (4th Edition) by Anthony Dessain and Michael Wilkins, and which has been recently reviewed.
Bedell Cristin acted for HSBC in its application to the Royal Court in HSBC v. Tambrook Jersey Limited  JRC 046 and also in the first of the requests for English administration in In Re O.T. Computers Limited  UJ 29.
For further information or if you would like a copy of the reasoned Court of Appeal judgment when it is delivered, please contact Robert Gardner.
1 In so far as relevant, section 426 reads:
"426(4) [Assistance between courts] The court having jurisdiction in relation to insolvency law in any part of the United Kingdom shall assist the courts having the corresponding jurisdiction in any relevant country or territory.
426(5) [Request under s.426(4)] For the purposes of subsection (4) a request made to a court in any part of the United Kingdom by a court in a relevant country or territory is authority for the court to which the request is made to apply, in relation to any matters specified in the request, the insolvency law which is applicable by either court in relation to comparable matters falling within its jurisdiction.
In exercising its discretion under this subsection, a court shall have regard in particular to the rules of private international law."