Insolvency: How strong and how long is "The Golden Thread"?

05 Jun 2014

Insolvency: How strong and how longJurisdictional issues in a globalised world – a Jersey view point

In February 2014, The Jersey and Guernsey Law Review published an article by Anthony Dessain of Bedell Cristin, and Michael Wilkins, the Viscount of the Royal Court of Jersey, on insolvency and universality and the impact of Rubin v Eurofinance SA; New Cap Re-insurance Corporation v Grant [2012] UKSC 46, Re HIH Casualty and General Insurance Limited [2008] UKHL 21, Cambridge Gas Transportation Corporation v Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] UK PC 26 and HSBC Bank v Tambrook Jersey Limited [2013] EWHC 866 (Ch).

The article considers how the principles of those cases would be viewed in Jersey and whether they would be followed by the Royal Court of Jersey and in the light of such cases as O.T. Computers Limited 2002 JLR N[10] and In re Royco Investment Company Limited 1994 JLR 236.

The article reviews decisions in the Cayman Islands and elsewhere on the recognition and enforcement of foreign judgments and orders, including the scope of English liquidators and receivers.

Such foreign orders involving insolvency may be more complex by the interaction with trusts as in Re Esteem Settlement 2002 JLR 53 and foreign matrimonial orders as in Re IMK Family Trust 2005 JLR 250 and in relation to injunctive and disclosure relief, including foreign court-appointed receivers as in Re Ablyazov 2012 (1) JLR 44.

The effect of the Bankruptcy (Désastre) (Jersey) Law 1990, the Judgments (Reciprocal Enforcement) (Jersey) Law 1960 and the UNCITRAL Model Law on the principles of universality are discussed.

The article concludes with 20 guiding principles to which, in the authors' view, the Royal Court is likely to have regard.  The overriding principle is that there are statutory and common law gateways, rules and discretions of the home court that need to be respected.  The principle of universality is embraced and there are particularly good reasons for doing so in an insolvency to achieve maximum recovery and a fair distribution at minimum cost.

The principle has been recognised in a number of Jersey cases and operates within certain boundaries.  Universality works within the law and is part of it but it cannot be applied to suppress the law of Jersey.