The UK Supreme Court's decision in Rubin v Eurofinance, declaring that an order made in Chapter 11 bankruptcy proceedings in the US could not be enforced as a judgment of the English courts. The ruling could have significant repercussions in the British Virgin Islands and Cayman Islands.
As was reported last week by The Lawyer on 24 October 2012, the Uk Supreme Court has handed down its much anticipated judgment in Rubin v Eurofinance (see judgment here).
In considering whether overseas insolvency orders can be enforced automatically under the common law where the English defendant has not submitted to jurisdiction overseas, or alternatively under the Cross-Border Insolvency Regulations 2006 (CBIR), the court decided they could not.
The Supreme Court was asked to determine whether bankruptcy orders are a separate category of judgment.
Eurofinance SA successfully argued that the common law requires classification of foreign judgments, a bankruptcy order is an in personam judgment and not a Cambridge Gas type of order because it seeks to establish rights, not just enforce them, therefore Rule 43 of Dicey4 applies and the New York court has no jurisdiction. Nor do the CBIR provide for enforcement.
Lord Collins, giving the leading judgment, provided a detailed summary of the applicable legislation and case law before providing his judgment, with which Lords Walker and Sumption agreed.
There is no reason to treat a bankruptcy avoidance judgment differently to any other type of judgment obtainable by an office holder.
The court had to balance private international law and insolvency, many of whose practitioners would have welcomed automatic enforcement. This has far-reaching implications for major cross-border insolvency such as Lehman and Madoff.
The respondents progressively reduced the extent of the New York order which they sought to enforce so as to align it with English claw back provisions.
However, English defendants, in order to defend themselves, would potentially have to appear in all overseas proceedings, thereby incurring significant costs and exposing themselves to jurisdiction for any other claims brought against them.
As for the principle of universalism, recognised by Lord Hoffman and others as being modified in England, the interests of creditors have not been promoted at the expense of third party rights.
A more immediate consequence of this judgment is to the Madoff trustee, Mr Picard, who seeks to recover assets for his estate from offshore. Mr Picard made detailed written submissions to
This decision is not an end to the development of universalism in England which appears inexorable but it has balanced all interests. It is a victory for certainty.
Asset Protection Problems? Offshore Collections Problems?