Guernsey: The Enforceability Of Foreign Insolvency Judgments In Guernsey

Last Updated: 21 March 2013
Article by Anthony Williams

In its recent judgment in Rubin v Eurofinance S.A.; New Cap Reinsurance Corpn. v Grant [2012] UKSC 46 (Rubin), the UK Supreme Court considered the extent to which the English courts should recognise and enforce a judgment made in non-EU foreign insolvency proceedings. The Supreme Court ruled that there is no separate rule at common law in England for foreign insolvency judgments, and that the English courts will not enforce a foreign insolvency judgment where the English creditor was not present in nor had submitted to the foreign court.

As a result of this decision (which will be persuasive in the Guernsey courts), Guernsey businesses with foreign counterparties may breathe a sigh of relief. Foreign insolvency judgments against Guernsey businesses, including funds and other investment companies that carry on investment activities in foreign jurisdictions, may only be recognised and enforced in Guernsey under the statutory regime relating to the reciprocal enforcement of foreign judgments or traditional common law principles.

The Supreme Court Decision in Rubin

The Supreme Court judgment dealt with two conjoined appeals, namely Rubin v Eurofinance S.A and New Cap Reinsurance Corpn Ltd v Grant. The main issue for consideration before the Supreme Court was whether, and to what extent, a judgment of a foreign insolvency court in relation to avoidance claims available in that jurisdiction (e.g. claims to claw back unfair preferences or transactions at an undervalue) would be enforced in England where the defendant had not submitted to the jurisdiction of the foreign court. In particular the Supreme Court was asked to consider whether, following the decision of Lord Hoffman in the Privy Council in Cambridge Gas Transportation Corporation v Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] UKPC (Cambridge Gas), such a judgment constituted a special category which fell outside of the scope of traditional English common law rules relating to the enforceability of foreign in personam judgments (i.e. judgments against the person, as opposed to an in rem judgment attaching to property).

Under the English common law, a foreign court has jurisdiction to give judgment in personam capable of enforcement where the person against whom it was given was present in or submitted to the jurisdiction of the foreign court. The precise circumstances in which such a person will be held to have submitted to the jurisdiction of the foreign court is beyond the scope of this article; however submission will typically involve voluntarily participation in the foreign proceedings or being present in the foreign country where the proceedings are instituted.

In Cambridge Gas, the Privy Council (on appeal from the Isle of Man Court of Appeal) stated that bankruptcy proceedings did not constitute judgments in rem or in personam but instead constituted a special category of judgment peculiar to insolvency proceedings. Ultimately, the majority of the Supreme Court in Rubin held that the decision in Cambridge Gas was wrong and stated that there was no reason to adopt a more liberal rule as regards foreign insolvency judgments in avoidance proceedings in the interest of universality.

The Supreme Court held that there was no difference in principle between a foreign judgment against i) a debtor on a substantial debt due to the company in liquidation based on normal contractual and tortious principles, and ii) a creditor based on avoidance type claims. Secondly, the Supreme Court held that such a distinction would in any event require the court to develop new jurisdictional rules determining the nexus between insolvency and the foreign court and the judgment debtor and the foreign court. Lord Collins, in the leading judgment, stated that "There is a reason for the limited scope of the Dicey rule and that is that there is no expectation of reciprocity". The Supreme Court stated that a change in the settled law of enforcement of foreign judgments is properly a matter for the legislature.

Therefore there is no separate rule at common law in England for foreign insolvency judgments (whether in rem or in personam). It is likely that the Guernsey court, which has in modern jurisprudence adopted English principles of private international law and accords considerable weight to decisions of the UK Supreme Court where Guernsey law follows the English common law, will see the decision in Rubin as persuasive absent public policy considerations peculiar to the Island. A test case is eagerly awaited.

The Guernsey Cross-Border Insolvency Regime in light of Rubin

Guernsey is neither part of the UK nor a member of the EU. Therefore the English Cross Border Insolvency Regulations and the EC Regulation on Insolvency Proceedings do not apply in Guernsey. Guernsey has not adopted the UNCITRAL Model Law and does not have a specific statutory regime dealing with cross-border judicial co-operation in insolvency proceedings. It should be noted that neither Rubin nor New Cap concerned any issues arising under the EU law.

The Insolvency Act 1986 (Guernsey) Order 1989 extended the operation of sub-sections 426(4), (5), (10) and (11) of the English Insolvency Act 1986 (the 1986 Act) to the Bailiwick of Guernsey, the effect of which is that Guernsey's Royal Court may assist courts of the UK, the Bailiwick of Jersey and the Isle of Man having jurisdiction in relation to insolvency law.

Importantly, the majority of the Supreme Court in Rubin held that subsections 426(4) and (5) of the 1986 Act are not concerned with the enforcement of judgments but are restricted to facilitating the provision of assistance to designated foreign courts exercising jurisdiction in relation to insolvency proceedings. It is submitted that the Guernsey courts may be persuaded to adopt a similar interpretation.

In light of the above, a party who has obtained a judgment in foreign insolvency proceedings may either enforce it in Guernsey at common law (following English principles of private international law) or under The Judgments (Reciprocal Enforcement) Law, 1957 (the 1957 Law).

If the foreign judgment is made by a prescribed court of one of the jurisdictions approved by the 1957 Law, then the 1957 Law must be applied (i.e. there is no option to use the common law). In circumstances where the 1957 Law does not apply, the foreign insolvency judgment must be enforced at common law. An analysis of those principles is beyond the scope of this article. Expert advice should be obtained from a qualified legal practitioner

Conclusion

The extent to which foreign insolvency judgments will be enforced against Guernsey businesses by the Guernsey courts will necessarily have strategic implications as regards the extent to which those businesses elect to participate in foreign insolvency proceedings.

Guernsey businesses can draw comfort from the Supreme Court decision in Rubin as foreign officeholders should have no expectation that a judgment obtained in foreign insolvency proceedings will be enforced on the basis of universal reciprocity, in circumstances where the Guernsey business was not present in or had not submitted to the jurisdiction of the foreign court.

As originally appeared in Contact Magazine – March 2013

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Anthony Williams
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions