Jersey is a popular international finance centre because it is well regulated, creditor friendly and has modern and flexible legislation. It is home to a large number of asset holding vehicles and, according to a 2016 report by Capital Economics, is custodian of over £1.3 trillion of wealth.
As a result of Jersey's prominence as an offshore financial centre, it is an increasingly common occurrence for foreign officeholders to come to Jersey to gather information and evidence to help them carry out their duties.
This guide looks at the key things you need to know about getting a foreign officeholder recognised in Jersey.
Words in bold text are defined at the end of this guide.
Why take actions in Jersey?
Typically, a foreign officeholder will have been appointed in respect of:
- foreign assets of a Jersey person; or
- a foreign person which owns Jersey assets (like a Jersey bank or custody account or shares in a Jersey company).
The kind of actions a foreign officeholder may want to take in Jersey include to:
- investigate and gather evidence;
- interview witnesses;
- protect or take control of assets located in Jersey;
- start legal proceedings in Jersey; or
- wind up an insolvent Jersey company or dispose of its assets.
Why is recognition needed?
The capacity and power of a foreign officeholder will be derived from the laws of the jurisdiction of the foreign officeholder's appointment - a foreign statute, a foreign court order or a foreign law governed security document.
A foreign officeholder has no standing or power under Jersey law to carry out the foreign officeholder's duties in Jersey, and consequently, has no power to compel a person in Jersey to cooperate with the foreign officeholder.
Invariably, a Jersey recipient of a request for information will require a foreign officeholder to produce a copy of an order of the Jersey Court recognising the foreign officeholder's appointment before cooperating.
Moreover, the Jersey Court has said that no foreign court should seek to exercise its powers in Jersey without the Jersey Court's consent.
To overcome the lack of power in Jersey, a foreign officeholder who wants to take any actions in Jersey must apply to the Jersey Court to:
- have the foreign officeholder's appointment recognised; and
- be given the authority to take the actions in Jersey the foreign officeholderwants to take.
The purpose of recognition is to enable the foreign officeholder to:
- avoid having to start parallel insolvency proceedings in Jersey; and
- give the foreign officeholderthe authority to exercise in Jersey the powers that would be available if equivalent proceedings were taken in the jurisdiction of the foreign officeholder's appointment.
What do we mean by recognition?
The basis of an application for recognition by a foreign officeholder is a letter of request from the Requesting Court asking the Jersey Court for assistance.
So recognition does not simply mean the Jersey Court will acknowledge the foreign officeholder's appointment. It means that the Jersey Court will assist the Requesting Court by:
- recognising the foreign officeholder's appointment; and
- making the orders set out in the letter of request (subject to any conditions the Jersey Courtconsiders appropriate) which authorise the foreign officeholderto exercise the powers given to the foreign officeholderunder the jurisdiction of the foreign officeholder's appointment.
How does a foreign officeholder get recognised?
A foreign officeholder may apply to the Jersey Court to be recognised under:
- the Bankruptcy Law if the foreign officeholder was appointed under the laws of a listed jurisdiction; or
- customary law (under the principle of mutual cooperation) if the foreign officeholderwas appointed under the laws of any other jurisdiction.
The Bankruptcy Law gives the Jersey Court the power to assist, to the extent it thinks fit, a Requesting Court from a listed jurisdiction in any matter relating to the insolvency of a person.
For the purposes of giving assistance to a Requesting Court from a listed jurisdiction, the Jersey Court:
- may have regard (to the extent it considers appropriate) to the UNCITRAL model law on cross border insolvency;
- may exercise any powers which the JerseyCourtor the Requesting Courtcould exercise in the circumstances; and
- must have regard to the rules of private international law.
The following general principles regarding recognition under the Bankruptcy Law arise from the cases in this area.
- Although the outcome of every application turns on its facts, where an application has satisfied the requirements of the Bankruptcy Law, the Jersey Court has shown a general willingness to assist the courts of a listed jurisdiction unless there are good reasons not to do so.
- The Jersey Courtmay
refuse an application if:
- the request for assistance from the Requesting Courtwere hopelessly badunder the law of the jurisdiction of the foreign officeholder's appointment; or
- there is a reason under Jersey public policy not to give the assistance sought.
- The Jersey Court will not generally give assistance if it has the effect of enforcing a penal, revenue or other public law of a foreign state.
- The Jersey Courtwill be concerned to ensure that the interests of any Jersey creditors are protected.
- The Jersey Courthas been prepared to exercise the powers of the Requesting Courtby authorising a foreign officeholderto manage Jersey real estate with a view to selling it even though a Jersey liquidator or holder of a security interest (judicial hypothec) over the real estate would not have the power to do so under Jersey law.
Customary law recognition
In the case of a foreign officeholder appointed under the laws of a jurisdiction that is not in a listed jurisdiction, the Jersey Court has inherent power to give assistance to a Requesting Court from that jurisdiction on the basis of mutual cooperation (or comity) and reciprocation.
The following general principles regarding customary law recognition arise from the cases in this area.
- It must be shown that the Requesting Court would provide similar assistance to the Jersey Court on a reciprocal basis if were asked to do so.
- There must be a valid connection between the debtor and the law under which the insolvency occurred.
- Unlike statutory recognition, where the Jersey Courtmay apply Jersey law or the law of the Requesting Court, in the case of customary law recognition, the JerseyCourtdoes not have the power to exercise any powers which the Requesting Courtcould exercise if those powers do not also exist under Jersey law.
- Customary law recognition:
- is merely a power to assist the Requesting Court; and
- cannot authorise a foreign officeholderto do something which the foreign officeholderdoes not have the power to do under the laws of the jurisdiction of the foreign officeholder's appointment.
- The Jersey Court has a discretion as to whether it should assist a Requesting Court and it should take into account all material factors. The fact that the Requesting Court has requested assistance is a weighty factor the Jersey Court should take into account.
- Although the Jersey Courtmay accept without further investigation the Requesting Court's views as to what is required for the proper conduct of an insolvency, a request is not conclusive as to the way in which the Jersey Court's should exercise its discretion.
- It is necessary to consider any matters that arise after the letter of request was signed by the Requesting Court.
- Any assistance to be given by the Jersey Courtis subject to Jersey law and public policy. The Jersey Courtcan only act within the limits of its own statutory and customary law powers.
Role of the Viscount
The Viscount is responsible for insolvency matters in Jersey.
Before making an application, a foreign officeholder must first consult with the Viscount. The Jersey Court will seek the Viscount's view on an application, so it is important that any issues identified by the Viscount are addressed in a way that is acceptable to the Viscount.
There is a two step consultation process.
The first step is for the foreign officeholder to discuss the application with the Viscount. The purpose of this step is to ensure that:
- the Viscount considers the application to be appropriate and does not object to it;
- it is possible under Jersey to give the assistance sought;
- the scope of the orders sought does not go beyond what is reasonably necessary in the circumstances; and
- any issues that may need to be addressed are identified and resolved at an early stage.
Submission of draft application documents
The next step is for the foreign officeholder to send a draft of the application documents to the Viscount. The purpose of this step is to ensure that:
- the orders sought are framed in terms that are appropriate under Jersey law;
- the application documents contain the information, and (where relevant) any undertaking to the JerseyCourt, necessary to allow the JerseyCourt to consider and approve the application and make the orders sought; and
- any issues identified by the Viscountin the first step will be appropriately addressed.
If there are any Jersey creditors or employees who will be affected by the orders sought, the Viscount will want to ensure that they will not be prejudiced.
Who may apply for recognition?
Any foreign officeholder may apply for recognition.
Frequently, the foreign officeholder is a court appointed liquidator or trustee in bankruptcy, however, the Jersey Court has also approved applications for recognition by:
- a provisional liquidator;
- an administrative receiver;
- a fixed charge receiver appointed under a security document; and
- a monitor.
For this purpose, it does not matter that Jersey law does not have an equivalent officeholder to the office held by the foreign officeholder.
Making an application
The application process is essentially the same irrespective of whether the foreign officeholder makes an application under the Bankruptcy Law or customary law.
The application comprises a representation (which is like a petition) and an affidavit from the foreign officeholder which confirms the details in the representation. The application must include:
- an original letter of request from a Requesting Court in the jurisdiction in which the foreign officeholder was appointed which states the assistance sought from the Jersey Court;
- draft orders which follow the orders requested in the letter of request; and
- a copy of the document under which the foreign officeholderwas appointed.
The representation and affidavit must:
- set out the background facts relating to the appointment of the foreign officeholder;
- outline the events that have taken place since the foreign officeholderwas appointed;
- explain the reasons for seeking assistance from the JerseyCourt;
- explain why it is not appropriate or possible to use a Jersey insolvency procedure in the circumstances (including taking into account things like cost and timing);
- state whether there are any Jersey creditors, and if so, explain the steps that will be taken to ensure that they will not be prejudiced by the orders sought; and
- if the jurisdiction in which the foreign officeholderwas appointed is not a listed jurisdiction, confirm that the Requesting Courtwould provide similar assistance to the JerseyCourton a reciprocal basis if were asked to do so.
If necessary, an application can normally be made on short notice (48 hours) by appointment, otherwise, the application would be heard in the Jersey Court on a Friday afternoon.
An application is typically made on an ex parte basis (without notice to other parties), however, the Jersey Court may require notice to be given to other relevant parties if the Jersey Court considers it appropriate to do so.
An application is normally heard in open court, but can be heard in private if the contents of the application are extremely sensitive. The Jersey Court has said, however, that justice should generally be done in public.
A representative of the Viscount will normally attend the hearing unless the application is straightforward.
Recognition is a discretionary remedy. If the Jersey Court is satisfied that it is appropriate in the circumstances to recognise a foreign officeholder, it will make the orders sought in the letter of request. To the extent that the Jersey Court considers it appropriate to do so, it may impose conditions on, or restrict the scope, of the orders sought.
The fact that a debtor is already subject to insolvency proceedings in Jersey is not necessarily a bar to the Jersey Court recognising a foreign officeholder.
Bankruptcy Law means the Bankruptcy (Désastre) (Jersey) Law 1990.
foreign officeholder means any officeholder appointed in respect of a person, or any assets of a person (whether a natural or legal person), on account of insolvency or default under a security document, including any liquidator, trustee in bankruptcy, compulsory manager, administrator and receiver of any kind.
Jersey Court means the Royal Court of Jersey.
listed jurisdiction means Australia, Finland, Guernsey, Ireland, the Isle of Man or the United Kingdom.
Requesting Court means a court in the jurisdiction under which a foreign officeholder was appointed which issues a letter of request to the Jersey Court asking it to recognise, and give assistance to, the foreign officeholder.
Viscount means the head of the executive arm of the courts of Jersey.
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.