UK: Allen Stanford And Cross-Border Insolvency: Court Of Appeal Decision

Last Updated: 8 March 2010
Article by Robert Hickmott and Daniel Hennis

In July 2009, the English High Court made a significant decision on the approach to be taken in establishing an insolvent company's Centre of Main Interests ("COMI"). The case considered two rival applications for recognition in the UK by two separate office-holders appointed over Stanford International Bank Limited ("SIB"). On the one hand, the liquidators appointed in Antigua took the view that they should be recognised in the UK on the basis that they maintained that SIB's COMI was in Antigua. On the other hand, the receiver appointed by the United States Securities and Exchange Commission took the view that SIB's COMI was in the US. The dispute revolved around a difference of opinion as to the proper test for determining where a company's COMI is.

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In July 2009, the English High Court made a significant decision on the approach to be taken in establishing an insolvent company's Centre of Main Interests ("COMI"). The case considered two rival applications for recognition in the UK by two separate office-holders appointed over Stanford International Bank Limited ("SIB"). On the one hand, the liquidators appointed in Antigua took the view that they should be recognised in the UK on the basis that they maintained that SIB's COMI was in Antigua. On the other hand, the receiver appointed by the United States Securities and Exchange Commission took the view that SIB's COMI was in the US. The dispute revolved around a difference of opinion as to the proper test for determining where a company's COMI is.

The Court of Appeal, on 25 February, upheld the approach taken at first instance by Mr Justice Lewison who had found that:

  1. SIB's COMI was in Antigua;
  2. the Antiguain liquidation was a foreign main proceeding; and
  3. the Antiguan liquidators were therefore to be recognised as the office-holders with authority in SIB's liquidation.

The Court of Appeal, in upholding Mr Justice Lewison's judgment, has endorsed the European Court of Justice decision in Eurofood and applied it outside the European context. This means that, whether under the EC Regulation on Insolvency Proceedings 2000 or UNCITRAL, the position on COMI is as follows:

  • The presumption is that the location of a company's registered office is also the location of that company's COMI. The burden of rebutting that presumption lies with anyone trying to disprove it.
  • The presumption will only be rebutted by factors that are objective. In the case of SIB, this meant factors such as the location of its headquarters, the contracts that SIB entered into with its customers and the marketing materials it produced.
  • Objective factors will not count unless they are ascertainable by third parties. So, in the case of SIB, third parties would not, in the ordinary course, have been able to ascertain that there had been a fraud, and the question of where the fraud was perpetrated was therefore irrelevant.
  • The question of what is ascertainable by third parties is to be considered by reference to what is in the public domain, and what could be ascertained from the ordinary course of business with the company.

In the SIB case, the registered office presumption was not rebutted as the weight of objective factors ascertainable by third parties pointed to Antigua.

This was not the only issue before the Court of Appeal, however. The High Court's decision was also challenged by the Serious Fraud Office ("SFO"), acting at the behest of the US Department of Justice ("DoJ"). The DoJ's position was that neither office-holder should have control over the assets of SIB in the UK as they were to be regarded as the proceeds of crime rather than the property of the insolvent estate. The SFO had obtained a restraint order over the UK assets in April 2009 on this basis.

Whilst expressing serious reservations about the way in which the restraint order had been obtained, the Court of Appeal ruled that the proceeds of crime legislation should take precedence over the appointment of the insolvency office-holders. As a result, although the Antiguan liquidation was recognised as the foreign main proceeding under the Cross-Border Insolvency Regulations and the Antiguan liquidators were found to be the appropriate office-holders to deal with SIB's UK assets, those assets should remain frozen. In the longer term it is thought that the DoJ is contemplating an application for a confiscation order that may be made once Allen Stanford has been convicted in the US.

It is expected that the Court of Appeal's decisions, both in respect of COMI and the SFO/DoJ restraint order, will now be appealed to the Supreme Court.


The Court of Appeal's decision demonstrates the potential scope of the proceeds of crime legislation in UK insolvency cases. If the insolvency was brought about by fraud, insolvency practitioners and creditors should be aware of the risk that what they might have thought comprised the assets of the insolvent estate (potentially available for distribution) may in fact be characterised as the proceeds of crime, and subject to a criminal restraint order. In effect, this will mean that whilst the victims of the crime might eventually receive "compensation" from the proceeds of crime it will be at the expense of creditors, if they are not also victims.

In relation to COMI, the Court of Appeal's decision approves the test set out in Eurofood (strictly a case under the EC Regulation on Insolvency) as being applicable to cases brought under the UNCITRAL Model Law.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 02/03/2010.

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