The Insolvency and Companies Court has recognised Chapter 11 Proceedings in the US in respect of the manufacturer of controversial surgical mesh products which have generated a significant number of claims worldwide. The British Claimants have had their claims stayed as a result of this recognition.
Re Astora Women's Health LLC  EWHC 2412 (Ch)
What are the practical implications of this case?
The main practical implication of this case is that a number of claims brought by Claimants in Great Britain against the US manufacturer of allegedly harmful surgical mesh products have been stayed. Those Claimants must now pursue those claims through Chapter 11 Proceedings in the US. This came as a result of the recognition by the Insolvency and Companies Court of the Chapter 11 Proceedings in the Courts of England and Wales and Scotland. The judgment also offers a useful summary of the approach which a Court should take when being asked to recognise foreign insolvency proceedings under the regime set out in the Cross-Border Insolvency Regulations 2006/1030 and the Model Law, including the matters which do and do not need to be evidenced, the obligation on the applicant to give full and frank disclosure and whether the foreign proceedings are to be considered main proceedings.
What was the background?
Astora Women's Health LLC ("Astora") is a Delaware limited liability company operated and managed from Wilmington, Delaware. Astora has ceased trading but is subject to over 30,000 litigation claims as a result of its manufacture of surgical mesh products used to treat various conditions. Most of the Claimants in that litigation are based in the US, however, 13 claims have been brought in England and Wales and 56 claims have been brought in Scotland. In August 2022, Astora and other members of its corporate group filed petitions in the United States Bankruptcy Court for the Southern District of New York to commence bankruptcy proceedings under chapter 11 of title 11 of the United States Code. An application was brought by Mark Bradley, the Chief Financial Officer of Astora and the wider group, to stay the claims brought in England and Wales and Scotland and requiring the Claimants in those claims to pursue their claims against Astora in the Chapter 11 Proceedings rather than through the Courts in the UK. This required recognition of the Chapter 11 Proceedings by the Insolvency and Companies Court.
What did the court decide?
The Cross Border Insolvency Regulations 2006 ("CBIR") were introduced pursuant to section 14 of the Insolvency Act 2000 in order to give effect in Great Britain to UNCITRAL's Model Law on Cross-Border Insolvency. In order to be recognised, the Chapter 11 Proceedings must be found to be a "foreign proceeding" within the meaning set out in article 2(i) of the Model Law. This requirement was met in this case by virtue of an order dated 18 August 2022 made by the Honourable James L. Garrity Jr, a United States Bankruptcy Judge in the United States Bankruptcy Court in the Southern District of New York. That order requested the aid and assistance of the UK Court to recognise the Chapter 11 Proceedings as a foreign main proceeding and Mr Bradley as a foreign representative according to the CBIR. The overall supervision of the Chapter 11 Proceedings by the US Bankruptcy Court renders those proceedings "judicial" and "subject to the control or supervision by a foreign court" within the meaning of Article 2(i) of the Model Law. The purpose of the Chapter 11 Proceedings is akin to liquidation in England and Wales where the business and assets of a company are realised for the benefit of creditors whose claims take the priority afforded to them by statue. The Chapter 11 Proceedings are therefore proceedings for reorganisation or liquidation within the meaning of Article 2(i) of the Model Law. Mr Bradley could be considered a "foreign representative" for the purposes of Article 2(j) of the Model Law by virtue of both the Order of 18 August 2022 and also a resolution passed by Astora on 15 August 2022. Astora has no assets in the jurisdiction. It was proposed that there be a sale of Astora's business in the Chapter 11 Proceedings with a view to achieving a better result for its creditors as a whole, particularly by preserving funds which would otherwise be used to respond to the ongoing claims. As a result, there was no reason on public policy grounds to avoid recognising the Chapter 11 Proceedings. The Chapter 11 Proceedings were foreign main proceedings as Astora's COMI is in the United States. Pursuant to Reg. 7 of the CBIR, the order made shall be enforced in Scotland as if it were made by the relevant court in Scotland.
- Court: High Court of Justice, Business and Property Courts, Insolvency and Companies Court
- Judge: ICCJ Burton
- Date of judgment: 27 September 2022
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