Will a local court recognise concurrent foreign restructuring or insolvency proceedings over a local debtor? What is the process and test for achieving such recognition?
Restructuring & Insolvency
Australian courts act cooperatively with foreign courts and insolvency practitioners, and will recognise the jurisdiction of the relevant court where the ‘centre of main interest’ is located. This approach follows the UNCITRAL ‘Model Laws’ on insolvency with were codified into Australian law through the Cross-Border Insolvency Act 2008 (2008) (Cth).
To receive recognition, evidence of the existence of the foreign proceedings must be tendered. A court has power to grant both provisional relief pending the determination of a recognition application and, if a finding of recognition is made, a broad power to grant ‘any appropriate relief’ requested by the foreign representative. The types of relief that can be granted included:
- staying the commencement or continuation of induvial actions or individual proceedings concern the debtor’s assets, rights, liabilities or obligations;
- staying execution against the debtor’s assets to the extent it has not been stayed; and
- providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor’s assets, affairs, rights, obligations or liabilities.
Whilst conceivable that an Australian company’s centre of main interest could be recognised as being outside Australia, a foreign restructuring that purported not to company with the Australian Corporations Act and the Australian regulatory regime (imposed by ASIC and the ASX) would unlikely be recognised.
In addition, the Foreign Judgments Act 1991 (Cth) creates a general system of registration of judgments obtained in certain foreign countries. This legislation only extends to judgments pronounced by courts in countries where, in the opinion of the Governor-General, substantial reciprocity of treatment will be accorded by that country in respect of the enforcement in that country of judgments of Australian courts.
The application to register a foreign judgment must be made by a judgment creditor to the appropriate court (usually the State or Territory Supreme Court) within six years of the date of judgment or, if an appeal has been taken, within six years of the last judgment in the appeal proceedings.
The Companies Winding Up Rules 2008 (as amended) provide for a Cayman Islands appointed liquidator to enter into protocols with foreign officeholders appointed by a foreign court for the purpose of promoting the orderly winding up of the company's affairs and avoiding conflicts between the competing winding up proceedings in the Cayman Islands and the foreign jurisdiction.
Section 241 of the Companies Law also allows a foreign representative (defined as a trustee, liquidator or other official appointed for the purposes of a foreign bankruptcy proceeding) to apply to the Court to make orders ancillary to the foreign bankruptcy proceeding. Such orders include:
- An order recognising the foreign representative's right to act in the Cayman Islands on behalf of or in the name of the debtor;
- An order granting a stay of proceedings or the enforcement of a judgment against the debtor;
- An order requiring certain persons with information regarding the debtor's business or affairs to be examined and/or to produce documents to the foreign representative; or
- An order requiring the debtor to turn over property to the foreign representative.
Swiss insolvency proceedings are intended to apply universally for local debtors. Swiss authorities would, thus, not recognize and give effect to any foreign main insolvency proceedings opened outside of Switzerland. That said, certain foreign restructuring proceedings (including a UK scheme of arrangement) may not be viewed as insolvency type of proceedings from a Swiss perspective but rather as court rulings or contractual matters where recognition may be available. This will have to be looked at on a case by case basis.
Any judgment opening insolvency proceedings handed down by a court of an EU Member State which has jurisdiction shall be recognized in all other Member States (Article 19 EU Regulation 2015/848). The courts of the Member State within the territory of which the centre of the debtor's main interests (COMI) is situated, have jurisdiction to open main insolvency proceedings (Article 3 of Regulation 2015/848). However, any Member State may refuse to recognize such insolvency proceedings where the effects of such recognition would be manifestly contrary to that State's public policy, in particular its fundamental principles or the constitutional rights and liberties of the individual (Article 33 EU Regulation 2015/848).
Similarly, insolvency proceedings opened in a non EU jurisdiction are recognized, unless, in particular, such recognition would lead to a result which is manifestly incompatible with major principles of German law, in particular with basic rights (Sec. 343 Insolvency Act).