Sir Allen Stanford - US receiver defeated on COMI
The controversy surrounding Sir Allen Stanford has reached the Royal Courts of Justice. Both the Antiguan liquidator of Stanford International Bank Limited and the US receiver appointed over its assets sought recognition in the UK under The Cross Border Insolvency Regulations 2006. Both sought to be recognised as the foreign representative in foreign main proceedings.
Lewison J noted on 3 July 2009 that “the apparent lack of co-operation between them has resulted in an expensive application at the creditors’ expense.”
The judgement makes clear that The Cross Border Insolvency Regulations 2006, which were of course founded on the UNCITRAL Model Law, are closely tied to the EC Insolvency Regulation, particularly in relation to COMI.
“In my judgement it is a reasonable inference that the intention of the framers of the model law was that COMI in the Model Law would bear the same meanings as in the Regulation since it “corresponds” to the formulation in the EC Regulation.”
The judgement also considered Eurofood on the basis that Lewison J did not need to decide whether he was strictly bound to follow it but the parties agreed that he should do so. He went on to analyse application of the Head Office functions test and the presumption in favour of COMI coinciding with a company’s registered office, disapproving of his own previous judgement in Lennox Holdings, and concluding that the decision in ReCi4net.com Inc, to the effect that the location of the registered office is no more than a factor to be considered was also no longer be followed.
Interestingly, in relation to the presumption, Lewison J distinguishes between the US implementation of the law as Chapter 15 and The Cross Border Insolvency Regulations 2006. In Chapter 15 the registered office is presumed to be the debtors’ COMI in the absence of evidence to the contrary, whereas in The Cross Border Insolvency Regulations 2006, the debtor’s registered office is presumed to be the COMI is absence of proof to the contrary.
Lewison J notes
“this change of language of the enactment, as it seems to me, may well explain why the jurisprudence of the American courts has diverged from that of the ECJ”.
As a final point, having decided that the COMI of Stanford International Bank Limited was in Antigua, Lewison J decided that the powers and duties conferred or imposed on the receiver did not amount to a ‘foreign proceeding’ and that the receivership cannot be recognised under The Cross-Border insolvency Regulations 2006.
All in all an innings defeat of the US Receiver by the Antiguan liquidators!
The full judgement is available at http://www.bailii.org/ew/cases/EWHC/Ch/2009/1441.html.
Chris Laughton is a partner at Mercer & Hole. The views given in this blog are personal to the author.
Date: 8th July, 2009
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