England: Cross Border Restructuring and Insolvency Update
Sparkasse Hilden Ratingen Velbert v (1) Horst Konrad Benk (2) Official Receiver  EWHC 2432 (Ch)
A bankruptcy order was annulled by the High Court because the debtor's COMI had not been in England.
B had been living and practising as a Notary in Germany where the applicant bank (S), one of B's creditors, brought enforcement proceedings against B, who owed them more than €3 million. B then moved from Germany to England and began working as a sports photographer. Whilst living in England, B petitioned for his own bankruptcy and an order was made to that effect.
S applied for the annulment of the English bankruptcy order made against B as it argued that B's COMI remained in Germany and not in England, therefore the order did not comply with Regulation 1346/2000 art.3(1) and should be annulled.
The Court held that B's COMI was at all material times in Germany and the bankruptcy order should be annulled. The Court based its conclusion on the following reasons:
B had unsuccessfully tried to appeal against his preliminary suspension as a Notary in Germany by relying on his English discharge. This indicated that B's real purpose was to opt for an English bankruptcy so that he could resume his activities as a Notary in Germany once that bankruptcy had been discharged;
Most of B's creditors were in Germany, but he had taken no formal steps to notify them of his change of COMI; and
- B had lived with his partner in England and had been financially dependent on her. Her habitual residence and COMI had been in Germany throughout. She had funded their life in England through use of German credit cards and bank accounts and had retained her residential address in Germany.
By way of comment, it is now common practice in the High Court in London for foreign debtors' petitions to be adjourned to allow service of the petition on creditors and, if required, further detailed information to be provided.
Radziejewski v Kronofogdemyndigheten i Stockholm CJEU C-461/11
Advocate General advises CJEU that a residence requirement as pre-condition for debt relief is against Art. 45 TFEU
In the Swedish system of debt relief, a Swedish public authority (K) may discharge a debtor partly or entirely from his obligation to pay his debts in the event that it cannot reasonably be presumed that the debtor will be able to settle his debts in the near future.
R, a Swedish national living and working in Sweden, was made bankrupt in 1996. R's creditors were all Swedish. R's subsequent earnings were subject to a repayment order administered by K. R, working for a Swedish employer, moved to Belgium in 2001. R remains in that employ. In 2011, R applied to K for debt relief. K rejected R's application (without examining other requirements for obtaining debt relief) because R was not resident in Sweden and did not have a registered residence in Sweden. R appealed to the Swedish Court on the basis that the residence requirement infringes the freedom of movement of workers in the EU.
The Swedish Court referred the case to the Court of Justice of the European Union (CJEU) for a preliminary ruling on the question of whether residence in Sweden as pre-condition for eligibility for Swedish debt relief is liable to prevent or deter a worker from exercising his right to freedom of movement.
The Advocate General's Opinion submitted that residence as a condition for obtaining debt relief does constitute a restriction on the freedom of movement of workers because it is liable to prevent or deter a worker from leaving [in this case] Sweden to take up employment in another Member State.
Judgment will follow once the Judges of the CJEU have discussed the case and considered the Advocate General's Opinion (which they are not bound to follow).
Updates from around the World
The Scottish Government has consulted on a draft Bankruptcy Bill which will provide new debt solutions for individuals and businesses. These proposals are the clearest statement yet that a radical overhaul of Insolvency law in Scotland is on its way. It appears inevitable that the role of the Court in Scotland for personal insolvency will be all but removed, with genuine concerns about whether it is desirable to have the Accountant in Bankruptcy functioning in effect as judge, jury and executioner.
Japan Airlines Ltd, which was made bankrupt in 2010 owing US$29 billion and delisted from the Tokyo stock exchange, has made a remarkable return after a massive overhaul followed by an initial public offering of US$8.5 billion making it the world’s second-biggest IPO this year after Facebook.
Elpida, a Japanese manufacturer of microchips which was driven into bankruptcy in Tokyo District Court by falling sales and foreign competition, has agreed to sell its business to U.S. rival Micron Technology Inc for $2.5 billion. However, some of Elpida's $5.6 billion bondholders argue that the sale drastically undervalues the company which they state is worth closer to $3.78 billion.
The bondholders have made the unusual demand that the U.S. Court take steps to protect their interests in Elpida's U.S. assets by placing Elpida's American subsidiary into bankruptcy in the United States. Furthermore, the bondholders have filed reorganization plans for Elpida with the Tokyo court. A decision is expected this month as to whether these plans will be sent to creditors for a vote.
Bulgarian telecoms operator Vivacom has obtained approval of the High Court in London for a €1.7 billion debt restructuring. The vast majority of Vivacom's lenders approved the terms of the restructuring in which they are writing off €1 billion of debts. This is the latest in a growing trend of restructures of non-UK companies approved by the UK Courts, which is seen as a more favourable jurisdiction.
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Ashfords LLP is Authorised and Regulated by the Solicitors Regulation Authority. The information in this note is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances. Links to other sites and resources provided by third parties are included for your information only. We have no control over the content and accept no responsibility for them.
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