How foreign insolvency proceedings may be recognised in England and Wales

Seeking recognition of foreign insolvency proceedings is often necessary in order to obtain information or to preserve or realise assets. A number of recent court decisions have provided insight into some of the issues that must be considered, including the relevance of the solvency of the entity seeking recognition and the interplay between recognition and rules on immovable property.

Recognition of foreign insolvency proceedings

Restructurings and insolvencies often involve entities that have operations or assets in multiple jurisdictions. This can lead to disparities between insolvency regimes. Typically, an insolvency practitioner appointed over an entity in one jurisdiction may want to make an application for the entity’s insolvency proceedings to be recognised in another jurisdiction where the entity has assets that need to be realised, assets that are subject to claims or enforcement, or an officeholder’s information-gathering powers need to be exercised against individuals or entities in that jurisdiction.

The United National Commission on International Trade Law (UNCITRAL) model law on cross border insolvency (model law) provides a legal framework for the court to recognise insolvency proceedings initiated in another jurisdiction. The UK implemented the model law through the Cross-Border Insolvency Regulations 2006 (CBIR). The CBIR applies to foreign insolvency proceedings which are “collective judicial or administrative proceedings in a foreign state pursuant to a law relating to insolvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganisation or liquidation”. The entity need not have a legal personality in the UK, as long as it is recognised as a separate legal entity in the jurisdiction in which its insolvency proceedings have been opened. 

There have been numerous applications to the English courts for recognition in recent years. This has partly been driven by the fact that there is no longer automatic recognition of insolvency proceedings between the UK and EU member states following Brexit; and also because of the number of entities in overseas jurisdictions including the Middle East and offshore financial centres with assets or operations in the UK.

Solvency of the entity for which recognition is sought

One question that has arisen from case law is whether, in seeking recognition of a foreign insolvency proceeding, the entity must actually be insolvent. If insolvency is a condition to recognition, it may preclude recognition of entities wound up by courts solely on just and equitable grounds or solvent liquidations – for example, the equivalent of members’ voluntary liquidation in England and Wales.

This issue was considered in the case of Re Sturgeon Central Asia Balanced Fund Ltd in 2020 (Sturgeon) where the English court determined that it was not possible to obtain recognition under the CBIR of a solvent Bermudan company that had been wound up on a just and equitable basis in Bermuda. The court considered that recognition under the model law was only available in respect of companies that were actually insolvent or in severe financial distress. The Sturgeon decision has been subject to scrutiny in academic commentary and in the case of Re Ascentra Holdings, Inc. in 2023 where the Singapore Court of Appeal decided not to follow Sturgeon and recognised a solvent Cayman Islands liquidation.

Although the decision in Sturgeon has been subject to criticism, it has not been overturned in England and Wales. Therefore, those applying for recognition of proceedings concerning solvent entities will be required to consider whether the use of the model law is applicable. 

This was a consideration relevant for Navigator Global Fund Manager Platform SPC (In Official Liquidation) (Navigator). Navigator was an open-ended investment company incorporated in the Cayman Islands, which hosted segregated portfolios on its platform. The segregated portfolios received investment from third parties in return for redeemable participating shares. Due to concerns about misuse of investor funds, a petition to wind up Navigator on a just and equitable basis was presented in the Cayman Islands in July 2023 by an investor. The petition was successful, and Navigator was wound up by the Grand Court of the Cayman Islands in December 2024 on the just and equitable basis, with joint official liquidators appointed.  

The joint official liquidators ascertained that Navigator and certain third parties had important records in England that were required for their investigations. The liquidators instructed Pinsent Masons to apply to the English court for the liquidation of Navigator in the Cayman Islands to be recognised as foreign main proceedings in England and Wales under the CBIR, and to simultaneously seek relief under the CBIR to compel a third party to provide certain information and records.  

In the Cayman Islands, official liquidators must provide an initial determination on whether a company is solvent, insolvent or of doubtful solvency within 28 days of the winding up order. In the case of Navigator, the liquidators had to determine the solvency of Navigator in isolation given its assets and liabilities are distinct from the assets and liabilities specific to each of its segregated portfolios. The liquidators determined that Navigator was insolvent on the basis that Navigator had no assets to pay its creditors, which included the petitioning investor in respect of its petition costs.   

Even though the winding up of Navigator was made on the just and equitable basis, the High Court granted recognition of the liquidation of Navigator as a foreign main proceeding in England and Wales under the CBIR. Determination of the solvency of the debtor entity was not taken at the time of its winding up for the purposes of determining whether recognition should be granted, but rather the determination was made at the time the court was to decide whether recognition should be granted, so the fact that the liquidators only determined that Navigator was insolvent following their appointment was not detrimental to obtaining a recognition order.

The High Court also granted the relief sought compelling a third party to deliver up information and records to the liquidators. It found that, if proceedings are recognised, the foreign representatives hold the powers available to insolvency practitioners appointed under the Insolvency Act 1986, including information gathering powers. 

Accordingly, the winding up of an entity on just and equitable grounds does not itself preclude recognition being granted. A successful winding-up petition should seek an order of the court that the petitioner’s costs of the petition be payable from the liquidation. The petitioner will generally be a creditor for such amounts, which may assist in showing that the entity is insolvent.  

Immovable property

The immovables rule is a principle of private international law which provides that where immovable property - most commonly land and those fixtures permanently attached to it – is situated in England and Wales, the English courts will not recognise or give effect to laws or judgments of other countries regarding rights and interests affecting that immovable property. 

In the case of Almeqham v Al-Sanea & Ors this year, the High Court determined that the recognition of foreign insolvency proceedings under the CBIR did not of itself vest rights and interests in English land in a liquidation trustee appointed in Saudia Arabia. The court confirmed that grant of recognition does not provide an automatic exception to the immovable rule. 

In this case, Mr Al-Sanea, the founder of Saad Trading, Contracting and Financial Services (STC), was judged by the Saudi Arabian courts to have orchestrated a multi-billion dollar Ponzi scheme. In 2009, Al-Sanea had transferred land in Saudia Arabia to his family or STC. The Saudi Arabian courts found these transfers were fraudulent and should be reversed and freezing orders were granted against the assets of Al-Sanea and his family. 

A liquidation trustee was appointed over Al-Sanea and STC in 2022 by the Saudi Arabian courts. In 2024, the appointment was recognised in England under the CBIR, and the liquidation trustee subsequently issued proceedings in England against Al-Sanea and five offshore companies alleging that he had taken efforts to conceal further assets, which included transferring English properties to the offshore companies. 

The liquidation trustee sought to argue that the offshore companies held properties in England on a resulting or constructive trust for Al-Sanea and/or STC and, as they were the true owners of the property, title to the English properties vested in the liquidation trustee.

The offshore companies instructed Pinsent Masons to defend the proceedings on the basis that there was no serious issue to be tried as to whether a declaration should be made as to any trust argument over the assets. The court accepted this argument and confirmed that the recognition of foreign insolvency proceedings under the CBIR did not automatically vest rights and interests in English land in the liquidation trustee. Whilst it would be open to the liquidation trustee to apply for specific relief under the CBIR to deal with the immovable assets in England and gain an interest in the property so as to seek enforcement over them, in the absence of any application, there was no serious issue to be tried on the issue of whether declaration should be made as to any trust argument over the assets.

The court did comment, however, that successful applications would provide a statutory exception to the immovables rule. 

When seeking recognition of foreign insolvency proceedings under the CBIR, this case confirms the importance of applicants considering what other relief may need to be sought as it is not granted automatically on a recognition order being made. Foreign representatives who wish to take control of a debtor’s English immovable property should consider making an application under the CBIR for an order entrusting them with the administration and realisation of those assets.

Seeking recognition of foreign proceedings can provide many benefits in circumstances where the entity subject to those proceedings operates or has assets or records in multiple jurisdictions. The CBIR provides a clear process for seeking recognition in England and Wales, but the evolving case law is providing a body of nuanced considerations.  

Co-written by Dre Efthymiou of Pinsent Masons.