The High Court has considered a recent Court of Appeal ruling on whether trustees in bankruptcy should be able to deploy privileged documents in the discharge of their duties.

The existing position under Avonwick

The facts of Shlosberg v Avonwick Holdings Limited [2016] EWCA Civ 1138 involved a company called Webinvest. Webinvest was beneficially owned by Mr Shlosberg. Avonwick lent US$100 million to Webinvest, with Mr Shlosberg personally guaranteeing the loan.

In Short

The Situation: In cross-border restructuring cases, court-approved insolvency protocols are applied to facilitate communication between U.S. and foreign courts and standardize certain common procedures. The protocols are sometimes adapted to address case-specific issues.

The Result: Case-specific provisions tend to address information-sharing guidelines, claims reconciliation, the management of assets, and dispute resolution.

In the March/April 2013 edition of the Business Restructuring Review, we reported on an opinion by the U.S. Bankruptcy Court for the Southern District of New York concluding that a chapter 15 debtor’s sale of claims against Bernard Madoff’s defunct brokerage company was not subject to review as an asset sale under section 363(b) of the Bankruptcy Code.

In Short

The Situation: For cross-border insolvency matters, parties increasingly depend on court-approved protocols to assist in the management of complex insolvencies involving a debtor or debtors whose assets, liabilities, or operations span international borders.

The Action: Courts in Bermuda, the British Virgin Islands, Singapore, the United Kingdom, and some U.S. bankruptcy districts have implemented Guidelines for Communication and Cooperation between Courts in Cross-Border Insolvency Matters.

The English Supreme Court has considered various new categories of creditor claims against a company with unlimited liability in administration where, unusually, there was enough money to pay all creditors and a surplus existed.

In proceedings commonly referred to as the Waterfall I litigation, the Supreme Court considered issues relating to the distribution of funds from the estate of Lehman Brothers International Europe (in administration) (LBIE), in circumstances where there was a surplus of assets amounting to approximately £8 billion.

On April 5 and June 8, 2017, the U.S. House of Representatives passed bills (the Financial Institution Bankruptcy Act of 2017 ("FIBA") and the Financial CHOICE Act of 2017) that would allow financial institutions to seek protection under Chapter 11 of the Bankruptcy Code.

In bankruptcy cases under chapter 11, debtors sometimes opt for a "structured dismissal" when a consensual plan of reorganization or liquidation cannot be reached or conversion to chapter 7 would be too costly. In Czyzewski v. Jevic Holding Corp., 137 S. Ct. 973, 2017 BL 89680 (U.S. Mar. 27, 2017), the U.S. Supreme Court held that the Bankruptcy Code does not allow bankruptcy courts to approve distributions in structured dismissals which violate the Bankruptcy Code's ordinary priority rules.

At first glance, it seems that cross-border insolvencies between the UK and EU are likely to become more time-consuming, complex and expensive post-Brexit. However, the situation may not be as dire as it first appears due to the existence of alternative legislation and the exemptions to the EU legislation. As with other areas of law, when it comes to insolvencies much will depend on what steps are taken to maintain the current arrangements with the EU or whether they fall away altogether.

On May 1, 2017, the U.S. Supreme Court agreed to hear Merit Management Group v. FTI Consulting, No. 16-784, on appeal from the U.S. Court of Appeals from the Seventh Circuit. The Court's decision could resolve a circuit split as to whether section 546(e) of the Bankruptcy Code can shield from fraudulent conveyance attack transfers made through financial institutions where such financial institutions are merely "conduits" in the relevant transaction.

On May 1, 2017, the U.S. Supreme Court agreed to hear Merit Management Group v. FTI Consulting, No. 16-784, on appeal from the U.S. Court of Appeals from the Seventh Circuit. See FTI Consulting, Inc. v. Merit Management Group, LP, 830 F.3d 690 (7th Cir. 2016) (a discussion of the Seventh Circuit's ruling is available here).