The Pauline Action is a legal mechanism that allows creditors to apply to the Royal Court of Jersey to set aside transactions undertaken by a debtor to defraud or otherwise prejudice them.
Emirates NBD Bank PJSC v Almakhawi and Others [2024] JRC 256 is the most recent case from the Royal Court to affirm that the Pauline Action, which has its origins in Roman law, remains an effective debt recovery tool for creditors in Jersey.
Purpose of the Pauline Action
Debt exchanges have long been utilized by distressed companies to address liquidity concerns and to take advantage of beneficial market conditions. A company saddled with burdensome debt obligations, for example, may seek to exchange existing notes for new notes with the same outstanding principal but with borrower-favorable terms, like delayed payment or extended maturation dates (a "Face Value Exchange"). Or the company might seek to exchange existing notes for new notes with a lower face amount, motivated by discounted trading values for the existing notes (a "Fair Value Exchange").
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