Most trading contracts contain specific terms setting out the consequences of a counterparty insolvency or other default. This article explores whether, and in what circumstances, it may be sensible to invoke rights under such clauses or whether it can be better to adopt a more “wait and see” attitude. We also look at drafting options prior to finalising contract terms.

When considering how to respond to a counterparty event of default (EOD), relevant considerations will include potential consequences:

In the recent case of Greece v Stroumpoulis on 25 February 2016, the European Court of Justice (ECJ) decided that EU protections under the Insolvency Directive apply to EU residents working in the EU, regardless of whether their employer is an EU company. The ECJ reached this decision based on the social objective of the Insolvency Directive, irrespective of the maritime waters on which the vessel sailed.

On 28 April 2016, the Third Parties (Rights against Insurers) Act 2010 (Commencement) Order 2016 was made. It provides for the Third Parties (Rights against Insurers) Act 2010 (the New Act) to come into force on 1 August 2016.

A party to arbitration or court proceedings in Australia can obtain a freezing order in advance of obtaining a domestic court judgment or arbitration award, in prescribed circumstances. In PT Bayan Resources TBK v BCBC Singapore Pte Ltd [2015]¹ the High Court of Australia has confirmed that Australian courts have the same power to grant freezing orders prior to a judgment or award being obtained in respect of proceedings commenced outside of Australia, provided that judgment or award would be enforceable in Australia.

On March 2, 2016, Sports Authority, Inc. (“Sports Authority”) and six of its affiliates filed for Chapter 11 bankruptcy in Delaware.  The filing will significantly impact Sports Authority’s landlords and trade creditors.  In a press release, Sports Authority stated that it intends to close or sell approximately 140 locations and two distribution centers in the coming months.  The company is also seeking $595 million in post-bankruptcy financing to continue operations.  Sports Authority is a sporting goods retailer with 463 locations in 41 states and Puerto Rico.

High profile insolvencies in the construction industry highlight the risks faced by contractors, and also the way in which debtor companies can seek to obtain advantage through ‘forum shopping’ once insolvency occurs, by seeking to invoke the jurisdiction of debtor-friendly countries like the United States.

Employers scored a big victory in In re Trump Entertainment Resorts, a case of first impression in the Third Circuit, which held that a debtor-employer can terminate their obligations under an expired Collective Bargaining Agreement (CBA) and implement the terms of a final offer.

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The High Court has upheld the pari passu principle central to English insolvency legislation when applied to a deceased’s insolvent estate and interpreting legislation stated to be “modified accordingly”. This approach clarifies that foreign currency claims and claims for interest should be calculated for voting purposes as at the date of death, rather than the date an Insolvency Administration Order (IAO) is made. HFW acted for the respondent in this case.

Introduction

In a recent decision of the High Court of Australia (which is the highest appellate court in Australia), a freezing order in respect of a prospective foreign judgment has been unanimously upheld.

This is a significant decision as the High Court has confirmed the validity of prospective freezing orders, a point previously the subject of some uncertainty in Australia, thereby greatly improving the position of parties seeking security in Australia in respect of foreign proceedings.

Background

There is a wide range of precautionary attachment options in the UAE which creditors in the region should take into account.