The English Court has agreed to lift the automatic stay on proceedings under the Cross Border Insolvency Regulations 2006 (“CBIR”) against STX Offshore & Shipbuilding Co Ltd (“STX”) which had entered into rehabilitation proceedings in Korea.

Facts

The shipping industry was recently in the headlines when on 31 August 2016 Hanjin Shipping Co filed for bankruptcy protection in the Seoul Central District Court. Hanjin was South Korea’s biggest container carrier and the seventh largest in the world.

The latest development in what has been a long-running (and expensive) cross-border insolvency proceeding involving Nortel (see our June 2015 and September 2015 legal updates for previous instalments) is a settlement between:

The English Court granted recognition of Chapter 11 proceedings in relation to a company that was incorporated in the UK but had its centre of main interests ("COMI") in the United States, confirming that the Directors were foreign representatives for the purpose of the Cross Border Insolvency Regulations 2006 ("the Regulations").

Singapore is set to adopt the recommendations of the Committee to Strengthen Singapore as an International Centre for Debt Restructuring.

The International Centre for Settlement of Investment Disputes (ICSID) has recently rendered a decision in a dispute between the Portuguese investor Dan Cake and Hungary. The dispute was based on a bilateral investment agreement between Portugal and Hungary concluded in 1992. In its decision, the Tribunal declared Hungary liable for the breach of the investment agreement. The Tribunal will decide on the amount of damages at a later date.

Dan Cake versus Hungary

The Board of Governors of the Federal Reserve System proposed a rule that would require US global systemically important banking institutions to amend their contracts for certain common financial transactions to preclude the immediate termination of such contracts if a firm enters bankruptcy or a resolution process. Relevant contracts – termed “qualified financial contracts” – that would have to be amended include those used for derivatives, securities lending and short time financing such as repurchase agreements.

Introduction

On 3 June 2016, the Hong Kong Government gazetted the Companies (Winding Up and Miscellaneous Provisions) (Amendment) Ordinance 2016 (“Amendment Ordinance”). The date of commencement of the Amendment Ordinance will be appointed by the Secretary for Financial Services and the Treasury by notice published in the Gazette.

Background

Key points

• Automatic stays on proceedings are imposed by Article 20 of the UNCITRAL Model Law (and mirrored in s.130(2) IA 1986)
• The case reinforces the principle that automatic stays are designed to avoid the unnecessary expenditure of assets otherwise available for distribution amongst creditors

The facts