In the matter “La Seda de Barcelona SA”, the English High Court of Justice decided on the international competence of English courts for the implementation of a “scheme of arrangement” with respect to multinational or foreign companies. The question had arisen, if Scheme proceedings according to English law can be applied on a company which was founded according to Spanish law.
The decision concerned a Spanish holding company which also has subsidiaries in Great Britain. The company had been going through a crisis and intended to obtain new capital by way of restructuring. Therefore, the court was asked for approval of a scheme with which by way of new subscriptions on the one hand, and by novation of existing claims on the other hand, an increased liquidity could be achieved. Before approving of this agreement, the English court first had to assess its international competence in this matter. This was not an easy undertaking in the case of the Spanish holding company.
In the end, this question was answered with the help of three criteria on the basis of para. 221 Insolvency Act 1986 : the adequate connection of the company to England and Wales, the favourite effects to be reasonably expected for applicants and the international competency of the English courts for at least one of the persons who were interested in the allocation of the company’s assets. The court regarded all three conditions as fulfilled. The underlying loan agreements were subject to English law, at the same time England had been determined as place of venue. Many of the loaners of the company had their seat in England and could hope to profit from the proceedings. In the end, the adequate connection of the Spanish holding company to England was seen in the fact, that it had subsidiaries, a branch office and an employee in Great Britain.
Thus, the international competency of the court was not examined by consulting Regulation (EG) no. 1346/2000 of the council of 29 May 2000 concerning insolvency proceedings, the so-called Insolvency Regulation. The regulation determines the competence in insolvency proceedings by deciding where a company has its centre of main interest (COMI). In this case the court decided according to case law, stating that Insolvency Regulation could not be applied. An established jurisdiction would exist concerning the local competence for the “scheme of arrangement” proceedings which would not be replaced by the Insolvency Regulation in that aspect, because the scheme proceedings are not listed under the proceedings according to annex A of the Regulation.
This sheds new light on prospects of success and preconditions regarding such proceedings for German companies who are looking for a way into Great Britain and into English scheme proceedings for restructuring. Not definitely resolved, however, is still the question if such proceedings will be accepted by German courts.
