Re Nortel Networks SA & Ors

The High Court has an inherent jurisdiction to issue a letter of request to a foreign court where appropriate. In cross-border insolvency, the duty of co-operation under Article 31(2) of the EC Regulation on Insolvency Proceedings extends beyond office-holders and may require co-operation between the courts supervising main and secondary proceedings. A letter of request may seek prior notification of an application for secondary proceedings and an opportunity for the main-proceedings administrators to make submissions. It must not direct the foreign court how to decide the application. The possibility of staying liquidation under Article 33(1) does not necessarily prevent winding-up proceedings in other Member States or the resulting cessation of trading. Assistance was therefore appropriate where secondary proceedings could obstruct a coordinated group reorganisation.

Joint administrators of companies in the Nortel Group sought letters of request to courts in several Member States. They asked those courts to notify them of any application to open secondary insolvency proceedings and to permit them to address the potential effect on the companies’ estates, creditors and a planned group reorganisation.

The English administrations had been ordered by Blackburne J, with the English proceedings designated as main proceedings under Article 3 of the EC Regulation on Insolvency Proceedings. The central issue was whether the High Court should exercise its inherent jurisdiction to seek this assistance.

1. Jurisdiction and scope. The High Court possessed an inherent jurisdiction to issue a letter of request to a foreign court in appropriate circumstances. The request could seek notification of an application for secondary proceedings and an opportunity for the English administrators to be heard. It could not prescribe how the foreign court should determine that application.
2. Co-operation between courts. Article 31(2) imposed a duty of co-operation on the liquidator in the main proceedings and liquidators in secondary proceedings. The court accepted that this duty had been treated by courts in Member States as reflecting a wider obligation extending to courts exercising control over insolvency procedures. The reasoning in Re Stojevic (9 November 2004, 28 R 225/04w) supported that approach.
3. Utility of prior participation. A court considering secondary proceedings should be given the reasons why those proceedings might adversely affect the main proceedings. Rover France SAS [2006] I.L.Pr. 32 illustrated the practical benefit of hearing the main-proceedings administrators before secondary proceedings were opened.
4. Effect of a stay. Although Article 33(1) permitted a stay of liquidation in secondary proceedings, subject to protection of creditors’ interests, that would not prevent winding-up proceedings in Member States where the companies were incorporated. The commencement and continuation of such proceedings was likely to cause the relevant company to cease trading, as recognised in Re Collins & Aikman (Higher Regional Court of Graz, 20 October 2005, 3 R 149/05, reported in NZI 2006 vol 11 p.660).
5. The anticipated obstruction to a coordinated reorganisation made the requested assistance highly desirable. The court authorised appropriate letters of request to the judicial authorities identified in the Schedule to the draft order.

This was a first-instance application by the joint administrators. The judgment records that Blackburne J had previously made the administration orders and designated the English proceedings as main proceedings, but it does not describe an appeal.