Stanford International Bank Ltd, Re

A receivership obtained in securities-fraud proceedings is not a foreign insolvency proceeding merely because a court-appointed receiver may later seek a distribution order. It must presently be a collective process brought pursuant to a law relating to insolvency and directed to reorganisation or liquidation.

The presumption that a company’s centre of main interests is at its registered office is rebutted only by factors that are both objective and ascertainable by third parties. Secret fraud and facts discovered only after the event do not satisfy that test.

On a without-notice restraint application, material disclosure failures may require the order to be discharged. The court may nevertheless make a fresh restraint order from the date when the application could properly be determined.

SIB, an Antiguan bank alleged to have operated a large fraudulent investment scheme, was placed into liquidation in Antigua. A United States receiver had earlier been appointed in securities-fraud proceedings. The Antiguan Liquidators and the US Receiver each sought recognition in England under the Cross-Border Insolvency Regulations 2006.

Lewison J recognised the Antiguan liquidation as the foreign main proceeding, but refused recognition to the US Receivership. Separately, HH Judge Kramer QC refused to discharge or vary a restraint order made under the Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005.

The Court of Appeal considered whether the two foreign processes qualified for recognition, where SIB’s centre of main interests lay, and the effect of material non-disclosure on the restraint order.

1. The appeals against Lewison J’s recognition decision were dismissed. The Antiguan liquidation was a collective judicial process under insolvency-related law, for liquidation under court supervision. It was therefore a foreign proceeding, and the Antiguan Liquidators were foreign representatives.
2. The US Receivership was not a foreign proceeding within Article 2(i) of the UNCITRAL Model Law. The relevant US laws and equitable jurisdiction protected investors in securities-fraud proceedings. They were not, on the orders then made, laws relating to insolvency. The receivership was not then collective in the relevant sense and was not for reorganisation or liquidation. A later order could change that position, but no such order had been made.
3. The Court followed Re Eurofood IFSC Ltd [2006] Ch 508 on centre of main interests. Each debtor has its own centre of main interests. The registered-office presumption is displaced only by factors which are objective and ascertainable by third parties. Information obtainable only by investigation, and the subsequently uncovered fraudulent scheme, could not rebut the presumption. SIB’s centre of main interests was therefore Antigua, so the Antiguan liquidation was the foreign main proceeding.
4. The Antiguan Liquidators’ restraint-order appeal was allowed in part. The SFO and US authorities had materially failed to disclose the Antiguan proceedings, the true position on the English freezing order, and the basis for asserted urgency. The correct question was whether the omitted information was material to the grant of without-notice relief, not whether it caused the order to be made. The original restraint order should be set aside, with costs consequences reserved.
5. However, on the facts known by 29 July 2009, Article 46 of the Proceeds of Crime Act 2002 (External Requests and Orders) Order 2005 supported a fresh restraint order to preserve the identified deposits for a possible external confiscation order. Property vested in the Antiguan Liquidators remained property held by SIB for this purpose. The majority would re-grant the order from 29 July 2009. Arden LJ considered that the arguable interests of unsecured creditors should first be capable of fuller argument.
6. The Court recognised the Antiguan liquidation and Liquidators, but adjourned the question whether powers under Article 20 of the UNCITRAL Model Law should be tailored to avoid inconsistency with the restraint order.

• Court of Appeal (Civil Division): dismissed the US Receiver’s and SFO’s appeals from Lewison J’s recognition order. It allowed the Antiguan Liquidators’ appeal in part by setting aside the original restraint order and directing that a fresh order take effect from 29 July 2009.
• High Court, Chancery Division (Companies Court): Lewison J, on 3 July 2009, recognised the Antiguan liquidation as SIB’s foreign main proceeding and refused recognition of the US Receivership.
• Central Criminal Court: HH Judge Kramer QC, on 29 July 2009, refused to discharge or vary the restraint order made on 7 April 2009.