Rawlinson & Hunter Trustees SA v Kaupthing Bank HF & Ors

For recognition under the Credit Institutions (Re-organisation and Winding-up) Regulations 2004, a winding-up must be opened by the administrative or judicial authorities of the home state. Legislation which treats a moratorium as a winding-up, without such an opening decision, does not satisfy the Directive’s requirements. A later winding-up order cannot retrospectively defeat rights accrued while English proceedings were pending. Where proceedings fall within the Lugano Convention’s exclusive jurisdiction provisions, exceptional grounds are needed for a stay in favour of foreign insolvency proceedings. Lodging a proof of debt under compulsion does not waive the contractual right to litigate in the agreed forum.

Trustees of the Tchenguiz Discretionary Trust and the Tchenguiz Family Trust brought substantial claims against Kaupthing Bank HF in the Commercial Court, relying on exclusive jurisdiction clauses in the Framework Agreement and security documents. Kaupthing sought a stay for want of jurisdiction, contending that Icelandic moratorium and winding-up measures had effect under the Credit Institutions (Re-organisation and Winding-up) Regulations 2004. It alternatively alleged abuse of process because the claimants had lodged proofs of debt in Iceland. The central issue was whether a Directive-compliant reorganisation measure or winding-up existed when the English claims were commenced in July 2010.

1. The application was dismissed. The court held that, after the April Amendment, the Icelandic process was winding-up in substance, despite being labelled an authorised debt moratorium. The process incorporated the substantive features of winding-up and treated the undertaking as if winding-up had been ordered.

2. That did not make it a Directive-compliant winding-up. Article 9 of the Directive required the opening decision to be made by the administrative or judicial authorities of the home state. The April Amendment opened the process by legislation and was not subject to the safeguards of appeal or judicial review. The later Icelandic order of 22 November 2010 confirmed or continued the process, but did not retrospectively open it on 22 April 2009 so as to affect proceedings already commenced.

3. Accordingly, in July 2010 there was neither an extant reorganisation measure nor a Directive-compliant winding-up in Iceland. When the Icelandic winding-up was opened in November 2010, the English lawsuits were already pending. Regulation 32 therefore required their effects to be determined by English law. The claims concerned rights of creditors against the bank, within the reasoning in Syska v Vivendi Universal SA [2008] EWHC 2155 (Comm); [2009] BPIR 163.

4. The alternative Icelandic-law argument would also have failed. The relevant provision of the Financial Undertakings Act was construed consistently with the Directive. The absence of the word “pending” did not justify reading it into the statute, and a wider application of the provision was not non-compliant.

5. There was no abuse of process. BCCI (Overseas) Ltd (In Liquidation) v Habib Bank Ltd [1999] 1 WLR 42 concerned election or estoppel after a proof had been rejected and not challenged. The claimants here had been required to lodge proofs to preserve their rights. The exclusive English jurisdiction clauses, together with the Lugano Convention, left little room for a stay based on lis alibi pendens or forum non conveniens. Exceptional grounds would be required.

First-instance decision of the High Court (Commercial Court). No appellate history is stated in the judgment.