Primacom Holding GmbH & Ors v. A Group of the Senior Lenders and Crédit Agricole

The court sanctioned a Part 26 Companies Act 2006 scheme of arrangement proposed by Primacom Holding GmbH, a German company, after four convened class meetings approved a modified scheme by overwhelming majorities. The judge was satisfied that statutory requirements for convening classes and explanatory material had been met and that the scheme was one which an ordinary commercial creditor could reasonably approve.

The principal legal issue concerned the English court's jurisdiction to sanction a scheme for a foreign-incorporated company in light of Council Regulation (EC) No 44/2001 (the "Judgment Regulation"). The court considered whether Article 2 applied and whether Articles 23 or 24 could provide jurisdiction. The judge concluded either (i) a scheme is not within Article 2, or (ii) if Article 2 applies, Articles 23 and 24 (contractual jurisdiction and appearance) operated to confer jurisdiction in the present facts. The court also considered, by analogy, Article 4 but did not need to rely on it.

This was an application for the court's approval of a scheme of arrangement under Part 26 of the Companies Act 2006, brought by Primacom Holding GmbH (the scheme company), which is incorporated in Germany. The application followed an earlier hearing at which the court directed that four classes of scheme creditors be convened. After negotiations between the company and creditors the scheme was modified and the four meetings were held.

The factual background included urgency arising from upcoming instalments under debt instruments and extensive negotiations which produced amendments acceptable to creditors. Three of the four classes voted 100% in favour, and the fourth class showed majorities of 96.8% by number and 98.40% by value.

The issues framed by the court were:

• Whether the convening directions, class composition and explanatory material satisfied the statutory requirements for a Part 26 scheme;
• Whether the English court had jurisdiction to sanction a scheme for a non-UK (German) company in the light of Council Regulation (EC) No 44/2001 (the Judgment Regulation), particularly Article 2 and the possible operation of Articles 23 and 24, and by analogy Article 4;
• Whether there was a realistic prospect of recognition and enforcement in Germany such that sanctioning the scheme would not be inappropriate.

On the first issue the court was satisfied that the statutory requirements had been complied with and that the classes and explanatory materials were appropriate. The scheme was judged to be one that commercial creditors could reasonably approve.

On jurisdiction the court addressed four alternative analyses advanced for conferring jurisdiction: (i) a scheme of arrangement is not within Article 2 of the Judgment Regulation because no one is being sued in the conventional sense; (ii) if Article 2 applies it is subject to the Regulation as a whole so Articles 23 (party agreement on jurisdiction) and 24 (jurisdiction by appearance) could apply; (iii) the parties had contractually chosen English law and exclusive English jurisdiction in the relevant loan and umbrella agreements, engaging Article 23; and (iv) many of the principal creditors had participated in earlier proceedings and thereby submitted to the English court, engaging Article 24. The judge indicated a preference for the view that Article 2 does not apply but held that, even if Article 2 did apply, Articles 23 and 24 were satisfied on the facts, so the English court had jurisdiction. An analogy to Article 4 was noted but not essential to the decision.

The court also received expert evidence about recognition in Germany and accepted there was a reasonable prospect that a German court would ultimately accept recognition, so any risk of non-recognition did not prevent sanctioning the scheme. Consequently the court approved the proposed order and the scheme in its final form.

This first instance application was allowed: the court sanctioned the Part 26 scheme. The judge concluded that the statutory requirements for convening the classes and providing explanatory material were satisfied and that the scheme was commercially appropriate. On jurisdiction, the court held that either a scheme is not within Article 2 of Council Regulation (EC) No 44/2001 or, alternatively, that Articles 23 and 24 of the Regulation imported contractual choice of forum and submission by appearance which, on the facts, supported the exercise of jurisdiction by the English court. The court also found a reasonable prospect of German recognition and so approved the scheme.