NEF Telecom Co BV, Re

The English court may sanction a scheme of arrangement for a foreign company where a sufficient connection with England is established and the company falls within the statutory scheme jurisdiction. The Judgments Regulation does not necessarily restrict that jurisdiction. Where the Regulation applies, an exclusive English jurisdiction clause in the underlying finance documents may engage article 23, while article 6 may also apply where a relevant creditor is domiciled in England.

On sanction, the court must verify statutory compliance, proper class representation and bona fide voting, whether an intelligent and honest member of the class might reasonably approve the scheme, and whether any blot exists. The court gives substantial weight to the commercial judgment of creditors, but does not act as a rubber stamp.

NEF Telecom Company BV and Bulgarian Telecommunications Company AD applied under section 899 of the Companies Act 2006 for sanction of schemes of arrangement forming part of a group debt restructuring. The applicants were foreign companies whose finance agreements were governed by English law and contained exclusive English jurisdiction clauses.

KDB Bank (Hungary) Ltd opposed sanction. It challenged the court’s jurisdiction, relied on contractual consent requirements, questioned recognition of the schemes in the Netherlands and Bulgaria, and argued that the schemes were unfair to minority creditors. The central issues were whether the court had jurisdiction and whether the schemes should be sanctioned.

1. Jurisdiction. The court had jurisdiction to sanction both schemes. Under section 895(2)(b) of the Companies Act 2006, the foreign scheme companies had a sufficient connection with England and could be wound up under the Insolvency Act 1986. The court did not finally decide whether article 2 of the Judgments Regulation applied, or whether scheme creditors were defendants. On either analysis, jurisdiction was established.
2. If the Regulation applied, article 23 was engaged by the exclusive English jurisdiction clauses in the loan agreements. Agreement to English law included the possibility of invoking Part 26 of the Companies Act 2006. Article 6 also provided an alternative basis because some relevant creditors were domiciled in the United Kingdom. The court did not need to decide whether article 24 applied.
3. The contractual requirement for unanimous lender consent did not prevent sanction. The purpose of Part 26 was to enable a statutory scheme to bind creditors who had not consented individually.
4. The statutory scheme-sanction tests were satisfied. The legislation had been complied with; each class had been fairly represented; the statutory majorities had acted bona fide and without coercion; and the schemes were ones which an intelligent and honest member of the relevant class might reasonably approve. The court was slow to second-guess the overwhelming commercial judgment of the creditors.
5. The evidence did not establish any recognition problem in the Netherlands or Bulgaria, and there was no blot on either scheme. The schemes were desirable and appropriate. Both applications were sanctioned.