Fibria Celulose S/A v Pan Ocean Co. Ltd & Anor

Relief under article 21 of the Cross-Border Insolvency Regulations 2006 is principally procedural. Article 21(1)(a) does not permit the court to restrain a contracting party from serving a contractual termination notice, because that is not the commencement or continuation of an individual action or proceeding. The general power to grant “any appropriate relief” does not ordinarily authorise relief unavailable in a domestic insolvency or the alteration of substantive contractual rights by applying foreign insolvency policy. Where parties have chosen English law, the recognising court should ordinarily give effect to that choice. Even if jurisdiction existed, relief preventing termination of a long-term contract would not have been appropriate on the facts.

Pan Ocean Co Ltd, a Korean shipping company, entered Korean rehabilitation proceedings. Those proceedings were recognised in England as a foreign main proceeding. Pan Ocean’s administrator sought relief under article 21 of the Cross-Border Insolvency Regulations 2006 to prevent Fibria Celulose S/A from terminating a long-term English-law contract by reason of Pan Ocean’s insolvency.

The administrator argued that article 21(1)(a), or alternatively the words “any appropriate relief” in article 21(1), empowered the Companies Court to restrain termination. Fibria argued that termination was governed by English law, that service of a contractual notice was not a proceeding, and that the requested relief was unavailable and inappropriate. The court also considered whether a request should be sent to the Korean court concerning Korean insolvency law.

1. Article 21(1)(a). The service of a contractual termination notice is not the commencement or continuation of an individual action or proceeding. The ordinary meaning of those words, particularly when coupled with “commencement” and “continuation”, refers principally to legal or quasi-legal proceedings. Article 21(1)(a) therefore did not confer power to restrain Fibria from serving notice under clause 28.1 of the contract.
2. General power under article 21(1). Although “any appropriate relief” is expressed in wide terms, it must be construed in context. The legislative history and Guide to Enactment indicated that the recognising court was not intended to apply foreign insolvency law so as to grant relief unavailable in a domestic insolvency. Article 21(1)(g) reinforced that conclusion by referring expressly to relief available to a British insolvency office-holder under British law.
3. Procedural and substantive relief. Rubin v Eurofinance SA supported a broad interpretation of article 21 in procedural matters. However, preventing termination would alter the parties’ substantive rights and obligations under a 25-year English-law contract. It would commit Fibria to continued performance and payment, rather than merely preserve procedural matters.
4. Contractual choice of law. The parties had deliberately chosen English law. The English law position recognised the effectiveness of the insolvency termination provisions, consistently with Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd. The court was not persuaded that Korean insolvency policy should displace that contractual choice.
5. Discretion and disposition. Even if the court had jurisdiction under the general words of article 21(1), it would not have granted the requested relief. A Korean court might hold that a termination notice was ineffective, but that did not require an English order restraining service of the notice. The administrator’s request for a letter of request to the Korean court was unnecessary. Fibria’s application for permission to commence arbitration was left for consequential orders.

First-instance decision. The judgment does not state any appeal from this decision.