Tabata v Glencore Ltd

Recognition of a foreign insolvency proceeding cannot continue after the proceeding has been terminated merely because obligations under its reorganisation plan remain outstanding. A foreign representative’s status depends on the existence of the foreign proceeding and cannot be sustained independently of it. Where circumstances have materially changed, the English court should respect and assist the court chosen to determine creditors’ substantive rights, while ensuring adequate interim protection. Funds held in England may therefore be released subject to undertakings designed to preserve the position pending directions from the foreign court.

Sanko entered Japanese corporate reorganisation proceedings, which were recognised in England as the foreign main proceeding. Glencore claimed losses arising from delay to cargo carried by Sanko’s vessel and pursued related claims in Japan. Proceeds of sale of the vessel were paid into the Admiralty Court.

After the Japanese proceedings were terminated, Mr Tabata sought continued recognition as foreign representative under article 17(4) of the Cross-Border Insolvency Regulations 2006, together with payment out of the funds under article 21(2). The central issues were whether recognition could continue after termination and how the funds should be dealt with pending determination of Glencore’s claims in Japan.

1. Recognition application. The application was dismissed. The Japanese proceedings had been terminated, and the fact that the reorganisation plan remained to be fully implemented did not make them ongoing. A foreign representative could not sustain an independent status after the foreign proceeding had ended.
2. The statutory definitions and the Guide to Enactment supported the conclusion that a recognised foreign proceeding requires control or supervision of the debtor’s assets and affairs by a foreign court or other independent official body. There was no sufficient expert evidence that the Japanese court retained such authority after termination, or that Mr Tabata remained a foreign representative.
3. Article 17(4) was engaged because the grounds for recognition had ceased to exist. The natural construction of the provision, supported by commercial common sense, did not permit continued or modified recognition of proceedings which had been terminated.
4. Remission application. The court recognised that the circumstances had materially changed. The Japanese court remained the forum chosen to determine Glencore’s entitlement, and comity required the English court to respect and assist that process. The court also considered the absence of clear evidence about Japanese law, the progress of Glencore’s petitions and the appropriate protective order in Japan.
5. Leaving the funds in England risked encouraging delay. Exercising the court’s inherent powers, and having regard to the Admiralty Court’s order and Civil Procedure Rules provisions concerning payment out, the court ordered that the funds be paid out and held in a US dollar account in the joint names of the parties’ solicitors, provided Glencore undertook within 42 days to seek preservation orders in Japan, progress its petitions with due expedition and give a cross-undertaking in damages. Without that undertaking, the funds were to be paid to Mr Tabata after 21 days for distribution under the plan and his undertaking to the Japanese court.

The judgment records that Teare J had struck out Glencore’s caution and made payment out conditional on an undertaking preserving the funds pending determination in Japan. Applications for permission to appeal were pending before the Court of Appeal. This court was not bound by the Admiralty Court’s view and made its own order.