Agrokor DD, Re (Cross-Border Insolvency Regulations 2006)

Recognition under the Cross-Border Insolvency Regulations 2006 depends on the statutory criteria, construed in light of the Model Law’s international origin and purpose. A foreign proceeding may qualify even where the governing law is not labelled insolvency legislation, provided insolvency or impending insolvency is one basis for commencing it. A group proceeding may be recognised in respect of an individual debtor, although the group itself is not recognised as a single legal entity. Court supervision may be potential or indirect. The public-policy exception is narrow: differences between foreign and English insolvency priorities, or the possibility of a future compromise affecting pari passu distribution, do not by themselves make recognition manifestly contrary to English public policy.

Ante Ramljak, the foreign representative of Agrokor DD, applied for recognition in Great Britain of Croatian extraordinary administration proceedings as a foreign main proceeding under the Cross-Border Insolvency Regulations 2006. Agrokor was the Croatian holding company of a large corporate group. The Croatian proceeding covered Agrokor and affiliated and controlled companies, but recognition was sought only for Agrokor.

Sberbank, a creditor, opposed recognition. It argued that the Croatian legislation was not a law relating to insolvency, that the proceeding was not collective or subject to court supervision, that a group proceeding fell outside the Regulations, and that recognition would be manifestly contrary to English public policy. The central issue was whether the Croatian proceeding satisfied the definition and recognition requirements in Schedule 1.

1. Recognition granted. The Croatian extraordinary administration proceeding was recognised in respect of Agrokor as a foreign main proceeding under the Cross-Border Insolvency Regulations 2006.
2. The court had to decide the statutory questions under English law. The characteristics of the Croatian proceeding were matters of Croatian law proved by expert evidence. The Regulations were construed purposively, having regard to their international origin and the need for uniformity: [2017] EWHC 2791 (Ch) [34]-[37].
3. A group proceeding could be recognised in relation to an individual debtor. The Model Law focuses on each group member as a separate legal entity. It prevents recognition of the group as such, but does not prevent recognition concerning a particular debtor where the statutory criteria are met: [2017] EWHC 2791 (Ch) [44]-[54].
4. The Croatian legislation was a law relating to insolvency. The relevant test was whether insolvency was one of the grounds on which the proceeding could be commenced. It was unnecessary for every company included in the proceeding to be insolvent. The actual or threatened insolvency of one company could trigger the proceeding, and the statutory presumption concerning impending insolvency did not alter that conclusion on the facts: [2017] EWHC 2791 (Ch) [55]-[77].
5. The proceeding was subject to control or supervision by the Croatian court. The required control could be potential and indirect. The court’s powers over the extraordinary administrator and settlement agreement, taken together, satisfied the requirement: [2017] EWHC 2791 (Ch) [78]-[93].
6. The proceeding was collective because it addressed the assets and liabilities within the proceeding and involved creditor participation and a proposed settlement agreement. The fact that it was group-wide did not make it insufficiently collective: [2017] EWHC 2791 (Ch) [94]-[99]. Its purposes included restructuring companies in serious financial difficulty and, if restructuring failed, liquidation. It therefore operated for the purposes of reorganisation or liquidation: [2017] EWHC 2791 (Ch) [100]-[108].
7. The public-policy exception was not engaged. The word manifestly required clarity as well as serious incompatibility, and the exception was to be narrowly construed. Differences in priorities, possible departures from pari passu distribution, and the absence of a presently proposed settlement agreement did not establish a manifest violation of English public policy: [2017] EWHC 2791 (Ch) [109]-[131].