OOO Nevskoe v UAB Baltijos Šalių Industrinio Perdirbimo Centras

Where foreign insolvency proceedings have not yet been recognised in England and Wales, their existence does not ordinarily prevent a diligent creditor from obtaining a final enforcement order. The court’s usual approach remains first past the post, subject to abuse, sharp practice and other countervailing considerations.

The court must consider all the circumstances. It may prioritise one creditor over creditors participating in an unrecognised foreign insolvency. Where a potentially decisive assignment or non-disclosure issue has not been properly argued by affected parties, the court may make the order final but impose conditions, defer payment and give interested parties leave to apply to vary or set it aside.

The claimant obtained a GAFTA arbitration award against the Lithuanian defendant and converted it into orders of the English court. It then sought a final third party debt order against money held for the defendant by an English company.

The defendant had become insolvent in Lithuania. Its insolvency administrator applied for recognition in England and Wales shortly before the final third party debt order hearing, but recognition had not yet occurred. Recognition would have stayed further enforcement under the Cross-Border Insolvency Regulations 2006.

The administrator also relied on an apparent assignment of the claimant’s rights to UAB Dognus and alleged that the assignment had not been disclosed at the interim, without-notice stage. The central issue was whether the final third party debt order should be made before recognition, and how the unresolved assignment issues should affect the order.

1. Final order. The final third party debt order was made. Payment of €627,717.11 was deferred and made subject to conditions, disclosure of the assignment agreement and possible applications to vary or set aside.
2. Applicable requirements. A final third party debt order required a debt due or accruing due from the third party to the debtor, a third party within the jurisdiction, a debt situated within the territorial jurisdiction, and an exercise of the discretion to make the order final in all the circumstances: [2004] 1 AC 260; [2014] 1 All ER (Comm) 993.
3. First past the post. In the absence of recognised domestic insolvency proceedings, the historic first-past-the-post approach applies. A creditor is prima facie entitled to the fruits of its diligence, including where competing creditors are participating in an unrecognised foreign insolvency. The Cross-Border Insolvency Regulations 2006 deliberately require a recognition process and do not confer automatic recognition on Lithuanian insolvency proceedings after Brexit.
4. The existence of insolvency and the resulting priority for one creditor are relevant circumstances, but they do not alone prevent a final order. The court found no sharp practice or abuse by either side. The defendant’s conduct in pursuing arbitration arguments and agreed extensions was not enough to justify departing from the usual approach.
5. The apparent assignment raised potentially material issues, including whether the claimant could enforce and whether it should have disclosed the assignment at the interim stage. Those issues could not fairly be determined in the urgent hearing without the affected parties and evidence on the relevant law. They were therefore preserved for a later application, while the funds were protected pending that process.

not stated in the judgment.