Khurram Shahzad v Lars Skanvig Bramhelft

Recognition of a foreign insolvency proceeding under the Cross-Border Insolvency Regulations 2006 is mandatory where article 17 is satisfied, subject to the public policy exception in article 6.

The common-law rule against enforcing foreign revenue laws does not prevent recognition merely because a foreign tax authority is a creditor, initiated or funded proceedings, or recommended a trustee. The relevant question is whether the proceeding is in substance direct or indirect enforcement of foreign revenue liabilities for that authority’s sole benefit.

The applicant sought to set aside recognition of his Danish bankruptcy as a foreign main proceeding under the Cross-Border Insolvency Regulations 2006. He relied on article 6, alleging that recognition would enforce Danish tax liabilities.

He accepted that the Danish bankruptcy was a collective insolvency proceeding satisfying the recognition requirements and that the immovables rule did not apply. The issue was whether the proceeding was, in substance, direct or indirect enforcement of Danish revenue laws because the Danish tax authority had petitioned for bankruptcy, recommended and funded the trustee, and was a creditor.

1. The application was dismissed. The Danish bankruptcy satisfied article 17: it was collective, based on insolvency law, subject to foreign-court supervision, and conducted for reorganisation or liquidation. The requirements concerning the foreign representative and application were also satisfied.

2. Article 6 is a confined statutory public policy exception. Article 13 limits the foreign-revenue objection by providing that a foreign tax claim cannot be challenged solely because it is made by a foreign tax authority, subject to the statutory exceptions.

3. The common-law rule described in Government of India v Taylor [1955] AC 91 does not automatically prevent recognition of a foreign insolvency proceeding involving tax claims. The court must examine whether the substance of the proceeding involves direct or indirect enforcement of foreign revenue liabilities.

4. Peter Buchanan Ltd v McVey [1954] IR 89 and QRS1 ApS v Frandsen [1999] 1 WLR 2169 were distinguishable. In those cases the revenue authority was the sole creditor and the proceedings were directed to recovering its tax debt. Here there were numerous creditors, pari passu distribution, and no evidence that the trustee acted at the tax authority’s direction or solely for its benefit.

5. The description of the Danish tax authority as a “dominant creditor” had no real legal meaning. Its petition, recommendation of the trustee and funding of the proceedings did not establish indirect revenue-law enforcement.

6. Kireeva v Bedhamova [2025] AC 812 confirmed that the immovables rule did not apply to foreign bankruptcies recognised under the CBIR. That issue was accepted and was not determinative.