Latam Finance Ltd
| Jurisdiction | Cayman Islands |
| Judge | (Kawaley, J.) |
| Judgment Date | 24 August 2020 |
| Court | Grand Court (Cayman Islands) |
(Kawaley, J.)
Conflict of Laws — companies — cross-border insolvency — approval of court-to-court communication protocol — common law duty to assist foreign insolvency courts
Held, granting the orders sought approving the protocol:
(1) The principal foundation of the court’s jurisdiction to approve the protocol was the common law duty to assist foreign insolvency courts in service of the goal of a universal application of the regime for dealing with creditors’ claims being applied in the main insolvency proceeding (modified universalism). The principle of comity had been identified as underpinning the common law assistance power. Subsidiary sources of jurisdictional rules included the court’s inherent jurisdiction to manage its own processes. The JPLs had rightly identified as important Practice Direction No. 1 of 2018, which approved the American Law Institute/ International Insolvency Institute Guidelines Applicable to Court-to-Court Communications in Cross-Border Cases (the ALI/III Guidelines) and the Judicial Insolvency Network Guidelines for Communication andCooperation between Courts in Cross-Border Insolvency Matters (the JIN Guidelines). The Practice Direction and the Guidelines could be viewed as emerging sources of law which provided a jurisdictional basis for approving the protocol (paras. 17–26).
(2) The main governing principles applicable to an application for the court’s approval of a court-to-court communication protocol were that (a) the court was under a positive duty to assist the primary foreign main insolvency or restructuring proceedings unless there were good reasons not to do so; (b) there was a starting assumption that a clear framework for communication between the court and any relevant foreign courts in cross-border insolvency cases would enhance the efficiency of the cross-border case; and (c) there was a starting assumption that the ALI/III Guidelines and the JIN Guidelines (approved in the Practice Direction) were suitable guidelines to adopt and apply in cross-border cases. It was consistent with constitutional principles of judicial independence, the more pragmatic principles of modified universalism and the inherent powers of the court to protect the efficiency and integrity of its processes that the particularities of how to advance the efficiency of cross-border insolvency proceedings at the operational case management level should predominantly be grounded in such soft law instruments, which could be viewed as a form of extra-judicial judge-made transnational procedural law. There was a long and substantial history of the court coordinating its hearings with parallel insolvency and restructuring proceedings in foreign courts and commun-icating indirectly with such courts. The cooperation and coordination between the court and foreign insolvency courts in past cases had been grounded in the court’s common law duty to assist foreign courts and to promote the most economically efficient administration of transnational insolvency estates (paras. 26–32).
(3) In light of the clarity and depth of the common law principles commending judicial coordination and communication in cross-border insolvency cases, combined with the recent promulgation of the Practice Direction, it was obvious that the protocol could only properly be approved. The protocol merely sought formal approval of the already administratively pre-approved ALI/III Guidelines Applicable to Court-to-Court Communications in Cross-Border Cases. The judicial approval sought also implicitly required the court to recognize the Chapter 11 proceeding as a foreign main proceeding which the court, in conjunction with the courts in Chile and Colombia, was willing to assist. This was also uncontroversial. The requisite recognition had already effectively been granted by the court’s initial appointment of the JPLs for the explicit purpose of pursuing a restructuring. It was explicitly contemplated that such restructuring would take place primarily through Chapter 11 proceedings before the US Bankruptcy Court (paras. 33–34).
(1)BCCI (Overseas) Ltd., In re, 2009 CILR 373, considered.
(2)CW Group Holdings Ltd., Re, FSD 113 and 122 of 2018, Grand Ct., August 3rd, 2018, unreported, considered.
(3)Cambridge Gas Transport Corp. v. Creditors’ Cttee. (Navigator Holdings plc), [2006] UKPC 26; [2007] 1 A.C. 508; [2006] 3 W.L.R. 689; 2005–06 MLR 297; [2006] 3 All E.R. 829; [2007] 2 BCLC 141; [2006] BCC 962, considered.
(4)China Agrotech Holdings Ltd., In re, 2019 (2) CILR 356, considered.
(5)Da Yu Fin. Holdings Ltd., Re, [2019] HKCFI 2531; October 17th, 2019, considered.
(6)Impex Servs. Worldwide Ltd., In re, 2003–05 MLR 115; [2004] BPIR 564, dicta of Deemster Doyle considered.
(7)Lancelot Investors Fund Ltd., In re, 2009 CILR 7, considered.
(8)Nanfong Intl. Invs. Ltd., In re, 2018 (2) CILR 321, considered.
(9)Singularis Holdings Ltd. v. PricewaterhouseCoopers, [2014] UKPC 36; [2015] A.C. 1675; [2015] 2 W.L.R. 971; [2014] 2 BCLC 597; [2015] BCC 66, considered.
Grand Court Law (2015 Revision), s.11: The relevant terms of this section are set out at para. 18.
The court was asked to approve a court-to-court communications protocol.
Joint provisional liquidators (the JPLs) were appointed with “light-touch” powers to supervise a restructuring on the application of each of three companies. It was anticipated that the companies would seek relief under Chapter 11 of the US Bankruptcy Code. There were also proceedings in Chile and Colombia.
The JPLs applied for orders for directions that a cross-border court-to-court communications protocol be approved subject to the approval of the same by the relevant courts in the United States, Chile and Colombia. The JPLs relied on O.21 of the Companies Winding Up Rules 2018, Practice Direction No. 1 of 2018 (Court-to-court Communications and cooperation in cross-border insolvency and restructuring cases) and the court’s practice of promoting cross-border cooperation in insolvency cases.
M. Hecht and Z. Nolan for the joint provisional liquidators.
1 KAWALEY, J.:
Background
The JPLs were appointed with “light-touch” powers to supervise a restructuring on the application of each of the companies on May 28th, 2020 (LATAM Finance Ltd. (“LTM”) and Peuco Finance Ltd. (“PF”)) and on July 10th, 2020 (Piquero Leasing Ltd. (“PL”)), respectively. It was anticipated by each petition that the companies would seek relief under Chapter 11 of the US Bankruptcy Code.
2 By ex parte summonses each dated July 22nd, 2020, the JPLs applied for orders for directions that:
“1. The certain cross-border court-to-court communications protocol be approved subject to the approval of the same by each of the United States Bankruptcy Court for the Southern District of New York, the 2nd Civil Court of Santiago, Chile and the Superintendencia de Sociedades in Colombia.”
3 The applications were supported by the first affidavit of Jeffrey Stower which explained how the protocol idea had developed (prompted by the suggestion of the Chilean court) and placed the proposed form of protocol before the court. Counsel for the JPLs addressed the court’s jurisdiction to grant the applications, albeit by reference to general principles beingunable to identify any directly applicable previous published decision of this court. At the end of the hearing I granted the applications and made orders, inter alia, that:
“1. The cross-border court-to-court communications protocol as appended hereto (the ‘Cross-Border Protocol’), as it may be amended or supplemented by further order of this Honourable Court, be approved in all respects subject to approval of the same by each of the United States Bankruptcy Court for the Southern District of New York (the ‘U.S. Court’), the 2nd Civil Court of Santiago, Chile and the Superintendencia de Sociedades in Colombia (the ‘Courts’).”
4 As this appears to be the first time that this court has approved a “court-to-court communications” protocol, and the jurisdictional basis for this decision was somewhat unclear, I now give reasons for this decision.
The JPLs’ submissions
5 In the JPLs’ skeleton argument, it was first submitted that the “law applicable to the presentation and consideration of international protocols is contained in Order 21 of the Companies Winding Up Rules, 2018 (the ‘CWR’)” (para. 10). It was further submitted that the scope of the proposed protocol was consistent with the requirements of CWR, O.21, r.3. As I observed in the course of hearing, this was a difficult basis to rely upon given the apparent non-alignment between the types of protocols contemplated by O.21 and the narrow scope of the proposed “cross-border protocol” (“the protocol”).
6 It was then submitted as follows:
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