E-briefing: Recognition of moratorium granted by Singapore Courts as foreign main proceedings under UK’s enactment of the UNCITRAL Model Law on Cross-Border Insolvency

Recognition of moratorium granted by Singapore Courts as foreign main proceedings under UK’s enactment of the UNCITRAL Model Law on Cross-Border Insolvency

H & CS Holdings Pte Ltd v Glencore International AG [2019] EWHC 1459 (Ch)

Introduction

1. The High Court of England and Wales, in a landmark decision, recognised a moratorium order granted by the High Court of Singapore under Section 211B of Singapore’s recently enhanced Companies Act as a foreign main proceeding under the UNCITRAL Model Law on Cross-Border Insolvency (“Model Law”).

Facts

2. H & CS Holdings Pte Ltd (“the Company”) is a Singapore incorporated company.

3. In January 2019, the Company applied to the Singapore High Court for a 6-month’ moratorium pursuant to section 211B of the Companies Act to restrain proceedings and enforcement against the company and its assets to allow it the opportunity to propose a scheme of arrangement with its creditors.

4. The Company’s application was granted by the Singapore Courts at the hearing of the application on 20 February 2019 and a moratorium was granted (“Singapore Moratorium Order”).

5. The Company then applied to the English Court for recognition of the Singapore Moratorium Order pursuant to Article 15 of the Model Law which has the force of law in the UK under the Cross-Border Insolvency Regulations 2006.

6. The underlying purpose of seeking recognition of the Singapore Moratorium Order is to seek an automatic stay of two (2) arbitration proceedings in UK with Glencore International AC (“Glencore”):

• Under the first arbitration proceedings which was commenced by Glencore, the hearings had been completed and is only pending the decision of the arbitrators.
• Under the second arbitration proceedings which had been effectively discontinued by the Company, the only issue that remains was that of the costs of the proceeding.

7. In the proceedings before the English Court, Glencore did not oppose the recognition of the Singapore Moratorium Order but had argued that the automatic stay under Article 20 of the Model Law should be modified pursuant to Article 20(6) to allow the arbitrations to proceed on its undertaking that it will enforce the same.

Decision

8. The English Court held that scheme of arrangement proceedings in Singapore are “foreign main proceedings” and the Company is a foreign representative that may apply for recognition such that the requirements of Article 15 of the Model Law are satisfied. Accordingly, the effects of the recognition as prescribed by Article 20 of the Model Law which includes an automatic stay came into effect.

9. The English Court then considered whether the automatic stay under Article 20 of the Model Law was to be modified as per Glencore’s application and decided as follows:

• With regard to the first arbitration proceedings, the English Court decided that given the late stage of the arbitration proceedings, a stay would lead to increased costs, further delays and effectively require parties to re-litigate the same claim in the Singapore proof of debt process. Further, a binding award would assist parties in the Singapore proof of debt proceedings. As such, the English Court modified the automatic stay to allow the decision of the first arbitration proceedings to be issued but not enforced.
• With regard the second arbitration proceeding, the English Court declined to modify the automatic stay given that only the issue of costs remained which could be easily and efficiency dealt under Singapore’s proof of debt process.

Significance of the case

10. This case clarifies any uncertainty that may exist as to whether the English Courts will recognise the extra-territorial effect of a moratorium order granted by Singapore’s Courts under the amended Companies Act.

11. In addition, given the increasing nature of insolvency matters being cross-border in nature, it is strategically important for both companies seeking to restructure and creditors of distressed companies to be aware of the jurisdictions that have recognised foreign proceedings under the Model Law in aid of restructuring in a foreign jurisdiction (in this case, the English Courts for the restructuring of a distressed company in Singapore).

NOTE: The content of this article is for general information only and does not constitute any form of legal advice. Please seek specific legal advice regarding your specific circumstances.

Eversheds Sutherland / Eversheds Harry Elias Restructuring & Insolvency

Eversheds Harry Elias’ Restructuring and Insolvency practice is a leading practice in Singapore comprising of a dedicated team that is well equipped to advise on both contentious and non-contentious matters involving corporate and individual restructuring and insolvency.

Together with Eversheds Sutherland, which is one of the largest global full service law firms, with 69 offices in 34 countries, our global restructuring and insolvency practice covers key jurisdictions across the world and includes many lawyers listed as insolvency experts in leading legal directories including Chambers, Legal 500, GRR, Asialaw Profiles, Benchmark Litigation and IFLR1000.

We are therefore well placed to advise and support our clients in any cross-border restructuring and insolvency matters.

For further information, contact:

Justin Chia

Head, Restructuring & Insolvency

Partner, Eversheds Harry Elias

JustinChia@eversheds-harryelias.com

+65 6361 9814

Jamie Leader

Partner, Eversheds Sutherland (UK)

JamieLeader@eversheds-sutherland.com

+44 207 919 4756

Chua Jian Zhi

Senior Associate, Eversheds Harry Elias

Jianzhi@eversheds-harryelias.com

+65 6361 9814