Scheme of arrangement jurisdictional issues - yet again!

Published on
3 min read

The company applying for the scheme of arrangement had only been incorporated a month earlier and, prior to that, the financing arrangements of the group had no materially relevant connection with England: its parent being incorporated in the Netherlands and the notes originally being governed by New York law. It was only by means of a supplemental trust deed that the company became co-issuer of the notes and that the governing law and jurisdiction provisions of the notes were changed so as to refer to England.

On the issue of jurisdiction, the court held that two questions need to be considered.

The first question was jurisdiction over the company itself. The court held, following a line of recent authority, that the court had jurisdiction over the company and it did not matter that the company was only recently created or that the governing law and jurisdiction had only recently been changed to England.

The second question was whether the court also needed to be satisfied that it had jurisdiction over the scheme creditors under the Recast Judgments Regulation. The court here followed existing authority by not deciding whether such jurisdiction was necessary but instead, assuming that it did apply, and then considering whether it was satisfied.

The court first considered Article 25, which confers jurisdiction on the courts of a Member State if those courts have been nominated in a jurisdiction clause. The court held that Article 25 was satisfied here.

The court then considered Article 8, which provides that a person domiciled in one Member State may also be sued where they are one of a number of defendants in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear them together. The court here referred to conflicting authorities: one having suggested that the court is required to consider whether the “numbers and size of the scheme creditors domiciled in [the UK]” are “sufficiently large”; and another line of authority to the effect that it was sufficient if a single creditor was domiciled in the UK. The court held - in what was technically a mere semble - that the presence of a single creditor is a necessary but not a sufficient condition, reasoning that the proviso is rather less about the geographical distribution of the prospective defendants and is rather more about the expediency in case management terms of connected claims being resolved in one place, even if only one anchor defendant is domiciled there, and therefore tentatively concluding that Article 8 was also made out on the basis that a number of defendants were domiciled in England & Wales, and the nature of the claims against them was such that it was expedient for them to be resolved in the same place at the same time.

In re Selecta Finance Limited

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