This article was sourced from Ashfords. Article by Alex Connors and Alan Bennett.
The English Court of Appeal dismissed an appeal that a claim could be pursued in the English courts whilst the defendant was also subject to winding-up proceedings under Icelandic insolvency law.
This case concerned a Court of Appeal hearing following the collapse of the large Icelandic bank, Kaupthing Bank HF (“Kaupthing”), in 2008. Kaupthing was subject to a moratorium order made by the Icelandic courts in 2008 and a winding-up order in November 2010.
The appellants were a group of businessmen who sought to bring proceedings in the English High Court against Kaupthing and other related parties for the tort of unlawful means conspiracy. The case does not concern the merits of that claim, but the right to pursue that claim through the English courts.
At first instance, the High Court decided that it had jurisdiction to hear the claim against all defendants under the Lugano Convention 2007. However, as Kaupthing was the subject of a winding-up order in Iceland, this resulted in a conflict with Directive 2001/24/EC which concerns the reorganisation and winding up of credit institutions (“the Winding-up Directive”). Article 10 of the Winding-up Directive provides that a credit institution is to be wound up in accordance with the laws of its home member state, and under Icelandic insolvency law, the Icelandic courts have exclusive jurisdiction to determine civil disputes after a winding up order is made.
The High Court concluded that the Winding-up Directive applied the Icelandic law on jurisdiction throughout the EEA, and the claim against Kaupthing was therefore prohibited from being pursued in the English courts and should instead be brought in the Icelandic courts.
The appellants submitted that the Winding-up Directive actually “seamlessly dovetailed” with the Lugano Convention, and that the Winding-up Directive should therefore be interpreted in a manner that did not override the allocation of jurisdiction governed by the Lugano Convention. They also submitted that the exclusive jurisdiction under Icelandic insolvency law only had domestic effect.
The Court of Appeal held that inserting such a limitation on the Winding-up Directive would create an ill-defined exception where citizens of one member state would be prohibited whilst those in other member states would only be limited by their own law. Briggs LJ stated that this would be contrary to the universal and unifying nature of the Directive.
In addition, the effect of Article 10 of the Winding-up Directive was to either incorporate the Icelandic law into English law for the relevant purposes, or to enlarge Icelandic territory to incorporate all contracting states. In either interpretation, the Icelandic law had effect to grant exclusive jurisdiction.
The Court of Appeal therefore unanimously dismissed the appeal in its entirety, and the claim against Kaupthing should only be pursued through the Icelandic courts.
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