This article was written by Bird & Bird partner Richard Keady and trainee Jay Qin, and was first published in the ASIAN-MENA COUNSEL magazine (Volume 10, Issue 9, 2012/13). For more information about this publication visit www.inhousecommunity.com.
Rubin v Eurofinance: a return to common sense
In a recent landmark ruling, the UK Supreme Court deliberated on the question of whether an overseas defendant had to have submitted to the jurisdiction under common law before a foreign bankruptcy order would be recognised and enforced in England. Richard Keady and Jay Qin of Bird & Bird consider the practical implications of the decision and the significance it may have on practitioners going forward.
On 24 October 2012, the United Kingdom Supreme Court (UK Supreme Court) handed down its highly anticipated decision in respect of the enforceability of foreign judgments arising from two conjoined appeal cases of Rubin v Eurofinance S.A.  UKSC 46 and New Cap Reinsurance Corporation v Grant  EWCA Civ 971.
The UK Supreme Court decision reversed the previous Rubin v Eurofinance Court of Appeal (CA) decision which altered the long standing position that a foreign court would not enforce a judgment in personam if the defendant has not submitted to the jurisdiction.
The Court of Appeal decision in Rubin was based upon the Privy Council decision in Cambridge Gas Transportation Corp v.Official Committee of Unsecured Creditors of Navigator Holdings plc  UKPC 26 in which it was held that bankruptcy judgments were different from judgments in personam or in rem because the purpose was not to determine the existence of rights but to provide a mechanism of collective execution by a creditor against the property of a debtor and thus formed a new category of cases.
The heart of the issue
The main issue in the conjoined appeals before the UK Supreme Court was whether or not in the situation where the defendanthad not submitted to the jurisdiction of the primary overseas court and was not subject to the in personam jurisdiction of the court, the English courts would recognise and enforce any insolvency orders under common law.
In Rubin, a U.S. bankruptcy court made orders for the recovery of fraudulent transfer of funds which were made to individuals involved in a sales promotion scam. The defendants were residents of England, and took no part in the U.S. proceedings. Default and summary judgment were subsequently entered against them. The English proceedings sought to enforce the U.S. judgment against the individuals. In New Cap Reinsurance, an Australian reinsurance company went into insolvent liquidation in the territory. A judgment was obtained in Australia by the liquidators against a Lloyds syndicate to whom significant payments had been made, shortly before liquidation, under a commutation agreement. The liquidators sought to enforce the judgment in England.
Supreme Court decision
In a 4 – 1 decision, the UK Supreme Court allowed the appeal in Rubin and dismissed the appeal in New Cap. The UK Supreme Court reversed the previous CA Rubin decision holding that there was no reason to class avoidance judgments relating to insolvency proceedings any differently to any other type of foreign judgments and thus restated the applicability of traditional common law rules on the enforcement of foreign judgments to insolvency orders.
The situation post-Rubin is now clear. In order to enforce foreign insolvency orders in England at common law, the foreign office holder must show that the judgment debtor:-
1. was present in the foreign jurisdiction at the time of when the proceedings were instituted; and
2. was the claimant or the counter–claimant in the foreign proceedings; and
3. had submitted to the foreign proceedings by appearing voluntarily; or
4. had submitted to the foreign proceedings by agreement.
As such, the appeal in New Cap failed because the Lloyds syndicate,by filing a proof of claim in the Australian liquidation and participating in the process, was held to have in fact submitted to the jurisdiction of the Australian court and thus the Australian judgment was enforceable under common law rules. The Lloyds syndicate, by its participation in the liquidation proceedings, had sought to benefit from the process, and as such it should also be subject to the burden of compliance with orders made in the proceedings.
In reaching its decision, the UK Supreme Court also held that the decision in Cambridge Gas had been wrongly decided and that such changes to settled law should be made by the legislature and not the courts.
Two key principles which emerged from the Rubin and New Cap judgment are: (i) that enforcement of insolvency proceedings will be treated in the same manner as any other foreign judgment, and (ii) participation in foreign insolvency proceedings (for example, submitting proof of debt or attendance at a creditor’s meeting) is likely to be sufficient in determining that a party has submitted to the foreign court.
The decision re-asserts the importance of territorial limits in respect of insolvency proceedings and clarifies the common law position on enforceability of foreign judgments. Although the decision of the UK Supreme Court is not binding in Hong Kong, it will surely nevertheless be persuasive. The judgment arising from the conjoined appeals of Rubin and New Cap will be of importance not only to practitioners seeking to enforce foreign judgments in Hong Kong but will also be of significance to those seeking enforcement of Hong Kong judgments outside the territory.