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14 December 2012
In Interdevelco Limited v Waste2energy Group Holdings Plc (October 10 2012) the Isle of Man High Court has declined to accept jurisdiction over the winding up of a Manx company because of other material insolvency proceedings in the United States.
In a recent decision Deemster Doyle, the Isle of Man's first deemster, considered forum non conveniens (ie, that proceedings should be conducted in the most convenient or natural forum) and the principle of universalism in cross-border insolvency matters.
The deemster held that:
"In simple terms, the principle of universalism in Manx law provides that personal and corporate insolvency should be unitary and universal. There should be a unitary insolvency proceeding in the appropriate lead jurisdiction which receives worldwide recognition and applies universally to all of the insolvent's assets. The assets of the insolvent entity should be distributed to creditors under a single universally applicable system of distribution."
An Isle of Man company, being part of a corporate group which had considerable connections and activity in the United States and party to proceedings in the US bankruptcy courts, was the subject of winding-up proceedings in the Isle of Man.
The claimant sought to wind up the defendant company under the laws of the Isle of Man. The defendant applied to the court, seeking a declaration that the court should not exercise any jurisdiction it may have to try a claim for the winding up of the defendant in the Isle of Man and an order setting aside the claim form and service thereof.
The claimant, a Guernsey company, argued that the United States had substantially less connection to the parties than the Isle of Man. Further, as the company was incorporated in the Isle of Man and its governing law was clearly Manx law, the Isle of Man court had to determine as to whether the company could and should be wound up. The claimant argued (applying well-known Spiliada principles) that the Isle of Man was the natural forum, and that the court should thus retain its jurisdiction and hear the case.
The defendant, however, argued that, relying upon the Privy Council decision in Cambridge Gas Transportation v Navigator Holdings (PLC  UKPC 26), the principle of universality ought to apply. This principle dictates that there ought to be one insolvency proceeding under which all creditors' claims can be collectively assessed and administered. Further, the commercial necessity for international cooperation between courts in matters of cross-border insolvency has long been recognised, together with the need for the common law to develop and change to meet these necessities. While it was not denied that the Isle of Man court had jurisdiction to wind up the defendant, the court was urged to exercise its discretion and decline to exercise its jurisdiction on the basis of forum non conveniens.
While holding that the court clearly had jurisdiction to wind up the defendant, by virtue of its incorporation in the Isle of Man, the court determined that in this case it would decline to exercise its jurisdiction by taking account of forum non conveniens factors and the principle of universalism, and exercising its discretion in all circumstances of the case.
The deemster concluded that the evidence showed that the most appropriate forum was the United States and declined jurisdiction. He commented:
"An unnecessary duplication of substantive insolvency proceedings in more than one jurisdiction is undesirable. It inevitably involves further delay, expense and inconvenience. The substantive insolvency proceedings should be confined to one jurisdiction with other courts worldwide, where necessary, acting in an ancillary capacity and recognising and assisting the jurisdiction of the primary court in an orderly progression and conclusion of the substantive insolvency proceedings."
This is another example of the Isle of Man court's determination to take a global view in accordance with the principles of comity. The first deemster, in this judgment, quoted the words of the former justice of the Australian High Court, Michael Kirby, that we should see "the challenges of our time through the world's eye". The deemster also quoted the Roman poet Terentius: "I am human and nothing human is foreign to me."
The court stated that in today's global community, it should approach matters as an internationalist, rather than in a parochial way. This is supportive of the trend towards international assistance.
Each case will be decided on its merits. Jurisdictional cases are particularly fact sensitive – hence the need for comprehensive evidence. The court recognised that it has jurisdiction over an Isle of Man company but, proving that some legal principles stand the test of time, the deemster reminded himself of the words of Deemster Christian in Garrett v Curphy (December 20 1839), in respect of the jurisdiction of deemsters, when he said that "we must take care not to transgress the limits of the jurisdiction".
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John T Aycock