Supreme Court of Gibraltar recognises United States Chapter 11 bankruptcy proceedings as a foreign main proceeding.
Peabody Energy Corporation ("Peabody"), based in St. Louis, Missouri, is the world's largest private-sector coal company with operations in the US and Australia. Peabody has a large number of subsidiaries, owns 28 coal mines and has reserves of around 6.3 billion tons of coal. However, due to the slow collapse of the coal industry over recent years, Peabody's position has become increasingly precarious. The corporation's first-quarter results for 2016 revealed their losses to be running at over $100m a month, so perhaps unsurprisingly Peabody (along with its 153 subsidiaries) filed for Chapter 11 bankruptcy on 13 April this year.
As one of Peabody's many subsidiaries, Peabody Holdings (Gibraltar) Limited ("the Company") also filed for Chapter 11 bankruptcy. Its only asset is shares in another company called Peabody Investments (Gibraltar) Limited.
A few days after Peabody's Chapter 11 bankruptcy was filed, the Company's foreign representative applied to the court in Gibraltar for recognition of Peabody's Chapter 11 bankruptcy proceedings as the main insolvency proceedings the purposes of the Insolvencies (Cross Border Insolvencies) Regulations 2015. These Gibraltarian regulations, similar to the Cross-Border Insolvency Regulations in the UK, give effect to the UNCITRAL model law on cross border insolvency.
Judge Jack, in hearing this application at the Supreme Court of Gibraltar, was tasked with establishing whether the Company's centre of main interest ("COMI") lay in the US or Gibraltar. Only if the Company's COMI was found to be in the US would the definition of "foreign main proceeding" be applicable and accordingly there would be an automatic stay.
Judge Jack considered the judgments of several similar cases in coming to his conclusion and it was Interedil SRL that proved most applicable. In that case, the court held that "…a debtor company's main centre of interests must be determined by attaching greater importance to the place of the company's central administration, as may be established by objective factors which are ascertainable by third parties".
Accordingly, evidence was presented to show that half of the Company's directors are based in Missouri, the Company's head office functions are operated from Missouri, and all operational decisions stem from discussions that take place in Missouri. Furthermore, the Company had only been incorporated in Gibraltar for fiscal purposes. The Court therefore held that the Company's COMI was indeed in Missouri, and that the Chapter 11 bankruptcy proceedings should be treated as foreign main proceedings.