- Without notice applications for recognition orders carry the obligation of full and frank disclosure to the English court in relation to the effect such orders may have on third parties.
- Failure to provide full and frank disclosure may have cost consequences.
The Applicant (Nordic Trustee A.S.A) chartered a vessel (the “Charter”) from the Respondent (OXG Petroleo E Gas S.A). The Respondent ran into financial difficulties and began to renegotiate the Charter and petitioned for judicial reorganisation under Brazilian law.
The Brazilian court approved the plan. As the renegotiation of the Charter was ongoing, it was not included in the planned debt restructuring. When the Respondent fell into arrears, the Applicant submitted a request for arbitration in accordance with the terms of the Charter.
The Respondent successfully applied to have the Brazilian judgement recognised under the Model Law on Cross Border Insolvency, the effect of which was to automatically stay existing or threatened proceedings. In applying for recognition, the Respondent failed to disclose that the Charter was not covered by the Brazilian reorganisation. The Applicant applied to set aside the order recognising the judgement.
The order recognising the Brazilian reorganisation was set aside. The judge emphasised the requirement of full and frank disclosure when applying for recognition of foreign proceedings if invoking the automatic stay would have an effect on third parties.
The court has discretion under article 20(6) of the Model Law to modify the stay from the outset. If a party knows that a stay would potentially affect proceedings then it has a duty to inform the court.
(1) Nordic Trustee A.S.A (2) OSX 3 Leasing B.C and (1) OXG Petroleo E Gas S.A (EM Recuperacao Judicial) (2) Pedro Moraes Borba, Paulo Narcelio Amaral and Julio Alfredo Klein jr EWHC 25 (Ch)