Key points

  • Section 236 (inquiry into company’s dealings) does not have extra-territorial effect
  • Section 237(3) (examination) only has extra-territorial effect where appropriate machinery exists in the foreign jurisdiction
  • Taking of Evidence Regulation not available where litigation not commenced or contemplated

The facts

Shortly after MF Global (“MFG”) went into administration, UK and French LCH.Clearnet‎ entities closed out MFG’s open positions as a result of which very large losses were suffered by MFG.

Concerned about the extent of the losses, the administrators applied for an order under s236 for the production of documents and an explanation by way of witness statement as to the sale/auction process‎ which the LCH entities followed. Alternatively, the administrators sought an order under s237(3) that the English court issue a request under the provisions of the Taking of Evidence Regulation (EC No. 1206/2001) (the “Regulation”) for an examination of appropriate officers of LCH France.

LCH France opposed the application on grounds that s236 does not have extra-territorial effect and therefore the English court lacked jurisdiction to make such an order against a French entity. Further LCH France argued that the Regulation did not apply in the circumstances.

The decision

The court held, relying primarily on the CA decision in Re Tucker, that s236 does not have extraterritorial effect. Consequently, no order could be made against LCH France.

In relation to the examination provisions of s237(3), the court held that while it had jurisdiction to make an order against a French entity, there must be appropriate legal procedural machinery in France pursuant to which LCH France could be compelled to comply with the order.

A request could only be made if evidence were intended for use in proceedings “commenced or contemplated”. As the administrators were only at a fact finding stage, the Regulation was not available.

Comment

The decision brings further clarity on the position in relation to s236, albeit by restricting its scope.

Re MF Global UK Ltd