Three former managers of a Russian company sought security for costs from its liquidator in respect of hearings to set aside a recognition order obtained by the liquidator pursuant to the Cross-Border Insolvency Regulations 2006 (the CBIR) and for documents pursuant to Section 236 of the Insolvency Act 1986.
- The objective of the CBIR is to promote efficient and cost-effective cross border insolvencies via automatic recognition of foreign insolvency proceedings. The Court was concerned that an order granting security for costs would frustrate that aim in opening the floodgates to future challenges.
- The facts of the liquidation here, however, were so idiosyncratic as to confine security for costs to limited situations where there was a public policy argument against recognition pursuant to the CBIR.
- The Court, therefore, granted security for costs: the liquidator had no assets in the jurisdiction, it would be impossible to enforce an order for security for costs in Russia and the liquidator had sufficient funds that such an order would not stifle participation in the hearings.
The case is useful is confirming the Courts’ commitment to the efficiency and harmonisation of cross-border insolvency under the CBIR. It was only when the Court was convinced that the granting of security for costs here could be confined to its facts – on the basis of a public policy objection to recognition – that it was prepared to make the order.