- Court cannot grant relief under the UK Cross Border Insolvency Regulations 2006 (CBIR) where it could not provide such relief in a domestic insolvency.
- Even if such option were possible, court would not do so where a contract is governed by English law.
- Possibility of effectively applying provisions of foreign law under the CBIR restricted.
Pan Ocean Co. Limited ("Pan Ocean"), a Korean shipping company, entered into shipping contracts with Fibria Celulose S/A ("Fibria") which provided that either party could terminate on the insolvency of the counterparty.
Rehabilitation proceedings were commenced in Korea in respect of Pan Ocean following which Fibria served a termination notice on Pan Ocean.
The Korean administrator sought recognition of the proceedings in England under the CBIR and relief under Article 21 that Fibria be restrained from terminating the contract given that such provisions were void under Korean law. In essence the court was asked to apply substantive provisions of Korean law.
The Korean administrator's application was refused. Given such clauses were valid under English law, restraining termination would be providing assistance that it would not be able to provide in a domestic insolvency which the Court did not consider was within the scope of Article 21. Further, even if relief of this nature were possible, the court would have declined to do so as the contract was expressly governed by English law.
While marking a contrast to the approach taken by the US courts under the equivalent provision of the US Bankruptcy Code, it appears that any hope of being able to apply foreign law (or achieve the same result) under the CBIR has been dashed. Permission to appeal has been granted.