In recent years, several foreign companies have used the English law scheme of arrangement as a flexible restructuring method to compromise creditor claims. The decision of the High Court in the latest of these cases, that of the German company Rodenstock GmbH, clarifies that an English court will accept jurisdiction where the only connection to England is that the company’s finance documents were governed by English law.
Rodenstock had no establishment or assets in the UK, and its centre of main interests was in Germany. Faced with a worsening financial situation and breaches of its financial covenants, the company sought an English scheme of arrangement to achieve a restructuring. A minority of lender creditors objected on the basis that the English court did not have jurisdiction to hear the application to sanction the scheme.
Previous cases have established that it is necessary to show a “sufficient connection” with England to allow an English court to sanction a scheme. The High Court concluded that the scheme should be sanctioned on the basis of the choice of English law and exclusive jurisdiction clause contained in the company’s facilities agreement. This underlines the usefulness to borrowers of English law and English governing law and jurisdiction clauses in finance agreements.