28 February 2014
 EWHC 540 (Ch)
Companies Court (Etherton C)
When is a company’s property not its property?
The liquidators of Saad Investments (“SICL”), a Cayman company whose liquidation had been recognised in England under CBIR / UNCITRAL Model Law, sought declarations under s.127 of the Insolvency Act that the transfer by A-S to Samba of shares in various Saudi Arabian companies, title to which A-S apparently held as nominee on behalf of SICL, were void – such transfer having been made after the recognition in England of SICL’s Cayman winding-up. Samba, which for enforcement reasons was sued at its London branch, sought to stay the English insolvency claim on forum non conveniens grounds, arguing that the courts of Saudi Arabia were the more appropriate forum. Samba succeeded.
The key question in this s.127 claim was whether SICL had a proprietary interest in the shares. Thus, the “decisive” issue on the stay application was what law governed that question, since all the other factors in the case tended to point away from England. Etherton C concluded that, whether under common law conflicts principles or as a matter of the Hague Trusts Convention, the law which governed whether and on what terms A-S held the shares on trust for SICL was Saudi Arabian law. His primary reasoning was that ownership of shares is governed by the law of the place where the shares are situate – here, Saudi Arabia – and that that rule was preserved by Article 15(d) of the Hague Convention. Secondly, even under the Convention the conclusion would be the same: Saudi Arabian law was “the law with which the [alleged] trust is most closely connected”. This was all notwithstanding the fact that, as was common ground, Saudi Arabian law knew no such concept as the trust or beneficial ownership. In other words, the court invalidated what the parties were apparently trying to achieve by A-S holding the shares as SICL’s nominee: under the governing, Saudi Arabian, law SICL had no property in the shares at all.
Ownership of a company’s beneficially owned property may be held to be governed by a law which does not recognise trust / nomineeship concepts, and may therefore be unavailable to creditors in the event of the company’s liquidation.