2 March 2021
R&I update – March 2021 – 2 of 5 Insights
On 11 February 2021, the English High Court confirmed in gategroup Guarantee Limited that restructuring plans are insolvency proceedings so are not covered by the Lugano Convention.
One of the debt instruments subject to the gategroup restructuring plan contains an exclusive Swiss court jurisdiction clause. Under the Lugano Convention, proceedings relating to "civil and commercial matters" must generally be brought in the jurisdiction benefitting from the exclusive jurisdiction clause.
If, however, restructuring plans are insolvency proceedings and fall within the "bankruptcy exception" to the Lugano Convention, then the English High Court would have jurisdiction to sanction the plan.
In marked contrast to the generally held view that schemes of arrangement are civil and commercial matters, the court held that restructuring plans contain all the elements of insolvency proceedings and are outside the scope of the Lugano Convention. In particular, they are:
This judgment draws a clear line between restructuring plans and schemes of arrangement. Although the UK is no longer a party to the Lugano Convention post-Brexit, if it is permitted to accede, potentially different recognition rules apply to restructuring plans and schemes raising additional considerations in deciding which process to use.
To discuss recognition issues or the practical steps to consider in the restructuring plan process, please reach out to a member of our Restructuring & Insolvency team.