A recently released decision of the Grand Court of the Cayman Islands clarifies the circumstances in which receivers appointed by foreign courts or by foreign governmental bodies may seek the recognition in the Cayman Islands.
In the matter of the Silk Road Funds Ltd (Unreported, 8 February 2018, Smellie CJ) examined the matters that the Court would consider when deciding whether to grant orders allowing recognition and enforcement of the functions and powers of receivers appointed by a foreign court.
The Court looked at the ways in which an officeholder could seek recognition and assessed them in light of the circumstances of their appointment. The main routes were: (i) Part XVII of the Companies Law; (ii) "Modified universalism"; and (iii) common law.
In this particular case, the Cayman Court considered that the common law route was the most applicable - the Companies Law route applied only where the officeholder had been appointed over a debtor for the purposes of a foreign bankruptcy proceeding, and the Court also took the view that "modified universalism" was also most relevant in the context of ensuring universality of insolvency and bankruptcy proceedings given their particular legal consequences, as opposed to a broader application to receiverships in general. In looking at the common law position, however, the Court considered that it was absolutely clear that it had inherent jurisdiction to recognise foreign receivers to act in keeping with the terms of their appointment, and set out the following tests to be applied when considering whether to exercise that jurisdiction:
- Has the company in respect of whose assets the receiver and manager has been appointed, been made a defendant in the action in the foreign court?
- Has the company in respect of whose assets the receiver and manager has been appointed, been incorporated in the country which appointed the receiver and manager?
- Would the courts of the country of incorporation recognise a foreign appointed receiver?
- Has the company carried on business in the jurisdiction of the appointment or is the seat of its central management and control located there?
These tests are a useful restatement of the factors that the Cayman Court will consider when deciding whether to recognise a foreign receivership, the central tenet being the need to demonstrate a sufficient connection between the defendant and the jurisdiction in which the receiver was appointed in order to justify recognition. If, however, recognition of a receiver could give effect to a penal, revenue or other public law of a foreign state, recognition of the Cayman Court would not be granted whether the above tests were satisfied or not.
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