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Manx Judge Clarifies Jurisdiction In Bankruptcy Case

Thursday, October 18, 2012

The Isle of Man's High Court of Justice has issued a ruling which clarifies to what extent Manx jurisdiction will be applied in cases involving multi-jurisdictional Manx businesses under solvency proceedings in other nations.

The defendant - Waste2Energy Group Holdings, a company incorporated under the laws of the Isle of Man, is part of a group of companies whose main centre of interests was in America and over which an American Chapter 11 trustee had been appointed by the United States Bankruptcy Court for the District of Delaware.

The claimant, Interdevelco Limited, a potential creditor of the defendant registered in Guernsey, had applied in the Isle of Man for the defendant to be wound up in the Isle of Man according to Manx law. However, in turn, the defendant applied for a declaration that the court should not exercise any jurisdiction it might have to try the claim for the winding up of the defendant in the Isle of Man.

In delivering his judgement that the principal insolvency proceedings should be in the United States, Deemster David Doyle cited three previous similar cases involving Manx law. The Deemster said there was no sense in having separate substantive winding up proceedings in the Isle of Man. Indeed, he opined that such duplication would cause additional and unnecessary expense, delay and inconvenience. The Deemster accordingly made a declaration that the court should not exercise the jurisdiction it had to try the claim.

The Deemster said: "There should in the circumstances of this case be one unitary and universal insolvency based in the US; the jurisdiction with which the group of companies including the defendant have close connections or to put it in other words 'the centre of their main interests' or their 'nerve centre'. The defendant and the other companies do not have any real substantive connection with the Isle of Man. They are simply incorporated here."

He continued: "That simple formal fact should not prevent the well advanced insolvency proceedings in the US from proceeding to their conclusion without additional substantive insolvency proceedings being commenced in the Isle of Man. There is nothing in Manx law or Manx public policy that requires this court to disregard the proceedings before the US Bankruptcy Court. This court should not seek to unravel or duplicate all the good work done by the US Bankruptcy Court."

"If the Claimant is a genuine creditor of the defendant then it should have nothing to fear from the proceedings before the US Bankruptcy Court which like insolvency proceedings in all sophisticated jurisdictions are designed to assist genuine creditors to obtain a fair share of the assets. The insolvency proceedings in this case should be permitted to proceed in the US. There is no need for additional substantive winding up proceedings to take place in the Isle of Man," the Deemster concluded.