A recent decision of the Privy Council in Stichting Shell Pensioenfonds v Krys and another (British Virgin Islands) [2014] UKPC 41 clarifies a liquidator's authority in relation to anti-suit injunctions and provides guidance as to what amounts to a submission to the jurisdiction within the liquidation process.

The case arose out of the liquidation of Fairfield Sentry ("Fairfield"), a BVI feeder fund of the collapsed Madoff fund. Fairfield Sentry had assets in its own name at a Dutch bank account in an account in Ireland ("the bank account"). The appellant (Shell), a Dutch pension fund which had bought shares in Fairfield, was granted conservatory attachments (security for a claim before judgment) over Fairfield's assets, being the cash balance of US$71 million held in the bank account. The effect of the attachments was that, if Shell succeeded in its substantive claim in the Dutch courts (for breach of representations and warranties) Fairfield would be able to satisfy its judgment debt in full ahead of other creditors in the BVI liquidation process.

Shell, however, had also submitted a proof of debt in the liquidation of Fairfield in the BVI. Accordingly, in contrast to the other creditors who had claims in the liquidation who could only recover a dividend, Shell was seeking to gain a priority over the funds in the account via direct enforcement overseas, but hedging bets with respect to a claim within the liquidation process alongside other creditors.

The liquidators of Fairfield applied to the BVI Court for an anti-suit injunction to restrain Shell from enforcing the attachments. The liquidators were unsuccessful at first instance but succeeded on appeal. Shell subsequently appealed and the matter was heard by the Privy Council on 26 November 2014.

The Privy Council considered two factors: (a) whether Shell had submitted to the BVI Court's jurisdiction and (b) whether it was appropriate to prevent a foreign litigant from utilising remedies available to it from the court of its own country.

In relation to the first issue the board determined that Shell had submitted to the BVI Court's jurisdiction by defending the anti-suit proceedings and submitting a proof of debt in the liquidation proceedings.

In relation to the second issue they found no basis for a distinction between domestic and foreign claimants. Accordingly, there was no principle which prevented the anti-suit injunction from being enforced against a foreign litigant, Shell. It found there was an underlying public interest in enabling a single court, in the place of incorporation of a company, to conduct an orderly winding up of its affairs on a worldwide basis. Consequently, when a party has submitted to the jurisdiction of the Court and it brings foreign proceedings which will interfere with the assets of the insolvent company, an injunction may be available to restrain those proceedings irrespective of nationality or residence.

Accordingly, the Privy Council dismissed the appeal and upheld the anti-suit injunction.

This case makes it clear that liquidators can feel certain that, in relation to creditors over which the Court has in personam jurisdiction, the option of an anti-suit injunction is an available remedy to consider where the creditor is using its home court to interfere with the liquidation process. Further, creditors should give consideration before submitting a proof of debt in an insolvency as this will be considered as a general submission to the jurisdiction. We suggest this is indeed the fairest way to create the level playing field of creditors within the central liquidation process. If creditors could reserve their space in the queue of distribution while at the same time try measures to bypass the queue altogether, it would drive a coach and horses through any sense of cross-border cooperation in respect of orderly distributions.

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