On 19 May 2014, the Supreme Court (Lords Neuberger, Reed and Toulson) rejected Kaupthing Bank’s application for permission to appeal against the Court of Appeal’s judgment in Isis v Kaupthing Bank h.f. & Elfar Adalsteinsson  EWCA Civ 1493. David Lascelles acted for Mr Adalsteinsson (led by Charles Samek QC) in successfully resisting the application. David and Charles were instructed by LOGOS Legal Services.
This leaves the Court of Appeal’s decision as the definitive judgment on the meaning and scope of “lawsuits pending” in Article 32 of the EC Directive on the Reorganisation and Winding Up of Credit Institutions (Directive 2001/24/EC).
In its judgment, the Court of Appeal confirmed that the phrase refers to the whole of the lawsuit and not just the claims brought by the Claimant against a Defendant. Further, the Court confirmed that an additional claim under CPR Part 20, once allowed, is part and parcel of the existing proceedings.
Click here for The Court of Appeal’s judgment.
The decision is of significance to parties litigating in the face of one party’s insolvency in another EEA state in particular where new claims are sought to be brought against the insolvent party, after the date of insolvency, within proceedings commenced prior to that date.
The general rule under the Directive is that the law of the Member State of the insolvency applies throughout the EEA. However an exception provides that the effect of winding up proceedings on a pending lawsuit shall be governed by the law of the Member State in which the lawsuit is pending. Analogous rules apply under the Insolvency Regulation in relation to non-credit-institutions.
The underlying proceedings in Isis relate to £130million proceeds of the sale of Somerfield supermarket. Mr Adalsteinsson and the other Icelandic investors he represents were clients of Kaupthing and had invested in the Somerfield transaction through the claimant company, Isis Investments.
The proceedings in England were ongoing prior to Kaupthing’s much publicised insolvency in Iceland. After the insolvency, Mr Adalsteinsson sought permission to bring Part 20 claims including of unlawful means conspiracy against its co-defendant, Kaupthing Bank. Kaupthing contended that the effect of the Directive was that its insolvency in Iceland precluded the English Court from having jurisdiction to grant permission Mr Adalsteinsson.
The Court of Appeal rejected Kaupthing’s contention. It held that the term “pending lawsuit” refers to the entirety of the proceedings in question, not just a part of it. Accordingly, it held that the law of the Member State where the lawsuit is pending (here English law) will determine all matters concerning the effect of the winding up, including procedural questions such as how the proceedings should continue which included whether or not it is appropriate for a party to existing proceedings to be allowed to raise an additional claim against the insolvent company.
The Court of Appeal therefore rejected Kaupthing’s appeal, upholding the decision of Asplin J at first instance in Mr Adalsteinsson’s favour, and awarding him his costs.
The Supreme Court rejected the application for permission to appeal expressly on the basis of the submissions drafted by David and Charles. They further refused an application for the matter to go to the Court of Justice of the European Union.