Cross-border insolvency: German administrator granted recognition under English law

The England and Wales High Court of Justice (Chancery Division) has delivered an important decision on cross-border insolvency recognition and assistance. In Schmitt v Deichmann & Ors [2012] EWHC 62 (Ch), Justice Proudman dealt with an application by a German administrator for recognition under the English common law and authority to exercise powers afforded to licensed insolvency practitioners under the Insolvency Act 1986 (the Act).

Her Honour held that the court has inherent common law jurisdiction to grant recognition to a foreign administrator, and to permit the statutory power under section 423 of the Act (to set aside transactions entered into at an undervalue for the purpose of defrauding creditors) to be applied where a foreign administrator does not fall within the express scope of the Act.

This case demonstrates that an administrator may need to consider provisions beyond its home jurisdiction in insolvency claims of a cross-border nature. The case also acknowledges that Australia is a 'relevant country or territory' for the purposes of section 426 of the Insolvency Act. This means that Australian administrators should be able to rely on the statutory provisions in the Act, rather than on the court's inherent common law jurisdiction.