Post-Brexit Divergence In Cross-Border Insolvency Recognition And Its Impact On Arbitration
1. Background: Brexit and Cross-Border Insolvency
Pre-Brexit
The UK was part of the EU Insolvency Regulation (Recast) (EU 2015/848).
Insolvency proceedings in one member state were automatically recognised across the EU.
Example: A UK liquidation was automatically recognised in France or Germany, and vice versa.
Post-Brexit
After 31 December 2020, the EU Insolvency Regulation no longer applies between the UK and EU.
Recognition of foreign insolvencies in the UK is now under the UNCITRAL Model Law, via the Cross-Border Insolvency Regulations 2006 (CBIR).
Recognition of UK insolvency in EU countries depends on domestic laws of each EU state, often requiring separate court procedures.
Impact: Increased fragmentation, potential parallel insolvencies, delays, and higher costs.
2. Key Case Laws in the UK
A. Recognition of Foreign Insolvencies in the UK
Re Sturgeon Central Asia Balanced Fund Ltd (2020)
Court: English High Court
Principle: Only insolvency proceedings involving a financially distressed debtor qualify for recognition under the Model Law.
Significance: Solvent winding-ups are not recognised under CBIR.
Almeqham v Al-Sanea & Ors (2024)
Court: English High Court
Principle: Recognition under CBIR does not automatically vest immovable property in a foreign liquidator.
Significance: Specific relief must be sought to deal with immovable assets.
Servis-Terminal LLC v Drelle (2025)
Court: Court of Appeal (England)
Principle: Foreign insolvency judgments must be recognised in the UK before they can support bankruptcy or winding-up petitions.
Significance: Recognition alone is not enough; enforceability must be ensured.
Re Greensill Bank AG (2021)
Court: English High Court
Principle: German insolvency proceedings were recognised under the Model Law.
Significance: Shows that non-automatic recognition via CBIR is possible post-Brexit.
Antony Gibbs & Sons v La Societe Industrielle et Commerciale des Metaux (1890)
Court: Court of Appeal (England)
Principle: A foreign insolvency discharge does not release obligations governed by English law.
Significance: The “Gibbs rule” limits the effect of foreign insolvency judgments on English law obligations.
Re HIH Insurance Ltd (2001)
Court: English High Court
Principle: Recognition of foreign proceedings under the CBIR can stay domestic claims if necessary to preserve the integrity of the foreign proceedings.
Significance: Shows how UK courts balance domestic creditor rights with foreign insolvency recognition.
3. Impact on Arbitration
A. Jurisdiction and Enforcement
Arbitration awards continue to be recognised under the New York Convention, independent of EU rules.
However, insolvency proceedings may stay arbitration, delaying enforcement of awards.
B. Insolvency vs Arbitration Rights
Insolvency laws focus on collective creditor interests, whereas arbitration emphasises party autonomy.
Courts may prioritise insolvency proceedings, potentially overriding arbitration agreements.
C. Recognition Risks
Post-Brexit, awards involving insolvent parties with assets in multiple jurisdictions may face enforcement challenges, especially if local courts require formal recognition of insolvency proceedings first.
D. Example Principles from Case Law
In cases like Servis-Terminal LLC v Drelle, an unrecognised foreign insolvency cannot be used to enforce arbitration claims, highlighting interactions between insolvency recognition and arbitration.
4. Practical Consequences
| Issue | Pre-Brexit | Post-Brexit |
|---|---|---|
| Recognition of EU insolvencies in UK | Automatic under EU Regulation | Non-automatic under CBIR / UNCITRAL Model Law |
| Recognition of UK insolvencies in EU | Automatic | Subject to domestic EU laws |
| Arbitration enforcement | Stable | Still under New York Convention, but impacted by insolvency proceedings |
| Risk of parallel insolvencies | Low | Higher due to fragmented recognition |
| Procedural delays | Minimal | Significant, due to court applications and recognition hurdles |
5. Key Takeaways
Brexit ended automatic cross-border recognition of insolvency judgments between the UK and EU.
The UK now relies on the CBIR/UNCITRAL Model Law, while EU states apply domestic rules.
Recognition is non-automatic, especially for immovable assets or complex cross-border debt.
Arbitration remains viable but may be limited or delayed due to insolvency proceedings.
Historic common law principles, like the Gibbs rule, continue to guide recognition and enforcement.
Case law shows courts balancing recognition, enforcement, and creditor protection, which must be factored into arbitration strategy.
RELATED Blog
comments