International Law

US Receiver Not Recognized As Proper Party In Foreign Proceeding

By Rick Rein

In the Antiguan liquidation of Stanford International Bank, the Court of Appeal has significantly limited the ability of a US receiver from pursuing claims in a foreign country. In In Re Stanford International Bank, SI 2006/1030, the court was faced with two issues: 1) what constituted a main proceeding under the Cross Border Insolvency Regulations 2006 ("CBIR") and 2) whether the an SEC receiver has standing to proceed in a foreign insolvency proceeding.

The Court decided that the Antiguan liquidation was a foreign proceeding. It is presumed that the debtor's registered office is the center of the debtor's main interests, which should correspond to the place where the insolvency is brought. Such presumption can only be rebutted by objective and ascertainable factors.

The Court further decided an SEC receivership would not result in a foreign proceeding because such a receivership had nothing to do with insolvency and was for the benefit of investors and not creditors. Consequently, the US receivership did not possess the necessary characteristics under CBIR to be a foreign proceeding and the US receiver was not a foreign representative, who could initiate a foreign proceeding.

Here, there was a liquidation in place in Antigua and the order appointing the SEC receiver did not include language permitting or referring to distribution of assets and that such distribution would benefit creditors. If the order had been drafted differently, the standing issue might have been overcome.

Full post as published by International Asset Recovery Law Blog on May 14, 2010 (boomark / email).