As part of the London International Disputes Week, Howard Kennedy hosted a panel discussion exploring the challenges which can arise when dealing with cross-border insolvency matters, and how best to plan ahead to counteract the impact those may have on successful recoveries.
Crispin Daly, who chaired the meeting, and fellow partner Rebecca Hume were joined on the panel by:
Ian Thompson – Senior Managing Director, FTI Consulting
Read our 3 takeaways from the session below.
1. The Need to Plan
Ian provided his insight, from a forensic accounting perspective, on initial planning and how to come up with an effective strategy early.
Planning is crucial at the investigation stage of a cross-border insolvency. There is perpetual risk of destruction of data from the outset and so it is important to consider what information may be available and in what form (e.g. hard copy evidence/papers, electronic files, information and data on personal devices such as WhatsApp, telegram and personal email).
The scenario being discussed involved an offshore bank. It was noted that working with central banks can be challenging and there are often involve political, territorial and bureaucratic issues which should be considered. To mitigate such difficulties, it is important to again identify the nature of the data the banks may hold, such as forensic copies of data, as well as hard copies and electronic data and documents.
While early planning to preserve and recover information and documentation is essential another key consideration that should not be overlooked is the collaboration between the legal team, private investigators and accountants. The panel discussed scenarios which they have encountered where it has been essential to work as a team across all relevant industries to achieve the best possible result for creditors.
How the investigation is budgeted is also a key consideration referenced by the panel. While it is difficult to budget at the outset of any matter the panel agreed that it is likely that investigations of this nature will be budgeted on a phased approach.
2. The Need to Coordinate and Collaborate
Working with counsel across different jurisdictions means that it is important for all teams to remain on the same page. It is vital that parties establish boundaries and put together a protocol on how the line of communication will work and how to coordinate the use of evidence to ensure efficient management and no duplication of costs.
It is key to consider how the documents will be collected and to remember that data protection is different in jurisdictions especially the law on electronic disclosure. Similarly, it is important that those working in your team understand how privilege works within the relevant jurisdictions.
Identifying the key targets is also crucial at the outset. It is advised that the team decide on who is taking the lead on coordinating and making sure everyone within that team has the information they need. It is also important to ensure that the client is not creating new documents that may be subject to disclosure. Finally, the team must consider the use of illegally obtained information and be aware how such information is viewed in different jurisdictions and how the relevant Court will treat it.
Key considerations for a team when considering potential targets / Defendants and third parties should include:
How litigious/sophisticated is the target;
Does the target have deep pockets?
Whether 'low hanging fruit' is available;
Does the prospective defendant face claims by competing creditors.
It was suggested that opening up a dialogue with competing creditors may be useful however it is important to ensure you are careful with what information is being shared and not to disclose information or documents that the potential claimant wants to keep privileged.
What further information can be obtained before commencing proceedings?
This will depend on the jurisdiction in which they are based, however the team could consider the use of tools such as Seal and Gag Orders Norwich Pharmacal Orders, and utilising tools to alert them to any other active litigation against targets which may result in public disclosure of useful information.
3. The Need to Identify the Best Field of Battle
This element of the discussion was led by Andrew Shaw and focused on next steps once initial investigations have been concluded and the team has gathered as much information as possible to support potential claims.
Andrew highlighted the need for Counsel be involved in cross-border proceedings of this nature at an early stage. It is important the client has a well-articulated claim with a key consideration of who is the Defendant and what is the cause of action.
The team need to consider what information they already have, what information is available and what other information needs to be obtained to establish cause of action. Tracing assets and where the information is located is important for this part of establishing the claim. Pre-action interim proceedings to obtain further information such as Norwich Pharmacal Orders and Bankers Trust Orders should be considered if appropriate.
Within an insolvency context there is also the possibility of an office holder being appointed over a connected company if that company is also in financial distress, which opens up the option for the administrator or liquidator to exercise their powers under S.236 of the Insolvency Act 1986 and gather further information from a number of sources.
Again, careful consideration should be given to who the target of any proceedings is before they are commenced. The team will need to identify who is holding potential assets, if any third parties may have a proprietary claim to recoverable assets, or whether the company can assert such a claim (opening additional avenues for recovery such as a proprietary injunction).
For any cross-border matter jurisdiction of any proceedings will need to be discussed and advice sought early on. While English officeholders may prefer proceedings to be commenced in the English Courts, it is important to remember litigation in England can be lengthy, and even urgent applications such as freezing orders may not be dealt with before assets are moved or dissipated. The team should consider options available in all relevant jurisdictions, even if those are only for interim applications / proceedings. There is also the risk that targets will challenge proceedings brought in England if another jurisdiction would be more appropriate or they can argue Forum non conveniens.
Recording of the panel discussion
If you missed our panel discussion, or would like to watch it again, it's not too late! You can find a recording of the discussionhere.
Want to hear more from us? 
