Summary

Court direction on release of funds to the Luxembourg liquidators of the Bank of Credit and Commerce ('BCCI') for distribution to creditors and the court's refusal to disapply Insolvency Act 1986 set-off rules.

Facts

Application by the English liquidators of Bank of Credit and Commerce International SA ('BCCI') for directions as to whether English liquidators should make provision for various matters before: (i) releasing funds already held in the central pool to the Luxembourg liquidators of BCCI for payment of dividends to creditors; and (ii) transmitting to the Luxembourg liquidators funds representing the proceeds of realisations made by the English liquidators. The English liquidators also sought directions authorising them to pay out of the sums they retained certain limited dividends at the same time and at the same rate as dividends paid by the Luxembourg liquidators. The application raised the question as to whether and to what extent the court could disapply r.4.90 Insolvency Rules 1986 in order to allow the rules of Luxembourg insolvency regarding set-off to apply.

Held

Rule 4.90 could not be disapplied for one class of creditors/debtors but not for another class. The rule applied in the English winding up and must be given effect. The question of what, if any, retentions should be made by the English liquidators to protect the positions of net creditor or net debtors must be answered on that footing. His Lordship then dealt with the Pooling Agreement, net creditors and net debtors, claims and admission procedures, the Deposit Protection Board and the Scottish and Isle of Man branches of BCCI. The insolvency regimes in Scotland and the Isle of Man had similar set-off rules to r.4.90. Net creditors in these jurisdictions should be dealt with in the same way as net creditors who have proved in England. If the English liquidators were to make provision for the Scottish and Isle of Man creditors, the assets collected in Scotland (#5 million) and the Isle of Man (#20 million) ought to be transmitted to the English liquidators. The claims in both jurisdictions should be transmitted to Luxembourg as soon as was possible so that those which did not raise difficulty could be accepted in Luxembourg and the provision to be made by the English liquidators could be limited accordingly.

Directions accordingly.