Vietnam Shipbuilding Industry Groups

JurisdictionEngland & Wales
CourtChancery Division
JudgeMr Justice David Richards
Judgment Date25 June 2013
Neutral Citation[2013] EWHC 2476 (Ch)
Date25 June 2013
Docket NumberCase No: 3992/2013

[2013] EWHC 2476 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

The Rolls Building

7 Rolls Buildings

Fetter Lane

London

EC4A 1NL

BEFORE:

Mr Justice David Richards

Case No: 3992/2013

In the Matter of:

Vietnam Shipbuilding Industry Groups

And in the Matter of

MR TOM SMITH (Instructed by Mayer Brown International LLP) appeared on behalf of the Applicant

Approval Judgment

Digital Transcript of Wordwave International, a Merrill Corporation Company 165 Fleet Street, 8th Floor, London, EC4A 2DY Tel No: 020 7421 4046 Fax No: 020 7422 6134 Web: Email: (Official Shorthand Writers to the Court)

Mr Justice David Richards
1

This an application under s.896 of the Companies Act 2006 made by Vietnam Shipbuilding Industry Group for an order convening a meeting of scheme creditors (which is a term defined in the scheme and to which I shall shortly refer) for the purposes of considering, and if thought fit, approving a proposed scheme of arrangement between the Company and the scheme creditors.

2

The Company is incorporated in Vietnam and is wholly owned by the Government of Vietnam. It is, as its evidence before the Court shows, insolvent and it has defaulted on a number of occasions in the payments due under a facility agreement governing loan facilities totalling US$600m. It is in the process of a restructuring affecting both the loan facilities and its other liabilities.

3

The proposed scheme of arrangement concerns only the lenders under the facility agreement. Put very shortly, the effect of the scheme, if approved, will be to replace the existing claims of lenders against the Company and against guarantors, which are companies within the same group, with notes to be issued by a State-owned entity, which will be guaranteed by the Government of Vietnam, waiving for this purpose sovereign immunity. The replacement notes will have a maturity date some years after the maturity dates of the current loans and will carry interest payable on a rolled-up basis at maturity.

4

The Company is a shipbuilding enterprise on a very significant scale. The downturn in global shipping demand has led to the current financial circumstances of the Company.

5

The Company has no connection with England, so far as the evidence discloses, except that the facility agreement is, by its express terms, governed by English law and confers non-exclusive jurisdiction on the English Courts. The terms of the jurisdiction clause provide in clause 36.1 for the English Courts to have non-exclusive jurisdiction to settle any dispute in connection with any finance document and in clause 36.1(b) that:

"The English Courts are the most appropriate and convenient courts to settle any such dispute in connection with any finance document. Each of the obligors agrees not to argue to the contrary and waives objection to those courts on the grounds of inconvenient forum or otherwise in relation to proceedings in connection with any finance document." (Quote unchecked)

Paragraph (c) of clause 36.1 states that the clause is for the benefit of the finance parties only, that is to say the lenders, and they are permitted, to the extent allowed by law, to take proceedings in any other court and concurrent proceedings in any number of jurisdictions.

6

The first issue which arises on this application is therefore whether the English Court has jurisdiction to sanction the proposed scheme of arrangement and, if it has jurisdiction, whether there is a reasonable prospect that it will exercise its discretion to sanction the scheme.

7

I am satisfied on the evidence and on the authorities that the Court has jurisdiction to sanction the proposed scheme. The Company is unquestionably a company "liable to be wound up" by the English court, having regard to the very wide meaning given to that expression, for example by Lawrence Collins J in Re Drax Holdings Limited [2004] 1 WLR 1049.

8

The second point is whether there exists a sufficient connection between the Company and this jurisdiction, to make it a scheme which the Court would be prepared to consider and, if thought fit, sanction. In my judgment, the fact that the facility agreement is governed by English law is sufficient for this purpose. As Lawrence Collins J, in Re Drax Holdings said at paragraph 30:

"In the case of a creditors' scheme, an important aspect of the international effectiveness of a scheme involving the alteration of contractual rights may be that it should be made, not only by the court in the country of incorporation, but also (as here) by the courts of the country whose law governs the contractual obligations. Otherwise dissentient creditors may disregard the scheme and enforce their claims against assets (including security for the debt) in countries outside the country of incorporation."

It will, of course, always depend upon the private international law of each country, but it is likely that most, if not all, countries would not recognise a change in the rights of lenders under this facility, unless it has been effected in accordance with English law.

9

The fact of English law governing the relationship between the Company and the relevant class of creditors was recognised also by Hildyard J in Re Primacom Holding GmbH [2011] EWHC 3746 Ch, as giving rise to a sufficient connection with the jurisdiction for the purposes of the scheme of arrangement: see paragraphs 18,63 and 64 of the judgment. For good measure the non-exclusive jurisdiction clause also creates, in my judgment, a sufficient connection with the jurisdiction, but I take the view that the fact that the loan agreement is governed by English law is of itself sufficient to create that necessary connection.

10

A further issue in relation to jurisdiction arises, as is frequently the case with schemes such as the present, by reason of Council Regulation (EC) No 44/2001 (the Judgments Regulation). It is known that at least two of the lenders are domiciled in EU member States other than the UK. Each of them has commenced proceedings in the Commercial Court to enforce the loan agreement. The issue arises under the Judgments Regulation whether, in the light of the domicile of those and perhaps other loan creditors in other member States, this Court has jurisdiction in relation to the scheme of arrangement. This is an issue which has been considered at first instance by judges in a number of cases, including by Briggs J in Re Rodenstock GmbH [2011] EWCH 1104 (Ch), [2011] Bus LR 1245; Hildyard J in Re Primacom, to which I have already referred, and by Hildyard J and by Vos J in Re NEF Telecom B.V. [2012] EWHC 164 Ch and [2012] EWHC 2944 Ch.

11

There are a number of issues which arise under the Judgments Regulation. The first is whether...

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