Clear and distinct--UK court stays proceedings in favour of Saudi courts

Clear and distinct--UK court stays proceedings in favour of Saudi courts

Why did the High Court decide to stay proceedings brought by Cayman liquidators in relation to the avoidance of s 127 property dispositions?

 Original news

Akers v Samba Financial Group  [2014] EWHC 540 (Ch), [2014] All ER (D) 02 (Mar) The Companies Court considered an application for a stay of proceedings pursuant to the  Civil Procedure Rules 1998, SI 1998/3132, Pt 11 (CPR) by the defendant financial group (Samba Financial Group) (Samba). The proceedings sought a declaration under  IA 1986, s 127 that the transfer of shares in five Saudi Arabian companies was a void disposition of Saad Investments Company Limited's (SICL's) property. The claim was made by the joint liquidators of SICL (a Cayman Islands company). In granting the stay, the court decided that the courts of Saudi Arabia were clearly and distinctly a more appropriate forum.

 What is the significance of this case?

The case gives an interesting overview of which law governs:

  • whether or not the company had a proprietary interest in the assets disposed of, and
  • any underlying trusts

What did the court decide?

Sir Terence Etheron J decided that:

  • the UK proceedings under IA 1986, s 127 should be stayed as Saudi Arabia was a more appropriate forum
  • Saudi law governs whether or not, at the date of the disputed share transfer, SICL had a proprietary interest in the shares
  • Saudi law is the governing law of the trusts created by the seven transactions

What were the key dates in this case?

The relevant chronology was:

  •  30 July 2009--winding up petition presented against SICL in Cayman Islands
  • 20 August and 25 September 2009--UK court recognises (under the Cross Border Insolvency Regulations 2006, SI 2006/1030 (CBIR)):      

◦            Cayman joint liquidators as foreign representatives, and

◦            Cayman insolvency proceedings as foreign main proceedings   

  • 16 September 2009--disputed share transfer takes place from Mr Al-Sanea (who allegedly held the shares on trust for SICL) to Samba
  • 18 September 2009--winding up order made in Cayman

 What were the key jurisdictional facts?

 Cayman Islands:

SICL incorporated in Cayman Islands

SICL entered liquidation

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.