Second bankruptcy—jurisdiction and applicable law for non-EU creditor and debtor (PJSC VTB Bank v Laptev)

Second bankruptcy—jurisdiction and applicable law for non-EU creditor and debtor (PJSC VTB Bank v Laptev)

A second bankruptcy petition was brought by a Russian bank against a Russian debtor, who was already bankrupt in Russia. The petition was based on Russian law debts, for which the bank had already proven in the Russian bankruptcy. The petition was defended on the basis that the bank did not have standing to petition. Under Russian law, when bankruptcy proceedings are opened, creditors can only prove in the Russian bankruptcy and cannot take any other steps. The question for the court was whether a creditor’s standing to petition is a procedural issue (governed by English law) or a substantive one (governed by Russian law, as the lex causae). Written by Alexander Halban, barrister at Littleton Chambers and counsel for the respondent.

PJSC VTB Bank v Laptev [2020] EWHC 321 (Ch) 

What are the practical implications of this case?

This is the first reported case of a bankruptcy petition being brought in England by a foreign creditor against a debtor (based outside the EU), where the creditor has already proven for the same debts in a foreign bankruptcy.
The decision has a number of practical implications for cases falling outside the Regulation (EU) 848/2015 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast) and potentially in future, for all bankruptcy petitions (depending on whether insolvency is covered in any future UK-EU trade agreement after Brexit).
First, in a bankruptcy petition founded on a debt governed by a foreign law, the parties should obtain expert evidence on the issues of:

  • whether the debt is due and payable under the law of contract which creates the debt (which will determine whether the debt is capable of supporting an English bankruptcy petition)
  • other prohibitions on the creditor petitioning for the debt under the foreign law
  • whether these prohibitions are substantive or procedural, or both (which will affect whether they are applicable in England)

Secondly, where the debtor is already subject to bankruptcy proceedings abroad, the expert evidence should explain any specific prohibitions under the insolvency law applicable to the first bankruptcy. These prohibitions have to be matters of foreign substantive law—not, or not solely, procedural—to be

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About the author:

Zahra started working as a paralegal at Lexis Nexis in Banking and Insolvency teams in April 2019. Zahra graduated with a 2.1 honours in a BA French and Spanish, completed the GDL at BPP University and is seeking some experience before commencing the LPC. She has undertaken voluntary work for law firms in London, Argentina and Colombia.