Q&As

Does new section 233B of the Insolvency Act 1986 affect contracts for the supply of goods and services under which the supplier and/or the customer are based outside of the UK?

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Produced in partnership with Oberon Kwok of Selborne Chambers and Chris Bryden of 4 King’s Bench Walk
Published on LexisPSL on 17/02/2021

The following Commercial Q&A produced in partnership with Oberon Kwok of Selborne Chambers and Chris Bryden of 4 King’s Bench Walk provides comprehensive and up to date legal information covering:

  • Does new section 233B of the Insolvency Act 1986 affect contracts for the supply of goods and services under which the supplier and/or the customer are based outside of the UK?
  • Where the insolvent customer is in this jurisdiction, and it is sought to apply IA 1986, s 233B to an overseas supplier
  • Where the insolvent customer is overseas, and it is sought to apply IA 1986, s 233B to a supplier in this jurisdiction

For the purposes of this Q&A, it is assumed that the relevant contract is a business-to-business contract for the supply of goods and/or services subject to English law. This Q&A does not address the content or operation of insolvency law in foreign jurisdictions. Moreover, the issues raised in this Q&A are wide-ranging and only an overall snapshot is provided.

Given the recent enactment of section 233B of the Insolvency Act 1986 (IA 1986), no authorities ruling on the question definitively yet exist. The starting point is IA 1986, s 233B(1)–(2), which provides that the section applies to a contract for the supply of goods or services to a company (the customer) which is subject to a ‘relevant insolvency procedure’. It should be noted that that section is not expressed to operate differently depending on the governing law of the contract.

Where the insolvent customer is in this jurisdiction, and it is sought to apply IA 1986, s 233B to an overseas supplier

Here the question is whether IA 1986, s 233B inherently has extra-territorial effect. In relation to a similar provision on ipso facto clauses that pre-dates the Corporate Insolvency and Governance Act 2020, the English court has been open to the possibility that IA 1986, s 233 had extra-territorial effect on foreign entities. In Official Receiver v Sahaviriya Steel Industries Public Co Ltd, the court granted permission

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