In the event of globalised companies becoming insolvent, international cooperation is essential. The case of a medical device manufacturer that had been overwhelmed by a deluge of litigation around the world provided an excellent example of UK and overseas legal systems working hand in hand to achieve a regulated outcome.
The Delaware-based company had, over a period of about 14 years, been on the receiving end of over 30,000 litigation claims by patients who were implanted with certain medical products made and distributed globally by the company or its predecessors. It had to date made over $3 billion in settlement payments.
The vast majority of the claims were brought in the US, but the company also faced litigation in other countries, from Australia to Britain. There were 59 outstanding UK claims, 13 in England and Wales and 56 in Scotland.
The company, its parent and 76 members of its corporate group had petitioned to commence bankruptcy proceedings in New York under Chapter 11 of the United States Bankruptcy Code. In a process akin to liquidation, those proceedings contemplated a sale of the group’s remaining business.
The group’s chief financial officer (CFO) applied to the High Court in London under the Cross-Border Insolvency Regulations 2006 for recognition of the Chapter 11 proceedings in the UK. His objective in doing so was to achieve a stay of the UK claims and their consolidation into the Chapter 11 proceedings, which would be conducted under the supervision of the US Bankruptcy Court.
The CFO considered that a stay of the UK claims would reduce the time and cost burden on the company of defending them in this country. That, in turn, would help to preserve such funds as might be realised in the Chapter 11 proceedings for the benefit of those of the company’s creditors and stakeholders who may be entitled to a distribution.
In granting the recognition sought, the Court noted that a US bankruptcy judge had authorised the CFO to act as the company’s foreign representative in the UK and had formally requested the aid and assistance of the UK courts. All the procedural requirements had been met and the Court could see no public policy grounds for refusing the application. The recognition would extend to Scotland.