RESTRUCTURING AMONG THE RUINS

Transcription

1 RESTRUCTURING AMONG THE RUINS IBA Athens 8-9 May 2006 Arbitration and ADR in insolvency & restructuring proceedings: a reinsurance case study Jan Woloniecki Attride-Stirling & Woloniecki 1

2 Acknowledgment The author gratefully acknowledges the assistance of Kehinde George (Partner, Head of Insolvency & Restructuring Department, Attride-Stirling & Woloniecki) and Maxanne Anderson ( Associate, Attride-Stirling & Woloniecki) in the preparation of this presentation 2

3 A primer on (re)insurance insolvency P.T. O Neill & J.W. Woloniecki The Law of Reinsurance in England and Bermuda (2nd ed., Sweet & Maxwell, 2004) See generally: chapters 17 & st Supplement [2006: in press] 3

4 Schemes of Arrangement UK Companies Act 1985, s.425/ Bda Companies Act 1981, s. 99 Any compromise or arrangement which is approved by each class of creditors by the requisite statutory majorities (over 50% in number + 75% in value) present and voting at separate class meetings duly convened by order the Court is binding upon all creditors ( including any dissenting creditors) subject to being sanctioned by the Court. 4

5 Classes of Creditors Test: persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interests. (Sovereign Life Assurance Co v. Dodd [1892] 2 Q.B. 573 at 583, per Bowen LJ) Definition of class can be problematic in reinsurance schemes. Re Hawk Insurance Co Ltd [2001] 2 B.C.L.C. 480 In the Matter of the British Aviation Insurance Co Ltd [2005] EWHC 1621 (Ch) English Courts favour a pragmatic approach in favour of one class. Re Hawk [supra] In the Matter of NRG Victory Reinsurance Ltd [2006] EWHC 679 (Ch). 5

6 Types of Scheme Cut-off (valuation) schemes Solvent Insolvent Run-off (reserving) schemes Hybrid schemes (combine elements of both) 6

7 Dispute Resolution Provisions Express preservation of creditors contractual dispute resolution rights: KWELM Original Scheme Adjudication by Insolvency Court (subject to modification of statutory regime): Mentor Insurance Co Scheme Kempe v. Ambassador Insurance Co [1998] 1 W.L.R. 271 Compulsory arbitration (overriding contractual dispute resolution provisions): Hopewell Scheme Scheme adjudicator (typically expert not arbitrator): KWELM Closing Scheme; Global General & Reinsurance Co Scheme; Pan Atlantic Co Scheme; Hawk Insurance Co Scheme 7

8 The Hopewell Scheme Scheme Arbitration Solvent scheme sanctioned by Sup Ct of Bda in June Compulsory arbitration (notwithstanding any contrary provision in any contract of reinsurance) before 3 arbitrators in Bermuda Bermuda substantive law applied to all reinsurance contracts US Bankruptcy Ct (SDNY) granted permanent injunction giving effect to Scheme Dispute Resolution Provisions: In re Petition of the Board of Directors of Hopewell International Insurance Ltd. 238 B.R. 25 (August 19, 1999) 8

9 Scheme Adjudication Most Cut-off Schemes now typically provide for a named individual as Scheme Adjudicator Scheme Adjudicator typically acts as expert not arbitrator thereby effectively excluding rights of appeal Scheme Adjudicator typically receives written submissions only and is not required to give reasons for decision English Cts have sanctioned Schemes providing for expert adjudication as not being inconsistent with the Human Rights Act 1998: Re Hawk Insurance Co [2001] 2 B.C.L.C. 480, at (Arden J.); Re Re Pan Atlantic Insurance Co [2003] 2 B.C.L.C. 678, at (Lloyd J.) 9