Foreign insolvency proceedings and first past the post

This case concerned a Lithuanian company the subject of Lithuanian insolvency proceedings. One of the company’s creditors who had obtained an arbitral award against the company in Lithuania applied for that award’s recognition in England and to recover payment by enforcement via a third party debt order (TPDO) in respect of monies that the Lithuanian company held in a bank account in England. 

The insolvency administrator in the Lithuanian insolvency proceedings had applied for recognition of those foreign insolvency proceedings in England. After Brexit, the recognition of insolvency proceedings from EU member states is no longer automatic and until the court has issued a ‘recognition order’ the foreign insolvency proceedings remain unrecognised.

Crucially, the final hearing of the creditor’s TPDO application was before the hearing of the recognition application. The insolvency administrator in the Lithuanian insolvency proceedings had not applied for any urgent relief to protect the Lithuanian company’s assets from creditor action before a recognition order was obtained.

As the TPDO application was heard first, the court applied the ‘first past the post’ principle which, in circumstances where multiple creditors are seeking to enforce against the same assets, gives the ‘first creditor’ priority. Therefore, by obtaining the TPDO prior to the recognition order, the creditor obtained priority over the other creditors in the insolvency proceedings.

Re OOO Nevskoe (No. 1) [2023] EWHC 15 (KB) (11 January 23)