In January 2018 the English High Court considered whether it had jurisdiction under the Cross-Border Insolvency Regulations 2006 (CBIR) to extend a temporary stay on the commencement of enforcement action in respect of English law debt obligations owed by a foreign debtor so that in effect the stay became permanent, or whether such a permanent stay would breach the long established rule in Gibbs[1](which provides that the discharge of an English law governed debt under the insolvency laws of a foreign jurisdiction outside of England and Wales is not a valid discharge of such debt).  Ultimately, the court found that ordering a permanent stay would substantively affect the creditors’ rights and amount to a discharge of the English debts, in breach of the rule in Gibbs, and that the CBIR could not be used to modify that rule.

[1] Antony Gibbs & Sons v La Societe Industrielle et Commerciale des Mataux (1890) 25 QBD 399


The case involved the restructuring of the OJSC International Bank of Azerbaijan (“IBA”), the largest commercial bank in Azerbaijan. Due to financial difficulties IBA entered into a restructuring proceeding under Azeri law to restructure approximately $3.34 billion of its financial indebtedness (the Restructuring).

In June 2017 the Restructuring was recognised as a foreign main proceeding under the CBIR and Ms Bakhshiyeva (the Applicant) as IBA’s foreign representative (the Recognition Order). The Recognition Order imposed a wide-ranging moratorium akin to that which would arise in an English administration (the “Moratorium”).

The Restructuring was approved by a substantial majority at a meeting of creditors in Azerbaijan in July 2017 and was later confirmed by the relevant court. At that stage the Restructuring became binding on all creditors, whether or not they had voted in favour of the Restructuring.  As a matter of Azeri law, the indebtedness of creditors bound by the Restructuring was cancelled and replaced by claims in the Restructuring.

Sberbank and Franklin Templeton (the Respondents) were two creditors with claims against IBA arising under English law debt documents.  Neither had agreed that the Restructuring should apply to them and neither had submitted to Azeri law.  Both claimed that the Restructuring could not bind them, or replace their English law debt claims with reduced claims in the Restructuring as the rule in Gibbs meant that the debt owing to them could not be discharged by a foreign insolvency proceeding to which they had not submitted.

At the time of the hearing which led to this decision (18 January 2018), the Restructuring was due to end on 30 January 2018 and there was no possibility as a matter of Azeri law for that period to be extended. The Applicant therefore applied to court for an order that the Moratorium should be made permanent, so preventing the Respondents from ever bringing proceedings in the English courts to recover their debts.  The Respondents objected and sought leave to bring proceedings against IBA.


  • Did the court have jurisdiction to extend a moratorium imposed under the CBIR without limit as to time, and in particular, beyond the date on which the foreign proceeding will terminate;
  • If so, should the court refuse to lift the continuing moratorium in favour of a creditor whose debt is governed by English law, so as to prevent that creditor from achieving a better return than that enjoyed by the company’s other creditors under a restructuring plan promulgated in the jurisdiction in which the company is registered and has its COMI.


The court held that it had no jurisdiction to extend the moratorium:

  • The extension of the Moratorium was not merely a procedural step to extend a stay that was already in existence. As a matter of substance, the application had the intended effect of preventing in perpetuity the exercise by the Respondents of an English law right in order to conform the position of the Respondents to the one they would have had as a matter of Azeri insolvency law.
  • The English court can only ever act within the limits of its own common law and statutory limits. It cannot order relief based on the relevant laws of the foreign insolvency proceeding if that relief is not also available as a matter of English law. The CBIR allows the court to grant relief which is “appropriate”; this does not include the purported application of foreign law or the substantive discharge or variation of an English law right.

Having found that the court had no jurisdiction to order a permanent stay, it was not required to decide whether, without such an order, a stay would come to an end when the foreign insolvency proceedings ended. However, it considered, obiter, that in the case of liquidation proceedings assistance provided under the CBIR would end when the insolvency process ended.  The position was less clear in insolvency proceedings that were intended to achieve a rescue of the business and where the company would continue once the insolvency proceedings had terminated.  The court expressed the view that, in that case, there was sense in the assistance also terminating when the proceedings terminated.  He also thought that an extension of the relief or assistance beyond such a date was a good test of whether the relief sought was substantive or procedural in nature.

The court went on to consider whether, if it had found that it did have jurisdiction to order a permanent stay, it would have exercised its discretion to do so and concluded that it would not:

  • The CBIR was concerned with procedural matters enabling procedural and not substantive intervention. It was not right to side-step the substantive rule in Gibbs through procedural means;
  • Parties to an English law contract would not necessarily expect their rights under that contract to be capable of discharge by a foreign insolvency process – they would not expect an English court to apply Azeri insolvency law to the substantive English law rights of the parties;
  • In granting relief under the CBIR the court has to be satisfied that the interests of the creditors are adequately protected. Varying or discharging English law rights was not necessarily in the interests of the creditors, particularly in the context of a restructuring.

Perhaps ironically, after the hearing but before the decision was handed down, Azeri law was changed to allow indefinite extensions of the Restructuring, thereby also extending the moratorium put in place when the Restructuring was recognised as a foreign main proceeding.

Permission to appeal was given.

Bakhshiyeva (in her capacity as the foreign representative of the OJSC International Bank of Azerbaijan) v Sberbank of Russia and others [2018] EWHC 59 (Ch).