Alex Guest discusses Gibraltar’s advantageous position to handle complex issues arising from maritime insolvency cases with cross-border dimensions, in Maritime Risk International

While both maritime law and insolvency law deal with the rights and obligations of creditors and debtors, the two have evolved very differently from an international and uniformity point of view.

Maritime law, deeply rooted in centuries of old commercial customs, has achieved a remarkable level of consistency across jurisdictions. This has made maritime law one of the most harmonised areas of international law, with common principles applying across ports and shipping lanes worldwide.

Insolvency law, on the other hand, has evolved largely within the boundaries of national legal systems. Jurisdictions have traditionally treated insolvency as a matter of domestic policy, which created a fragmented legal landscape where cross border insolvencies gave rise to uncertainty, jurisdictional conflicts and limited cooperation among courts.

To address the above issues, the legal community made significant strides towards harmonising cross-border insolvency frameworks. Two important instruments were set up in this regard: The UNCINTRAL Model Law on Cross-Border Insolvency (1997) and the EU Insolvency Regulation (Council Regulation (EC) No. 1346/2000). These instruments both seek to address the complexities of insolvency where assets, creditors, or proceedings are located in more than our country, but the Model Law is a global framework for adoption by any country, while the EU Regulation is binding within the EU Member States.

The creation of the above legal tools has been particularly helpful in resolving maritime insolvency cases that involve multiple jurisdictions. An example of this was the insolvency of the Korean shipping giant, Hanjin Shipping Co. Ltd

Hanjin Shipping Co. Ltd, filed for bankruptcy protection in South Korea in August 2016. The company’s financial distress stemmed from a prolonged downturn in the global shipping industry, leaving ships stranded at sea, cargo owners uncertain about deliveries, cargo seized in ports, and creditors scrambling to recover debts.

Hanjin’s insolvency proceedings in Korea were recognised in several jurisdictions through the UNCINTRAL Model Law on Cross-Border Insolvency such as the United States, Singapore or the United Kingdom, where on 6 September 2016, Mr Justice Nugee granted a recognition order treating Hanjin as if it had been wound up by a creditor’s petition, which afforded the company the same moratorium protections as if it were in administration.

Gibraltar has not ignored the benefits that the above mentioned international legal instruments can provide this is despite that it is not part of the EU, yet it continues to apply various EU regulations which are not unfamiliar to the maritime sector such as the Brussel Recast or Rome I Regulation.

Notably, Gibraltar has implemented the UNCINTRAL Model Law through the Insolvency (Cross- Border Insolvencies) Regulations 2014, which also reflect the principles of the EU Insolvency Regulation. The incorporation of this piece of legislation into Gibraltar’s legal system empowers Gibraltar’s courts to recognise and cooperate with foreign insolvency proceedings, including automatic stays and other forms of judicial assistance.

The Gibraltar courts have not shied away from putting this legislation into practice. One key example is the case of Peabody Holdings (Gibraltar) Ltd. In 2016, Peabody Energy Corporation, a major US-based energy company, filed for bankruptcy protection in Missouri, along with 153 subsidiaries, including Peabody Holdings (Gibraltar) Limited (“Holdings”). The Supreme Court of Gibraltar was asked to recognise the US bankruptcy proceedings as the main insolvency process for Holdings under Gibraltar’s cross-border insolvency regulations.

In determining the above issue, the court had to consider whether Holdings “center of main interests” was located in Gibraltar or in the United Stated. Although Holdings was incorporate and administered in Gibraltar, its strategic management and head office functions were directed from Missouri.

The court noted that while the centre of main interest is presumed to be where the registered office of the company is, this can be rebutted by objective factors that third parties can ascertain. In this case, the court found that Holdings was effectively managed from the United States, with key decisions made by US-based directors and advisers. Accordingly, the Gibraltat court held that the centre of main interests was in Missouri and granted recognition of the US proceedings as the main insolvency process.

Another significant Gibraltar case dealt with cross-border insolvency, involving Miracle World Ventures Limited. In this case, the Supreme Court recognised the appointment of liquidators under foreign main proceedings commenced in the British Virgin Islands. Applying the UNCINTRAL Model Law, the court granted full effect to those proceedings in Gibraltar.

Importantly, the court also held that such recognition could constitute the opening of insolvency proceedings under the EC Insolvency Regulations. This allowed for assets tracing and recovery across jurisdictions, further solidifying Gibraltar’s reputation as a willing jurisdiction and able to cooperate with global insolvency frameworks.

In the maritime context, while there have no publicly reported cases in which Gibraltar’ courts have directly applied the Cross-Border Insolvency Regulations in a maritime specific context, this should not be interpreted as an indication of legal incapacity or reluctance for the following reasons:

1. The Insolvency (Cross-Border Insolvencies) Regulations 2014 applies as much to claims in rem (a claim against a specific piece of property) as to proceedings in personam (a claim against a specific person).

2. Gibraltar courts are well positioned to handle complex issues arising from maritime insolvency cases with cross-border dimensions, as the foundational principles of its legal system are heavily influenced by English common law which have demonstrated a good understanding and application of the UNCINTRAL Model Law and the EU Insolvency Regulation.

The case of Peabody Holdings (Gibraltar) Ltd serves as compelling illustration of the extent to which the judicial system in Gibraltar is shaped by and reliant upon English common law principles. In this case, the Supreme Court of Gibraltar demonstrated a strong deference to English legal precedent, particularly in matters relation to cross-border insolvency. A notable example of this influence was the Court’s substantial reliance on the English High Court’s judgment in Re Standford International Bank Ltd ([2009] EWHC 1441 (Ch)).

In the Standford case, the English Court undertook a detailed analysis of how to establish a company’s centre of main interest. By referencing and applying the reasoning in the Standford case, the Supreme Court of Gibraltar reaffirmed its adherence to English jurisprudence and underscored the continuing influence of English case law on Gibraltar’s legal system, particularly in areas such as international insolvency law.

As the maritime industry becomes increasingly entangled with global finance, through mechanisms such as ship financing, marine insurance, and international supply chains, the potential for maritime insolvencies with cross-border implications is likely to rise.

Gibraltar, with its dual identity as a maritime and financial centre and its deeply embedded common law roots, is well equipped to provide clarity, coordination, and legal consistency in such matters.

Looking ahead, Gibraltar’s legislative and judicial commitment to international insolvency cooperation places it in an advantageous position to support the maritime sector during time of financial distress. Its capacity to provide immediate recognition of foreign proceedings, grant automatic stays, and enforce extraterritorial relief offers creditors and debtors alike the procedural certainty they require in a crisis.

If and when a maritime cross-border insolvency reaches Gibraltar’s courts, it is reasonable to expect a response that is both commercially aware and internationally coherent, one that reflects Gibraltar’s legal maturity but also its readiness to engage with the realities of an increasingly interconnected global economy.