The debtor is incorporated and has its centre of main interests in Singapore; it had experienced financial difficulty and sought to restructure its debts. A debt was owed to the opposing creditor, which was guaranteed by the debtor’s Norwegian parent. The debtors proposed Singapore schemes of arrangement and had obtained leave to convene scheme meetings in Singapore together with the moratoria, and sought to obtain recognition in Scotland and obtain similar relief to ensure that the dissenting creditor could not enforce its claims against the debtor’s two oil rigs situated near Scottish territorial waters. The creditor opposed this on the grounds that it had not submitted to the jurisdiction of the Singapore court, its debt stood outside the Singapore scheme as it is governed by English law and any purported debt for equity swap would be ineffective to extinguish the debt.

Lord Ericht denied recognition of the Singapore moratoria after considering and applying the Rule in Gibbs following the reasoning in OJSC International Bank of Azerbaijan, which held that it would be wrong in principle to use the provisions under the Model Law to circumvent the English law rights of English creditors. As the Singapore schemes do not bind the creditor, the “majority cannot, as far as English law is concerned, impose its will on [the creditor] under the proposed Singapore law Schemes… So far as English law is concerned, the [debts] simply fall outside the Singapore Scheme”.

The Court also rejected the debtors’ argument that consideration of recognising the moratoria could be separated from considering the Singapore schemes as the applications to the Singapore Court for the moratoria were closely linked to, and dependent upon the Singapore schemes.

Interestingly, Lord Ericht did say that had he been requested to, he would have granted recognition to bind other creditors but excluded remedies solely in relation to the opposing creditor, to preserve its English law rights.

Besides reinforcing the Rule in Gibbs, this case highlights both the limitation and the potential reach of the Singapore moratoria, under the application of the Model Law, as well as the potential for dissenting creditors to derail a restructuring if protection is not obtained in relevant jurisdictions.