Skip to content

English High Court finds that a Part 26A plan/restructuring plan constitutes an “insolvency proceeding.”

Headlines in this article

Related news and insights

Publications: 29 January 2024

Global Restructuring 2024: Managing transition

Publications: 26 January 2024

The Adler appeal: our key takeaways

News: 20 December 2023

A&O advises on landmark USD625 million sustainability-linked loan for CDB Aviation

Publications: 01 December 2023

Navigating the rule in Gibbs in cross-border restructurings: Alternatives to a solely English process

What the Gategroup convening judgement means for the aviation sector, especially creditors with registered interests under the Cape Town Convention.
Image of airplane taking off from lit runway in an evening shot

Brief background to the jurisdictional issue in the Gate Group convening hearing 

Gategroup (comprising gategroup Holding AG (the Parent, incorporated in Switzerland) and its subsidiaries) is the world’s largest provider of airline catering services. As a result of the Covid 19 pandemic (and the associated reduction in worldwide flights and passenger numbers), Gategroup is facing severe financial difficulties. The restructuring plan, part of a wider proposed restructuring, aims to amend and extend the maturity of the Group’s debt obligations to senior lenders and bondholders, while allowing those creditors to earn interest over the extended maturity period. [To facilitate the plan, the plan company (Gategroup Guarantee Limited) was incorporated in England and Wales as a wholly owned subsidiary of the Parent, and the bond issuer’s COMI was transferred from Luxembourg to England.] The bonds are governed by Swiss law and have an exclusive jurisdiction clause in favour of the Zurich courts. 

While the UK is no longer party to the Lugano Convention (with effect from 1 January 2021), the claim form in this case was issued prior to this date when it was subject to the Lugano Convention. Accordingly, at convening, the court had to consider whether a plan under Part 26A of the Companies Act 2006 (Part 26A plan/restructuring plan)  fell within the bankruptcy exception under the Lugano Convention. Gategroup accepted that if the restructuring plan did not fall within this exception, the exclusive jurisdiction clause in favour of the Zurich courts under the bonds would operate as a complete bar to the English court assuming jurisdiction. 

[In order to determine the applicability of the Lugano Convention it was necessary for Zacaroli J. to decide whether restructuring plans constitute “civil and commercial matters”, which would bring them within the scope of the Lugano Convention or, whether they fell within the “bankruptcy exclusion” (the exclusion applicable to "bankruptcy, proceedings relating to the winding-up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings”).]

In its analysis on this jurisdictional issue, the court considered two main questions: 

(a) the purpose of the bankruptcy exclusion under the Lugano Convention – the court found that the threshold conditions to a restructuring plan are sufficient to position it within this purpose; and
(b) whether a restructuring plan complies with the requirements of Article 1(1)  of the EU Insolvency Regulation (EUIR) . We set out the courts finding on this second question in brief below. 

For further insights into the judgment and what the implications will be for the aviation sector, especially creditors with registered interests under the Cape Town Convention download the PDF.


Recommended content