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International Corporate Rescue

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Vol 12 (2015) - Issue 4

Article preview

Stephen John Akers v Samba Financial Group [2014] EWCA Civ 1516; [2015] 2 WLR 1281

Andrew Shaw, Barrister, South Square, London, UK

Introduction
In Stephen John Akers v Samba Financial Group [2014] EWCA Civ 1516, the joint official liquidators ('the JOLs') of Saad Investments Company Limited ('SICL') appealed against a decision of the Chancellor to stay avoidance proceedings under section 127 of the Insolvency Act 1986 on the ground that the courts of the Saudi Arabia were the more appropriate forum for such a claim. The avoidance proceedings related to various transfers of shares by Maan Al-Sanea to the Samba Financial Group ('Samba') after the presentation of winding up petition against SICL in the Cayman Islands. The JOLs maintained that Mr Al-Sanea held the shares on trust for SICL and so the transfers to Samba were void.
The Chancellor held that Saudi Arabian or Bahraini law governed each of the relevant trusts. Key to the Chancellor’s decision was the applicability and effect of the Hague Convention on the Law Applicable to Trusts and their Recognition ('the Hague Convention'), and in particular Article 4. The Court of Appeal considered that Article 4 of the Hague Convention had a narrower scope than that contended by Samba and consequently, it was arguable that the trusts were governed by Cayman Islands law. Accordingly, the Court of Appeal lifted the stay imposed by the Chancellor which stay, as Lord Justice Vos pointed out, had effectively disposed of the JOLs avoidance claim because there was no equivalent action in Saudi Arabia.

Factual background
The shares in question ('the Shares') were in a number of Saudi Arabian banks, of which Samba was one. The Shares had all originally been registered in Mr Al- Sanea’s name. It was undisputed that SICL had bought the Shares from Mr Al-Sanea in six transactions between 17 December 2002 and 16 October 2008. In order to comply with certain requirements of Saudi Arabian law, under which the Shares could not be held by a foreign entity, in each instance Mr Al-Sanea was to hold the Shares on trust as nominee for SICL. The first two transactions contained choice of law clauses that explicitly applied Bahraini and Saudi Arabian law respectively. The declarations of trust arising out of the latter transactions were executed separately from the other transaction documents and did not contain explicit choice of law clauses. On 16 September 2009, Mr Al-Sanea transferred the Shares to Samba in consideration for the discharge of his indebtedness to Samba.

The Hague Convention
The Hague Convention is given the force of law in England by section 1 of the Recognition of Trusts Act 1987 ('the RTA'). The relevant provisions of the Hague Convention are as follows:
Article 4
The Convention does not apply to preliminary issues relating to the validity of wills or of other acts by virtue of which assets are transferred to the trustee.

Article 5
The Convention does not apply to the extent that the law specified by Chapter II does not provide for trusts or the category of trusts involved.

Chapter II
Applicable Law
Article 6
A trust shall be governed by the law chosen by the settlor. The choice must be express or be implied in the terms of the instrument creating or the writing evidencing the trust, interpreted, if necessary, in the light of the circumstances of the case.
Where the law chosen under the previous paragraph does not provide for trusts or the category of trust involved, the choice shall not be effective and the law specified in Article 7 shall apply.

Article 7
Where no applicable law has been chosen, a trust shall be governed by the law with which it is most closely connected.

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International Corporate Rescue

"International Corporate Rescue is a must-have of the most current substantive law developments in restructuring and insolvency law. Covering legislative overviews and novelties, case reviews and analyses of cross-border controversies, it is a concise, accessible and insightful collection of leading articles from respected lawyers and academics from all over the world."

Prof. Em. Bob Wessels, University of Leiden, Leiden

 

 

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