Lords step in for HIH creditors
Australian creditors of failed insurer HIH will benefit from a British ruling in favour of applying Australian bankruptcy law to reinsurance assets held in the UK.
The House of Lords ruling on April 9 means Australian creditors will receive priority over their UK counterparts.
It will take at least five years for the full financial effect of the verdict to become apparent as the HIH distribution schemes run their course, but insuranceNEWS.com.au understands it’s a significant outcome for Australian creditors in dollar terms.
HIH liquidator McGrath Nicol had appealed to the UK’s highest legal authority following adverse judgements in the High Court and the Court of Appeal.
The judgement means funds will be returned to Australia for local creditors, according to KPMG.
“The House of Lords decision will not alter the amount available to distribute to creditors, but will alter the allocation between creditors,” KPMG said in a statement.
“Creditors with liabilities in the UK will receive a lower distribution than they would have done had the English statutory priorities been applied.”
Law firm Allens Arthur Robinson says the Australian Prudential Regulation Authority’s proposed amendments to reinsurance capital, which it backed down from late last month, were prompted by uncertainty over reclaiming foreign reinsurance.
“The decision removes some of the concerns raised by APRA, particularly in relation to reinsurance placed in the London market, where the fact that the recoverable was payable in the United Kingdom had led to the proposition that under private international law the debt resided in the United Kingdom,” Allens Arthur Robinson said.
McGrath Nicol’s $529 million civil damages claim on behalf of HIH is currently before the NSW Supreme Court.
Mr McGrath is attempting to recover the $295 million HIH spent on FAI in 1998, plus interest, from nine defendants, including former FAI CEO Rodney Adler, as well as shadow treasurer and former Goldman Sachs Australia MD and Chairman Malcolm Turnbull. Fifteen cross-claims have also been lodged.
HIH collapsed in 2001 with debts of $5.3 billion.
The House of Lords ruling on April 9 means Australian creditors will receive priority over their UK counterparts.
It will take at least five years for the full financial effect of the verdict to become apparent as the HIH distribution schemes run their course, but insuranceNEWS.com.au understands it’s a significant outcome for Australian creditors in dollar terms.
HIH liquidator McGrath Nicol had appealed to the UK’s highest legal authority following adverse judgements in the High Court and the Court of Appeal.
The judgement means funds will be returned to Australia for local creditors, according to KPMG.
“The House of Lords decision will not alter the amount available to distribute to creditors, but will alter the allocation between creditors,” KPMG said in a statement.
“Creditors with liabilities in the UK will receive a lower distribution than they would have done had the English statutory priorities been applied.”
Law firm Allens Arthur Robinson says the Australian Prudential Regulation Authority’s proposed amendments to reinsurance capital, which it backed down from late last month, were prompted by uncertainty over reclaiming foreign reinsurance.
“The decision removes some of the concerns raised by APRA, particularly in relation to reinsurance placed in the London market, where the fact that the recoverable was payable in the United Kingdom had led to the proposition that under private international law the debt resided in the United Kingdom,” Allens Arthur Robinson said.
McGrath Nicol’s $529 million civil damages claim on behalf of HIH is currently before the NSW Supreme Court.
Mr McGrath is attempting to recover the $295 million HIH spent on FAI in 1998, plus interest, from nine defendants, including former FAI CEO Rodney Adler, as well as shadow treasurer and former Goldman Sachs Australia MD and Chairman Malcolm Turnbull. Fifteen cross-claims have also been lodged.
HIH collapsed in 2001 with debts of $5.3 billion.