Michael.1
Insolvency and related law and policy, and more

Michael Murray is an Australian author and commentator on corporate and personal insolvency law and related issues, in Australia and internationally. He has a strong law and policy background, is independent of any connections, and his views are his own. He gives no legal advice. 

Cross-border insolvency protection of a ship on its way to Australia

An Italian shipping company – Michele Bottiglieri Armatore SpA – which is subject to Italian restructuring protection, a concordato preventivo – has successfully obtained a stay in Australia against the arrest by a creditor of one of its vessels – MBA Giovanni – which is due to arrive in Australia imminently, if it hasn’t already.  That creditor had a sister ship – Giuseppe – arrested in Canada in May 2021.

Justice Rares of the Federal Court made the stay orders under Art 19 of the UNCITRAL Model Law, as applicable under s 6 Cross-Border Insolvency Act 2008, along with interim recognition of the concordato preventivo as a foreign main proceeding under Art 17, saying that it was likely that recognition would be given, and a stay under Art 21(1).

Article 19(1) of the Model Law provides that once an application for recognition has been filed and until it is determined, the court may grant relief of a provisional nature, including staying proceedings against the company’s assets. The effect of a concordato preventivo under Italian law is analogous to proceedings under Part 5.3A of the Corporations Act. Hence, the stay is in the nature of a stay imposed under that part.

Under the Italian Bankruptcy Law, a company has 120 days in which to submit a proposal after negotiating with its creditors as to any suggested restructure. The Italian court will then review the proposal, including hearing argument as to whether it should be adopted, reinforced, or rejected.  Although the Italian court supervises the management of a company during this period, no external person is appointed to administer the debtor in possession process, rather the company administers the process itself.

The reason for the application

Bottiglieri was concerned that one of its secured creditors – Davy Investment Fund – would try to arrest Giovanni when she arrives here, as it had previously tried to do in China and as an associated Davy company did with a sister ship in Canada.

Bottiglieri said it has been impacted by changes in the international shipping market arising from a worldwide collapse in 2018 in industrial production in sectors using the company’s ships to carry cargo, and then by the effects of COVID-19 on global industrial production and consumption, and the need for ships’ crews to quarantine on entering some jurisdictions. Freight rates had fallen to below its vessels’ operating costs.

However evidence was given that the emergence of the world economy from the effects of the pandemic and the expansive monetary policy of a number of nation states would have a positive effect on the raw material market and dry cargo shipping sector, which would lead to an uptake in the company’s fortunes.

COMI

There was no doubt the company’s centre of main interests (COMI) was Italy. It was incorporated in Italy in 2008, its registered office is in Naples, and its directors all lived and worked in Italy. It has around 130 employees, 15 of whom are based in Naples, while the rest are crew members based on the ships. The company has five bulk carrier vessels each flagged in Italy but which trade worldwide and “rarely, if ever, call home”. Its bank accounts were based in Italy and its lenders, and the governing law of those debts is Italian law.  Except for the company’s Italian banks, most if not all of its creditors were based outside Italy.

The company’s owned and chartered ships trade to Australia on a regular basis but there was no property of the company in Australia and it has no creditors here, nor any other proceedings.

Canada

Giuseppe had been arrested on 9 April 2021 in Quebec City by a Davy related company. Bottiglieri applied for its release and a decision is reserved.  The Superior Court of Quebec in Canada had however recognised the concordato preventivo as a foreign main proceeding under the Model Law.

Timetable

The restructuring plan and proposal would be filed in Italy by about mid-October 2021, after which creditors would be able to vote on it in the following 120 days. If the creditors approved, the Italian court would then set a hearing date to consider whether to approve the arrangement, which would be around July 2022. Meanwhile, all proceedings are stayed.

While a Mr Bottiglieri was the named foreign representative in the Canada proceedings, and he gave evidence in this matter, the Model Law definition under Art 2(d) is sufficiently broad to allow for the recognition of a debtor in possession company itself to be recognised as the foreign representative: see Re Senvion GmBH (No 2) [2019] FCA 1732 at [11].

Relevant stay orders were made by Justice Rares subject to the usual form of order in proceedings involving shipping companies under the Model Law: see the Federal Court’s Admiralty and Maritime Practice Note (A&M-1), December 2019.   Rares J orders

The orders were to be published in Lloyd’s List International and the Daily Cargo News.

See Michele Bottiglieri Armatore SpA, in the matter of Michele Bottiglieri Armatore SpA [2021] FCA 795 (9 July 2021) (austlii.edu.au)

See an earlier related decision Board of Directors of Rizzo-Bottiglieri-De Carlini Armatori SpA v Rizzo-Bottiglieri-De Carlini Armatori Spa [2017] FCA 331; and this article in the Insolvency Law Bulletin – The scope of stays under the Model Law on cross-border insolvency: Senvion GmbH provides some welcome clarity — (2020) 20(6) INSLB 105 Stewart Maiden QC and Nicholas Wallwork.

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