First maritime cross-border insolvency proceeding is recognised by a Brazilian Court after the recent adoption of the UNCITRAL Model Law

[1] for the recognition of two separate moratorium protection proceedings brought before the High Court of Singapore[2] as the foreign main proceeding. Hence the application in Brazil of the orders from such Court.[3] Prosafe group had three foreign-flagged semi-submersible accommodation vessels in Brazilian waters close to Rio (out of the total of seven vessels that the group owned), and two of them were employed by Petrobras. Further, it had a local subsidiary located in Rio. These assets in Brazil could be arrested or seized by creditors if such protection was not extended to Brazil.

Upon Prosafe’s application for an  interim urgent injunction, the Court quickly recognised the moratorium protection as a foreign main proceeding, and extended to Brazil the order that, the period set forth by the Singaporean Court: (i) no resolution for the winding up of the applicants could be passed; (ii) no appointment of a receiver or manager over any property or undertaking of the applications could be made; (iii) no proceedings whether before a court, arbitral tribunal, administrative agency could be commenced or continued, except with the leave of the Court and subject to such the terms as it imposes; and (iv) no execution, distress or other legal process could be commenced, continued or levied against any property applicants, except with the leave of the Court and subject to such the terms as it imposes, among other orders.

Further, in the same decision, the Brazilian Court recognised Prosafe’s CFO, who had brought this application, as its foreign representative designated by the High Court of Singapore.

In another decision during the following months, the Court of Rio also recognised extensions of the moratorium protection period granted by the Singaporean Court, and finally recognised the ‘Scheme of Arrangement’ proposed by Prosafe and approved by its creditors and the Singaporean Court.

Conclusion

This is, as mentioned, the first case in which the Brazilian Courts applied the new rules based on the UNCITRAL Model Law on Cross-Border Insolvency, and thus cooperated with a foreign Court in this field. And it did so quickly and smoothly.

Prior to that, to achieve such a protection in the country, the foreign debtor would have to apply for judicial restructuring or another similar proceeding in Brazil, which would be more complex and costly, also being duplicative of the foreign proceeding in many ways. And it would also raise concerns as to whether the Brazilian Courts would have jurisdiction for this (at least in relation to the assets not belonging to the Brazilian entity). The other option would be to wait for the foreign proceedings to reach a final unappealable judgment that could be recognised by the Superior Court of Justice (probably the one that approves a scheme of arrangement or similar), but this could happen too late in many situations.

Prosafe’s case is also important because Brazil is one of the countries with the largest number of offshore support vessels in the world, many belonging to Norwegian or Singaporean companies and employed by Petrobras, as in this case.

Thus, the quick and efficient outcome of this transnational insolvency case is likely to encourage other similar cases before the Brazilian Courts, and also encourage other foreign companies to invest in the country, now that they can better foresee what will happen in the unfortunate case it needs to resort to the protection of global insolvency laws.

Notes