Project Lietzenburger Straße Holdco SARL, Re

This is my judgment on the application of Project Lietzenburger Straße Holdco S.à.r.L (the “Plan Company”) for an order sanctioning a restructuring plan (the “Plan”) between the Plan Company and three classes of its creditors (the “Plan Creditors”) under Part 26A of the Companies Act 2006 (the “CA 2006”).

The Plan Company is incorporated in Luxembourg and has its registered office in Luxembourg. It is part of a wider sub-group of companies (the “Group”) held under Aggregate Holdings 4 S.à.r.L (“AH4”). One of the companies within the Group, Project Lietzenburger Straße PropCo S.à.r.L. (“PropCo”), owns a development site on the “Ku’Damm”, a well-known shopping boulevard in Berlin (the “Development”). The Development is the key asset of the Group and is one of the largest uncompleted commercial real estate projects in Germany.

The Group is a sub-group of a wider group (the “Aggregate Group”) headed by Aggregate Holdings SA (“Aggregate Holdings”), whose ultimate beneficial owners are two Austrian businessmen, Mr Günther Walcher (as to 80%) and Mr Cevdet Caner (as to 20%).

The Group has three basic tranches of secured debt, ranking in the following order: the “Senior Debt” (€775 million); (ii) the “Tier 2 Debt” (€150 million); and (iii) the “Junior Debt” (€95 million). The Senior Debt and the Tier 2 Debt are primary obligations of PropCo; the Junior Debt is a primary obligation of AH4. I refer to the Tier 2 Debt and the Junior Debt together as the “Subordinated Debt”, to distinguish it from the Senior Debt.

The total secured debt exceeds €1 billion. All relevant secured debt documents are governed by German or Luxembourg law. The Plan Company has at all material times been a guarantor of the secured debt. By a Deed of Contribution governed by English law and dated 15 October 2023, the Plan Company has assumed obligations to the holders of the various classes of debt (the “Senior Creditors”, the “Tier 2 Creditors” and the “Junior Creditors” respectively).

The Development has suffered from substantial cost overruns. Construction was substantially halted in January 2023 and came to a complete stop in May 2023. In addition, the Group’s cash of some €102 million is held in an “Investment Reserve Account” that is currently blocked and over which the Senior Creditors have a security interest. The Senior Creditors have made available unsecured interim facilities (“Interim Facilities”), funded by “recycling” sums received following partial enforcement of their security over the Investment Reserve Account, to enable professional fees and expenses to be paid and also to ensure that necessary work can be done to keep the partly completed Development secure and in a suitable condition for construction work to resume. The Interim Facilities are governed by English law.

Pursuant to a Restructuring Support and Lock-up Agreement dated 15 October 2023 (the “RSA”), a “Senior Creditors’ Committee” agreed to support the Plan and, as a consequence, refrain from taking action to enforce their Senior Debt for a period of time. Initially that Senior Creditors’ Committee consisted of two entities (“AXA” and “Fidera”) that either held, or were acting on behalf of Senior Creditors who held, in excess of two thirds of the Senior Debt. Since then, the number of Senior Creditors who, together with the Senior Creditors’ Committee agreed to support the Plan, has expanded. By the time of the plan meetings referred to below, the Senior Creditors who support the Plan together with the Senior Creditors’ Committee consisted of holders of some 97.3% by value of the Senior Debt, all of whom have become party to the RSA.

All three tranches of the Group’s secured debt fell due for repayment on 28 November 2023. The Group failed to pay and has nowhere near enough cash to do so.

While the Group has €102 million of cash in the Investment Reserve Account, it cannot access that sum. It lacks the cash needed to redeem its debts and, even taking into account the €102 million, has insufficient cash to complete the Development. All parties are agreed that an ideal outcome would include, but not be limited to, PropCo obtaining additional funding necessary to complete the Development and an extension to the maturity of the Senior Debt so that it can be repaid out of either a sale or refinancing of the Development once it is completed.

The purposes of the Plan are disputed, as is the extent of the court’s jurisdiction to sanction it. At this stage, I simply note that the Plan Company’s position is that the purpose of the Plan is to restore the Group to solvency by: (i) restructuring the Group’s secured debt; and (ii) enabling the provision of a substantial amount of new money to allow the completion of the Development. It argues that the court should exercise its power to sanction the Plan because the Plan Company has moved its centre of main interests (“COMI”) to England and Wales (the “COMI Shift”, an expression I use recognising that there is a dispute as to whether there has been a shift in the Plan Company’s COMI).

On 1 November 2023 Miles J made an order giving the Plan Company liberty to convene three separate class meetings (the “Plan Meetings”) of the Senior Creditors, the Tier 2 Creditors and the Junior Creditors (together the “Plan Creditors”) to consider and, if thought fit, approve the Plan (the “Convening Order”). Miles J also gave a judgment in which he explained his reasons for making the Convening Order reported at [2023] EWHC 2849 (Ch).

In accordance with the Convening Order, the Plan Meetings took place on 27 November 2023. The Plan was approved by 97.3% of those voting at the meeting of the Senior Creditors and by 93.75% of those voting at the meeting of the Tier 2 Creditors. The Plan was not approved by any of the Junior Creditors.

These voting figures do not, however, give the full picture. There is objection to the Plan which is being led by Bank J. Safra Sarasin (“Safra”) who says that it represents 711 Tier 2 Creditors who hold some €86 million of the total Tier 2 Debt of €150 million. Ony 10.67% of the Tier 2 Debt was represented at the class meeting of the Tier 2 Debt. Accordingly, despite apparently opposing the Plan, Safra’s clients appear not to have registered their objection by voting against it. I do not need to consider why they acted in this way since the Plan Company accepts that there was not fair representation of the Tier 2 Creditors at their Plan Meeting and that the Tier 2 Creditors should be treated as a dissenting class despite their apparent vote in favour.

The Convening Order was made, and the Plan Meetings held, before the Court of Appeal gave judgment in Re AGPS Bondco Plc [2024] EWCA Civ 24 (“Re AGPS Bondco”). As will be seen, the Plan as proposed, and voted upon, contains a provision under which the Subordinated Debt is cancelled for no consideration. That gives rise to the issue, addressed below, as to whether the Plan in this form constitutes a “compromise or arrangement” with Subordinated Creditors such as to engage this court’s jurisdiction to sanction it. This section summarises the Plan on which Plan Creditors have voted and so does not take into account amendments that the Plan Company proposes (which are intended to ensure that the Plan does embody a “compromise or arrangement” with Subordinated Creditors to the extent it does not already).

The Plan seeks to make significant changes to the terms of the Senior Debt and a complete release of the Subordinated Debt. However, as I have noted in paragraph ‎5 above, all of the debt to be restructured by the Plan is governed by German law and is owed by PropCo and AH4, which are both companies incorporated in Luxembourg. It might, therefore, be wondered how a restructuring of this debt is to be achieved by a Plan under Part 26A, which takes effect under a UK statute and which is proposed to be sanctioned by an English court. The answer to this starts with the Deed of Contribution and also involves the COMI Shift.

The Plan Company has at all material times been a guarantor of both the Senior Debt and the Subordinated Debt. It has, therefore, at all such times owed obligations to Plan Creditors. By the Deed of Contribution, the Plan Company agreed that, if PropCo or AH4 make any payment on the debt, then those companies will have rights of contribution against the Plan Company in the same way as if the Plan Company had been a joint principal obligor.

Entering into the Deed of Contribution therefore created a risk of “ricochet” claims against the Plan Company if Plan Creditors make claims against PropCo and AH4. The Plan Company argues that the Plan can undoubtedly operate to release claims against the Plan Company in its capacity as guarantor of debt. Moreover, since the Plan Company is potentially liable in relation to “ricochet” claims, the Plan can properly result in claims of Plan Creditors against PropCo and AH4 being varied or released on the basis that those claims are closely related to claims against the Plan Company which are to be varied or released under the Plan. Reliance is placed on the judgment of Zacaroli J in Re Gategroup Guarantee Ltd [2021] EWHC 775 (Ch).

My jurisdiction to make an order that has the effect of varying or releasing the debt obligations of PropCo and AH4 is not challenged. Nor has any party suggested that the mechanism that the Plan employs to effect that variation or release is deficient as a matter of English law. By Clause 5.1 of the Plan, Plan Creditors appoint the Plan Company as its agent to execute documents giving effect to the variations and releases of the PropCo and AH4 liabilities, thus dealing with the points that Zacaroli J identified at [36] to [40] of Re Gategroup Guarantee Ltd.

However, the parties are far from agreed on whether I should exercise my discretion to sanction a Plan that results in the German law liabilities of the Plan Company, PropCo and AH4 being amended or released. As will be seen, Safra argues that the German and Luxembourg courts would be unlikely to recognise any order of an English court that has that result. The Plan Company argues that they would do so on the basis that, as a result of the COMI Shift, they would accept that the English courts have jurisdiction in what it asserts are “insolvency proceedings”.

Pursuant to the Plan, all of the Senior Creditors will be entitled (but not obliged) to participate in a new tranche of super senior financing (the “Super Senior Financing”) with a principal amount of €190 million. The function of the Super Senior Financing, when put together with the balance of the Investment Reserve Account which will become unblocked pursuant to the Plan, is to provide the Group with the funds necessary to complete the Development. The Super Senior Financing will also be used to repay the Interim Facilities and any transaction costs that are not paid by the Interim Facilities. The Super Senior Financing will rank in priority to the Senior Debt.

The Senior Creditors are entitled to participate in the Super Senior Financing pro rata to their existing holdings of Senior Debt. The deadline for agreeing to participate in the Super Senior Financing was 8 December 2023, and 97.3% of the Senior Creditors (by value) agreed to participate.

There is an “elevation” incentive for the 97.3% by value of Senior Creditors who agreed to participate in the Super Senior Financing. The Plan proposes that those Senior Creditors will be given an enhanced priority position in the post-restructuring waterfall for a portion of their debt. Senior Creditors who do not participate in the Super Senior Financing will not benefit from this elevation but the Plan Company asserts that they will be “no worse off” than in the relevant alternative.

The Senior Debt will be restated into four tranches. Those four tranches can be summarised as follows (in descending order of priority):

All four of the new tranches of Senior Debt will in practice become repayable on 28 November 2025 (although technically the Super Senior Financing is repayable on 28 November 2024 with a provision for automatic extension if not repaid by then). There is then an option for the Plan Company to extend all tranches until 28 November 2026 with the consent of two-thirds of the Senior Creditors.

Under the Plan as proposed and voted on, Tier 2 Creditors and Junior Creditors would release entirely their rights under the Tier 2 Debt and the Junior Debt. To the extent that the Subordinated Creditors have any claims against PropCo or AH4, those claims will likewise be released. That position is modified by the amendments to the Plan discussed below which envisage that Tier 2 Creditors would receive an aggregate consideration of €150,000 for the release of their rights with the Junior Creditors receiving an aggregate consideration of €50,000.

Holders of the Senior Debt will receive the following benefits in connection with the Plan:

It is also envisaged that, following implementation of the Plan, an affiliate of Aggregate Holdings will enter into an agreement (the “Consultancy Agreement”) under which it is appointed as consultant to the Development for a fee of €300,000 per month.

In parallel with the Plan it is proposed that there be a corporate reorganisation of the Group. That reorganisation does not require the sanction of the Plan by the court in order to proceed.

I will order this judgment as follows:

Section 901A provides that:

901A Application of this Part

(1)

The provisions of this Part apply where conditions A and B are met in relation to a company.

(2)

Condition A is that the company has encountered, or is likely to encounter, financial difficulties that are affecting, or will or may affect, its ability to carry on business as a going concern.

(3)

Condition B is that—

(a)

a compromise or arrangement is proposed between the company and—

(i)

its creditors, or any class of them, or

(ii)

its members, or any class of them, and

(b)

the purpose of the compromise or arrangement is to eliminate, reduce or prevent, or mitigate the effect of, any of the financial difficulties mentioned in subsection (2).

It is common ground that Condition A in s901A(3) is satisfied. However, the parties are not agreed on Condition B. Safra and other objecting creditors argue that the Plan as voted on does not constitute the requisite “compromise or arrangement” with Subordinated Creditors.

Section 901C provides so far as material as follows:

901C Court order for holding of meeting

(1)

The court may, on an application under this subsection, order a meeting of the creditors or class of creditors, or of the members of the company or class of members (as the case may be), to be summoned in such manner as the court directs.

(2)

An application under subsection (1) may be made by—

(a)

the company,

(b)

any creditor or member of the company,

(c)

if the company is being wound up, the liquidator, or

(d)

if the company is in administration, the administrator.

(3)

Every creditor or member of the company whose rights are affected by the compromise or arrangement must be permitted to participate in a meeting ordered to be summoned under subsection (1).

(4)

But subsection (3) does not apply in relation to a class of creditors or members of the company if, on an application under this subsection, the court is satisfied that none of the members of that class has a genuine economic interest in the company.

(5)

An application under subsection (4) is to be made by the person who made the application under subsection (1) in respect of the compromise or arrangement.

Section 901F deals with the situation (which is not the case with the present Plan) where all classes of creditor or member approve a Part 26A plan by the requisite majority. In that case, the court is given a discretion to approve the Plan in the following terms so far as material:

901F Court sanction for compromise or arrangement

(1)

If a number representing 75% in value of the creditors or class of creditors or members or class of members (as the case may be), present and voting either in person or by proxy at the meeting summoned under section 901C, agree a compromise or arrangement, the court may, on an application under this section, sanction the compromise or arrangement.

However, a Part 26A Plan can be sanctioned even if some classes of creditor or member failed to approve it by the requisite majority. Section 901G permits the court to effect what is commonly known as a “cross-class cramdown” as follows:

901G Sanction for compromise or arrangement where one or more classes dissent

(1)

This section applies if the compromise or arrangement is not agreed by a number representing at least 75% in value of a class of creditors or (as the case may be) of members of the company ("the dissenting class"), present and voting either in person or by proxy at the meeting summoned under section 901C.

(2)

If conditions A and B are met, the fact that the dissenting class has not agreed the compromise or arrangement does not prevent the court from sanctioning it under section 901F.

(3)

Condition A is that the court is satisfied that, if the compromise or arrangement were to be sanctioned under section 901F, none of the members of the dissenting class would be any worse off than they would be in the event of the relevant alternative (see subsection (4)).

(4)

For the purposes of this section "the relevant alternative" is whatever the court considers would be most likely to occur in relation to the company if the compromise or arrangement were not sanctioned under section 901F.

(5)

Condition B is that the compromise or arrangement has been agreed by a number representing 75% in value of a class of creditors or (as the case may be) of members, present and voting either in person or by proxy at the meeting summoned under section 901C, who would receive a payment, or have a genuine economic interest in the company, in the event of the relevant alternative.

Part 26A is relatively new legislation. However, it bears a number of similarities with Part 26 of CA 2006 which consolidates and re-enacts legislation on “schemes of arrangement” between companies and its creditors or shareholders that has been in existence for over 100 years.

There have been some inconsistent decisions at first instance on the meaning of “compromise or arrangement” for the purposes of s901A(3). In Re Prezzo Investco Ltd [2023] EWHC 1679 (Ch) Richard Smith J concluded that, for the purposes of Part 26A, a plan proposed under Part 26A could constitute a “compromise or arrangement” involving an “out of the money” class of creditors even if that plan proposed their debts be released for no consideration.

However, the approach of Richard Smith J was arguably incompatible with authorities on the meaning of “compromise arrangement” in Part 26 that stressed the need for an element of “give and take” with the result that a proposal to expropriate the rights of a creditor without any compensating advantage could fall outside the scope of the definition (see, for example Re NFU Development Trust Ltd [1972] 1 WLR 1548).

Snowden LJ considered the matter at [258] to [277] of Re AGPS Bondco. Noting that he was expressing a “provisional view”, that the point had been argued less fully than other grounds of appeal before him, and that the question was not strictly necessary to determine the appeal, he expressed the following conclusions:

The Plan Company formally invited me not to follow this approach on the basis that the judgment in Re AGPS Bondco in this regard is obiter and wrong. I will not accept that invitation. While I agree that the passages in question are obiter, I respectfully consider that they are correct and will, therefore, follow them. It follows that I have no power to sanction the Plan as it has been voted upon (see [270] of Re AGPS Bondco) and I will not do so.

On the day the Court of Appeal handed down judgment in Re AGPS Bondco, and after the Plan Meetings had taken place, the Plan Company notified Plan Creditors that it would seek an amendment to the Plan at the sanction hearing. Pursuant to the Plan as amended (the “Amended Plan”), Tier 2 Creditors would receive an aggregate sum of €150,000 in return for the cancellation of their Tier 2 Debt. Junior Creditors would receive an aggregate sum of €50,000 for the cancellation of their Junior Debt. The €200,000 would be paid by some of the Senior Creditors and would not be funded out of the assets of the Plan Company. The Plan Company asks me to sanction the Plan with those amendments and notes that no Senior Creditor objects to that proposal.

Both Safra and Chapelgate Credit Opportunity Master Fund Limited (“Chapelgate”), a Junior Creditor objecting to the Plan, argue that I simply have no power to make an order of this nature. They advance that argument in two ways:

The Plan Company disputes that analysis and reasons as follows:

I accept the Plan Company’s argument set out in paragraph ‎42.i). The answer is not to be found in any “invalidity” of the Convening Order. That order has not been reversed or set aside. The most that can be said is that there are doubts whether the Convening Order should have been made in the terms it was in the light of subsequent obiter comments in Re AGPS Bondco. That is insufficient to deprive the Convening Order of any effect. As Lord Dyson said in Rochdale Metropolitan Borough Council v KW (No 2) [2016] 1 WLR 198 at [22]:

An order of any court is binding until it is set aside or varied. This is consistent with principles of finality and certainty which are necessary for the administration of justice: … Such an order would still be binding even if there were doubt as to the court’s jurisdiction to make the order….

However, the Convening Order’s validity does not dispose of the point. I still need to be satisfied, at the sanction stage, that I have jurisdiction to amend the Plan and to sanction it in its amended form. I agree with Safra and Chapelgate that my focus should be on whether, looking at matters afresh at the sanction stage, Condition B in s901A(3) is met in relation to the Plan that has been “proposed” (see s901A(3)(a)). If it is not, then s901A(1) does not apply and the court’s jurisdiction under Part 26A to act in relation to the Plan as proposed, whether by sanctioning it, or amending it, is not engaged.

Without the benefit of the Court of Appeal’s judgment in Re Hawk, it might be thought that Condition B is postulating a single “compromise or arrangement”, albeit one that may be proposed between a company and multiple classes of creditor or member. Some support for that reading can be found in s901A(3)(b) which asks a question about the “purpose of the compromise or arrangement”. That, perhaps, points against the proposition that Condition B envisages separate “compromises or arrangements” with each separate class of creditor or member since the statute does not expressly deal with what is to happen if one “compromise arrangement” has the requisite purpose but others do not.

Re Hawk was a case about class composition. It was not disputed that the company had put forward a “compromise or arrangement”. The question was whether it was a single “compromise or arrangement” on which its creditors should vote as a single class. In analysing that question, Chadwick LJ noted at [15] that a Part 26 scheme involving two distinct classes might give rise to separate compromises or arrangements with the two classes concerned.

With the benefit of Chadwick LJ’s analysis in Re Hawk, I can accept that Condition B does not require there to be a single overarching “compromise or arrangement”. However, Re Hawk does not answer the question whether, if a company makes separate proposals to different classes of creditor or member, all of those proposals need to involve a “compromise or arrangement” in order to satisfy Condition B.

I accept that, read purely literally, the Plan Company could be said to have proposed a compromise or arrangement with “its creditors, or any class of them” for the purposes of s901A(3)(a)(i) by proposing the Plan which constituted a “compromise or arrangement” with the Senior Creditors but not with the Subordinated Creditors. However, in my judgment, that is not the correct reading when the statutory provisions are approached as a whole.

Part 26A follows the same three-stage architecture as that applicable to Part 26, which Chadwick LJ summarised at [11] of Re Hawk. At stage 1, the company makes a “proposal” to its creditors, members or any class of them and seeks an order under s901C for plan meetings to take place of the relevant classes of creditors or members. At stage 2, the creditors and members vote at the plan meetings. At stage 3, if the proposal has been passed by the requisite majorities at plan meetings, or if the court exercises its power to effect a cross-class cramdown, the court will consider whether it should exercise its jurisdiction to sanction a plan.

In my judgment, it follows from the scheme of the legislation at each of those three stages, that the proposal that is put forward must constitute a “compromise or arrangement” for every class of creditor or member to whom it is directed.

The first indication in favour of that interpretation is found in Condition B itself. The whole focus of Condition B is on whether the company has put forward a “compromise or arrangement” to address financial difficulties. The concept of a compromise or arrangement is wide, embracing almost everything with some element of “give and take”. It might well be wondered why Parliament would regard Condition B as satisfied if a company made proposals to particular classes of creditors or members that fall outside the wide concept of a “compromise or arrangement”.

That conclusion is reinforced by considering what is to happen at the second stage. The creditors or members to whom a company makes proposals are, by s901C summoned to vote. Section 901F(1) and s901G(1) ask whether the requisite majority at a plan meeting has agreed a “compromise or arrangement”. The implication is that at the second stage, each class of creditor or member has been asked to vote on a compromise or arrangement. That could not be achieved if the proposal made to some classes of creditor or member at the first stage involved a “compromise or arrangement”, but the proposal made to other classes did not.

I consider the Plan Company’s reliance on Re Hurricane Energy Plc to be misplaced. All that authority demonstrates is that if a company proposes a compromise or arrangement with some classes of stakeholder (for example creditors), the court has power under s901C(3), to order that another class of stakeholder (for example shareholders) which is affected by the compromise or arrangement should have the opportunity to participate in a plan meeting and vote on the compromise or arrangement. Any such additional meeting ordered on the court’s initiative has the same status as any other plan meeting of creditors or shareholders (as demonstrated by the fact that the ultimate outcome in Re Hurricane Energy Plc was that the shareholders voted against the proposal at the meeting the court required and the plan was ultimately not approved). I agree with Safra and Chapelgate that Re Hurricane Energy Plc does not answer the point made in paragraph ‎52. The proposal made to creditors in Re Hurricane Energy plc clearly answered to the statutory definition of “compromise or arrangement”. Even though the shareholders in Re Hurricane Energy Plc were not parties to it, they were still asked to vote on something that constituted a “compromise or arrangement”.

On the Plan Company’s analysis, a company could legitimately make a proposal to a class of creditor or member that is not a “compromise or arrangement”. That class of creditor could then be called to a meeting to vote on it. However, the vote would be of no effect since s901F(5) envisages that a court can only sanction a “compromise or arrangement” and so could not sanction the proposal as involving that class. I recognise that the practical answer to this is that the court would be unlikely to exercise discretion to call the meeting in the first place. However, the fact that the Plan Company’s interpretation admits the possibility is a pointer against that interpretation being correct and a pointer in favour of what I consider to be the most natural interpretation, namely that Condition B in s901A requires that, if a company chooses to make a “proposal” to classes of creditor or member, that proposal must constitute a “compromise or arrangement” for all classes involved.

I have not found the point straightforward, but conclude, in agreement with both Safra and Chapelgate, that Condition B is not satisfied by reference to the Plan.

It follows that I have before me a plan which does not satisfy Condition B in s901A with the result that Part 26A does not apply to it. A particular consequence of that is that the court’s jurisdiction to sanction the Plan is not engaged. In those circumstances, I would need a clear basis on which I could properly “amend” the Plan, thereby conferring jurisdiction on myself and, having done so, sanction the Amended Plan.

The Plan Company rightly does not argue that Clause 8.5 of the unamended Plan gives me the necessary power. Clause 8.5, being part of the Plan, comes into effect only if the court makes an order sanctioning it which is then delivered to the Registrar of Companies. Until then, by s901F(6), no aspect of the Plan, including Clause 8.5, has effect. As Hildyard J put it in Re Co-operative Bank Plc [2013] EWHC 4074 (Ch) at [30], until then the Plan is “writ in water”.

I acknowledge that the court has some inherent power to effect amendments to a Part 26A plan after the second stage, at which it has been voted upon, but before the third stage at which it is sanctioned. There is no need for me in this judgment to seek to delineate the precise parameters of that power. However, the power to effect amendments cannot be divorced from the statutory context of Part 26A. In Re Kempe Ambassador Insurance Co [1998] 1 BCLC 234, Lord Hoffmann, sitting in the Privy Council made the following statement in connection with a scheme of arrangement under legislation in Bermuda that is similar to what is now Part 26 of CA 2006:

It is true that the sanction of the court is necessary for the Scheme to become binding and that it takes effect when the order expressing that sanction is delivered to the Registrar. But this is not enough to enable one to say that the court (rather than the liquidators who proposed the scheme or the creditors who agreed to it) has bias order made the scheme. It is rather like saying that because Royal Assent is required for an Act of Parliament, a statute is an expression of the Royal will. Under section 99 [the relevant legislation in Bermuda] it is for the liquidators to propose the scheme, for the creditors by the necessary majority to agree to it and for the court to sanction it. It is the statute which gives binding force of the Scheme when there has been a combination of these three acts just as the rules of the constitution give validity to act duly passed by the Queen in Parliament.

All of the authorities I was shown touching on my power to amend the Plan were in a context where the court had power to sanction the Part 26 scheme or Part 26A plan in its unamended form. Here, as I have concluded, I have no such power. I consider that if I exercise, or purported to exercise, an inherent jurisdiction to amend the Plan I would be turning it from something that the court has no power to sanction into something that the court can sanction. I consider that to be a material amendment that either falls outside the scope of my power or would be an improper exercise of it.

I will not, therefore, make the amendments to the Plan that the Plan Company seeks. Nor will I, as the Plan Company invited me to, make an order under s901C(4) retrospectively disenfranchising the Tier 2 Creditors and the Junior Creditors and, having done so, sanction the unamended Plan pursuant to s901F. I make no determination as to whether an order under s901C(4) can now be made in relation to meetings that have already taken place. However, since I consider Part 26A does not apply to the Plan in its unamended form for the reasons given above, I consider I lack jurisdiction, at the sanction stage, to make an order under s901C(4) in relation to that Plan for the same reason that I lack jurisdiction to sanction the Plan.

For the Plan Company and the Senior Creditors, I had witness evidence from the following:

For Safra and the Tier 2 Creditors that it represents, I had witness evidence from the following:

I regarded the expert evidence of all experts who were cross-examined as first-rate. All experts clearly had expertise in their respective fields and no-one suggested otherwise. All experts were conscious of their duties to the court and gave their opinion evidence dispassionately.

I have examined disputed questions of Luxembourg law in some detail as I consider that they were important not just to the question of whether any order sanctioning the Plan would be recognised in Luxembourg, but also to some other issues. On some of those questions, I have by a slender margin preferred the opinion of Professor Prüm. However, I have reached those conclusions on the balance of probabilities by reference to brief cross-examination on what I accept are difficult questions of Luxembourg law. In reaching my conclusions, I should not be taken as doubting the quality of Professor Cuniberti’s analysis for which I was most grateful.

Mr Beckwith and Mr Vogt were both impressive witnesses. I considered that they were both reliable and truthful and I have accepted their evidence.

The Plan Company has invited me to conclude that Ms Alashkar did not give her evidence in a straightforward and frank manner. It also submitted that in places her evidence was untruthful. I will not make that finding. Ms Alashkar clearly believes that the Plan treats Tier 2 Creditors unfairly. She has spent a long time and a lot of effort in opposing the Plan. As a consequence, her answers to questions in cross-examination were sometimes long and sometimes argumentative. She did not always directly answer questions put to her. However, while sometimes witnesses adopt this strategy as a means of avoiding difficult questions, I am quite satisfied that Ms Alashkar did not. Rather, I concluded simply that she is strongly invested in the Tier 2 Creditors’ opposition to the Plan, there was a lot she wished to say and she was concerned that, if she did not do so, important matters might escape the court’s attention.

The Plan Company also criticised Ms Alashkar’s witness statement for being misleading in its accounts of links between the Aggregate Group, the Plan Creditors and London. I do not accept that. I conclude that Ms Alashkar did not think these links important as the focus of the COMI issue was on the Plan Company’s links to England and Wales. At the beginning of her evidence, she disclosed, without being in any way prompted, that one of the Tier 2 Creditors has an address in England.

I am satisfied that Ms Alashkar gave her evidence truthfully.

It is common ground between the parties that the location of the Plan Company’s COMI, as defined in Article 3(1) of Regulation (EU) 2015/848 on insolvency proceedings (as recast) (the “Insolvency Regulation Recast”), at various times is of significance.

For reasons that are explained below, my factual conclusion is that the Plan Company’s COMI was located in Luxembourg until 16 October 2023, the date of the notice to Plan Creditors referred to in paragraph ‎71.iii). From the giving of that notice, the Plan Company’s COMI was located in England.

It is not disputed that the Plan Company has taken the following steps with a view to moving its COMI to England:

Various provisions of the Insolvency (Amendment) (EU Exit) Regulations 2019 (the “2019 Regulations”) ensure the continued significance of the concept of “COMI” as defined in Regulation 3(1) of the Insolvency Regulation Recast. The applicable definition of “COMI” is as follows:

the place where the [Plan Company] conducts the administration of its interests on a regular basis and which is ascertainable by third parties.

The following principles to be followed when determining a company’s COMI, which were largely drawn from Trower J’s summary at [15] of Re Swissport Holding International SARL [2020] EWHC 3556 (Ch), were common ground:

The Plan Company’s business, being that of a holding company, consists of reasonably circumscribed activities. As Trower J observed at [22] of Re Swissport Holding International SARL, it is likely to be more straightforward to move the COMI of a company carrying on such a business than it would be to move the COMI of an operating company.

In my judgment, the primary facts set out in paragraph ‎71 provide a strong basis for rebutting the presumption that the Plan Company’s COMI remained in Luxembourg. Those primary facts indicate that the Plan Company conducts the administration of its interests on a regular basis from England and that its creditors are well aware of that fact, having been specifically notified. Indeed the Senior Creditors constitute a significant majority by value of the Plan Company’s total creditors and Senior Creditors have positively assented to the movement of the Plan Company’s COMI to England pursuant to the RSA. The presence of full-time employees in England, who perform their duties at physical premises that the Plan Company occupies in England, together with the notification of a changed tax residence to HMRC, and the registration as an overseas company with Companies House, provide a clear indication that the shift of administrative function is permanent.

Safra nevertheless invites me to look behind the apparently strong case. It argues that there has been substantial window-dressing that seeks to obscure the true position, namely that creditors would actually perceive relatively little permanent conduct of the Plan Company’s administration in England.

Safra points out that the initial licence of the Moorgate Office was taken out on a short-term basis which committed the Plan Company only for one month at a time. Safra notes that this very flexibility was a selling point that IWG plc stressed on its website. However, I see little force in that objection. The Plan Company resolved on 6 October 2023 to move its COMI. It needed office space in England to do that. There was nothing wrong in principle with the Plan Company acting quicky and taking a short-term licence of office space on 9 October 2023. What matters to the Plan Company’s COMI is not whether it was entitled to terminate the licence agreement of the Moorgate Office on short notice or not but whether, viewed as a whole, the transfer of administration to London was permanent or not. The Plan Company’s act of taking a 36-month lease of dedicated office space at Copthall House provides a clear indication that it did not require office space on a temporary basis only.

I also see little force in Safra’s arguments that the Plan Company engaged in window-dressing by taking on three employees that it did not really need and by taking a lease of Copthall House which provided accommodation considerably in excess of its true needs. Mr Beckwith spoke convincingly in his oral evidence about how difficult it was for him to have to do everything before the employees were appointed. I accept that the Plan Company had a genuine need for an employee to deal with finance-related matters given that, as matters stand, much of the Plan Company’s activity has involved dealing with its creditors. Nor do I see any sign of window-dressing in the Plan Company’s appointment of an employee to deal with “operations”. After all, the Plan Company is a holding company of entities whose main asset is a partially completed development in Berlin. It was reasonable for the Plan Company to appoint an employee to help look after that underlying asset. I can quite understand that the Plan Company considered that some additional administrative support was needed in the form of an office administrator.

The Copthall House office may well be larger than offices used by other businesses with four employees (including Mr Beckwith), but that does not detract from the conclusion that it represents accommodation genuinely used by the Plan Company in London.

I acknowledge that the Plan Company has an incentive to present the facts in as attractive a way as possible since it wishes to rely on the COMI Shift in the face of opposition from Subordinated Creditors. However, in my judgment the allegation of window-dressing is not made out, partly because of the points made in paragraph ‎78, and partly because I do not consider that there is an alternative “true” picture that any window-dressing is designed to obscure. Rather, the true position is that the Plan Company has, since 16 October 2023, when it gave notice of the fact to its creditors, carried on the administration of its interests in London.

Safra argues that the move of the Plan Company’s COMI to England would have been insufficiently visible to creditors because (i) the Plan Company held very few face-to-face meetings with creditors in London, (ii) such meetings as there were with creditors took place by means of a call or video meeting and (iii) it does not really matter where Mr Beckwith was physically located when he participated in remote meetings since those meetings could function perfectly well whether he was physically present in London or not.

I do not accept that argument. The Plan Company can only administer the business interests that it has. Its creditors are based largely, but not exclusively, outside the UK. It is inevitable that, in the modern business environment, discussions with those creditors are largely going to take place at remote meetings, rather than face-to-face. I accept Mr Beckwith’s oral evidence that during remote meetings, the fact that he was physically present in the UK was occasionally remarked on. In any event, Safra’s argument overlooks the significance of the express notification to creditors that the Plan Company would, from 16 October 2023, be administering its business interests from London.

Relatedly, Safra argues that since creditors continued to send documentation to the Plan Company at its Luxembourg registered office, they cannot have been sufficiently aware of the asserted transfer of the Plan Company’s COMI to London. Mr Beckwith has produced a schedule of correspondence received in a hardcopy at the Plan Company’s registered office in Luxembourg. Some of that was received from Luxembourg authorities, such as its revenue authorities and its Chamber of Commerce. It is not obvious to me that those entities are “creditors” and, in any event, they could be expected to correspond using a known address in Luxembourg. Some correspondence came from creditors, but I accept the Plan Company’s point that Subordinated Creditors have a clear self-interest in sending correspondence to a Luxembourg address to bolster their arguments that COMI has not shifted. I regard the weight of this indication as slender.

I attach little significance to Safra’s other objections based on the continued presence of certain documents in Luxembourg and the engagement of a Luxembourg corporate services provider. Despite the shift of its COMI to London, the Plan Company remains a Luxembourg incorporated company. It therefore has legal obligations that it must comply with under Luxembourg law. The fact that it takes steps to comply with those obligations, by keeping documents in Luxembourg as required, and engaging a provider of corporate services to ensure compliance with Luxembourg legal obligations, says little if anything about the location from which it administers its business interests. In a similar vein, I attach little significance to the fact that the Plan Company is party to legal proceedings in Luxembourg. Those proceedings relate to the Subordinated Creditors’ attempts to wind up the company under Luxembourg law and therefore necessarily have to be brought in Luxembourg.

Finally, Safra notes that, if the Plan is sanctioned, the Plan Company will have much less of a continued role in the group structure. Ms Cooke suggested in the Plan Company’s closing submissions that it might be reduced to holding just 5% of the shares in PropCo following a reorganisation of the Group that is proceeding in parallel with the Plan. However, that is simply a statement that the Plan Company’s business may reduce in scale. It does not suggest that the place where the Plan Company administers its business interests, (whether those business interests reduce in the future or not) is somewhere other than England. I am not satisfied that the move of the COMI to England is “temporary” in the sense that, if the Plan is sanctioned, the Plan Company proposes to relocate its administration of that business back to Luxembourg.

I have reached the following conclusions which I will explain in the remainder of this section:

Article 2 contains four paragraphs. The first paragraph provides for the Plan Company’s registered office to be in the municipality of Luxembourg. The managers are entitled to move the registered office to another address in the municipality of Luxembourg. The second paragraph provides that a resolution of shareholders is needed to approve the move of registered office to any other place outside the municipality but still in the Grand Duchy of Luxembourg.

The third paragraph permits the registered office of the Plan Company to be transferred outside the Grand Duchy of Luxembourg on a temporary basis if a threshold condition is satisfied namely that “military, political, economic or social reasons … might prevent normal performance of the activities of the [Plan Company] at its registered office [in the Grand Duchy of Luxembourg]”. Such a transfer of registered office can be temporary only “until such time as the situation is normalised”.

Professor Prüm based his opinion on what he considered to be the natural reading of Article 2 as dealing only with the registered office of the Plan Company and imposing no restriction on the location of its administrative functions. That seemed to me to accord with the ordinary meaning of the words used and the overall purpose of Article 2: while shareholders’ approval would be needed to move the registered office within the Grand Duchy of Luxembourg, exceptional circumstances could permit the managers to approve a temporary transfer outside Luxembourg without the need for shareholder approval.

Professor Cuniberti’s contrary opinion was based on the statement in Article 2 that a temporary transfer of registered office “will not have any effect on the [Plan Company’s] nationality which notwithstanding said temporary transfer of registered office will remain a Luxembourg company”. Professor Cuniberti’s point was that this wording indicated that Article 2 is concerned with an examination of the nationality of the Plan Company. Since the COMI Shift would result in a change of nationality, his opinion was that Article 2, when read together with other provisions of the Articles of Association, did indicate that any transfer of administrative function could similarly take place only on a temporary basis.

However, I preferred Professor Prüm’s opinion. The wording on which Professor Cuniberti relies, in my judgment, explains the consequences of a temporary transfer of registered office rather than imposing any restriction on the transfer of administrative functions.

The conclusion set out in paragraph ‎86.ii) was largely common ground between the experts. Until amendment on 16 October 2023, Article 11 of the Articles of Association of the Plan Company precluded a majority of managers from attending a board meeting while being located in the same jurisdiction outside Luxembourg. An amendment to the Articles on 16 October 2023 removed this restriction. The Plan Company resolved to move its COMI on 6 October 2023, while the “old” Articles remained in force. Therefore, there was scope for a breach of the Articles between 6 October 2023 and 16 October 2023. Both Professor Prüm and Professor Cuniberti agreed that the location of the Plan Company’s COMI was a question of fact. Accordingly, any breach of Article 11 could not, as a matter of Luxembourg law, vitiate the COMI Shift.

I have reached the following conclusions which I explain in the remainder of this section:

The propositions that I have set out in paragraphs ‎93.i) and ‎93.ii) above were common ground between Professor Prüm and Professor Cuniberti.

Professor Prüm’s opinion was that “one could reasonably expect” that Article 45 protects rights of extraordinary creditors only to the extent that they are “in the money” although he acknowledged that the point was unclear. He supported his opinion by reference to academic commentary on the Belgian law on which the Luxembourg Restructuring Law had been based. That Belgian law had been amended expressly to provide that rights of secured creditors could be varied without consent to the extent that the debt was “out of the money”. Professor Prüm’s conclusion was that academic commentary in Belgium supported the conclusion that this amendment merely clarified what had been intended all along and he considered that a Luxembourg court would apply a similar approach.

Professor Cuniberti’s opinion was that the Luxembourg Restructuring Law was so new that it is very difficult to express an opinion. He acknowledged the possibility of a “liberal” approach under which the Luxembourg court would interpret Article 45 as permitting some extinguishment of “out of the money” debt held by extraordinary creditors. He thought that the likelihood of the liberal approach being applied would be affected by the amount of the extinguishment so that a 10% extinguishment might be acceptable but complete expropriation might not be. Against that, he acknowledged the possibility of a “conservative position” under which Article 45 is interpreted as precluding any extinguishment of secured debt without consent.

I reach the conclusion in paragraph ‎93.iii) because both Professor Prüm and Professor Cuniberti both accepted that the position was unclear and both experts’ analyses struck me as entirely plausible.

I have concluded that the Plan would not infringe the Luxembourg law of 5 August 2005 on Financial Collateral Arrangements (the “Luxembourg Collateral Law”) by providing for the release of Subordinated Debt that benefits from a share pledge under Luxembourg law.

Article 20(4) provides for both Luxembourg and non-Luxembourg provisions governing reorganisation measures not to apply to “financial collateral arrangements” and not to constitute an obstacle to the enforcement and performance of the parties’ obligations, particularly their obligation of re-transfer or repurchase. It is common ground that both the Senior Debt and the Subordinated Debt are secured by a share pledge under Luxembourg law that constitutes a “financial collateral arrangement” for the purposes of Article 20(4).

Professor Prüm’s opinion is that this provision is dealing only with the “financial collateral arrangement” in question in order to make it “unassailable” including in circumstances where a Luxembourg company is subjected to insolvency proceedings in a different country. He explained that, in his view, Article 20(4) was intended specifically to interact with the predecessor to the Insolvency Regulation Recast. Under that regulation, it was typically the law of the country in which the winding up takes place that determines whether security can be set aside in that winding up. However, the regulation permitted an exception where the law of the territory under which the security was granted prevented the security from being set aside. In Professor Prüm’s opinion, Article 20(4) was intended to enact just such an exception. He supported that articulation of purpose by reference to a judgment of the Luxembourg Court of Appeal in Case CAL-2020-00840.

Professor Cuniberti’s contrary opinion was that Article 20(4) prevents the Plan from releasing any part of the underlying debt obligations owed to creditors who benefit from a share pledge under Luxembourg law. However, I concluded that this contrary opinion did not accord with the natural meaning of Article 20(4) and did not provide a clear rationale why the Luxembourg legislature should wish to protect debt obligations from release in a provision which was ostensibly dealing with the continued validity of security. Overall, I concluded that Professor Cuniberti’s analysis did not explain clearly what was wrong in Professor Prüm’s opinion. I accordingly prefer the analysis of Professor Prüm.

Subordinated Creditors have initiated the following insolvency proceedings against members of the Group in Luxembourg:

I conclude that the Luxembourg courts would not decline to recognise an English judgment sanctioning the Plan on the basis that the Luxembourg courts have exclusive jurisdiction in relation to a winding up of the Plan Company or a restructuring of its debt.

Professor Cuniberti’s opinion was that the Luxembourg courts would consider that both the July Proceedings and the September Proceedings conferred on it exclusive jurisdiction to open faillite in Luxembourg. Faillite is a Luxembourg insolvency proceeding that falls within Annex A of the Insolvency Regulation Recast (“Annex A”). Proceedings of this kind survive enactment of the Luxembourg Restructuring Law. Professor Cuniberti based his conclusion on judgments of the Court of Justice of the European Union (the “CJEU”) made in the context of moves of COMI between member states of the EU. Concluding that case law of the CJEU (including Case C-723/20 Galapagos BidCo Sarl) indicates that Luxembourg would retain exclusive jurisdiction if the Plan Company had moved its COMI to another member state after the applications in Luxembourg, Professor Cuniberti concludes that there would be still greater reason for the Luxembourg courts to assert exclusive jurisdiction in the context of a shift of COMI outside the EU.

Professor Prüm bases his opinion squarely on the assumption that the Plan Company’s COMI is in England at the time of any order sanctioning the Plan. On that assumption, Professor Prüm concludes that a central consideration is the fact that the Luxembourg courts have not yet made any decision to open insolvency proceedings in relation to the Plan Company. The July Proceedings were dismissed and the September Proceedings stayed. If the English court sanctions the Plan, Professor Prüm’s opinion is that the Luxembourg courts would not regard that as trespassing on their exclusive jurisdiction. He disputes Professor Cuniberti’s analysis as based on EU law, concluding that this has no application where the shift of COMI is to a country outside the EU. He considers that the Luxembourg courts would be more likely to adopt the approach of the French Cour de Cassation in a judgment dated 30 September 2009. In that case, the French court was first seised of an application, but a foreign court ruled first. The French court concluded that the proceedings in France had become irrelevant once the foreign judgment was given.

Both of these opinions were tested in cross-examination. Both held up to scrutiny and, therefore, I concluded that both opinions had a realistic chance of being accepted by a Luxembourg court. Professor Prüm’s opinion was based, at least to an extent, on reasoning by analogy to the CJEU’s judgment in Galapagos. He concluded that since, in that case, the CJEU held that the jurisdiction of the German court was not affected by the existence of pending insolvency proceedings in England after the end of the Brexit withdrawal period, the converse was likely to be true namely that pending insolvency proceedings in Luxembourg should not cause the Luxembourg courts to conclude that the English courts lack jurisdiction. I saw the logic of that, but it remained an argument based on reasoning by analogy. I also saw force in Professor Cuniberti’s point that, since Luxembourg would retain exclusive jurisdiction if the COMI Shift had been to an EU member state, the Luxembourg courts might be reluctant to conclude that they lost exclusive jurisdiction when the COMI Shift was to a non-EU member state.

If the matter had rested there, I would have concluded that the opinions of Professor Prüm and Professor Cuniberti were both eminently respectable points of view, but neither should necessarily be preferred to the other. There are two factors that tip the balance and lead me to prefer the opinion of Professor Prüm.

The first is Professor Prüm’s conclusion that the Luxembourg courts would only consider that they have exclusive jurisdiction given the existing insolvency proceedings if the Plan Company, AH4 and PropCo have been shown to have defaulted on payment obligations that are due. The Luxembourg courts have already, in the September Proceedings and the Aintabi Proceedings, concluded that PropCo and AH4 have not been shown to have defaulted on the obligations under the Junior Debt or Tier 2 Debt on which those proceedings relied. Accordingly, Professor Prüm considers that the Plan Company would similarly not be considered to have defaulted in relation to its obligations in respect of the Junior Debt or Tier 2 Debt.

Professor Cuniberti clearly disagreed with the reasoning of the Luxembourg court as regards the insolvency proceedings against PropCo and AH4. However, as matters stand, those are the decisions of the Luxembourg Court and Professor Cuniberti accepted that there is a prospect that the same decision would be made in relation to the Plan Company by the same Luxembourg first instance court.

The second factor is that Professor Cuniberti’s opinion was that the July Proceedings established the exclusive jurisdiction of the Luxembourg courts, even though they had been dismissed on the basis that Safra lacked standing to bring them with that dismissal not under appeal. I did not obtain from Professor Cuniberti’s evidence a clear explanation of this apparently anomalous result.

Therefore, albeit by a slender margin, I conclude that Professor Prüm’s opinion on the question of the exclusive jurisdiction of the Luxembourg courts is to be preferred.

The parties agree that a relevant question is whether, if the Plan is sanctioned, there is a reasonable prospect that it will be recognised and given effect to in the relevant overseas jurisdictions, being Luxembourg and Germany in this case. Certainty as to the position under overseas law is not needed. (See [27(iii)] and [27(iv)] of the judgment of Sir Alastair Norris in Re DTEK Energy BV and another (No 2) [2021] EWHC 1551 (Ch)). I am satisfied that there is such a reasonable prospect in relation to Luxembourg.

Professor Prüm and Professor Cuniberti agree that the Luxembourg court would recognise and enforce any order of an English court that gives effect to the Plan provided all of the following conditions are satisfied:

I have already in paragraph 103 explained why I prefer Professor Prüm’s opinion that the Luxembourg courts would not regard themselves as having exclusive jurisdiction. Both Professor Prüm and Professor Cuniberti agree that the question whether there is an actual connection between the dispute and England is determined in a flexible and liberal manner. Nevertheless, Professor Cuniberti thought that there would be difficulties in satisfying this test since he considers the better view is that the test of “actual connection” should be determined at the time insolvency proceedings were first brought in Luxembourg. At that time, the Plan Company had no connection with England.

Notwithstanding this difference of opinion on the question of “actual connection”, I conclude that there are at least reasonable prospects that the Luxembourg courts would consider that test to be satisfied. Put another way, I do not consider it clear that, if the Luxembourg courts were satisfied that they did not have exclusive jurisdiction they would apply a test of actual connection, which is intended to be “flexible and liberal”, by reference only to circumstances existing in July or September 2023 and so before the date of the very English court order whose recognition they would be considering.

The question raised in paragraph ‎113.ii) was the subject of a clear difference of opinion between Professor Prüm and Professor Cuniberti. Professor Cuniberti’s analysis of fraude à la loi drew on his opinion, which I have not accepted, that the COMI Shift involved a breach of the Plan Company’s articles. It also drew support from the proposition that the Plan Company is insolvent in Luxembourg terms and so the effect of the COMI Shift is to result in Luxembourg insolvency law being sidestepped. However, the force of that objection is diminished by rulings to date which, as I have explained, suggest that the Luxembourg courts would conclude that the Plan Company has not been shown to be in default on obligations in relation to the Tier 2 Debt on which the September Proceedings rely.

Professor Cuniberti also considered that the Plan Company’s clear acceptance that the COMI Shift is being effected solely to enable it to propose the Plan under UK law made it clear that the Plan Company was engaged in a fraude à la loi or a fraude au jugement since it emphasised that the Plan Company was seeking to obtain a foreign judgment applying foreign insolvency law instead of a Luxembourg judgment applying Luxembourg insolvency law.

Professor Prüm drew precisely the opposite conclusion noting that, at the time of the COMI Shift, the Luxembourg Restructuring Law was not in force and so there was simply no mechanism available in Luxembourg that permitted the Plan Company to achieve the outcome it sought. He did not consider that accessing a foreign law to achieve a result that, while not possible, was not positively prohibited by Luxembourg law, amounted to a fraude à la loi. He drew an analogy with a judgment of the Luxembourg court to the effect that there was no fraude à la loi where a Luxembourg couple sought recognition from a US court of parenting rights over a child who was born under arrangements with a surrogate mother in circumstances where Luxembourg law had no legislation relating to surrogate motherhood.

If it were necessary to choose between these opinions, I would prefer the opinion of Professor Prüm. Professor Cuniberti’s contrary opinion was based on propositions that I considered insecure (see paragraphs ‎116 and ‎117). It also leads to the conclusion that, despite EU law recognising that a company can validly move its COMI, any move of COMI to a jurisdiction that has a different insolvency law from Luxembourg could be regarded as a fraude à la loi. That struck me as a surprising outcome and I preferred Professor Prüm’s reasoning that provided a coherent explanation of why that is not the correct interpretation. At the very least, I conclude that there is a reasonable prospect that the requirement of paragraph ‎113.ii) is met.

Significantly in my judgment, Professor Cuniberti accepted at paragraph [82] of his expert report that there would be no violation of Luxembourg public policy simply on the basis that the Plan achieves a result that cannot be achieved under the Luxembourg Restructuring Law. Rather, his opinion that the condition in paragraph ‎113.iii) is not met was based on the proposition that the Plan results in a breach of the Luxembourg Collateral Law and a breach of Article 45 of the Luxembourg Restructuring Law.

I have not accepted Professor Cuniberti’s opinion on the Luxembourg Collateral Law (see paragraph ‎98 above). I therefore do not accept that this aspect of the Plan involves a breach of Luxembourg public policy. I have found (see paragraph ‎93.iii) above) that Professor Cuniberti may be correct in his conclusion that Article 45 would not allow Subordinated Creditors to have their debt extinguished even though they are completely “out of the money” by reference to the security for that debt. However, I prefer Professor Prüm’s opinion that this aspect of the Plan does not involve a breach of public policy either. Since the interpretation of Article 45 is not settled, it is difficult to see how that Article can set out a clear expression of public policy that is breached by the Plan.

Both Professor Prüm and Professor Cuniberti agree that to date there is no conflicting decision of a Luxembourg court with the result that there is no difficulty with the requirement of paragraph ‎113.iv).

The principles of German law set out in this section were common ground between Professor Thole and Professor Skauradszun.

Section 343 of the German Insolvency Code (Insolvenzordnung) (the “InsO”) provides for the opening of non-German “insolvency proceedings”, and judgments implementing “insolvency proceedings” to be recognised in Germany. There is an exception if the courts in which the proceedings were opened, or judgment given, would lack jurisdiction applying German law principles or where recognition leads to a result which is manifestly incompatible with major principles of German law.

Both experts agree that an English judgment sanctioning the Plan would be recognised in Germany only if the Plan Company’s COMI is in England at the time of any order sanctioning the Plan. Without that, the German courts would not accept that the English courts have jurisdiction for the purposes of s343 of the InsO.

Neither Professor Thole nor Professor Skauradszun suggested that the Plan is manifestly incompatible with major principles of German law.

The central question that divides the experts is whether the English proceedings seeking sanction of the Plan are “insolvency proceedings” for the purposes of s343 of the InsO. If not, there might still be a route to recognition of the Plan under s328 of the Civil Procedure Code (Zivilprozessordnung) (“ZPO”). However, the ZPO is most obviously applicable to bilateral civil judgments and so provides a less attractive basis for recognition than the InsO.

Section 1(1) of the InsO provides some insight as to the meaning of the term “insolvency proceedings” as follows:

The purpose of insolvency proceedings is to jointly satisfy a debtor's creditors by exploiting the debtor's assets and distributing the proceeds or by making a different provision in an insolvency plan, in particular to preserve the company. The honest debtor is given the opportunity to free himself from his remaining liabilities.

In order to constitute “insolvency proceedings” for the purposes of the InsO, it is necessary for those proceedings to deal with obligations of creditors collectively. Professor Thole and Professor Skauradszun are not agreed on whether this means that the claims of all creditors are dealt with in the proceedings. However, they are agreed that provided the Plan satisfies the requirement of “collectivity”, it will be treated as a form of “insolvency proceedings”. Put another way, there are no other obstacles standing in the way of the Plan qualifying as “insolvency proceedings”.

Germany has implemented into domestic law the provisions of the EU Directive 2019/1023 on Preventive Restructurings (the “Restructuring Directive”). The implementing legislation is the Stabilisation and Restructuring Framework for Businesses Act (the “StaRUG Act”). The StaRUG Act permits “preventive restructuring proceedings” (“StaRUGs”) to take effect in German law which include features that are provided for in Part 26A, including the facility to implement a “cross-class cramdown”.

The StaRUG Act contains provisions for the recognition in Germany of preventive restructuring frameworks that take effect in other EU member states to the extent they fall within the scope of the Insolvency Regulation Recast. However, these provisions of the StaRUG Act do not apply to the Plan since the UK is no longer an EU member state.

The StaRUG Act appears in the list of provisions contained in Annex A. Accordingly, a StaRUG must be recognised and given effect in EU member states in accordance with the Insolvency Regulation Recast.

For reasons that follow, I am satisfied that there is a reasonable prospect that any order sanctioning the Plan would be recognised and given effect to in Germany.

Professor Thole’s reasons for concluding that the Plan would be recognised and given effect to in Germany can be summarised as follows:

Professor Skauradszun’s reasons for reaching a contrary conclusion can be summarised as follows:

When considering the debate between the experts on Luxembourg law, I have, in particular instances said that I preferred the conclusion of one expert over the other. I did so because propositions of Luxembourg law potentially affect other factual determinations I must make including the viability of the Safra Proposal. However, the question of German law that is before me is more limited. I simply need to decide whether there is a “reasonable prospect” that an order sanctioning the Plan would be recognised and given effect to in Germany.

Both experts’ opinions set out a coherent and reasonable view. Moreover, the experts approached the question from different standpoints. Professor Thole is an academic and so understandably adopted an academic and scholarly approach in reasoning how a German court might determine a controversial point. By contrast, Professor Skauradszun is both an expert and a practising judge. He acknowledged that a logical argument could be made along the lines that Professor Thole proposes but, based on his experience as a judge, thought that a German court would adopt a less academic approach.

I have concluded that, while each expert’s opinion is tenable and reasonable, neither is clearly to be preferred to the other. Nevertheless, the very fact that Professor Thole was able to articulate a clear and cogent reason why an order sanctioning the Plan would be recognised and given effect to in Germany leads me to conclude that there is a reasonable prospect of the Plan being so recognised in accordance with s343 of the InsO. Having reached that conclusion, I do not consider it necessary to address the experts’ competing positions under s328 of the ZPO.

My overall conclusion, which I explain in the sections that follow is that, if the Plan is not sanctioned the most likely alternative outcome is that the Company would be placed into liquidation under the laws of England and Wales and PropCo and AH4 would be placed into liquidation under Luxembourg law. In that scenario, neither the Safra Proposal (described below) nor any variant on it would be implemented.

In that hypothetical liquidation, the Senior Creditors would secure repayment of around 45% of amounts due to them. Subordinated Creditors would receive nothing.

Safra invited me to make findings as to how recoveries under the Safra Proposal compare with recoveries under the Plan. I will not make any such findings since, having concluded that the Safra Proposal or variants to it would not be implemented, the Safra Proposal would not produce any recoveries.

Safra has proposed an alternative to the Plan (the “Safra Proposal”). The Safra Proposal suggests, while stressing that it is a matter for the Group to decide, a change of sponsor of the Development, away from the Aggregate Group, which Safra considers is tainted by its association with Mr Caner. Safra recommends the Group moves to Jesta as sponsor.

Safra intends that the Safra Proposal would be implemented under Article 13 of the Luxembourg Restructuring Law. It contains the following ingredients:

The Safra Proposal takes the form of a restructuring plan under the Luxembourg Restructuring Law. It is common ground that, for such a plan to be implemented under Luxembourg law, it must be approved by 50% by value and a majority by number of creditors of each relevant class. It is not clear whether the Senior Creditors and the Subordinated Creditors would vote as a single class, or as separate classes, if the Safra Proposal were put forward. However, that does not matter greatly for the following reasons:

In fact, the position is even more stark than the figures set out in paragraph ‎144 might suggest. The Safra Proposal involves the Cost Overrun Funding Facility being advanced on terms that it ranks pari passu with the existing Senior Debt and shares in the existing security package that is available to the Senior Debt. By Article 45 of the Luxembourg Restructuring Law, any measure “affecting the rights of” the Senior Creditors, other than a postponement of payments due to them for a period of up to 36 months, cannot be implemented without the consent of each Senior Creditor. In my judgment, a requirement to share the benefit of existing security with the providers of the Cost Overrun Funding Facility clearly does “affect the rights of” the existing Senior Creditors. Professor Cuniberti accepted as much in cross-examination.

During her cross-examination, Ms Alashkar suggested otherwise. She reasoned that, since the Cost Overrun Funding Facility would result in PropCo receiving new money that it could use to complete the Development, it would necessarily result in the value of the security being enhanced. Therefore, she argued, although the Senior Creditors would have to share their security with others ranking pari passu with them, an apparent disbenefit, they would achieve a countervailing benefit consisting of an increase in value of that security.

I do not accept that analysis. It relies on the proposition that, as soon as the Cost Overrun Funding Facility is advanced, there would be an immediate increase in the value of the Senior Creditors’ security. That strikes me as both uncertain and unlikely. After all, the principal amount of the Cost Overrun Funding Facility will not remain as an asset of PropCo, but will be spent. There must, at the very least, be some delay between the spending of money on contractors and a euro for euro increase in the value of the Development. Moreover, there must be some risk that spending money on contractors will not lead to such a euro for euro increase in value. The whole point of the Senior Creditors’ security package is to insulate them from a degree of risk. I conclude that the admission of a class of creditor ranking pari passu with the Senior Creditors and sharing in their security “affects the rights” of the Senior Creditors.

That conclusion of itself means that the Safra Proposal would, on a balance of probabilities, not be approved since any single Senior Creditor could veto it. In circumstances where 97.3% by value of Senior Creditors have confirmed their opposition to the Safra Proposal (see paragraph ‎150.ii) below), I conclude that at least one of them would veto.

However, in case I am wrong in my conclusion that a single Senior Creditor could veto the Safra Proposal, I will go on to consider the level of support that the Safra Proposal could expect from Senior Creditors generally.

The Plan Company attaches significance to what it submits are at least three documents that demonstrate Senior Creditors’ opposition to the Safra Proposal:

The documents referred to in paragraphs‎150.i) to ‎150.iii) clearly envisage that if the Plan is not approved, the Senior Creditors who are signatories, will take steps to demand repayment of their Senior Debt and will enforce their security over the Investment Reserve Account and other assets. That is clearly incompatible with the signatories supporting the Safra Proposal.

Safra does not deny that there is an apparent incompatibility. However, it invites me to conclude that the Senior Creditors are party to those documents only because they currently hope that the Plan will be sanctioned and that, if that hope is dashed, they will reappraise the situation. Safra points out that on the projections set out in Ms Rickelton’s evidence (see paragraph ‎180 below) Senior Creditors could expect to recover only some 45% of amounts due to them if they were to take enforcement action that led to a liquidation. Since the Safra Proposal offers at the very least the prospect of a much better recovery than this, Safra argues that the only rational choice available to the Senior Creditors if the Plan is not sanctioned, is to support the Safra Proposal or a variant of it.

It is right that I consider the possibility that the documents referred to in paragraph ‎150.i) to ‎150.iii) seek, consciously or otherwise, to advance the Senior Creditors’ case without necessarily providing a definitive guide as to how they would act if the Plan is not sanctioned. That is not to say that these documents might be calculated to mislead. Rather, it is simply to acknowledge the reality namely that, having put a lot of effort into agreeing the Plan between themselves and with the prospect of earning significant reward and fees should it proceed, the Senior Creditors have an obvious self-interest in presenting the Plan as the only realistic proposal.

During his oral evidence, Mr Vogt referred on several occasions to the fiduciary obligations that Fidera owes to others to whom Fidera provides investment advice and assistance. Since Mr Vogt clearly takes Fidera’s fiduciary obligations seriously, I conclude that Fidera was prepared to look at the Safra Proposal with an open mind. If that proposal appeared to offer the advantages that Safra claimed, in the form of a lower debt burden and reduced fees, Fidera would have concluded that its fiduciary obligations required it to give the Safra Proposal proper consideration. Since Fidera speaks for over 45% by value of the Senior Debt, Fidera’s attitude to the Safra Proposal would carry significant weight in discussions with other Senior Creditors.

Similarly, Mr Beckwith is a lawyer and former partner at Freshfields. I concluded from his evidence that he, as a manager of a company that might well be on the brink of insolvency, is acutely aware of his own obligations to deal fairly with the interests of all of the Plan Company’s creditors. Accordingly, if the Safra Proposal offered, or appeared to offer, advantages over the Plan, Mr Beckwith would have considered the Safra Proposal seriously.

Therefore, there were reasons why both Senior Creditors and the Plan Company would consider the Safra Proposal seriously. Even though it took just a few days from Safra’s communication of the proposal to the Rejection Letter, I accept the evidence of Mr Vogt and Mr Beckwith that during those few days the Senior Creditors spent a lot of time considering that proposal and did so with an open mind.

Accordingly, the Senior Creditors’ rejection of the Safra Proposal came after it was given serious thought. That itself points against Safra’s suggestion that holders of the Senior Debt were “bluffing” when they rejected the Safra Proposal and pointed out flaws with it. I agree with Safra that the Senior Creditors cannot have meant the Conditional Enforcement Notice to be absolutely irrevocable in any circumstance. I doubt, for example, that my refusal to sanction the Plan as proposed will cause them to initiate a liquidation. Instead, I consider they will seek sanction of the Amended Plan as foreshadowed by the Plan Company’s applications considered in Part D of this judgment. However, that does not mean that Senior Creditors would respond to a refusal of sanction simply by engaging in negotiations with Safra since, as discussed in paragraphs ‎161 to ‎179 below, a number of the flaws that the Senior Creditors identify in the Rejection Letter are, in my judgment, indeed present in the Safra Proposal.

I also reject Safra’s broader submission that since May 2023 at the latest, the Plan Company and the Senior Creditors had a fixed mindset that they would pursue a plan under Part 26A and so refused to countenance any alternative, including Jesta’s offer to purchase the Development or proposals that Safra made in negotiations. I was shown some evidence of the state of negotiations in May 2023.

First, Jesta never provided evidence satisfactory to the Plan Company and its advisers that it had sufficient funds to complete a purchase of the Development. It was not unreasonable for the Plan Company to require some certainty as to Jesta’s funding position before engaging in negotiations with them. After all, the stakes were high. If time and money was spent negotiating with Jesta only to find that Jesta was in no position to complete, the Development risk to being put in an even worse position and while failed negotiations with Jesta were ongoing, the opportunity to look at alternatives would have been lost.

Turning to negotiations between the Senior Creditors and Safra, there was a meeting on or around 17 May 2023. It clearly was not constructive. However, following that meeting, Fidera, through its lawyers articulated a proposal that would involve the Tier 2 Creditors having their debt converted into some equity thereby, on the face of it, offering the Tier 2 Creditors some interest in the residual value of the Project. I make no finding as to whether Safra should, or should not, have accepted that offer, but it points against the existence of the fixed mindset that Safra alleges. I also accept Mr Vogt’s evidence that Safra’s institution of the July Proceedings made further negotiations difficult since Safra’s apparent parallel pursuit of a value-destructive liquidation caused Senior Creditors to lack confidence that any negotiations would be in earnest. Again, I express no view as to whether Mr Vogt was correct in that assessment, but it was a reasonable concern to have and also points against the allegation of a fixed mindset.

The Safra Proposal envisages a Cost Overrun Funding Facility of €105 million with a provision for a further extension of €45 million “if required”. Even assuming that the uncertainties referred to below were resolved, that would still produce a maximum amount of new funding of €150 million.

Ms Rickelton has expressed her professional opinion that, even assuming that the full amount of the Investment Reserve Account is available on implementation of the Safra Proposal (as to which see paragraph ‎163 below), additional funding of €150 million would be insufficient to enable the Development to be completed. She bases that conclusion on her opinion that the Safra Proposal underestimates the costs of completing the Development. I recognise that there is inherent uncertainty in any exercise that involves an estimate of future costs. However, Ms Rickelton prepared her estimate following discussions with Dunman Capital, a real estate adviser to PropCo, in which Dunman Capital gave their detailed projections of future costs. By contrast, as Ms Alashkar accepted in cross-examination, the projection of future costs which underpins the Safra Proposal is based on Safra’s understanding of a methodology set out in a “point of view” given by Trockland, a German real estate adviser to Jesta of which Safra has never been shown the underlying supporting calculations. In those circumstances, I regard Ms Rickelton’s projections as more reliable than those of Safra.

The Safra Proposal assumes that the balance standing to the credit of the Investment Reserve Account will be made available to fund part of the costs of completing the Development. However, that assumption is not justified. If the Plan is not sanctioned, then the Senior Creditors’ obligations under the RSA fall away so that each Senior Creditor is entitled to enforce its security over the Investment Reserve Account. The clear risk is that the Investment Reserve Account will be depleted so that still further funding from external sources would be needed to complete the Development.

Ms Alashkar said in her witness statement that Jesta had committed to underwrite “at least 51%” of the Cost Overrun Funding Facility. That statement emphasises the lack of certainty as to where the other 49% is to come from. Safra suggests that the uncertainty is resolved by an undated letter (apparently sent by hard copy post to the Plan Company’s registered office in Luxembourg) from Daventry, an affiliate of Jesta. In that letter, Jesta wrote:

We reaffirm our willingness and ability to enter into the Proposed Transaction. This includes acting as lead underwriter for the cost overrun funding facility to provide further funding for the Company as part of the Luxembourg Reorganisation Plan (the “Cost Overrun Funding Facility”).

However, this letter does not say precisely how much further funding Daventry or Jesta is prepared to underwrite. Safra argues that since the letter contains an express cross reference to the Explanatory Memorandum in which Safra set out the Safra Proposal, it is clear that the offer is to underwrite €150 million since that is the figure that appears in the Explanatory Memorandum.

I do not agree. In “Table 2” of that Explanatory Memorandum, the Cost Overrun Funding Facility is described as having a notional exposure of €105 million “+ €45m Extension if required”. Annex I of the Explanatory Statement similarly uses the term “Cost Overrun Funding Facility Extension” to distinguish the additional €45 million from the main “Funding Gap” of €105 million. Since the Explanatory Memorandum uses different terminology to distinguish between the €45 million extension and the main facility of €105 million, it is quite possible to read the reference in Daventry’s letter to a willingness to underwrite the “Cost Overrun Funding Facility” as referring to just €105 million. Less legalistically, if Daventry had wished to reassure Senior Creditors that it was underwriting the full €150 million, it could have said so in terms and when it did not, Senior Creditors were entitled to conclude that it leaves the amount of committed funding uncertain.

In addition, the Safra Proposal is lacking in detail as to how precisely Senior Creditors would be repaid on the extended maturity date of 28 November 2025. Ms Alashkar was pressed on this in cross-examination. Her position was that, once the Development has a strong and credible sponsor, such as Jesta, it would be in a position to inject sufficient equity into companies associated with the Development to enable the Senior Debt to be refinanced once the Development is completed. I understand that as a general proposition, but I consider that it suffers from the same lack of detail and certainty as does the proposal to raise a maximum of €150 million of new funding that I have discussed above. The Safra Proposal does not explain how much additional equity is proposed or how Senior Creditors can have confidence that it will be provided. The letter from Daventry is silent on this matter.

Ms Alashkar was right to emphasise in her evidence that a liquidation will result in the Senior Creditors crystallising a significant loss of some 55% of their investment. However, I do not accept the conclusion that she draws from this fact, namely that it is economically rational for Senior Creditors to support the Safra Proposal simply on the basis that it offers a prospect of a better outcome. Senior Creditors would need a high degree of assurance that the Safra Proposal could be implemented (i) successfully and (ii) in a reasonably short period of time in order to support it.

As matters stand, Senior Creditors are currently entitled to enforce their claims against some €102 million sitting in the Investment Reserve Account as well as against other assets of the Development. Continued delay will diminish the balance of the Investment Reserve Account. Ms Rickelton says in her expert reports that it is necessary to spend €3.7 million per month both to keep the site secure and to ensure that construction can restart when necessary. So, for example it is necessary to keep cranes on the site, continue to retain contractors and perform limited capital expenditure on deteriorating assets. Ms Alashkar said that the true figure is just €300,000 per month on the basis that much of Ms Rickelton’s higher figure consists of professional fees associated with the Plan. Beyond making that general challenge to Ms Rickelton’s estimate, Safra has not put forward any evidence of its own as to the true amount of the necessary costs.

Ms Rickelton’s report makes it clear that her figure was derived following discussions with Dunman, construction and real estate advisers, who were asked to estimate the costs that would be needed if construction stopped for 16 months between January 2024 and April 2025 during a Luxembourg bankruptcy. Dunman estimated total costs over the 16-month period of €59 million (an average monthly cost of €3.7 million). I do not accept that this estimate was unduly skewed by professional fees associated with the Plan since it was prepared by a firm of construction advisers and referenced costs incurred after January 2024 when, no doubt, much of the professional costs associated with the Plan would already have been incurred. I accept Ms Rickelton’s figure as broadly accurate.

The Safra Proposal recognises that, even if it had the necessary support of Senior Creditors, it would take some four months to obtain the approval of the court in Luxembourg as required by the Luxembourg Restructuring Law. During that time, continued funding of some €14.8m, on the basis of Ms Rickelton’s figures, is likely to be necessary to keep the Development secure and in a position where construction can restart. The Safra Proposal simply assumes that Senior Creditors would continue to provide funding on an unsecured basis with that funding ultimately being written off. Safra argues that it would be economically rational for the Senior Creditors to provide that further unsecured funding. However, it is all too easy to express opinions on how others should spend their money. Given the significant questions that exist over whether the Safra Proposal truly is viable, the Safra Proposal requires the Senior Creditors to provide bridge finance (i) without knowing the date to which that finance is bridging and (ii) on terms that the finance would not be repaid. I accept Mr Vogt’s evidence that Senior Creditors would regard this as an exercise in “throwing good money after bad”.

I conclude from Mr Vogt’s evidence that, if the Plan is not sanctioned, the Senior Creditors would have a difficult balance to strike. On the one hand, they must consider the prospect of the Safra Proposal actually delivering them a better outcome than a liquidation. On the other, they must measure the risk that the Safra Proposal turns out to be unworkable and that the time spent trying to resolve difficulties associated with it simply leads to a reduction in Senior Creditors’ receipts in a delayed liquidation. In my judgment, Senior Creditors would conclude that the uncertainties associated with the Safra Proposal that I have outlined tip the balance in favour of not supporting that proposal and making the best of what would be a low, but at least certain, recovery in a liquidation. I am, therefore, satisfied, that the Senior Creditors’ statements of intention that I have referred to in paragraph ‎150 would survive any judgment that brings to an end the prospect of the Plan, or the Amended Plan, being sanctioned.

Much of my reasoning in this regard follows from the conclusions I have expressed in the section above.

In cross-examination, Ms Alashkar accepted that there were aspects of the Safra Proposal that could benefit from refinement. She said, however, that if the Plan is not sanctioned, it would be in the economic interests of the Senior Creditors to engage with Safra to iron out any difficulties. Therefore, she said that, even if the Senior Creditors were unwilling to accept the Safra Proposal wholesale they would, after a reasonably short period of negotiation, accept some variant on it.

I am quite unable to accept that. While I accept that there are aspects of the Safra Proposal that could be made more palatable for the Senior Creditors with some relatively small changes (for example the addition of a structure to address the risk of German real estate transfer tax (“RETT”) which is currently absent from the Safra Proposal), the deficiencies that I have identified in the Safra Proposal are fundamental and not susceptible to an easy fix. Senior Creditors have genuine and legitimate concerns as to whether the Safra Proposal provides sufficient new funding, whether it is sufficiently certain that even the new funding that it envisages will be forthcoming and whether it provides a secure basis for them to conclude that a good part of their Senior Debt will be repaid on the extended maturity date. Moreover, the Safra Proposal exposes them to incremental risk associated with the requirement that they share their security package with providers of the Cost Overrun Funding Facility who rank pari passu with them.

Ms Alashkar and Mr Beckwith agree that, in principle with motivation on both sides, deals to restructure complicated debt can be completed “over a weekend”. However, I consider that much more time than this would be needed to address the defects in the Safra Proposal. Even if a lot of time were invested and the Senior Creditors and Safra were able to put aside some of the bitterness that has characterised their negotiations to date, I am not satisfied that even the investment of a significant amount of time would lead to a proposal that the Senior Creditors could support.

Moreover, the same dynamic that I have explained in paragraph ‎171 would militate against the Senior Creditors engaging in further negotiations with Safra that would be unlikely to produce a satisfactory outcome in a short timescale. In my judgment, the Senior Creditors would view the prospect of such negotiations as simply leading to a delayed liquidation with even less available to satisfy their claims. They would conclude that their best option if the Plan is not sanctioned is to demand repayment under the Senior Debt and enforce their rights under the security and cross-guarantees. If they took that action, Mr Beckwith as the Plan Company’s sole manager would have no choice but to institute a liquidation process in England and Wales. For the same reasons, PropCo and AH4 would be obliged to file for bankruptcy in Luxembourg.

During the hearing, Safra handed up a letter dated 5 February 2024 that it had written to the Plan Company. That letter explained that an unnamed client of an affiliate of Safra had indicated that it was prepared to provide a facility of up to €200,000,000 to the Plan Company to enable the Safra Proposal to proceed. The letter indicated that there would need to be a negotiation as to the precise terms of that facility, with the identity of Safra’s client to be kept confidential until “a later stage of the negotiations”. However, the letter indicated that the financing to be provided was anticipated to rank senior to the Senior Debt.

In my judgment, this letter does not address the problems with the Safra Proposal that I have identified in the sections above. The fact that it is made by an anonymous financier and the expressed need for further negotiation on its terms does not address the Senior Creditors’ need for certainty and quick implementation. The proposal that the new facility would rank senior to the Senior Debt would, in my judgment be completely unacceptable to the Senior Creditors. Moreover, there could be little doubt that it affected their existing rights with the result that the Luxembourg Restructuring Law would require it to be approved unanimously by Senior Creditors.

I accept as accurate the approach that Ms Rickelton followed when calculating her estimate of the likely recoveries if the Plan Company, PropCo and other group companies entered liquidation following failure of the Plan to achieve sanction. That approach can be summarised as follows:

Safra argues that the 25% insolvency discount is too high. However, in circumstances where it has provided no expert evidence to contradict that of Mr Waschkuhn, the Plan Company’s expert on this matter, and chose not to cross-examine Mr Waschkuhn, I reject that argument.

Safra challenges Ms Rickelton’s estimates as to the “as is” value of the Development. A challenge on this basis faced formidable difficulties because, whereas the Plan Company has expert evidence on matters of valuation from Mr Gerlinger, Safra has put forward no valuation evidence at all. Accordingly, Safra’s case in this regard largely consisted of it inviting Mr Gerlinger in cross-examination to accept that the value of the Development might be higher than he had estimated.

Mr Gerlinger’s calculation of the “as is” value started with what he termed the Gross Development Value (“GDV”) of the Development when completed. The GDV was calculated as at September 2023. The calculation of GDV did not involve a consideration of the value of comparable developments or the value that a willing buyer might pay for the Development at any particular time. Rather, Mr Gerlinger approached the question by considering what annual rent the Development might achieve if it were complete in September 2023 and multiplying that figure by what he concluded to be an appropriate multiplier. That produced a GDV in Mr Gerlinger’s opinion of €909 million.

To calculate the “as is” value, Mr Gerlinger reduced the GDV by construction and other development costs that have not yet been incurred and so are not reflected in the current condition of the Development. He also stripped out letting income which cannot be received since the Development is not complete. This process, together with other adjustments led him to the residual value of €392,000,000.

In the absence of any evidence as to an alternative approach of calculating the “as is” value I accept as valid the approach that Mr Gerlinger has followed.

In cross-examination, Mr Gerlinger accepted that the GDV, being something of an arithmetic construct, cannot be taken as a cast-iron guarantee of the exact value of the completed Development at any particular date. He accepted that he would be surprised if the value of the Development was the exact figure that he had calculated as the GDV. However, he was adamant, and I accept, that GDV provided a good estimate of the value of the Development if it was complete as at September 2023 because it synthesised all the realistically possible values into the most likely outcome of marketing a completed Development at that time. It follows that I accept that, as at September 2023, on a balance of probabilities, the completed Development would have been worth €909 million.

It was not directly suggested to Mr Gerlinger that a sale of the Development “as is” in the course of a liquidation process would produce a figure higher than his estimate. The focus of his cross-examination was on the likely value of the Development in November 2025 or June 2026 as part of an evaluation of the Safra Proposal. It was, however, suggested to him that his estimate of rents achievable on a completed Development was too conservative. He rejected that suggestion and I accept his expert evidence not least since I have no competing opinion that challenges it.

I do not accept Safra’s submission in closing that the Development has suffered a temporary “dip” in value and may well recover. I accept, of course, that property prices might rise in the future. However, they could also fall and I accept Mr Gerlinger’s expert opinion that is not contradicted by other expert evidence that, despite evidence of refinancing costs falling in Q4 2023, he would not expect property prices in Berlin to rise.

The evidence I have seen demonstrates that the Development ran out of funding because of inflationary pressures that caused costs to rise. It is therefore only partially completed and can only be expected to rise in value once it is completed. The Plan Company’s valuations indicate that, even once completed, the Development will have a value sufficient only to repay some 86.6% of the Senior Debt. While I accept Safra’s general point that a valuation is not a guarantee, and the value could turn out to be higher (or lower) than predicted, I have no competing valuation evidence from Safra that suggests a higher value.

In its skeleton argument and closing submissions, Safra suggested that Ms Rickelton had ignored other valuable assets that would be available to companies in the Group in a liquidation. It pointed to FTI’s Restructuring Opinion which indicates that PropCo has assets of €814 million. It pointed to inter-company receivables on PropCo’s balance sheet which it submitted an office holder would seek to realise in a liquidation. However, I am not satisfied that PropCo’s balance sheet provides a reliable guide as to the actual market value that PropCo could expect to realise from its assets if placed into insolvency. Moreover, Ms Rickelton, in calculating the likely recovery of creditors in a liquidation, has had regard to all assets available to the Group I do not consider that she has overlooked assets having material value in reaching that conclusion.

Safra has alluded to other potentially valuable assets. It suggests that the Group could obtain some €70 million by enforcing a “Costs Overrun Guarantee”. However, that benefits Senior Creditors rather than any company in the Group. It was suggested that the Group might have claims against directors and others who allowed it to get into a position where despite taking out funding of some €1 billion, it now holds a partially completed development that is apparently worth less than a third of that. However, the precise nature of these claims, and their value, has not been explained in the evidence. The Group would need to discover over €450 million of additional assets for the Subordinated Creditors to receive a single cent in a liquidation. While I can accept that there might be possible claims against directors or others, I do not consider that there is any realistic prospect of it obtaining sufficiently large sums from those claims.

As I have noted, the Amended Plan involves a payment of €150,000 being paid to Tier 2 Creditors, and a payment of €50,000 being paid to Junior Creditors in return for the complete extinguishment of their debt. I consider that sufficient to make the Plan, insofar as relating to the Tier 2 Creditors and the Junior Creditors, a “compromise or arrangement”. Payment of those sums means that Subordinated Creditors’ debt is not being expropriated for no consideration. I acknowledge that the sums payable are small in relation to the principal amount of their debt. However, at [277] of Re AGPS Bondco, Snowden LJ commented that payment of a “modest amount” by way of compensation for the extinction of debt could make all the difference in deciding whether a proposal involves a “compromise or arrangement”. I consider that the sums payable to Tier 2 Creditors and Junior Creditors under the Amended Plan are indeed modest, but are not so small that they can be ignored altogether. After all, the question whether the Amended Plan involves a “compromise or arrangement” goes to jurisdiction and is not an open-textured question of fairness. In any event, I do not regard the sum payable to the Subordinated Creditors as unfair in the light of my findings earlier in this judgment as to the extent to which their debt is “out of the money”.

Accordingly, in this section, I proceed on the basis that the Amended Plan embodies a “compromise or arrangement” with both the Senior Creditors and the Subordinated Creditors and so is properly before the court and capable of sanction.

The principles that apply when a court is asked to exercise its discretion to sanction a scheme under Part 26 of CA 2006 are well known. They are summarised in what David Richards J described, in Telewest Communications (No. 2) [2004] EWHC 1466, as the “classic formulation” of applicable principles in the judgment of Plowman J in Re National Bank Limited [1966] 1 WLR 819 by reference to a passage in Buckley on the Companies Acts (13^th edition, 1957). Since there was no dispute between the parties on the applicable principles in the context of Part 26 schemes (as distinct from Part 26A plans), I will not set out the passage in full, but I have it firmly in my mind.

In Re AGPS Bondco, the Court of Appeal gave guidance on how the proper approach to the sanction of a Part 26 scheme should be modified in the context of a Part 26A plan. Again, since there was no dispute between the parties on the proper approach apart from in the single respect described below, I will not set out quotations from authorities but will summarise the key principles.

Where, as here, a court is invited to sanction a plan under Part 26A that involves a “cross-class cramdown”, the court must apply the following approach:

I understood the need to consider the matters set out in paragraphs‎ 196.i), ‎196.ii), ‎196.iii) and ‎196.vii) to be common ground. However, the Plan Company and Safra were not agreed on whether Subordinated Creditors who, on my findings as to the “relevant alternative” are significantly out of the money, could complain of an unfair allocation of the benefits of the restructuring (the matters set out in paragraphs ‎196.iv) to ‎196.vi)). I took this to be a dispute, not as to the applicable principles, since the points summarised in paragraphs ‎196.iv) to ‎196.vi) are indeed made in Re AGPS Bondco, but rather as to how those principles should be applied to creditors who would be out of the money in the relevant alternative. I address this dispute, therefore, in paragraphs ‎209 to ‎215 below in which I apply the relevant principles.

The Plan Company has already encountered financial difficulties that are affecting, or will or may affect, its ability to carry on business as a going concern. That is demonstrated by the fact that unless the Plan is sanctioned, the Plan Company is likely to have to go into an insolvent liquidation. Condition A in s901A of CA2006 is met. As I have explained in paragraph ‎193, I proceed on the basis that the Amended Plan embodies the requisite “compromise or arrangement”. The purpose of that compromise or arrangement is to eliminate or reduce the financial difficulties to which I have referred by removing the imminent likelihood of the Plan Company going into insolvent liquidation. Condition B in s901A of CA2006 is met.

An explanatory statement was provided to Plan Creditors. Neither Safra nor the 2.7% by value of Senior Creditors who voted against the Plan have made any criticisms of that explanatory statement. I am satisfied that it met the requirements of s901D. More generally, I am satisfied that it gave Plan Creditors sufficient information to enable them to decide how to exercise their votes at the Plan Meetings.

Mr Cattermole’s unchallenged second witness statement satisfies me that that the requirements of the Convening Order were met.

The Senior Creditors have approved the compromise or arrangement by the requisite majority with that approval satisfying Condition B in s901G. The Tier 2 Creditors and the Junior Creditors are both “dissenting classes” who have not agreed the compromise or arrangement.

Condition A in s901G requires an analysis of whether the Subordinated Creditors would be no worse off under the “relevant alternative” than they would be under the Plan. For these purposes, the “relevant alternative” is whatever the court considers would be most likely to occur if the Plan were not sanctioned. That does not require the court to be satisfied that any particular alternative outcome would definitely occur. Instead it requires the court to consider which of the possible alternatives is most likely to occur (see Re Virgin Active [2021] EWHC 1246 (Ch) at [107]).

Based on my factual findings above, I have concluded that the “relevant alternative” is a liquidation of the Plan Company, PropCo and AH4 under which the Subordinated Creditors would receive precisely nil. Under the Amended Plan the Tier 2 Creditors and the Junior Creditors will receive, in aggregate €150,000 and €50,000 between them. They will not, therefore, be any worse off than in the relevant alternative of a liquidation.

In arguing against that conclusion Safra submitted that, in a liquidation, Subordinated Creditors would at least have a prospect of obtaining some realisation, whereas under the Plan they will achieve just €200,000 between them. However, given the extent to which the Subordinated Creditors are out of the money, I consider that the prospect of such realisations is fanciful and does not amount to any genuine economic interest. The only realistic outcome is that Subordinated Creditors would receive nil in a liquidation.

I am satisfied that all statutory requirements, including those necessary to effect a cross-class cramdown are satisfied.

Some 97.3% by value of the Senior Creditors voted in favour of the Plan at their meeting. The minority was, therefore, very small indeed and no member of the minority has made any representations suggesting that I should decline to sanction the Plan.

I see no suggestion that the majority coerced the minority. I see no evidence suggesting that the majority who voted in favour were doing anything other than seeking the best outcome for themselves in their capacities as Senior Creditors. I see no evidence that the majority voting in favour had any “special interest” different from their rights as Senior Creditors, for doing so.

I am quite satisfied that an intelligent and honest person, acting in respect of their interests, might reasonably approve the Plan at the class meeting of the Senior Creditors.

The parties’ submissions on this issue proceeded largely at cross-purposes. At [137] to [152] of its skeleton argument, Safra made detailed submissions as to why the Plan failed fairly to allocate the benefits of the restructuring. In essence, Safra’s complaint was that the Plan allocated all those benefits to the Senior Creditors and to Mr Caner by, among other means, “expensive” Super Senior Financing in which only Senior Creditors can participate, the elevation of that Super Senior Financing and some existing Senior Debt above existing indebtedness of the Group, the various fees payable to the Senior Creditors that I have summarised in paragraph ‎26 and the Consultancy Agreement.

While the Plan Company did not accept Safra’s complaints, it did not in its closing arguments, engage with the detail of them by seeking to explain why the allocation of benefits was “fair”. Rather, the Plan Company argues that, since the Subordinated Creditors would be out of the money on the relevant alternative, they had no entitlement to share in the benefits of the restructuring, with the result that it was none of their concern how the Senior Creditors chose to share those benefits among themselves or with others.

I have concluded that the Plan Company’s submissions are to be preferred. Accordingly, I do not consider that any “unfairness” in the allocation of the benefits of the Plan provides a reason why I should exercise discretion not to sanction it. Since I have no submissions from the Plan Company defending the “fairness” of that allocation, I will base my conclusion in this regard solely on the proposition that the Subordinated Creditors, being out of the money on the relevant alternative, have no entitlement to share in the benefits of the Plan. In my judgment, that conclusion follows both from the scheme of Part 26A and from authority.

Pursuant to s901C(4) of CA 2006, the court has power to order that creditors without a “genuine economic interest” in a company are not to be represented at a meeting summoned to consider a plan. Section 901C(4) does not, by contrast with s901G(5), explicitly link the question of whether there is a “genuine economic interest” to what would happen in the event of the “relevant alternative”. The wording of s901C(4) and s901G(5) are different in that regard. Nevertheless, it is common ground between the parties that the concept of a “genuine economic interest” in s901C(4) is similar to that in s901G(5) and invites an analysis of whether there would be a genuine economic interest in the relevant alternative. Support for that common position can be found in the judgment of Snowden J in Re Virgin Active Holdings Ltd [2021] EWHC 1246 (Ch) at [247]-[249] the judgment of Miles J in Re Smile Telecoms Ltd [2022] 2 BCLC 626 at [76]-[77]. It is also supported by [251] of the judgment of Snowden LJ in Re AGPS Bondco.

Accordingly, it is common ground that if, as I have found, the Subordinated Creditors would obtain nothing in the event of a liquidation, which constitutes the “relevant alternative”, they have no “genuine economic interest” for the purposes of s901C(4). Since an order under s901C(4) could have been made, which would have obviated any need to consult Subordinated Creditors about the Plan, limited weight should be attached to their views on whether the Plan fairly allocates the benefits of the restructuring.

The conclusion set out in paragraph ‎211 is also supported by authority. In Re Virgin Active Holdings Ltd [2022] 2 BCLC 62, Snowden J considered the point in detail. He concluded at [249] that the views of an out of the money class (the Subordinated Creditors) on how the benefits of the restructuring should be shared among in the money classes (the Senior Creditors) were of little weight. Moreover, if the Senior Creditors decide that it is in their commercial interests for some of the benefits of the restructuring to be shared with holders of equity (who rank junior to the Subordinated Creditors), the views of the out of the money Subordinated Creditors as to the fairness or otherwise of that course will similarly count for little. It is clear from [249] of Re Virgin Active Holdings that the test of whether a creditor is “out of the money” or “in the money” is to be performed by reference to the relevant alternative, in this case a liquidation.

Safra acknowledges these points but submits that there is a difference between ascribing “no weight” to the views of an out of the money class and ascribing “little weight”. I accept that as a general proposition, but I do not consider it advances the debate greatly. The Subordinated Creditors are so far out of the money that the Senior Creditors’ views on how the benefits of the restructuring should be shared are, in this case at least, to be followed.

In its skeleton argument, Safra made a number of points in support of its proposition that “the Plan Company lacks a sufficient connection to the jurisdiction”. That is a convenient way of grouping a number of points that relate to the Plan Company’s ties to England. However, before dealing with these I note the following propositions of law which were common ground between the parties:

The reason it is appropriate for the court to enquire as to the “sufficiency” of the Plan Company’s connection with England is explained at [21] to [23] of the judgment of David Richards J (as he then was) in Re Magyar Telecom BV [2013] EWHC 3800 (Ch). The issue is closely related to the question whether the Plan, if approved, will have a substantial effect. So, for example, if a foreign company proposing a plan under Part 26A had assets within the jurisdiction, the court might conclude that an order to sanction the Plan would have effect by preventing execution by creditors against those assets save in connection with the plan. Similarly, if the foreign company concerned had a number of creditors in England subject to the personal jurisdiction of the court, the court would attach significance to the fact that those creditors would be bound to act in accordance with the Plan if sanctioned.

Once the reasons for looking at the “sufficiency” of the Plan Company’s connections with England are appreciated, it becomes clear that the court is not looking for a “bright line” between a connection that can, at a high level of generality described as “sufficient”, and an “insufficient” connection. Rather, the enquiry is closely related to the question whether the Plan will, if sanctioned, have a substantial effect.

In my judgment, if the Plan is sanctioned it is likely that it would have a substantial effect. In accordance with its terms, it has a significant impact on the rights of holders of both the Senior Debt and the Subordinated Debt. I have concluded that there is a reasonable prospect that it will be recognised and given effect to in both Germany (whose law governs the debt) and in Luxembourg (where the Plan Company, PropCo and AH4 are incorporated). Moreover, on any view the Plan seeks to effect a significant alteration to the rights of Senior Creditors, 97.3% of whom by value have submitted to the jurisdiction of the English courts for purposes connected with the Plan pursuant to the RSA.

Safra argues that the Plan Company’s links with England arise only following the COMI Shift. It submits that there is no decided case in which the court has found a “sufficient connection” on the basis of COMI alone without some additional “supporting factor” such as the plan or scheme in question having the overwhelming support of creditors, there being no alternative restructuring process available elsewhere, the debt being released being governed by English law or the presence of a good number of creditors within the jurisdiction of England and Wales. Reference was made to the facts of Re Magyar Telecom BV, Re Zlomrex International Finance SA [2014] BCC 440, Re DTEK Energy BV [2021] EWHC 1551, Re Smile Telecoms Holdings Ltd [2022] EWHC 740 (Ch) and other cases.

However, in my judgment this argument misunderstands the nature of the enquiry as to “sufficient connection” which I have explained above. The fact that the Plan Company has its COMI in England is crucial to the opinions of Professor Thole and Professor Prüm that the Plan that would be recognised and given effect to in Germany and Luxembourg. Without the COMI Shift, therefore, the Plan would be unlikely to have a substantial effect because the courts of Luxembourg and Germany would be unlikely to recognise it. The COMI Shift does not, therefore, need “support” in order to satisfy an English court that the Plan will have substantial effect since the COMI Shift is a central part of the court’s confidence that the Plan will have such an effect. I am reassured to note that David Richards J reached a similar conclusion at [23] of Re Magyar Telecom BV saying:

in the present case, the significance of moving the COMI of the company to England again lies not so much in the establishment and the abstract of a connection between the company and England but, on the basis that any insolvency process for the company would be taken under English law in England, providing a solid basis in background for a scheme under English law which alters contractual rights governed by a foreign law.

In any event, the assertion that the Plan Company has no connection with England other than its COMI is wide of the mark. I attach relatively little significance to the Plan Company’s argument that certain individuals and employees of AXA and Fidera might be based in London. Since AXA and Fidera are incorporated outside the UK, I do not consider that it matters that they have chosen to locate some of their employees in the UK. However, holders of the Senior Debt have submitted to the jurisdiction of England in connection with the Plan and the Interim Facilities which are affected by the Plan are governed by English law. In addition, as Ms Alashkar fairly noted in corrections to her witness statement, one of the holders of Tier 2 Debt that Safra represents has an address in England.

Finally in this regard, Safra submits that, purposes of the “sufficient connection test”, the Plan Company’s COMI should be ascertained as at the date of the Convening Order, rather than when the court is considering whether to sanction the Plan. I consider that this submission also misunderstands the relevance of COMI in these proceedings. There is no “test” that requires the English court to assess the Plan Company’s COMI at any particular time. Rather, in the circumstances of this case, the location of the Plan Company’s COMI is significant in underpinning the conclusion that the there is a reasonable prospect that the courts of Luxembourg and of Germany will recognise and give effect to the Plan. As I have explained in paragraphs ‎105 and ‎125 above, the opinions of Professor Thole and Professor Prüm in this regard depend on COMI being present in England at the time of an order sanctioning the Plan.

I conclude that the Plan and the Plan Company have a sufficient connection with the UK.

Safra also raises “forum shopping” concerns in support of its contention that there is an insufficient connection between the Plan Company and England. It refers to the accepted fact that the COMI Shift was effected for the sole purpose of enabling the Plan Company to propose the Plan pursuant to the provisions of CA 2006. It characterises the COMI Shift as having been effected with unseemly haste in parallel with the Part 26A proceedings. More generally, it argues that having failed to secure agreement of the Subordinated Creditors pursuant to the consent solicitation provisions of the German law debt, and being unable to secure the result they seek under the Luxembourg Restructuring Law, the Senior Creditors have procured the Plan Company to engage in wholly artificial forum shopping to achieve that result under Part 26A.

I attach relatively little significance to the perceived “artificiality” of the COMI Shift on its own. As I have explained, in paragraph ‎73.v), in principle the Plan Company is free to choose where it carries on the administration of its business in a jurisdiction of its choosing, including for reasons that might be characterised as “self-serving”. I have rejected the argument that the COMI Shift involved a breach of the Plan Company’s Articles of Association. I have concluded that the Plan Company’s COMI is in England and I do not consider that the question of why that is the case to be, on its own, much of a guide to the exercise of my discretion to sanction the Plan.

In any event, I have already addressed the perceived “artificiality” of the COMI Shift in considering whether it amounts to a fraude à la loi for the purposes of Luxembourg law (see paragraph ‎116 above). Despite that artificiality, I have concluded that there is a reasonable prospect that an order sanctioning the Plan would be recognised and given effect to in Luxembourg, the applicable threshold requirement (see paragraph ‎112 above). Since the question of artificiality has entered the balance in reaching that conclusion, I do not consider that it would be appropriate for it to enter the balance again, this time as a dispositive factor, so as to prevent me from exercising discretion to sanction the Plan.

That said, the COMI Shift could conceptually indicate that the Plan is being put forward for illegitimate and abusive reasons. As Newey J said at [18] of Re Codere Limited [2015] EWHC 2015:

In a sense … what is sought to be achieved in the present case is forum shopping. Debtors are seeking to give the English court jurisdiction so that they can take advantage of the scheme jurisdiction available here and which is not widely available, if available at all, elsewhere. Plainly forum shopping can be undesirable. That can potentially so, for example, where a debtor seeks to move his COMI with a view to taking advantage of a more favourable bankruptcy regime and so escaping his debts. In cases such as present, however, what is being attempted is to achieve a position where resort can be had to the law of a particular jurisdiction, not in order to evade debts but rather with a view to achieving the best possible outcome for creditors. If in those circumstances it is appropriate to speak of forum shopping at all, it must be on the basis that there can sometimes be good forum shopping.

In Re Gategroup Guarantee Limited, Zacaroli J also made observations on the question of forum shopping. For example, at [14] he said:

I also noted at [174] of the convening judgment, however, that “it is possible to envisage a case where the artificial structure is the only solution to enable a restructuring to be effected, all other possible alternatives having been explored and rejected for one or other reason of law or practicability; where the alternative is a value-destructive liquidation; and where the terms of the restructuring demonstrate the benefits the affected creditors. In such a case, there would be a powerful argument that the artificiality of the structure should not prevent the company and its creditors being able to take advantage of the English scheme or plan jurisdiction.”

He continued at [22]:

… To the extent that it may be seen as forum shopping, for the first five reasons already given, this case undoubtedly falls into that class of “good forum shopping” cases as identified by Newey J in Re Codere Finance UK Lt [2015] EWHC 3778 (Ch) at [18]-[19]; the co-obligor structure is being used here, not to enable a debtor to exploit it for its own advantage, and at the expense of a creditor class, the insolvency laws of a particular jurisdiction, but with a view to achieving the best possible outcome for all.

Perhaps unsurprisingly, the Plan Company sought to highlight aspects of the circumstances that it submitted constitute “good forum shopping” such as the risk of a value-destructive liquidation if the Plan is not sanctioned. Safra emphasises its view that the Plan benefits the Senior Creditors only and achieves a result that could not be achieved under Luxembourg law in support of its argument that the Plan Company has engaged in “bad” forum shopping.

I do not, however, consider that either Re Codere Limited or Re Gategroup Guarantee Ltd should be read as formulating a test of what constitutes “good”, as distinct from “bad” forum shopping. Still less do those judgments formulate necessary and sufficient conditions for a case of forum shopping to fall into either category. Rather, in my judgment, the question of forum shopping is related to the question of “sufficient connection” which in itself is relevant to the court’s exercise of discretion. The question I must address, therefore, is whether despite the fact that I have jurisdiction to sanction the Plan I should exercise my discretion and decline to do so on the basis of Safra’s arguments based on “forum shopping”.

I have dealt at some length with the legal position in Luxembourg because I consider that to be significant. I accept that the result that the Plan Company seeks under the Plan could, on Professor Cuniberti’s interpretation of Article 45 of the Luxembourg Restructuring Law, not be achieved under Luxembourg law. However, I do not consider the result to be at odds with fundamental matters of public policy in Luxembourg (see paragraphs ‎120 and ‎121 above). Similarly, I acknowledge that the act of the Plan Company moving its COMI with a view to promulgating the Plan after bankruptcy proceedings had been initiated in Luxembourg by reference to the Plan Company’s COMI there, raises questions of forum shopping and comity. However, I consider that the better view is that the Luxembourg courts would accept that the COMI Shift properly confers jurisdiction of the English courts to sanction the Plan (see paragraph ‎111 above).

In short, therefore, I consider that there are sufficient prospects of the Plan being recognised in Luxembourg, not being contrary to principles of comity as applicable to the Luxembourg courts, and not being contrary to public policy in Luxembourg, that it is appropriate for me to sanction it. I recognise that there is room for doubt on these matters and the Luxembourg courts will have the final say on any doubt that remains since they can ultimately decide not to recognise my order. However, I do not consider it would be right to decline to sanction the Plan simply because of the possibility of doubt. That would be to remove all prospect of the Plan taking effect in circumstances where it offers clear benefits to the Senior Creditors who, on my findings are the only in the money class.

The issues of comity and public policy are less significant in relation to Germany since there are no existing insolvency proceedings involving the Plan Company, PropCo or AH4 there. However, my conclusion in paragraph ‎234 applies similarly to Germany given my conclusion in paragraph ‎133 that there are reasonable prospects of the Plan being recognised and given effect to in Germany.

Turning to Zacaroli J’s observations in Re Gategroup Guarantee Ltd, I quite accept that the parties have different perceptions on whether the Plan is in the interests of the creditors as a whole. However, given my factual conclusion that the “relevant alternative” is a liquidation of the Plan Company, PropCo and AH4 in which the Subordinated Creditors would obtain a nil return, I do not consider that there is any fundamental unfairness in the Subordinated Creditors obtaining just €200,000 on sanction of the Plan. The matter can be tested by considering the results that would apply if I were to exercise discretion to refuse to sanction the Plan. In that case, the Senior Creditors would be forced into a value-destructive liquidation as a consequence of opposition from the Subordinated Creditors who on my findings would obtain no return in that liquidation. I do not consider that it would be right to exercise my discretion so as to achieve that outcome.

I will not decline to sanction the Plan on “forum shopping” grounds.

In its skeleton argument, Safra argue there were a number of “blots” on the Plan. Most of those points overlapped with its argument that the Plan does not achieve a fair restructuring of the benefits of the restructuring, which I have rejected.

Also in its skeleton argument, but not in oral closing submissions, Safra argued that the Plan involved a breach of the pari passu principle on the basis that Mr Caner obtained benefits, under the Consultancy Agreement, for example even though he is a holder of equity and so ranks junior to the Subordinated Debt which is to be discharged in return for just €200,000. I do not accept that. First, Mr Caner is not himself a holder of “equity” in the Plan Company, AH4 or PropCo, which are liable in relation to the Subordinated Debt. The fact that he holds shares in companies higher up the corporate structure in the Aggregate Group does not alter that conclusion. More fundamentally, as I have explained, the Senior Creditors are the only creditors with a genuine economic interest in the Group. If they choose to share some of the benefits of the restructuring with Mr Caner, that is their prerogative and does not involve any breach of the pari passu principle.

I conclude that there are no “blots” that should cause me to withhold sanction.

For all the reasons set out above if, contrary to my conclusions in Part A, I have the power to sanction the Amended Plan, by effecting a cross-class cramdown, I would do so.

The hearing before me, therefore, started as a sanction hearing but, with my refusal to sanction the Plan as proposed and voted upon, has become a convening hearing. The Plan Company asks me to convene a further Plan Meeting to consider the Amended Plan. It asks me to make an order under s901C(4) that Tier 2 Creditors and Junior Creditors be disenfranchised from participation in any such meeting on the basis that they have no genuine economic interest in the Plan Company. Since the new Plan Meetings will involve Senior Creditors only, of whom 97.3% by value supported the original Plan and have indicated that they will continue to support the Amended Plan, the Plan Company asks for an order that the meeting be convened on just three business days’ notice.

I have not heard detailed argument on all the matters that might normally be aired at a convening hearing. However, I am prepared to make the order under s901C(4). As I have explained in paragraph ‎213, in the light of my findings on the Subordinated Creditors’ entitlement on the “relevant alternative”, it is common ground that they have no “genuine economic interest” in the Plan Company for the purposes of s901C(4). In those circumstances, I see no reason why they should be entitled to vote on the Amended Plan. I proceed on the basis that, if the Senior Creditors approve the Amended Plan, then that can be sanctioned under s901F without any need for a cross-class cramdown and, on delivery to the Registrar of Companies will become binding on all creditors, including the Subordinated Creditors. That, however, will be a matter for the judge at any future sanction hearing.

I am content to order that the further meeting of Senior Creditors takes place on just three business days’ notice in the light of the Plan Company’s assurance that 97.3% by value continue to support the Amended Plan. In making this order, of course, I am not tying the hands of the judge who comes to consider sanction of the Amended Plan (if approved), if turnout at the meeting is low.

I have no draft further convening order before me. However, I am prepared to make an order along the lines of the Convening Order with the modifications set out above. The Plan Company should provide a draft of the order they seek with any further deviations from the Convening Order explained and justified by reference to written submissions from counsel.