guernsey sets precedent in recognising receiver appointed by foreign court
US, English and offshore law firms have worked closely together to bring a landmark receivership case to the Royal Court of Guernsey.
Simon Davies, partner and head of litigation of the Guernsey office at Ogier, acted on behalf of US attorneys DurretteBradshaw, and its receiver Roy Terry, along with Paul Clements, partner and head of the dispute resolution department at English solicitors Rooks Rider, to recover the assets of Vavasseur Corp, a Bahamian company, which ran a $121m (£65m) international securities fraud scheme.
It is the first time a US receivership of a foreign company has been recognised in Guernsey, setting a precedent for all common law jurisdictions.
Vavasseur was controlled by Terry Dowdell, who managed the fraud scheme, which raised as much as $121m from investors in the US and Europe through the sale of fictitious securities.
Funds fraudulently obtained from investors were traced to a number of jurisdictions including the US, Channel Islands, the British Virgin Islands and Ireland.
As receiver of the assets, DurretteBradshaw was acting to recover funds owing to investors defrauded in the scheme. Ogier were instructed to seek recognition in Guernsey of the US receivership order, which would enable the recovery of money held in certain bank accounts.
Terry said: "Our appointment order directs that we recover assets wherever they are found. What has made this effort especially complex is the interplay of law from the various jurisdictions. Proceeding in Guernsey has involved not only gaining familiarity with Guernsey law, but also with relevant laws of the US, UK and the Bahamas."
Under the current state of Guernsey corporate law, the concept of receivership is restricted to a small number of specialist fields. In no previous case had Guernsey ever recognised a receiver appointed by a foreign court. In order to do so, the court relied on applicable English law.
Davies added: "This judgment is a clear demonstration the Royal Court of Guernsey will not tolerate those who attempt to misuse the financial services industry in Guernsey for illegal or improper purposes. As a result, the receivers of Vavasseur will be able to provide a more substantial recovery to the true victims of the fraud."
Davies said it was hoped that the legal obstacles that the Royal Court was able to overcome would lead to other common law jurisdictions taking the same approach to comparable cases.
"The decision will be welcomed by legal and insolvency practitioners alike and it is to be hoped that the decision will set a new international standard that is likely to be upheld for years to come," he said.
First time a US receivership of a foreign company has been recognised in Guernsey
Decision welcomed by legal and insolvency practitioners
Case involved $121m (£65m) international securities fraud scheme
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