In a classic display of the fluidity of the law, an intriguing shift has occurred within the confines of the English High Court. The protections typically provided to English law creditors have recently been weakened, as seen in a distinct departure from established case law concerning the Rule in Gibbs. This change came about in an unusual context: an Irish Scheme of Arrangement. Further details on this development can be found in a report by Katten Muchin Rosenman LLP, available here.
Historically known as the foundation for protecting creditors’ rights under English contract law, the Rule in Gibbs asserted that a debt’s legality and payability are both under the dominion of the law under which the debt was created. More simply, an English law debt can only be modified or discharged according to English law. This principle has stood, unquestioned, for nearly 130 years.
Yet, it seems that even time-honoured rules are not immune to change. The recent judgment involving an Irish Scheme of Arrangement has challenged the seemingly rigid Rule in Gibbs, prompting questions about its continuing relevance.
While the full text of the judgment remains inaccessible, the outcome is certain: this shift is far from minor. Legal professionals, particularly those dealing with debtor-creditor relationships under English law, would do well to remain informed about the developments of this issue. This change in dynamics, nestled within the complexities of international law and insolvency proceedings, signals a considerable evolution in Britain’s long-standing credit jurisprudence.