Re PT Garuda Indonesia (Persero) Tbk

• Jurisdiction: Singapore
• Judge: Kannan Ramesh JAD,Anselmo Reyes IJ,Christopher Scott Sontchi IJ
• Judgment Date: 18 January 2024
• Docket Number: Originating Application No 5 of 2022 and Summons No 34 of 2023
• Court: High Court (Singapore)

Re PT Garuda Indonesia (Persero) Tbk and another matter

[2024] SGHC(I) 1

Kannan Ramesh JAD, Anselmo Reyes IJ and Christopher Scott Sontchi IJ

Originating Application No 5 of 2022 and Summons No 34 of 2023

Singapore International Commercial Court

Insolvency Law — Cross-border insolvency — Recognition of foreign insolvency proceedings — Application made by foreign representatives of foreign airline company undergoing restructuring proceeding in Indonesia — Whether Indonesian restructuring proceeding ought to be recognised in Singapore — Article 17 of Third Schedule Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed)

Insolvency Law — Cross-border insolvency — Recognition of foreign insolvency proceedings — Application to recognise and enforce Indonesian restructuring composition plan and homologation order as appropriate additional relief — Whether relief could be granted for recognition and enforcement of foreign insolvency judgments and orders under UNCITRAL Model Law on Cross-Border Insolvency — Article 21(1)(g) UNCITRAL Model Law on Cross-Border Insolvency

Insolvency Law — Cross-border insolvency — Recognition of foreign insolvency proceedings — Foreign creditors alleging insufficient classification of creditors for purposes of voting on restructuring composition plan — Foreign creditors alleging insufficient disclosure of financial information for purposes of voting on restructuring composition plan — Whether recognition would be contrary to public policy — Article 6 of Third Schedule Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed)

Insolvency Law — Cross-border insolvency — Recognition of foreign insolvency proceedings — Foreign creditors seeking non-recognition on basis of ongoing proceedings in Indonesia that might annul restructuring proceeding and plan — Whether recognition should be refused because of ongoing challenges against restructuring proceeding and plan — Art 17 of Third Schedule Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed)

Held, allowing the application:

SUM 34

(1) SUM 34 involved the Greylag Entities' seeking of disclosure of the following documents: (a) the commercial background and purposes regarding Garuda Indonesia and Garuda France's structuring of the lease arrangement involving the Aircrafts; (b) the reasons for providing in the Composition Plan the release of debts owed by Garuda France (the “Third-Party Release Provisions”) and the reasons given by the Jakarta Commercial Court in the Homologation Decision when approving such Third-Party Release Provisions; and (c) both consolidated and non-consolidated financial statements of Garuda Indonesia and/or its subsidiaries: at [36].

(2) The Greylag Entities were not able to show how the requested documents were material to the issue of public policy. None of the documents requested were relevant to the various grounds of public policy complaints raised by the Greylag Entities in OA 5: at [41] to [44].

General principles applicable to recognition applications

(3) The Model Law sought to advance the principle of modified universalism. This principle required that national courts should, as far as was consistent with justice and the public policy of the State of that court, strive to administer the estate of an insolvent company in co-operation with the courts in the country of the principal liquidation or restructuring. This was to ensure that all of the company's assets were distributed to its creditors under a single system: at [64] to [67].

(4) Modified universalism recognised that there were differences in the insolvency laws and procedures of each State, but took the view that such differences should not stand in the way of impeding the recognition of foreign insolvency proceedings and the benefits that would accrue to creditors as a collective whole through a global effort to coordinate the distribution of assets in a cross-border collapse: at [69].

(5) In the context of cross-border insolvency, the principle of comity required that one State accord recognition to the legislative, executive or judicial acts of another State. A key aspect of comity required that courts eschew an inquiry into the substantive merits of foreign law and the findings made by the foreign court in the foreign proceedings. The application of foreign insolvency laws by the foreign court and the findings reached there should ordinarily be respected by the courts where recognition was sought: at [70] and [71].

The Premature Application Objection

(6) Recognition of a foreign proceeding under Art 17 of the Third Schedule did not require a foreign proceeding to be concluded, or that all avenues of appeal and review had to be exhausted in the foreign jurisdiction before an application for recognition of the foreign proceeding was brought. A recognition application could be brought immediately after the commencement of the foreign proceeding: at [76] and [77].

(7) A recognition application granted by the Singapore courts could always be terminated under Art 17(4) of the Third Schedule if the substratum for granting that application no longer existed: at [79].

(8) The Nullification Action was not a bar to the recognition of the PKPU Proceeding and enforcement of the Composition Plan as a consequent relief. In the event the Greylag Entities succeed in the Nullification Appeal, it was open to them to apply under Art 17(4) of the Third Schedule to request termination of both the recognition of the PKPU Proceeding and any ancillary reliefs granted in support of recognition: at [80].

The Public Policy Objection

(9) Article 6 of the Third Schedule permitted a court to refuse the recognition of a foreign insolvency proceeding or relief sought under the Third Schedule if doing so would be contrary to Singapore public policy: at [81].

(10) The absence of the word “manifestly” before the words “contrary to public policy” under Art 6 of the Third Schedule (as compared to Art 6 of the Model Law) did not change the applicable threshold required before a finding of a breach of Singapore public policy. Any successful challenge against recognition on the basis of Art 6 of the Third Schedule had to be narrow in scope; such a challenge would succeed only if the recognition and the grant of relief were contrary to the fundamental public policy of Singapore: at [84] and [95].

(11) The inclusion of the word “manifestly” in Art 6 of the Model Law was not meant to affect in any way the standard of “public policy” as contemplated and applied; rather, it made explicit what was always implicitly understood when a public policy objection was raised against recognition, namely, that a high threshold had to be met before recognition was refused: at [85] to [88].

(12) Article 8 of the Third Schedule required any resulting interpretation of the provisions under the Third Schedule to promote the purpose and objective of the Model Law and the goals of achieving uniformity and consistency in its application. In this regard, the interpretative trend amongst various foreign jurisdictions had recognised that Art 6 of the Model Law was to be applied restrictively: at [91] and [92].

(13) Singapore public policy might be engaged under Art 6 of the Third Schedule where allegations were made that the creditors participating in a foreign insolvency process were not accorded due process. The requirement of due process was a fundamental tenet of fundamental public policy. Due process required that the creditors be notified of and be accorded an opportunity to participate in the relevant insolvency proceedings and have their views heard. The opportunity to be heard also required that there be proper disclosure of relevant documents to creditors to enable them to make an informed decision when participating in foreign insolvency proceedings: at [98] to [101].

(14) Upholding due process was part of the broader requirement that creditors participating in foreign proceedings had to be treated fairly and equitably. The safeguarding of creditors' interest required that the court scrutinise whether the creditors had been accorded fair and equitable treatment of creditors by being able to participate meaningfully in the insolvency process: at [105] and [106].

(15) Not every perceived form of unfairness in the treatment of creditors would be sufficient to establish a breach of Singapore public policy. It was necessary for the party alleging a breach to clearly articulate how their right to fair and equitable treatment was violated: at [106].

(16) In evaluating whether there had been a breach of the right to fair and equitable treatment, the focus was not on substantive law but on procedural fairness. And even in matters of procedure, the foreign proceedings need not mirror Singapore law. Without being exhaustive, the question was whether the affected creditors had a full and fair opportunity to vote, were given adequate disclosure of information material to aid in their vote and had a full and fair opportunity to be heard in the foreign proceedings in a manner consistent with the standards of due process under Singapore law: at [107].

(17) The evidence did not disclose any unfair treatment of Garuda Indonesia's creditors on the basis of a lack of proper classification of unsecured creditors when voting on the Composition Plan: at [129].

(18) The evidence also did not disclose any inadequate disclosure of information during the PKPU Proceeding which amounted to a breach of Garuda Indonesia's creditors' due process rights: at [130].

Reliefs granted in OA 5

(19) The kinds of relief granted under Art 21 of the Third Schedule could extend to the recognition and enforcement of foreign insolvency orders: at [142].

(20) The proper basis for recognition and enforcement of a foreign insolvency order was under the chapeau of Art 21(1) of the Third Schedule (ie, under the limb of “any appropriate relief”), not Art...