Felixstowe Dock And Railway Co v US Lines Inc Freightliners Ltd v US Lines 
Inc

Queen's Bench Division (Commercial Court)

[1989] 1 QB 360, [1988] 1 All ER 77, [1989] 2 WLR 109, [1987] 2 Lloyd's Rep 
76

HEARING-DATES: 12, 16, 26, 27 February, 12 March 1987

12 March 1987

CATCHWORDS:
   Practice -- Mareva injunctions -- Application to set aside -- Plaintiffs 
claimed moneys owed to them by defendants -- Plaintiffs obtained Mareva 
injunctions against defendants -- Defendants granted restraining order 
under US Federal Bankruptcy Code -- Whether restraining order should be 
recognized by English Courts -- Whether injunctions should be set aside.

HEADNOTE:
   The defendants, USL, had for many years carried on a large world-wide 
shipping business.  They were incorporated in the State of Delaware, USA 
and were registered in England as an oversea company under s 691 of the 
Companies Act, 1985.

   In 1986 USL encountered very severe financial difficulties as a result 
of which they petitioned the US Bankruptcy Court under Chapter 11 of the US 
Federal Bankruptcy Code.  On Nov 24, 1986, USL were granted a restraining 
order the effect of which was to enable USL to survive as a going concern 
while undergoinga major programme of reorganization and retrenchment under 
the supervision of a creditors' committee and the Court maintaining an 
even-handed balance of the interests of all their creditors, all claims 
against USL bein frozen.  That order was substantially varied on Feb 23, 
1987.

   The plaintiffs, FDR, were a statutory body responsible for the docks and 
railway at Felixstowe and up to the end of 1986 USL vessels had loaded and 
discharged at Felixstowe.

   FDR claimed L367,922.44 from USL being berthing and dock facility 
charges andcharges for stevedoring the wharfage services for the 
defendants' vessels at Felixstowe, such charges being unpaid.

   On Nov 25, FDR were granted ex parte a Mareva injunction restraining the 
removal of assets from the jurisdiction so as not to deplete them below 
£400,000.

   The plaintiffs, FL, were a container company which provided, maintained 
and inspected containers used by USL and they claimed from USL £236,717.20 
in respect of charges for such services which remained unpaid.

   On Dec 18, 1986, FL obtained a Mareva injunction which was varied on Jan 
2, 1987 to enjoin any depletion of assets below L650,000.

   ECT, another creditor of USL, claimed L1,692 million for stevedoring and 
allied facilities for USL vessels over the period May, 1983 to December, 
1984 and were granted a Mareva injunction on similar terms.

   The defendants applied for the injunctions to be set aside in that on 
grounds of international comity, the English Court should recognize the 
order of the US Bankruptcy Court and allow it to govern the disposition of 
USL's assets in England so as to enable them to be dealt with in accordance 
with that order; that the injunctions by retaining assets in England 
prevented those assets beingadministered in accordance with the intentions 
of the Chapter 11 Scheme and thatif the injunctions were continued the 
plaintiffs would gain priority over other creditors. The plaintiffs argued 
that it was for the English Courts to deal in the insolvency context with 
the disposition of assets in England; that the mareva injunctions were 
ancillary to claims properly brought here by English companies in respect 
of debts incurred by USL in England; that the continuance of the Mareva 
orders would in no way give the plaintiffs any priority over other 
creditors and that the discharge of the Mareva injunctions would cause the
plaintiffs serious prejudice including as originally contended the risk of 
exposing themselves to contempt proceedings in the USA and wasted legal 
costs in England.

   -- Held, by QB (Com Ct) (HIRST, J), that (1) the mareva jurisdiction 
vested in the Court a wise judicial discretion to be exercised on equitable 
principles,to provide interlocutory relief in personam but not giving the 
plaintiff any proprietary rights over the frozen assets nor operating as a 
charge upon them; it was incumbent on the Court to take into account all 
the relevant circumstances in the exercise of its discretion; the US 
Chapter 11 procedure wasa very important circumstance but it could not 
properly be treated as an overriding consideration so as to accord to it 
any kind of paramountcy or dominance over all others; and the Court had to 
weigh up the competing assertions of the parties as to the irreparable 
prejudice which would follow from the continuance or discharge of the 
Mareva and the overall balance of convenience (see p 84, col 2; p 85, col 
2); (2) the Chapter 11 order could not be treated as affecting the status 
of USL and the restraining order was essentially an order in personam even 
though the nature of the US bankruptcy jurisdiction was generally in rem 
(see p 86, col 2); (3) English practice was to regard the Courts of the 
country of incorporation as the principal forum for controlling the 
winding-up of a company but in so faras a company had assets in England the 
usual practice was to carry out an ancillary winding-up in England in 
accordance with English rules while working in harmony with the foreign 
Courts but it did not necessarily follow that the Mareva should continue 
(see p 88, col 2; p 89, col 1);

   (4) as a result of a variation of the restraining order made on Feb 23, 
the risk of contempt or allied proceedings as far as the plaintiffs FDR and 
FL were concerned had vanished and the plaintiffs' objections on wasted 
costs had been eliminated (see p 91, col 1; p 92, col 2);

   (5) if the Mareva injunctions continued the money would stay in London 
in the safe hands of Citibank; it was well established that in the case of 
an insolventrespondent the Court would not permit the equitable remedy of a 
garnishee order to be used to enable a judgment creditor to gain priority 
over other creditors; as a condition of continuing the Mareva orders notice 
of Chapter 11 proceedings and their consequences was required to be given 
to the bank and the plaintiffs would be required to undertake not to take 
any steps to release the frozen funds until after the expiry of a 
reasonable period of notice to USL during which USL would be free to apply 
to the English Court for a winding-up order (see p 93,
cols 1 and 2);

   (6) in view of the intended withdrawal of USL from Europe there could be 
no possible benefit to the plaintiffs in seeing the Marvea funds 
repatriated to theUSA and ploughed into USL's general funds being used to 
keep USL afloat as a going concern (see p 93, col 2);

   (7) USL would suffer no prejudice if the Mareva injunctions were 
continued whereas the plaintiffs would suffer irreparable prejudice if they 
were not and the overall balance of convenicence strongly favoured their 
continuance; the mareva injunctions would be continued (see p 95, col 2).

 CASES-REF-TO:
 
American Cyanamid Co v Ethicon Ltd, (HL) [1975] AC 396;
Budget Services Co v Better Homes of Virginia, 804 F 2d 289;
Canadian Southern Railway v Gebhardt, 109 US 527 (1883);
Commercial Bank of South Australia, In re (1886) LR 33 Ch D 174;
Cretan Harmony, The (CA) [1978] 1 Lloyd's Rep 425;
Cunard Steamship Co Ltd v Salen Reefer Services AB, 773 F 2d 452 (2d Cir) 
(1985);
English Scottish and Australian Chartered Bank, In re [1893] 3 Ch 385:
Galbraith v Grimshaw, (HL) [1910] AC 508;
Macauley v Guaranty Trust Co of New York, (1927) 44 TLR 99;
Mobil Sales and Supply Corporation v The Owners of the Ship or Vessel 
Pacific Bear, [1978] HKLR 125;
Mordern Terminals (Berth 5) Ltd v States Steamship Co, [1979] HKLR 512;
NLRB v Bildisco & Bildisco, 465 US 513 (1984);
Oriental Inland Steam Co, (CA) (1874) LR 9 Ch App 557;
Rainbow v Moorgate Properties Ltd, [1975] WLR 788;
Schemmer v Property Resources Ltd, [1975] Ch 273;
Suidair International Airways Ltd, [1951] Ch 165;
Toga Manufacturing Ltd, In re (1983) 28 BR 165;
Travers v Holley, [1953] P 246;
Trepca Mines Ltd In re (CA) [1960] 1 WLR 1273;
US v Whiting Pools Inc, 462 US 198 (1983);
Victrix Steamship Co SA v Salen Dry Cargo AB, [1987] AMC 276;
Vocalion (Foreign) Ltd, In re [1932] 2 Ch 196;
Wolf v Weinstein 372 US 633 (1963)

INTRODUCTION:
   These were two summons by the defendants, United States Lines Inc (USL), 
to set aside Mareva injunctions for sums totalling L650,000 granted against 
them in two actions in which the respective plaintiffs were Felixstowe Dock 
and Railway Co (FDR) and Freightliners Ltd (FL) and Europe Container 
Terminus BV (ECT) 

   The further facts are stated in the judgment of Mr Justice Hirst which 
was delivered in open Court.

 COUNSEL:
   Mr David Steel, QC and Mr Charles Haddon-Cave for FDR; Mr WJ Norris for 
FL;
Mr Jonathan Harvie for ECT; Mr Geoffrey Brice, QC and Mr Nigel Meeson for 
the defendants USL.

 JUDGMENT-READ:
   Judgment was reserved.  Thursday, Mar 12, 1987.

PANEL: Mr Justice Hirst

JUDGMENTBY-1: MR JUSITCE HIRST
JUDGMENT-1:
   MR JUSTICE HIRST: INTRODUCTION

   These are two summonses by the defendants, United States Lines Inc 
("USL"), to set aside Mareva injunctions for sums totalling £650,000 
granted against them in two actions in which the respective plaintiffs are 
Felixstowe Dock & Railway Co ("FDR") and Freightliners Ltd ("FL").

   The basis of each summons is that USL were, on Nov 24, 1986, granted a 
restraining order under Chapter 11 of the US Federal Bankruptcy Code by 
Judge Howard C Buschman in the US District Court for the Southern District 
of New York (in Bankruptcy) hereinafter called US Bankruptcy Court).

   The purpose of such an order, in a nutshell, is to enable an insolvent 
company to survive as a going concern, while undergoing a major programme 
of reorganization and retrenchment under the supervision of a creditors' 
committee and the Court, maintaining an even-handed balance of the 
interests of all its creditors, all claims against the company being frozen 
meantime.

   The main foundation of this application, as originally presented by Mr 
Brice on behalf of USL, is that, on grounds of international comity, the 
English Courts should recognize the order of the US Bankruptcy Court, and 
allow it to govern the disposition of USL's assets in England, so as to 
enable them to be dealt with in accordance with that order: that the Mareva 
injunctions, by retaining assets here, prevents those assets being 
administered in accordance with the intentions of the Chapter 11 scheme: 
and that if the Mareva injunctions continue the plaintiffs will gain 
priority over other creditors.

   Mr Steel and Mr Norris, on behalf of FDR and FL respectively, resist the 
applications on the grounds that it is for the English Courts to deal in 
the insolvency context with the disposition of assets in England; that the 
Mareva injunctions were ancillary to claims properly brought here by 
English companies in respect of debts incurred by USL in England; that the 
continuance of the mareva orders will in no way give the plaintiffs any 
priority over other creditors; and that, by contrast, the discharge of the 
Mareva injunctions will cause the plaintiffs serious prejudice, including 
as originally contended the risk of exposing themselves to contempt 
proceedings in the USA and wasted legal costs here.

   The case thus raises issues of far-reaching general importance and it is 
for that reason that I am, at the request of all Counsel, delivering this 
judgment in open Court. On the day before the final resumed hearing another 
creditor of USL, a Dutch company called Europe Container Terminus (BV) 
("ECT"), were ganted a 24-hour ex parte Mareva injunction by Mr Justice 
Evans similar to that already obtained by the other two plaintiffs, though 
for a considerably larger sum.  This application, presented by Mr Harvie on 
behalf of ECT, is also now before me and, subject to one or two points, 
stands or falls on the same considerations as apply to the other two.

   In future when I refer to the plaintiffs I mean all three plaintiff 
companies; and any future reference to English creditors or the like of 
course include ECT.

   THE HISTORY OF THIS APPLICATION

   This application was opened on Thursday, Feb 12, 1987, and, as already 
noted, was based essentially on comity between the US Bankruptcy Court and 
the English Courts, and also, of course, on general considerations of 
discretion which always underlie applications in this field.

   The hearing continued on Monday Feb 16, when this application remained 
on thesame basis.  However, over the weekend, USL's advisers in the USA, 
Messrs Milbank, Tweed, Hadley and McCloy, in response to the submissions 
made on behalf of the two plaintiffs, radically altered their stance in 
relation to the contempt aspect of the US proceedings, and this departure 
was presented by Mr Brice on their behalf to the Court.  There had been no 
opportunity for the plaintiffs to investigate the significance of this 
change, or to obtain the advice of their US lawyers, Messrs Healy and 
Baillie, and consequently it was necessary to adjourn the application for 
this purpose.

   The adjourned hearing resumed on Thursday Feb 26, and a good deal of 
further evidence pertaining to the above problem and other discretionary 
aspects was placed before the Court.  In addition, and much more 
importantly:- (i) USL placed before the Court a substantial variation of 
the restraining order made by Judge Buschman on USL's application three 
days before on Feb 23; and (ii) USL for the first time mounted a new and 
fundamental attack on the Mareva orders, tothe effect that the Court had no 
jurisdiction to make or continue such orders, on the grounds that USL by 
virtue of the restraining order had ceased to be the beneficial owners of 
their property, and that therefore such property was no longer amenable to 
the Mareva jurisdiction.

   If, of course, this contention was correct, it would totally undermine 
the injunctions, and all the arguments based on comity and general 
discretion would become completely irrelevant.  I shall consider it 
straight away. The argument was based on one of two recent authorities 
decided in the Hong Kong Supreme Court, namely a decision of Mr Justice 
Trainor in Mordern Terminals (Berth 5) Ltd v States Steamship Co, [1979] 
HKLR 512, in which he specifically declined to follow a decision of the 
previous year by Mr Justice Cons in the case of Mobil Sales and Supply 
Corporation v The Owners of the Ship or Vessel "Pacific Bear", [1978] HKLR 
125.  Each of these cases concerned Chapter 11 proceedings in relation to 
different US shipping companies, and each depended onthe consideration of a 
number of US decisions in lower Courts.  Mr Justice Trainor held that the 
proper interpretation of these US cases was to divest the subject company 
of its beneficial ownership in its assets and to revest them in the company 
in a different capacity as a trustee for the benefit of the creditors; Mr 
Justice Cons, on consideration of the same authorities, had reached the 
diametrically opposite conclusion, and held that the subject 
companyremained in beneficial ownership.

   The theory adopted by Mr Justice Trainor became known as the "new 
entity" theory, and was treated with considerable reservation in subsequent 
cases in thelower Courts in the USA. 

   Finally, the matter was considered by the US Supreme Court in the case 
of NLRB v Bildisco & Bildisco, 465 US 513 (1984).  The majority opinion of 
the Court, delivered by Judge Rehnquist stated as follows:  

   Much effort has been expended by the parties on the question of whether 
the debtor is more properly characterized as an "alter ego" or a "successor 
employer" of the pre-bankruptcy debtor, as those terms have been used in 
our labor decisions . . . We see no profit in an exhaustive effort to 
identify which, if either, of these terms represents the closest analogy to 
the debtor-in-possession.  Obviously if the latter were a wholly "new 
entity", it would be unnecessary for the Bankruptcy Code to allow it to 
reject executory contracts, since it would not be bound by such contracts 
in the first place. For our purposes, it is sensible to view the debtor-in-
possession as the same "entity" which existed before the filing of the 
bankruptcy petition, but empowered by virtue of the Bankruptcy Code to deal 
with its contracts and property in a manner it could not have employed 
absent the bankruptcy filing.

   On the strength of this decision by the Court of highest authority, 
Healy and Baillie expressed the view that the "new entity" theory had been 
discredited and was no longer viable.

   Milbank Tweed sought to distinguish the Bildisco case by reference to 
two other earlier Supreme Court authorities, namely, US v Whiting Pools 
Inc, 462 US 198 (1983) and Wolf v Weinstein, 372 US 633 (1963). Suffice it 
is to say that, having considered both these cases, they do not seem to me 
to touch in any way on the critical point.  Consequently I have come to the 
conclusion that Messrs Healy and Baillie's interpretation of the  Bildisco 
case is the correct one, that the "new entity" theory is indeed 
discredited, andthat in consequence USL remain in beneficial ownership of 
their assets, while ofcourse remaining obliged to operate their business in 
accordance with the provisions of Chapter 11, and under the supervision of 
the creditors committee and the Court.  If the position were otherwise, it 
is very difficult to see why all the elaborate provisions of the 
restraining order quoted below were in any way necessary.  Consequently the 
jurisdiction point fails, and the case ends, as it began, turning on the 
crucial issues of comity and discretion. 

   US LINES INC

   USL has for many years carried on a very large world-wide shipping 
business. They are incorporated in the State of Delaware, USA, their 
operational headquarters being in Cranford, New Jersey.  They also carry on 
business in England from an address in Knightsbridge, together with a local 
office in Felixstowe, and are registered as an oversea company under s 691 
of the Companies Act, 1985.  Their holding company is a New York registered 
company called McLean Industries Inc. In 1986 USL encountered very severe 
financial difficulties, as a result of which they petitioned the US 
Bankruptcy Court under Chapter 11 on Nov 24, and onthe same day Judge 
Buschman made the restraining order, to which I shall in due course refer 
in more detail.

   The Chapter 11 petition contained details of USL's financial position on 
a consolidated basis as at Sept 27, 1986, showing assets totalling US 
$1.250 billion, and liabilities totalling US $1.272 billion, ie an excess 
of less than 2 per cent of liabilities over assets.  So far as England is 
concerned, its total liabilities (ie liquidated claims) amount to £2.4 
million (including those of the plaintiffs) and there are believed to be 
still further creditors.  The company's total English assets amount to 
approximately £720,000, so that there is a very substantial imbalance 
between English assets and liabilities, the latter exceeding the former by 
a factor of about 3.3, while of course only constituting a minute 
percentage of the global total which runs into over a thousand billion 
dollars.

   It is common ground that under the Chapter 11 reorganization and 
retrenchmentit is the intention of USL to close down entirely their English 
and European operations and concentrate their shipping activities mainly in 
North America. This is a consideration of great importance, as will 
ultimately appear.

THE PLAINTIFFS' CLAIMS AND THE MAREVA INJUNCTIONS

   FDR is a statutory body responsible for the operations of the Dock and 
Railway at Felixstowe.  Up to the end of 1986 USL vessels had for several 
years loaded and discharged at Felixstowe.

   FDR's claims totalling £367,922.44 comprise run-of-the-mill charges 
which remained unpaid for berthing and dock facilities, together with 
stevedoring and wharfage services for the defendants' vessels at 
Felixstowe.  While not formerlyconceded, no defence to this claim has been 
foreshadowed, and FDR intend to proceed under 14 unless the effect of my 
order makes such a course effectively valueless.

   FDR's Mareva injunction was sought, and granted ex parte by Mr Justice 
Leggatt, on Nov 25, ie the day after the Chapter 11 restraining order, and 
the existence of that order was very properly disclosed to the learned 
Judge in the plaintiffs' affidavit in support.  The Mareva restrained 
removal from the jurisdiction of assets so as not to deplete them below 
L400,000.

   FL is a container company based in London, which provided, maintained 
and inspected containers used by USL.  FL's claim totalling L236,717.20 was 
in respect of run-of-the-mill charges for such services which remained 
unpaid, and of which, as I am informed by Counsel, upwards of L200,000 is 
almost certainly undisputed, so that FL also intend to proceed under 0 14 
subject to the same reservation.

   FL's Mareva injunction was granted by Mr Justice Ognall on Dec 18, 1986, 
and here again the existence of the Chapter 11 order was very properly 
drawn to the learned Judge's attention.

   Originally the FL Mareva prohibited removal of any of the USL's assets 
from the jurisdiction save with the consent of the plaintiffs' solicitors, 
but this was varied on Jan 2, 1987, also after full proper disclosure, by 
Mr Justice Hoffman, so as to enjoin any depletion of assets below L650,000, 
with the express purpose of giving combined Mareva protection to FDR and 
FL.

   ECT are registered in the Netherlands, and provided stevedoring and 
allied facilities, for USL vessels over a period May, 1983 to December, 
1986.  Their claims total approximately 5.4 million Dutch Florins, 
equivalent to approximately L1.692 million sterling.

   They duly served proceedings on USL in this country, and subsequently 
USL entered an appearance and served a defence.  Procedurally, therefore 
their action here is soundly based and they also intend to take O 14 
proceedings. Mr Harvie adopted all the arguments of Mr Steel and Mr Norris, 
many of which had been developed before his clients appeared on the scene.

   CHAPTER 11 PROCEEDINGS

   The evidence concerning the operation of Chapter 11 in US bankruptcy law 
is derived from two sources.  These are: (i) A most helpful opinion of 
Judge Buschman himself, delivered at a status Conference on Feb 11, 1987, 
(ie, the daybefore the start of the present hearing) and directed by him to 
be furnished to this Court.  (ii) A memorandum by the defendants' US legal 
adviser, Mr John G Gellene, of Milbank Tweed, which is accepted by all 
parties to be accurate.

   This is such an important aspect of the case that I think it right to 
quote the salient parts of this evidence verbatim rather than attempting to 
summarize. 

   First I quote some of the opening passages of Mr Gellene's memorandum:

   Chapter 11 of the US Bankruptcy Code provides a procedure for placing a
financially distressed company under court protection so that the company 
can attempt to reorganize its financial condition and make provision for 
paying its obligations.  In a Chapter 11 case, the company becomes subject 
to the supervision of the US Bankruptcy Court, a "unit" or division of the 
US District Court, the general federal trial court.  The provisions of the 
US Bankruptcy Code, along with orders of the Bankruptcy Court which may be 
issued from time to time, impose certain restrictions upon the company's 
management which would not otherwise exist.

   In a Chatper 11 case, management of the debtor continues to operate its 
business as a "debtor in possession" unless the Bankruptcy Court appoints a 
trustee.  Generally speaking, a trustee is only appointed upon a showing of 
fraud, dishonesty or gross mismanagement . . .

   An important feature of Chapter 11 is that a "debtor in possession" has 
the same duties and powers as a trustee.  A debtor in possession is 
therefore obligated to treat similarly situated creditors equally, and to 
refrain from conduct that is not in the best interests of creditors.  If 
the status of a US bankruptcy trustee is recognized under the law of 
another country, there may be grounds for recognizing the status of a 
"debtor in possession" as the equivalentof a trustee for purposes of 
foreign law.

   The learned Judge prefaced his opinion as follows:

   Counsel for US Lines has informed the Court that the Debtor shall be 
making application to the English Court to modify or vacate such 
injunctions.  In connection with that application, counsel has advised that 
it may be useful for the English Court to have this Court's view on certain 
general matters of UnitedStates bankruptcy law.  These matters are:

   First, the extent of this Court's jurisdiction over the assets and 
property of a debtor in a case under Chapter 11 of the US Bankruptcy Code;

   Second, the issue of reciprocity, namely, whether this Court would 
extend comity to the orders and judgments of a foreign court, specifically 
an English court, in bankruptcy matters;

   Third, whether there may be any adverse discrimination in a Chapter 11 
case in the treatment of the claims of foreign creditors -- specifically, 
English creditors located in the United States.

   Counsel has requested that the Court express its view on these subjects 
in a manner that could be conveyed to the English Court.

   While the request is unusual, perhaps unprecedented, this Court is 
disposed to entertain it.  The courts in the United States have repeatedly 
recognized that relations among nations are furthered by recognition of and 
giving comity to proceedings in other countries.  In this circuit, for 
example, an admiralty arrest of a vessel belonging to a company involved in 
a Swedish bankruptcy proceeding was dismissed so that the Swedish 
proceeding could administer that property.  Cunard-Steamship Company Ltd v 
Salen Reefer Services AB, 773 F 2d 452(2d Cir, 1985).

   If this Court were in the position of the English Court being presented 
with the application of US Lines, the views of a jurist in another country 
to whom a bankruptcy or reorganization preceding has been assigned would be 
welcomed as a means or providing general guidance in matters of foreign 
law.  In the spirit offurthering the relations among nations, I shall, 
address myself generally to the three subjects raised by counsel.

   Judge Buschman describes the source and scope of the bankruptcy 
jurisdiction of his Court as follows:

   The intended scope of bankruptcy and reorganization jurisdiction extends 
beyond the borders of the United States . . . The nature of the 
jurisdiction is in rem.  The res, the estate of the debtor created by the 
commencement of a bankruptcy or reorganization cass, is viewed as a single 
entity to be dealt within a single proceeding.  The claims and interests of 
all creditors, foreign and domestic, are to be addressed in the course of 
the proceeding. The broad scope of bankruptcy jurisdiction under United 
States law is intended to permit similarly situated creditors, regardless 
of where they are located, to be treated equally in a bankruptcy or 
reorganization case. Discrimination on the basis of citizenship is not 
permitted.  All creditors are given the opportunity to file claims against 
the estate and their recovery is not limited to the assets in their own 
country.

   To achieve equality of treatment of all similarly situated creditors, 
wherever located, United States law contains several provisions.  Central 
to that goal are the requirements that claims arising prior to the filing 
of the petition are to be paid after the estate has been administered.  If 
the debtor is liquidated, the proceeds are distributed ratably.  If the 
debtor is to be reorganized, creditors are to be paid pursuant to a plan of 
reorganization. Concomitantly, a debtor is generally prohibited from paying 
claims of foreign and domestic creditors which arose prior to the filing of 
the petition except through such distribution or plan.  Fragmentation is 
not contemplated for it would defeat the purpose.

   Another measure designed to promote equal treatment among all similarly 
situated creditors is the "automatic stay" which comes into force upon the 
commencement of a bankruptcy or reorganization case with the filing of the 
petition.  Under Section 362 of Title 11, United States Code, all creditors  
are generally stayed and restrained from commencing or continuing judicial 
action against the Debtor that was or could have been commenced pre-
petition. All creditors are also generally stayed and restrained from 
enforcing their claims against any property of the debtor until and unless 
relief from the automatic stay is obtained for cause shown.  By these 
provisions creditors do not obtain preferred treatment through enforcement 
actions begun after the commencement of the Chapter 11 case and the estate 
is able to be administered.

   In addition, United States law recognizes that it may often be 
impracticable for creditors, because of the amount they are owed or for 
other reasons, to examine the myriad of matters that do not directly affect 
their interests by requiring in all reorganization cases, of which US Lines 
is one, the appointment of an unsecured creditors committee charged with 
the fiduciary duty of representing all unsecured creditors in matters that 
concern that group as a whole.  Principal among the duties of such 
committees is the negotiation of a plan of reorganization providing for a 
return to unsecured creditors.  The expenses of the committee are borne by 
the debtor.  These include counsel and accountants fees and the fees of 
other professionals such as investment brokers. All plans or reorganization 
must be submitted to all creditors for their consideration and vote before 
they can be confirmed by this Court and thereby have binding effect.  Each 
creditor, regardless of citizenship, has one vote and, also, an equal 
opportunity to be heard in opposition to the plan. Reverting now to Mr 
Gellene, the formulation of a plan of reorganization under Chapter 11 is 
described as follows:

   The goal of a Chapter 11 case is a "plan of reorganization", which 
provides for the treatment of the claims of creditors and of the interest 
of equity security holders.  In general, the formulation of a plan of 
reorganization involves negotiations among the debtor, the official 
Creditors' Committee, othercommittees which may be appointed to represent 
specific categories of  creditors and equity security holders, and other 
interested parties.

   A plan of reorganization will generally divide creditors into one or 
more classes, depending upon whether they are secured or unsecured and 
whether unsecured claims have statutory priority in right of payment . . .

   Under a plan of reorganization, an unsecured creditor, including secured 
creditors to the extent that the value of collateral is insufficient, is 
entitled to receive property of a value at least equal to what the creditor 
would receive in the event of the debtor's liquidation, taking into account 
the statutory priorities just described.  A secured creditor under a plan 
is entitled to property at least equal in value to the value of its 
security interest in the debtor's property.  However, a secured creditor is 
not necessarily entitled to realize its claim upon collateral subject to 
its security interest if the debtor can otherwise provide at least 
equivalent value.

   The debtor has the exclusive right to propose a plan of reorganization 
for 120 days following the filing of its Chapter 11 petition.  This 
exclusive time period can and often is extended upon request of the debtor, 
particularly in large complex cases such as that of US Lines.  Once this 
exclusive period lapses, creditors or other interested parties may propose 
a plan.

   A plan of reorganization must be submitted to creditors and equity 
security holders for their acceptance . . .

   A plan of reorganization may be approved or "confirmed" by the 
Bankruptcy Court if it meets the statutory requirements of the Bankruptcy 
Code and, in particular, if it is accepted by each class of creditors and 
equity security holders.

   Towards the end of his opinion, the learned Judge reverts to the 
question of comity in the following terms:

   As to the question of comity being afforded in the United States to 
proceedings under foreign bankruptcy law, particulary English law, 
reference is made to the recent case in Cunard-Steamship Company Limited v 
Salen Reefer Services AB, 773, F 2d 452 (2d Cir 1985), and to the long 
established decision of the United States Supreme Court in Canadian 
Southern Railway v Gebhard, 109 US 527 (1883).  These show that this 
country early on recognized that United States citizens should be bound by 
foreign debtor-creditor arrangement proceedings and now recognizes that to 
permit arrests or attachments by US citizens of debtor property would 
defeat that purpose. 

   I shall return later to these two US authorities.

   THE RESTRAINING ORDER

   The imposition of the "automatic stay" was achieved by a restrianing 
order issued by Judge Buschman on Nov 24, 1986 on the application inter 
alia of USL asfollows, so far as relevant:

   IT IS . . . ORDERED, that . . . all persons, entities and governmental 
units,wherever located, including those located outside the United States, 
and all persons acting on their behalf, including sheriffs, marshalls, 
constables and other or similar law enforcement officials, are hereby 
STAYED, RESTRAINED AND ENJOINED, effective immediately, from the following:

    (1) commencing or continuing a judicial, administrative or other action 
or proceeding against any of the Debtors that was or could have been 
commenced on or before November 24, 1986;

   (2) commencing or continuing a judicial, administrative of other action 
or proceeding against any of the Debtors to recover a claim against any of 
the Debtors that arose on or before November 24, 1986;

   (3) issuing, serving or otherwise employing legal process of any type, 
including writs or orders of attachment, arrest, sequestration or 
foreclosure, in connection with an action or proceeding against any of the 
Debtors referred to in paragraphs (1) or (2);

   (4) any act enforcing a judgment obtained on or before November 24, 1986 
against any of the Debtors or their property, wherever located, including 
vessels and other property of the Debtors located outside the United 
States;

   (5) any act to obtain possession of or exercise control over property of 
the Debtors' estates, including vessels, cargo, containers, chassis and 
other equipment in the possession or under the control of the Debtors, 
whether such property is located within or outside the United States;

   (6) any act to create, perfect or enforce any lien against property of 
the Debtors' estates, including vessels, cargo, containers, chassis and 
other
equipment in the possession or under the control of the Debtors, whether 
such property is located within or outside the United States;

   (7) any act to collect, assess or recover a claim against any of the 
Debtors that arose on or before November 24, 1986; and

   (8) the setoff of any debt owing to one of the Debtors that arose on or 
before November 24, 1986 against any claim against such Debtor . . .

   THE INSOLVENCY ACT, 1986

   This very recent enactment, applicable in England and Scotland, was 
based on the recommendations of the Cork Committee in their report entitled 
"Insolvency Law and Practice" (Cmd 8558).  It is convenient to refer at 
this stage to the relevant sections which establish a new bankruptcy 
procedure called an "Administration Order".  The Act came into force as 
recently as Dec 29, 1986.

   The procedure for Administration Orders is contained in Part II of the 
Act, and the material sections, so far as relevant, are as follows: 8. -- 
(1) Subject to this section, if the court -- (a) is satisfied that a 
company is or is likely to become unable to pay its debts (within the 
meaning given to that expression by section 123 of this Act), and (b) 
considers that themaking of an order under this section would be likely to 
achieve one or more of the purposes mentioned below, the court may make an 
administration order in
relation to the company.

   (2) An administration order is an order directing that, during the 
period forwhich the order is in force, the affairs, business and property 
of the company shall be managed by a person ("the administrator") appointed 
for the purpose by the court.

   (3) The purposes for whose achievement an administration order may be 
made are -- (a) the survival of the company, and the whole or any part of 
its undertaking, as a going concern . . . (d) a more advantageous 
realisation of the company's assets than would be effected on a winding up; 
and the order shall specify the purpose or purposes for which it is made . 
. .

   10. -- (1) During the period beginning with the presentation of a 
petition for an administration order and ending with the making of such an 
order or the dismissal of the petition -- (a) no resolution may be passed 
or order made for the winding up of the company; (b) no steps may be taken 
to enforce any security over the company's property, or to repossess goods 
in the company's possession under any hire-purchase agreement, except with 
the leave of the court and subject to such terms as the court may impose; 
and (c) no other proceedings and no execution or other legal process may be 
commenced or continued, and no distress may be levied, against the company 
or its property except with the leave of the court and subject to such 
terms as aforesaid. 

   Section 11 provides that on the making of an administratikon order any 
winding up petition shall be dismissed and any administrative receiver 
shall vacate office.  Sections 13-15 lay down the mode of appointment of 
the administrator and his powers, including the power to do all such things 
as may be necessary for the management of the company.  Section 17 provides 
for the administrator's duties, including a duty to take into his custody 
and control all the properties to which the company appears to be entitled, 
and to manage the affairs, business and property of the company.  He is 
also enjoined to summon a meeting of creditors if he is requested so to do 
by 1/10th in value of the company's creditors or is directed so to do by 
the Court.

   Under s 23 he is obliged to send to all creditors and other interested 
parties a statement of his proposals for achieving the purposes of the 
order within three months (or such longer period as the Court may allow) of 
the making of the order. Section 26 allows for the appointment of a 
creditors' committee.

   Section 27 lays down various provisions for protecting the interests of 
creditors and members. 

   Mr Brice strongly relied on the close similarity between this new 
English procedure and Chapter 11.  The main distinction, of course, between 
the two procedures is that in the USA the debtor company remains in 
possession, while here there is an independent administrator.  Mr Harvie 
placed strong reliance on this contrast, and submitted that, while the 
administrator here was in the true sense a trustee, the fiduciary duties 
resting upon a company as a debtor in possession under Chapter 11 were of a 
very low and rudimentary order, since they could only be removed from 
possession in cases of fraud, dishonesty or gross mismanagement.  In my 
judgment, having regard to the provisions of s 1107 of the US Bankruptcy 
Code, which specifically provides that the company is bound by allthe 
duties of a trustee, and to Judge Buschman's opinion, this is not a valid 
contrast.  I therefore accept Mr Brice's argument that, at any rate on a 
broad approach, the comparison between the two procedures is a valid one.

   THE BASIC ISSUES

   I now proceed to summarize the relevant authorities both English and US, 
the parties' rival submissions thereon, any relevant facts, and my general 
conclusions under the following headings: (1) The Mareva jurisdiction.  (2) 
Comity under English law.  (3) English bankruptcy procedure.  (4) The 
relevant US authorities on comity and bankruptcy procedure.  (5) Contempt 
in the USA.

   (1) The Mareva Jurisdiction

   The general jurisdiction to grant a Mareva injunction is now, of course, 
to be found in s 37(3) of the Supreme Court Act, 1981, which provides:

   (3) The power of the High Court under subsection (1) to grant an 
interlocutory injunction restraining a party to any proceedings from 
removing from the jurisdiction of the High Court, or otherwise dealing 
with, assets located within that jurisdiction shall be exercisable in cases 
where that party is, as well as in cases where he is not, domiciled, 
resident or present within that jurisdiction.

   This, as is common ground, vests in the Court a wide judifial discretion 
to be exercised on equitable principles, to provide interlocutory relief in 
personam but not giving the plaintiff any proprietary rights over the 
frozen assets, nor operating as a charge upon them.  (The Cretan Harmony, 
[1978] 1 Lloyd's Rep 425, especially per Lord Justice Buckley at pp 428-
430).

   So far as the present case is concerned Mr Brice submitted that a Mareva 
injunction is intended to prevent a debtor removing his assets from the 
jurisdiction so as unjustly to avoid meeting his liabilities, but not to be 
usedas a mechanism to undermine the effect of an order such as one made 
pursuant to Chapter 11.

   Mr Steel and Mr Norris submitted that the fundamental purpose of the 
mareva is to protect the plaintiffs against the defendants transferring 
assets abroad so as to make themselves judgment-proof, leaving the 
plaintiffs with worthless judgments, and that any question of discharge or 
variation of the Mareva in this case is essentially one of discretion; the 
Court should have regard to all the circumstances of the case in order to 
determine what justice requires.

   In my judgment it is indeed incumbent on the Court to take into account 
all the relevant circumstances in the exercise of its discretion.  In the 
present case, of course, the US Chapter 11 procedure is a very important 
circumstance, but it cannot in my judgment properly be treated in any way 
as an overriding consideration, so as to accord it any kind of paramountcy 
or dominance over all the others, as Mr Brice's formulation (with its 
reference to "undermining") tends to do. At the end of the day, this being 
an application for an interlocutory injunction, the Court must weigh up the 
competing assertions of the parties as to the irreparable prejudice which 
would follow from the continuance or discharge of the Mareva, as the case 
may be, and the overall balance of convenience, applying the very well 
established principles laid down by the House of Lords in the American 
Cyanamid case.

   I consider these aspects in the concluding sections of my judgment.

   (2) Comity in English Law 

   In Travers v Holley, [1953] P 246 the Court of Appeal considered the 
question of recognition of a divorce decree granted in theCourts of New 
South Wales applying principles similar to those applicable in England.  
Lord Justice Hodson (as he then was) stated, at p 257:

   . . . Where it is found that the municipal law is not peculiar to the 
forum of one country but corresponds with the law of a second country, such 
municipal law cannot be said to trench upon the interests of that country.  
I would say that where, as here, there is in substance reciprocity, it 
would be contrary to principle and inconsistent with comity if the courts 
of this country were to refuse to recognize a jurisdiction which mutatis 
mutandis they claim for themselves.  The principle laid down and followed 
since the Le Mesurier case must, I think, be interpreted in the light of 
the legislation which has extended the power of the courts of this country 
in the case of persons not domiciled here.

   Lord Justices Somervell and Jenkins concurred.

   In In re Trepca Mines Ltd, [1960] 1 WLR 1273 the Court considered the 
position of a foreign applicant in an English company liquidation where the 
former sought to prove a debt in resepct of which he was at the relevant 
time the holder of a judgment in his favour in the Courts of Yugoslavia.

   Lord Justice Hodson (with whose judgment Lords Justices Ormerod and 
Harmon agreed) stated at p 1280:

   There was a further argument addressed to this court which derives from 
the decision in a matrimonial case, Travers v Holley, where it was held in 
a divorce suit that where the courts of New South Wales and the English 
courts claimed the same jurisdiction, it would be contrary to principle and 
inconsistent with comity if the courts of this country refused to recognise 
a jurisdiction which mutatis mutandis they claimed for themselves.  Arguing 
from that, reliance was placed upon a dictum of Denning LJ in In re Dulles' 
Settlement (No 2) . . . It is argued, relying on the observations of 
Denning LJ, that in effect we should in this case ignore the position as it 
has always been understood in this country since not only Emanuel v Symon 
but other cases which have been decided, and give effect to the judgment of 
the Yugoslav court in toto, whether it is an action in personam or not.  I 
find myself unable to take that step.  The decision in Travers v Holley was 
a decision limited to a judgment in rem in a matter affecting matrimonial 
status, and it has not been followed, so far as I am aware, in any case 
except a matrimonial case.  Moreover, it is quite clear from the 
legislature's recognition of the rule in the Foreign Judgments (Reciprocal 
Enforcement) Act, 1933, that the classification of actions which  
asreferred to by Buckley LJ in Emanuel v Symon has been recognised in this
country.  Having regard to the Act of 1933, it would be a step which I for 
one am not prepared to take, to say that the Travers v Holley point really 
affects the whole of this question of jurisdiction as to the enforcement of 
a foreign judgment, and that Emanuel v Symon ought to be treated as a case 
which need not be regarded as binding upon this point because the court 
there had not addresseditself thereto.

   The Trepca Mines case has been frequently followed, including for 
example in Schemmer v Property Resources Ltd, [1975] Ch 273 where Mr 
Justice Foulding rejected a claim by a foreign receiver to recover the 
assets of an English company in England, stating inter alia at p 287: I 
think, however, that in view of well-known later decisions Travers v Holley 
must be followed only with caution outside its own subject matter of 
matrimonial status.

   In the light of inter alia these authorities the law is stated in Dicey 
and Morris on Conflict of Laws, 10th ed, under r 143 and the ensuing 
comment as follows:

   Rule 143. -- The authority of a liquidator appointed under the law of 
the place of incorporation is recognised in England.

   Comment

   The effect of a foreign winding up order in England has seldom been 
before the courts.  Rule 143 is however justified because the law of the 
place of incorporation determines who is entitled to act on behalf of a 
corporation.  If under that law a liquidator is appointed to act then his 
authority should be recognised here.

   A case has never arisen where recognition of a liquidator's authority 
was sought by reference to an appointment made in the exercise of a foreign 
jurisdiction similar to that conferred on the English courts in regard to 
companies incorporated outside the United Kingdom.  The protagonist of 
recognition in such a case could urge that "it would be contrary to  
principle and inconsistent with comity if the courts of this country were 
to refuse to recognise a jurisdiction which mutatis mandis they claim for 
themselves". However even if an appeal to comity has any force (which is 
doubtful) it is improbable, with one possible exception, that the 
liquidator's authority would be recognised as extending beyond those 
affairs of the company which are local to the country where the appointment 
was made.  The exception is where there is no likelihood of a liquidation 
in the country of incorporation.  This treatment of the argument based on 
comity is defensible because where there is a liquidation in the country of 
incorporation and the English courts exercise their own judisdiction to 
make an order, they seem concerned to ensure that the liquidator should not 
go beyond dealing with the company's English affairs without special 
direction.  Such concern is not shown where there is no likelihood of 
liquidation in the country of incorporation.

   Mr Brice submits that Travers v Holley forms a very close analogy to the 
present case, and while firmly disclaiming any suggestion that the 
restraining order is binding or enforceable here, he argues that, having 
regard to that order, with its express extra-territorial effect, the 
position here is "betwixt and between" Travers v Holley and Trepca Mines, 
though with a strong bias towards the former, on the footing that the US 
restraining order is in effect an order in rem affecting the status of USL.

   He also relies on other cases cited and distinguished in Schemmer's case 
(sup), under which foreign receivers and the like have been held entitled 
to proceed in England (eg, Macauley v Guaranty Trust Company of New York, 
(1927) 44TLR 99 where a receiver of a foreign company appointed under an 
order which was described as "a combination of an winding up order and an 
administration order" was held entitled to recover sums standing to the 
credit of the company in an English bank).

   Mr Steel and Mr Norris both submitted that the proper approach to comity 
is that, having regard to the decision in the Trepca Mines case and its 
successors, English law while of course according recognition of the 
authority of foreign liquidators, does not accord recognition to any decree 
of a foreign Court in personam or indeed in any other field outside the 
realm of status, which, they submit, is not applicable in the present case.

   As all Counsel of course recognize, this is not a case where USL are in 
terms seeking to enforce the restraining order, nor to obtain a stay of the 
English actions.  These authorities are therefore relied upon by way of 
helpful analogy rather than of direct application. Approaching the matter 
on this basis, I am quite satisfied that this is not a Travers v Holley 
type case, and that the Trepca Mines case (which itself arose in the 
context of company insolvency provides the surer guide in the present 
context.  The Chapter 11 order cannot be treated as affecting the status of 
USL having regard to the US Supreme Court rejection of the "new entity" 
theory; and I am quite satisfied that the restraining order as such, having 
regard to its terms, is essentially an order "in personam", even though the 
nature of the US bankruptcy jurisdiction generally is "in rem".

   I wish however to stress that the Court would in principle always wish 
to co-operate in every proper way with an order like the present one made 
by a Court in a friendly jurisdiction (of which the USA is a most 
conspicuous example).  But whether this is appropriate in any given case, 
and if so the precise nature and extent of such co-operation, must depend 
on the particular sphere of activity in question and the English law 
applicable thereto, as discussed in the ensuing section of this judgment, 
rogether with the overall circumstances.

   (3) English Bankruptcy Procedure

   It is not in dispute: (i) That the English Courts have jurisdiction to 
wind up USL here, both on the ground that it is registered in England and 
on the ground that it has assets here; and (ii) that Part II of the 
Insolvency Act, 1986, does not give the English Court jurisdiction to make 
an administration order in respect of a foreign company.

   In this section I focus on the authorities which relate to English 
bankruptcy procedure in cases where there is a substantial foreign element, 
and I deal first with four cases involving foreign registered companies.

   In re Commerical Bank of South Australia, (1886) LR 33 Ch D 174, a 
petition was presented in England to wind up an Australian incorporated 
banking company carrying on its main business in Australia, but with a 
branch office in London. Mr Justice North granted the petition, stating at 
p 178:

   . . . The question is whether the English creditors ought to be left to 
recover their debts in a winding-up of the company in Australia, their 
debts having been contracted here, and there being a large amount of assets 
here.  Two winding-up petitions have been presented here, and all I know 
about the proceedings in Australia is, that an order has been made for the 
appointment of provisional liquidators.  I have no proper proof that a 
winding-up order has been made there.  At any rate, if it has been made, it 
was not made till at least a month after the petitions were presented here.  
I think, therefore, that the English creditors are entitled to have a 
winding-up order made by this Court.  I do not think it would be right to 
insert any special directions in the order; this is not the proper time for 
giving such directions.  But I will say this, that I think the winding-up 
here will be ancillary to a winding-up in Australia, and, if I have the 
control of the proceedings here, I will take care that there shall be no 
conflict between the two Courts, and I shall have regard to the interests 
of all the creditors and all the contributories, and shall endeavour to 
keep down the expenses of the winding-up so far as is possible.  I think it 
clear that there is jurisdiction to make a winding-up order; the cases 
which have been cited shew that there is jurisdiction . . .

   In re English, Scottish, and Australian Chartered Bank, [1893] 3 Ch 385, 
Mr Justice Vaughan Williams, at first instance, stated as follows at p 394 
in a case dealing with an English scheme connected with the winding-up in 
Australia of an Australian based banking company incorporated in Australia:

   . . . One knows that where there is a liquidation of one concern the 
general principle is -- ascertain what is the domicil of the company in 
liquidation; letthe Court of the country of domicil act as the principal 
Court to govern the liquidation; and let the other Courts act as ancillary, 
as far as they can, to the principal liquidation.  But although that is so, 
it has always been held that the desire to assist in the main liquidation -
- the desire to act as ancillary to the Court where the main liquidation is 
going on -- will not ever make the Court give up the forensic rules which 
govern the conduct of its own liquidation.

   The Court of Appeal (Lindley, Lopes and AL Smith, LJJ) upheld this 
decision (ibid).

   In re Vocalion (Foreign) Ltd, [1932] 2 CH 196, Mr Justice Maugham (as he 
then was) stated the general principle as follows at p 206:

   Finally it must be remembered that there may be winding-up orders made 
in the foreign country where the company has carried on business and 
possesses assets. The view of this Court is that the principal winding-up 
should be in the principal domicil of the Corporation, and that any other 
winding-up order should be ancillary to the principal winding-up.

   In re Suidair International Airways Ltd, [1951] Ch 165, Mr Justice Wynn-
Parry in considering applications ancillary to the winding-up of a South 
African based company incorporated in South Africa, cited the passage 
quoted above from Mr Justice Vaughan Williams and then proceeded as follows 
at pp 173-174:

   . . . It appears to me that that must be the common sense of the matter, 
and that that passage enunciates a principle which, so far as I know, has 
never been doubted.

   Then it is said that all that that passage refers to is questions of 
procedure; that s 325 concerns a question of substantive law; and that 
therefore the passage, when properly regarded, is not any obstacle to the 
adoption by the court of the argument put forward on behalf of the 
liquidator.

   To that I would make two answers: first, I do not read Vaughan Williams 
J, as confining himself to what, on a narrow view, may be said to be 
matters of procedure.  I think that he intended his observations and the 
statement of the principle to apply to the decision of all questions 
arising in the ancillary liquidation.  Secondly, even if that passage could 
be read otherwise, I should be prepared for myself to say that I can see no 
sound reason for distinguishing between matters of procedure viewed in that 
narrow sense and matters of substantive right.  It appears to me that the 
simple principle is that this court sits to administer the assets of the 
South African company which are within its jurisdiction, and for that 
purpose administers, and administers only,the relevant English law; that 
is, primarily the law as stated in the Companies Act, 1948, looked at in 
the light, where necessary, of the authorities.  If that principle be 
adhered to, no confusion will result.  If it is departed from, then for 
myself I cannot see how any other result would follow than the utmost 
possible confusion.  Who could lay down as a clear and exhaustive 
proposition where the court was to draw the line in any particular case 
between administering the English law and the law of the main liquidation?

   In re Oriental Inland Steam Co, (1874) LR 9 Ch App 557 the Court of 
Appeal considered the position of judgment creditors in India of an English 
registered company carrying on business in India, holding that they should 
not be entitled to attach the company's property in India and thus secure 
priority over other creditors.

   Sir William James, LJ, with whose judgment Lord Justice Mellish agreed,
stated as follows at p 55:

   The winding-up is necessarily confined to this country.  It is not 
immaterial to obseve, that there could now be no possibility, having regard 
to the decision of the Supreme Court of Calcutta, in Bank of Hindustan v 
Premchand, which we must take to be quite right, of treating this case as 
if there were an auxiliary winding-up in India.  If this is so with regard 
to a company domiciled in England, but having its business and assets in 
India, there would be no ground for the contention on the part of the 
Appellants that they would obtain an equitable and rateable distribution of 
the assets between the creditors.  All the assets there would be liable to 
be torn to pieces by creditors there, notwithstanding the winding-up, and 
there would be an utter incapacity of the Courts there to proceed to effect 
an equitable distribution of them.  The English Act of Parliament has 
enacted that in the case of winding-up the assets of the company so wound 
up are to be collected and applied in discharge of its liabilities.  That 
makes the property of the company clearly trust property.  It is property 
affected by the Act of Parliament with an obligation to be dealt with by 
the proper officer in a particular way.  Then it has ceased to be 
beneficially the property of the company; and, being so, it has ceased to 
be liable to be seized by the execution creditors of the company.

   There may, no doubt, be some difficulty in the ways of dealing with 
assets and creditors abroad.  The Court abroad may sometimes not be 
disposed to assist this Court, or take the same view of the law as the 
Courts of this country have taken as to the proper mode of dealing with 
such companies, and also with such assets.  If so, we must submit to these 
difficulties when they occur.

   In this particular case there is no such difficulty.  There were assets 
fixed by the Act of Parliament with a trust for equal distribution amongst 
the creditors.  One creditor has, by means of an execution abroad, been 
able to obtain possession of part of those assets.  The Vice-Chancellor was 
of opinion that this was the same as that of one cestui que trust getting 
possession of the trust property after the property had been affected with 
notice of the trust. If so, that cestui que trust must bring it in for 
distribution among the cestui que trust.  So I, too, am of opinion, that 
these creditors cannot get anypriority over their fellow-creditors by 
reason of their having got possession of the assets in this way.  The 
assets must be distributed in England upon the footing of equality.

   Finally in this section I should refer to a case in the House of Lords, 
Galbraith v Grimshaw, [1910] AC 508, where a somewhat different topic was 
under consideration, namely wether a sequestration order under Scottish 
bankruptcy lawshould override an attachment in England obtained by an 
English creditor prior to the Scottish order.

   Lord Dunedin stated as follows:

   Now so far as the general principle is concerned it is quite consistent 
with the comity of nations that it should be a rule of international law 
that if the Court finds there already pending a process of universal 
distribution of a bankrupt's effects it should not allow steps to be taken 
in its territory which would interfere with that process of universal 
distribution; and that I take to be the doctrine at the bottom of the cases 
of which Goetze v Aders is only one example.  But if you wish to extend 
that not only to the question of recognizing a process of universal 
distribution but also of introducing the law of relation back, then it 
seems to me you at once get into rather great difficulties, because the 
question at once arises, according to which law will you apply the
doctrine of relation back?

   The House of Lords held that is should be according to the local 
(English) law of the attachment.

   Here of course there is no winding-up proceeding as such in England, so 
these cases also are cited by all Counsel as helpful by way of analogy, and 
I shall approach them in the same way.

   Mr Steel and Mr Norris submit that the first four of the above cited 
cases show that the English practice is to regard the Courts of the country 
of incorporation as the principal forum for controlling the winding-up of a 
company, but that in so far as that company has assets here, the usual 
practice is to carry out an ancillary winding-up in England in accordance 
with our own rules, while working in harmony with the foreign Courts.

   Applying this principle, they submit that the English Courts would and  
should not favour an order which removed the English assets entirely 
outside their control. Mr Brice stresses that the procedure followed in 
these same four cases recognized the proceedings in the foreign Court as 
the principal proceedings, and submits that the continuation of the Mareva 
injunction here will unjustly impede the US Chapter 11 proceedings which 
are plainly the principal proceedingsin this case. 

   Mr Brice also places strong reliance on the Oriental case, submitting 
that it provides a clear precedent for the order he seeks and that, 112 
years on, it follows from the policy there laid down that a Mareva 
injunction should be refused.

   In my judgment Mr Steel and Mr Norris are right in their interpretation 
of the first four cases, though of course it does not necessarily follow 
therefrom that the Mareva should continue.  For reasons which will appear 
hereafter I do not accept Mr Brice's argument that the continuation of the 
Mareva will unjustly impede the Chapter 11 proceedings in the USA, though I 
do of course accept (as do the plaintiffs themselves) that they are the 
principal proceedings.

   So far as the Oriental case is concerned, I think that it does no more 
than enshrine in eloquent and emphatic terms the general principle (which 
is not in dispute here) that the whole purpose of liquidation proceedings 
is to hold the scales even between the various classes of creditors by 
imposing a trust, and I do not think it gives any really useful guidance in 
the specific Mareva context.

   The opening passage quoted from Lord Dunedin in the Galbraith case, on 
whcih Mr Brice also strongly relied, seems to me again to do no more than 
stress the same general principle, and it is significant that, while 
upholding it, the House of Lords still gave preference to English law when 
deciding whether the Scottish bankruptcy order related back in order to 
override the attachment. 

   (4) Relevant US authorities on comity and bankruptcy procedure

   In the leading US Supreme Court case of Canadian Southern Railway v 
Gebhard, 109 US 527 (1883) (cited by Judge Buschman in his opinion of Feb 
11) the SupremeCourt in 1883 considered the effect of a Canadian 
Parliamentary scheme of arrangment for a Canadian railway company vis-a-vis 
its mortgage creditors.  In the opinion of the Court delivered by Circuit 
Judge Waite the following principle was stated at p 536:

   A corporation of one country may be excluded from business in another 
country. . . but, if admitted, it must in the absence of legislation 
equivalent to making it a corporation of the latter country, be taken, both 
by the government and those who deal with it, as a creature of the law of 
its own country, and subject to all the legislative control and direction 
that may be properly exercised over it at the place of its creation.  Such 
being the law, it follows that every person who deals with a foreign 
corporation impliedly subjects himself to such laws of the foreign 
government, affecting the powers and obligations of the corporation with 
which he voluntarily contracts, as the known and established policy of that 
government authorizes.  To all intents and purposes, he submits his 
contract with the corporation to such a policy of the foreign government 
and whatever is done by that government in furtherance of that policy which 
binds those in like situation with himself, who are subjects of the 
government, in respect to the operation and effect of their contracts with 
the corporation, will necessarily bind him.  He is conclusively presumed 
tohave contracted with a view to such laws of that government, because the 
corporation must of necessity be controlled by them, and it has no power to 
contract with a view to any other laws with which they are not in entire 
harmony.  It follows, therefore, that anything done at the legal home of 
the corporation, under the authority of such laws, which discharges it from
liability there, discharges it everywhere.

   This is a very important statement of general principle, but it is not 
directly in point here. In Cunard-Steamship Co Ltd v Salen Reefer Services 
AB, 773 F 2d 452 (also cited by Judge Buschman) the US Court of Appeals 2nd 
Circuit in 1985 held that the District Court properly exercised its 
discretion in vacating an attachment, in connection with an arbitration 
claim under a charter-party by the plaintiff English company, of US assets 
belonging to the defendant Swedish company, in the exercise of comity 
towards Swedish liquidation proceedings.  The judgment statedat pp 456 and 
459 respectively: 

   The district court aptly described the question before it as "whether an 
American court, as a consequence of a Swedish court's adjudication of the 
insolvency of a Swedish business entity, should vacate an admiralty 
attachment obtained by an English corporation in an effort to force London 
arbitration of an alleged debt between the Swedish and English 
corporations." . . . In the United States, the leading case on the concept 
of comity is Hilton v Guyot, 159 US 16 B Ct 139, 40 L Ed 95 (1985).  In 
that case, the Supreme Court described comity as:

   the recognition which one nation allows within its territory to the 
legislative, executive, or judicial acts of another nation, having due 
regard both to international duty and convenience, and to the rights of its 
own citizens or of other persons who are under the protection of its laws. 
Cunard has not demonstrated that the laws or public policy of the United
States would be violated or in any way infringed by according comity to the 
Swedish bankruptcy proceedings.  Indeed, the facts amply support the 
district court's conclusion that the public policy of the United States 
would be best served by recognising the Swedish proceedings and thereby 
"facilitat(ing) the orderly and systematic distribution of the assets of 
Salen." The district court noted that comity would not be granted if it 
would result in prejudice to UnitedStates citizens.

   Earlier the Court had rejected the contention of Cunard that Salen's 
exclusive remedy lay under section 304 of the US Bankruptcy Code.  This 
lays down a procedure for ancillary bankruptcy proceedings against the 
assets in the USA of a debtor against whom the principal bankruptcy 
proceedings have been taken in another country.

   The jdugment concluded at p 461:

   In view of the foregoing, we hold that, while an ancillary proceeding 
pursuant to section 304 of the Bankruptcy Code is the preferred statutory 
remedy, in this case, the district court properly exercised its discretion 
in granting comity to the Swedish bankruptcy court, and vacating the 
attachment of Salen's assets in the United States.  The judgment of the 
district court is, therefore, affirmed.

   Mr Brice, of course, strongly relied on the passage which I have quoted 
referring to comity, and submitted that this Court should reciprocate here 
in the same vein.  This is a fair plea so far as it goes, but its effect 
is, in my judgment, considerably blunted by the reservation in the 
concluding passage of the judgment.

   A similar result was reached in a closely analogous case, also arising 
out of the Salen bankruptcy proceedings in Sweden, namely Victrix Steamship 
Co SA v Salen Dry Cargo AB AMC 276 (1987).  Victrix, a Panamanian company, 
had attached assets in the USA in an attempt to enforce an arbitration 
award in England against Salen on which the Commercial Court had entered a 
judgment pursuant to s26 of the Arbitration Act, 1950.  The US District 
Court of the Southern District of New York held that "a Section 304 
proceeding in the Bankruptcy Court would be the preferable forum for this 
case, however it is not the exclusive forum."

   They then proceeded to cite the six criteria laid down statutorily in 
the US Bankruptcy Code for guidance in s 304 cases namely:

   (1) the just treatment of all holders of claims against or interests in 
such estate; (2) protection of claim holders in the United States against 
prejudice and inconvenience in the processing of claims in such foreign 
proceedings;

   (3) prevention of preferential or fraudulent dispositions of property of 
suchestate;

   (4) distribution of proceeds of such estate substantially in accordance 
with the order prescribed by this title;

   (5) comity; and

   (6) if appropriate, the provision of an opportunity for a fresh start 
for the individual that such foreign proceeding concerns.

   The Court held that none of these applied, and, in the case of criterion 
No 2, commented:

   Victrix is not a US creditor but a Panamanian corporation whose sole 
contractwith this county appears to be this law suit.

   As a result the attachment was vacated. Mr Steel relied on this last 
quotation to show that in effect the US Bankruptcy Court discriminates in 
favour of US citizens.  He also cited in support of the same proposition 
another bankruptcy case, Re Toga Manufacturing Ltd, (1983) 28 BR 165, in 
which the US Bankruptcy Court in Chicago considered anapplication by a 
Canadian trustee of a Canadian debtor for an injunction against US 
creditors from commencing or continuing actions against the debtor or its 
assets in the USA.  Having considered the section 304 tests, and taken 
judicial notice of the fact that there would be no inconvenience if the US 
creditors had to litigate in Canada, the Court rejected the application 
mainly on the basis that the relevant creditors had a secured claim in the 
USA which would not be available in Canada, thus invoking criterion No 2.

   In my judgment it is the fact that the debts were secured, rather than 
the fact that the relevant creditors happened to be US companies that was 
the ratio of the Toga case, and I do not think it is justifiable to 
conclude that there isany kind of unfair discrimination on the basis of 
either that or the Victrix case, particularly in the light of the 
unequivocal statements of Judge Buschman to the contrary.  However, I do 
not think these cases show: (i) that a section 304 proceeding (ie an 
ancillary proceeding in the US Courts) is the normal preferred procedure, 
rather than, as in fact happened in the Cunard and Victrix cases, simply 
handing over the whole matter including the assets to the foreign Court 
which is conducting the principal bankruptcy proceedings.  In other words, 
the decision made in the Cunard and Victrix cases, on which Mr Brice places 
such strong reliance, is the exception rather than the rule; and (ii) that 
comity, albeit important, is only one of six important considerations. 

   It follows that, were a precisely reverse situation to the present to 
arise in the USA, I feel some considerable doubt whether the US Courts 
would discard the "preferred solution" under section 304 in favour of the 
solution reached in the Cunard and Victrix cases, since the position would 
be in no way comparable with that arising in those two cases.

   (5) Contempt in the USA.

   On Dec 29, 1986, Judge Buschman gave a judgment, of which I have a 
transcript, in a case brought in connection with the present Chapter 11 
proceedings by USL against GAC Marine Fuels Ltd, an English company.  This 
aroseout of actions in rem brought by GAC, after the Chapter 11 proceedings 
and with knowledge of them, in the Courts of Hong Kong and Singapore 
respectively, to arrest USL vessels and to recover the cost of bunkers 
supplied to such vessels in the ordinary course of business prior to the 
Chapter 11 petition.  This was held to constitute a civil contempt of the 
US Bankruptcy Court, and since GAC have a presence in the USA so that they 
were amenable to the Court's jurisdiction, a fine of US $5,000 was imposed 
for each day during which GAC failed to take the necessary steps to vacate 
the Hong Kong and Singapore proceedings.

   I am informed that this judgment is at present under appeal, but I must 
of course treat it for present purposes as valid.

   This posed no idle threat to FDR and FL.  The GAC case was described in 
the Milbank Tweed memorandum as having a significant impact upon English 
creditors, and placing them in peril of contempt if, having a sufficient 
presence in the USA they sought to enforce their claims agaisnt USL in 
England.  Much more important, on Dec 12 and 18, 1986, respectively, USL's 
English solicitors threatened FDR and FL in the most peremptory terms with 
contempt proceedings in the USA.

   These threats, and their related aspects, were of course in the 
forefront of the original argument of Counsel for FDR and FL.  If they lost 
the Mareva orders, they submitted, there would be no point in continuing 
the English actions, although they had been perfectly properly brought to 
enforce straightforward English claims, and as a result substantial costs 
would be thrown away.  They would then have no alternative but to seek to 
prove their claims in the USA, thus submitting themselves to US 
jurisdiction and exposing themselves to the threatened contempt proceedings 
(at present neither FDR nor FL has any presence in the USA).

   The strength of these arguments was immediately manifest.  As result, 
over the weekend intervening between the first and second days of this 
hearing, USL came up with an offer contained in a letter dated Feb 13, 
1987, from Milbank Tweed not to seek any orders for contempt and to seek 
modification of the restraining order to allow these English actions to 
continue to adjudication, provided the Mareva injunctions are vacated and 
the funds transferred to the USA.

   This was accompanied by a letter from the Counsel to the Creditors' 
Committee, Messrs White & Case, consenting to these terms and conditions.

   This, to say the least of it, was a remarkable volte face.

   Mr Steel and Counsel appearing that day for FL, both of whom only learnt 
of the offer as they entered Court, were naturally concerned as to the 
efficacy of the undertakings, in particular as to whether USL had power of 
their own motion to waive contempt proceedings in a US Court.  As a result, 
as already noted, it was necessary to adjourn the case for these matters to 
be investigated. During the adjournment USL made a further application to 
Judge Buschman for avariation of the restraining order, having, I should 
make it clear, notified Healy and Baillie of an intention so to apply.  As 
a result Judge Buschman made the variation order dated Feb 23, beginning 
with a number of introductory "Findings and Determinations", all but the 
last of which I need not read, since they related mainly to the "new 
entity" point:

   . . . Considerations of fairness to foreign creditors and easing the 
burden to them of having to come before this Court to establish the facts 
upon which the case rests and comity for foreign law require that provision 
be made for theliquidation of claims by foreign creditors of US Lines in 
the courts and tribunals of the country in which such claims arose, 
provided that (i) recognition would be granted to money judgments rendered 
in the foreign country and (ii) creditors are not thereby enabled to obtain 
preferrential recoveries upon their claims by enforcing foreign judgments 
against property of the US Lines bankruptcy estate located outside the 
United States.

   The apparent conflict between the jurisdiction of this Court and the 
English court should be resolved by reciprocal considerations of comity.  
The vesting ofthe property of US Lines in its bankruptcy estate and the 
prohibition on collection efforts to prevent preferential treatment of 
creditors should be recognized by the English court.  In return the burden 
and inconvenience of English creditors to litigate and liquidate their 
claims against US Lines in this Court should be eased by permitting them to 
do so in the English court, the judgments of which should be recognized by 
this Court so that judgments obtained in the English courts will be 
conclusive evidence of the amounts of claims by English creditors for 
purposes of the Chapter 11 case.

   Upon the foregoing findings and determinations and after due 
deliberation, it appearing to this Court that the relief being sought by US 
Lines is in the best interests of the estate of US Lines and its creditors,

   IT IS ORDERED:

   1.  Subject to the conditions set forth in paragraph 2, the automatic 
stay provided by section 362 of the Bankruptcy Code and the Restraining 
Order issued by this Court in the above-captioned Chapter 11 cases dated 
November 24, 1986 are modified for the sole purpose of permitting (but not 
requiring) persons or companies domiciled in England to commence and 
continue lawsuits for damages against US Lines in the courts of England in 
order to fix and liquidate the claims of such persons and companies for 
purposes of allowances in the Chapter 11 case of US Lines.  This 
modification shall be deemed to be effective as from November 24, 1986, so 
that any conduct that would otherwise constitute a violation of the 
automatic stay of the Restraining Order shall not be  grounds for contempt 
sanctions or for claims for damages.

   2.  The relief granted in paragraph 1 is expressly conditioned upon the 
entryof a final order by the courts of England vacating [the FDR and FL 
Mareva injunctions] and upon the transfer by US Lines of the property 
covered by said orders to the United States, subject to the jurisdiction of 
this Court.

   Mr Brice's submission was that this variation totally and conclusively 
eliminated the plaintiffs' objection based on the risk of contempt 
proceedings and the wasted costs.

   So far as the wasted costs are concerned, Mr Steel and Mr Norris of 
course did not demur.  So far as contempt is concerned, they very properly 
conceded that the plaintiffs' fears were substantially allayed, in that 
there was no possibility of any contempt or allied proceedings either at 
the instance of USL or at the instance of the US Bankruptcy Court itself.

   However, they submitted that the risk was not entirely eliminated, 
having regard to the provision in section 362(H) of the US Bankruptcy Code 
which provides as follows in relation to a stay under the Chapter 11 
procedure: An individual injured by any wilful violation of a stay provided 
by this section shall recover actual damages, including costs and 
attorneys' fees, and, in appropriate circumstances, may recover punitive 
damages.

   This, they submitted, might furnish a disgruntled creditor with a claim, 
since it is plain, and established by authority, that this jurisdiction is 
not contingent on a finding of contempt (Budget Services Co v Better Homes 
of Virginia, 804 F 2d 289).

   Mr Brice, in response, relied on par 1 of the concluding section of the 
variation order, and submitted that, since it was backdated to Nov 24, 
1986, there was no possibility of any individual establishing that he had 
been injured by any wilful violation of a stay, since, as a result of the 
backdated variation, none of the plaintiffs' actions in England could 
constitute any such violation.

   In my judgment this argument is unanswerable, and I hold that the risk 
of contempt or allied proceedings has now vanished entirely so far as FDR 
and FL are concerned.

   ECT are of course not specifically covered by the variation order, since 
they are not an English registered company, but Milbank Tweed have given an 
undertaking to apply to the US Bankruptcy Court for an amendment to the 
variation order so that it will cover them also.  I feel confident that 
this will be granted, thus putting them in the same position as the other 
two plaintiffs.

   PREJUDICE AND BALANCE OF CONVENIENCE

   In the firt place, USL contend that, if the Mareva order continues, the 
fair and equal treatment of creditors will be frustrated or impeded since 
either the present two plaintiffs or perhaps one of the other creditors 
would obtain judgment and then follow that up with garnishee proceedings 
against the bank, thus enabling them to obtain priority over the other 
creditors.

   Secondly, release of the Mareva order would result in the monies at 
present frozen here being transferred to the USA and applied equitably for 
the benefit of the creditors as a whole under the Chapter 11 Scheme, always 
subject to the control of the creditors' committee and ultimately of the 
Court.  Under par 1102 of the US Bankruptcy Code 1982 the plaintiffs can 
apply to join the Creditors' Committee, or seek the appointment of a 
Special Committee. 

   Thirdly, and more generally, Mr Brice invited the Court to approach the 
case from the point of view of creditors generally world-wide, rather than 
from the point of view of the plaintiffs, in the best interests of 
international trade.

   I shall deal with the last of these three points at the end of this 
judgment.

   The anxiety underlying the first point is, I am quite satisfied, 
basically unsound.  If the Mareva injunctions continue, the money will stay 
in London in the safe hands of Citibank.  Moreover, it is well established 
that, in the case of an insolvent respondent, the Court will not permit the 
equitable remedy of a garnishee order to be used to enable a judgment 
creditor to gain priority over other creditors (Rainbow v Moorgate 
Properties, [1975] 1 WLR 788, especially perLord Justice Buckley at p 793).

   For good measure, I can, and shall, as a condition of continuing the 
Mareva orders, require notice of the Chapter 11 proceedings and their 
consequences to be given to the bank (though they probably know all about 
this already); and I can and shall also require an undertaking from the 
plaintiffs not to take any steps to release the frozen funds until after 
the expiry of a reasonable period of notice to USL, during which USL would, 
as Mr Brice accepts, be free to apply to the English Court for a winding-up 
order; technically this would require the consent of the US Bankruptcy 
Court, but in such circumstances that is extremely unlikely to be withheld. 
As to the second point, I consider that the considerations there advanced,
when properly analysed, tell strongly against USL rather than in their 
favour. If these were ordinary winding-up proceedings under which USL's 
assets would be collected together and distributed totally and rateably 
amongst all its creditors, USL's argument under this head would have 
substantial force.  But it is nothing of the kind.  This is a scheme to 
reorganize the company as a going concern, but on a much narrower 
commercial base limited to North America.  No doubt this will be of great 
benefit both to USl itself, and also to its North American creditors, who 
may well both be able to recover their debts or at least a substantial 
dividend thereon, and also, if the scheme succeeds, continue  their 
commercial relationship with USL as hitherto.

   Meanwhile, it seems to me commercially inevitable that some of the US 
creditors will be paid off at least in part in order to induce them to 
carry on doing business with USL during the reconstruction period; this is 
not contested by Mr Brice.

   But the position of the plaintiffs is entirely different.  They are 
English creditors whose business is based here and does not extend at all 
to North America; it follows that, in view of the intended withdrawl of USL 
from Europe, there could be no possible benefit to them in seeing the 
Mareva funds repatriated to the USA, and ploughed into USL's general funds 
being used in the above manner in the effort to keep USL afloat as a going 
concern.

   They could of course apply to join the Creditors' Committee, and a 
letter from the US Trustee of the Southern District of New York dated Feb 
19, 1987, states that if they made such a request, and showed sufficient 
interest and willingness to participate in the Committee's activities and 
deliberations, either personally or through local representatives or 
Counsel, the request would be considered favourably.  However it seems 
extremely doubtful whether such effort or expense would really be 
worthwhile in proportion to the very small influence European creditors 
would be likely to be able to bring in the circumstances; naturally, and 
understandably, the Creditors' Committee will be concentrating on North 
American business.

   In The Pacific Bear case in Hong Kong, Mr Justice Cons described the 
Chapter 11 process as --

   . . . not a process of universal distribution but a process of 
deliberately preferential distribution . . .

   and this description was strongly relied upon by Counsel for all the 
plaintiffs. In my judgment this somewhat pungent comment has more than a 
grain of truth in it, provided it is not interpreted as connoting any 
criticism of the Chapter 11 system, or any suggestion of unfair 
discrimination.  Indeed, I would stress that it is difficult to see how 
either a Chapter 11 scheme or its English counterpart can operate 
successfully on any other footing during the convalescence of the company; 
but where, as here, the plaintiffs will, for perfectly sound commercial 
reasons from USL's point of view, be entirely outside the scope of the 
reconstruction, they can have nothing to gain and much to lose from the 
transfer of their Mareva funds to the USA; it follows that such transfer 
must, in my judgment, redound substantially to their prejudice.

   Moreover, whereas the retention of the Mareva funds here will give the 
plaintiffs and their fellow European creditors security for a worthwhile
percentage of their debts, this same fund, if transferred to the USA, will 
be a mere drop in the ocean of the total assets, and therefore no more than 
the slimmest marginal benefit to USL and the US creditors.

   Furthermore, even assuming the worst case from USL's point of view, 
namely an English winding-up and distribution of the English assets 
exclusively to the European creditors, there will be no significant 
prejudice to the US creditors having regard to the great disparity between 
the asset-to-liability ratio here and the same ratio overall. It is of 
course central to USL's case that, in principle, there should be one single 
insolvency proceeding only.  This is perhaps most clearly epitomized in 
aparagraph of the "Findings and Determinations" preceding the variation 
order:

   The interests of efficiency, minimising costs of administration and 
fairness to all creditors of US Lines, wherever located, required that all 
property of the US Lines' bankruptcy estate be administered subject to the 
jurisdiction of this Court in a single judicial proceeding.

   However, evidence recently uncovered by FDR, and, rather surprisingly, 
not disclosed by USL until prompted, shows that there are already separate 
insolvency proceedings either under way or pending in France, The  
Netherlands, Belgium, and perhaps West Germany.

   The French proceedings are particularly striking.  On Dec 5, 1986, two 
USL vessels then situated at a shipyard at St Nazaire were placed under 
provisional arrest by the French Courts on the petition of two French 
creditors of USL. Since then detailed negotiations have taken place between 
USL and representatives of the general body of French creditors.  As a 
result, on Feb 11, 1987, USL petitioned the US Bankruptcy Court for leave 
to sell the two vessels, and to pay off the French creditors, both secured 
and unsecured out of the proceeds.  The petition is supported by an 
affidavit sworn on Feb 11, 1987, by Mr Greggory B Mendenhall, a Vice-
President of USL. 

   Mr Mendenhall testifies that the cost of placing the vessels in a 
condition in which they could be returned to an operating function is 
considerably in excess of their value, and that substantial charges are 
accruing for laying them up in France.  The total sale price is 
approximately US $3.2 million, of which about US $1.8 million will be 
repartriated to the USA after payment of all French creditors, secured and 
unsecured together with all expenses, if leave is granted.

   USL's evidential position on this aspect of the case is far from 
satisfactory.  Mr Mendenhall's affidavit was obtained by FDR from their 
French correspondents, and produced in evidence here by FDR's solicitors.  
When asked specifically by FDR's solicitors to explain this aspect of the 
case, Messrs Milbank Tweed replied somewhat blandly that --

   . . . US Lines is negotiating with counsel for French creditors for the 
sale of two vessels . . . to satisfy the claims of priority creditors ( -- 
Feb 25 and-- ) the sale of property of US Lines in France . . . has not 
been consummated .. . (Feb 26). Mr Brice submits that this in no way 
constitutes a departure from USL's general position, but is the only way 
they can sell valuable ships, which the French authorities will not release 
on any other terms.

   Even if I assume that this explanation is correct (and it could and 
should have been given in evidence rather than forensically), it seems to 
me that Mr Steel is fully justified in pointing out that this settlement in 
France, if approved, involves not only a serious breach of the "single 
proceedings" theory, but also a preference (in the interests no doubt of 
expediency) of one particular group of creditors.  Thus one central plank 
of USL's case is significantly weakened.

   A further difficulty seems to me to be posed by the combination under 
the variation order of a recognition that England is the forum conveniens 
for the determination of the plaintiffs' claims with the insistence that it 
is improper for this Court to exercise its power to grant conventional 
ancillary relief by way of Mareva injunction.  This attitude is graphically 
and perhaps not entirely unfairly categorized by Mr Steel as "tit-for-tat".  
I find it difficult to see why it is right for the claims themselves to 
continue in England, but wrong for the English Courts to exercise their 
normal powers to grant ancillary relief, particularly since it is common 
ground that the Mareva injunction gives the plaintiff no proprietary 
interest or secured status. I should refer briefly to one final point 
affecting FDR only.  Under various statutory provisions, which I need not 
recite, and which are agreed, they have preferential status to arrest 
vessels to enforce stevedore charges and dock dues.  The evidence shows 
that they had the opportunity to arrest a USL vessel in Felixstowe, and did 
not do so; looking at the evidence, however, it seems to me that their 
prime motive in not so doing was to avoid rocking the boat, rather than 
because they relied on the protection of the Mareva.  Mr Steel also 
submitsthat, since it is open to FDR to take in rem proceedings against 
vessels alreadydetained in foreign ports, the discharge of the mareva here 
would be a pointless exercise; however I accept Mr Brice's argument that, 
since the Mareva provides no security, this is not a material 
consideration; it follows that I place no weight on FDR's special 
preferential position in this respect.

   CONCLUSIONS

   As already noted, Mr Brice invited me to view this case from the point 
of view of the whole body of creditors rather than from that of the 
plaintiffs, and to consider the interests of international trade.

   In my judgment my task is not to view the matter (to use Mr Brice's 
metaphor) from either one end of the telescope or the other, but to 
endeavour, as I have done, to balance in the equation all relevant factors 
of which the Chapter 11 proceedings and international trade are but two, 
albeit very important ones, giving every one due weight.

   I have already concluded that the Travers v Holley doctrine is not 
applicable.  Moreover, the normal English procedure in the present 
circumstances is, I find, for any winding-up proceedings to be conducted 
here, ancillary to the principal US proceedings, and under our own rules, 
in which respects we seem to be in line with the US view on section 304 as 
expressed in the Cunard and Victrix cases.  Having regard to those cases I 
am by no means convinced by Mr Brice's concluding submission that, if the 
boot were on the other leg, the US Court would inevitably release the 
assets to allow repatriation here.

   So far as prejudice is concerned, I am satisfied that USL will suffer no 
material prejudice if the Mareva injunctions continue, since the assets 
will remain safely here, and there is no prospect of their being 
distributed without the intervention of ancillary winding-up proceedings.  
Moreover, while a desire to concentrate proceedings in the USA is fuly 
understandable, the experience in France and elsewhere in Europe shows that 
this aspiration must and does yield tothe exigencies of the local 
situation.

   Once it is conceded, as it has been, albeit conditionally, that England 
is the appropriate forum for the resolution of the claims themselves, any     
objection in principle to the acknowledged forum conveniens continuing a 
conventional ancillary order seems to me extremely weak.

   On the other hand, if the Marevas are discharged, I consider that the 
presentplaintiffs will suffer very substantial prejudice, seeing that the 
funds will beused to keep USL alive as a going concern in a manner from 
which the plaintiffs cannot possibly derive any benefit, because of USL's 
withdrawal from Europe.

   Taking all these aspects into account, bearing in mind the American 
Cyanamid test, I have concluded that USL will suffer no prejudice if the 
Mareva injunctions are continued, whereas the plaintiffs will suffer 
irreparable prejudice if they are not, and that the overall balance of 
convenience strongly favours their continuance.  It follows that, in the 
exercise of my discretion, Ishall continue the Mareva injunctions in all 
three cases.

 DISPOSITION:
   Judgment for the plaintiffs and Mareva injunctions to continue.

SOLICITORS:
   Westhorp Ward & Catchpole; Simon Osborne, Solicitor to British Railway 
Board, Norton Rose Botterell & Roche, Hill Dickinson & Co.