UK is clamping down on Irish 'bankruptcy tourism'

UK courts are clamping down on Irish businesspeople attempting to avail of that jurisdiction’s easier bankruptcy laws, according to insolvency specialists.

Since the property bubble burst in 2008, several high-profile developers have successfully sought bankruptcy in the UK, where they can be discharged with a clean sheet after just one year, compared to 12 years in the Republic.

To avail of the UK’s bankruptcy regime, they had to show they had been resident there for at least six months or that their main centre of operations was there.

A number of insolvency practitioners said it is becoming increasingly difficult for Irish people with substantial interests in the Republic to satisfy UK judges that they fulfil the criteria needed to be declared bankrupt in Britain or Northern Ireland.

Paul McCann, head of insolvency at Grant Thornton, said the firm had been aware of this trend for some time. “Our colleagues in Grant Thornton UK are advising us that their courts are clamping down on bankruptcy tourism,” he said.

Mr McCann warned that Irish people attempting to seek bankruptcy in the UK courts would need substantial evidence to support claims that their main centre of operations is based there.

David Hughes, the head of Ernst Young’s insolvency and corporate restructuring practice, said it was clear the test was becoming harder to satisfy. “The UK courts are tightening up on what they call forum shopping,” he said. “They are becoming much more rigorous and it will become much more difficult for Irish people to satisfy them that their main centre of operations is in the UK.”

Former developer John Fleming, whose Tivway construction and property business collapsed in early 2010 with debts of €1 billion, was declared bankrupt later that year in a British court. His Irish creditors supported the move. He was discharged from bankruptcy a year later.

Earlier this year, the High Court in London overturned a bankruptcy declaration against Irish developer Thomas McFeely, the former IRA hunger striker, involved in the construction of the Priory Hall complex in Dublin, whose residents had to vacate it after it was found to be a fire hazard.