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2018-01-doc10 The rule in Gibbs


The ‘rule in Gibbs’ is not well known on the European continent. In the English insolvency world, however, it’s a rule that can not be overlooked, and receives severe criticism. It goes back to over a century, but recently has kept laywyers in several parts of the world busy.

The rule of Gibbs refers to the case of Gibbs & Sons v La Société Industrielle et Commercial des Métuax ((1890) 25 QBD 399). In this case the defendant, a French company, had agreed to buy copper to be delivered in England by the plaintiff. The defendant refused to accept the copper and so was liable in damages to the plaintiff. The defendant was placed in judicial liquidation in France and it was assumed that as a matter of French law, the defendant was discharged from its liability in damages. However, the English court held that French law was irrelevant because it was ‘… not a law of the country to which the contract belongs, or one by which the contracting parties can be taken to have agreed to be bound; it is the law of another country by which they have not agreed to be bound.’

Fletcher (I reviewed the latest edition of his book at blog/2017-06-doc3-fifth-edition-fletcher-the-law-of-insolvency) is extremely offended as English private international law in this respect ‘… is insular and xenophobic in the extreme, and plainly guilty of maintaining dual standards with regard to the principle of universality of bankruptcy’.

Other parts of Fletcher’s opinions are cited, last week, by Hildyard J in Bakhshiyeva v Sberbank of Russia & Ors [2018] EWHC 59 (Ch). The High Court maintains to apply the Gibbs rule, however the judgment is an interesting read for its fundamental discussion, with references to quite some other cases and sources, ending with the conclusion that the introduction of a ‘new Model Law’ concerning the recognition and enforcement of insolvency related judgement may solve the problem.

I would add, indeed, as the European Insolvency Regulation (Recast) applies to foreign discharges presented as separate judgments and to discharge judgments closely related to insolvency proceedings, see Article 1(1) and 32(1) EIR 2015 respectively.