British Eagle International Airlines Ltd v Compagnie Nationale Air France
[1975] 1 WLR 758
Independent editorial summary — not the official judgment. Read the full judgment via the source link.
Ratio Decidendi
Contractual arrangements that have the effect of contracting out of the statutory scheme for pari passu distribution in insolvency are contrary to public policy and void.
Facts
IATA operated a clearing house system for inter-airline debts. When British Eagle went into liquidation, Air France argued the clearing house netting arrangement meant it did not owe anything to British Eagle directly.
Judgment Summary
The House of Lords held the clearing house arrangement could not override the statutory insolvency scheme. The pari passu principle could not be contracted out of, and the net balance between the two airlines was an asset available to British Eagle's creditors.
Key Quotes
"What the respondents are saying is that the clearing house arrangements constitute a mini-insolvency proceeding among the airlines. That cannot be the law."
— Lord Cross
Subsequent Treatment
Key authority on the anti-deprivation principle and pari passu distribution in insolvency.
What To Do Next
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