London 9th June 2008: The Department for Business Efficiency & Regulatory Reform, the UK regulator which petitioned for the winding up of Amway UK Limited, has been granted leave to appeal against the Court decision to dismiss the petition.

In the UK a Court judgment can be appealed on the basis that the Judge made an error and if that error was corrected the appeal would have a real prospect of success. As the original judgment was largely fact-based, albeit with the exercise of some judicial discretion, a successful appeal seemed unlikely.

However, Amway offered certain undertakings with regard to the future conduct of its business which were accepted by the Court even though the regulator was sceptical as to their value.  A previous Court case set out the grounds upon which a Court should decide whether it is just and equitable for a company to be wound up and the UK regulator successfully argued that the Judge in the Amway case did not properly apply that legal authority when accepting the undertakings, and so was incorrect as to a matter of law. The Judge also accepted that this error met the "threshold" test, in other words if that error was corrected the appeal would have a real prospect of success, and so the regulator has successfully established grounds for an appeal.

DBERR has 21 days to formalise its notice of appeal. DBERR also asked the Judge to impose a moratorium on the registration of new distributors but this was refused. In response to Amway's request, the Judge also said that he was not able to expedite the appeal process although he did believe that it was desirable for the appeal to be heard as soon as possible.

At this stage we cannot anticipate the determination of the Appeal Court and so we cannot analyse the legal implications of the grant of leave to appeal. The fact that the Judge accepted that the appeal has "a real prospect of success" should be seen simply in the context of meeting the "threshold" test for an appeal and does not mean that the Judge was saying that he believes that the Appeal Court will necessarily come to a different conclusion.

We will continue to monitor and report on developments in this case.