‘Establishment’ within the meaning of the Insolvency Regulation: the Court of Appeal in Olympic Airlines

[Update 5 May 2015: the Supreme Court confirmed the Court of Appeal’s findings on 29 April 2015 and declined to refer to the ECJ, (justifiably in my view) citing acte clair].

Under the EU’s Insolvency Regulation, core of the procedure takes place in the Member State with ‘COMI’: the centre of main interests of the company concerned.

‘Secondary’ and ‘territorial’ proceedings may only be opened if the debtor possesses an establishment within the territory of that other Member State, and only vis-a-vis the debtor’s assets in that State. Article 2(h) of the Regulation defines ‘establishment’ as ‘any place of operations where the debtor carries out a non-transitory economic activity with human means and goods’,  which the Court of Justice in Interedil has specified in less philosophical terms as  ‘a structure with a minimum level of organisation and a degree of stability for the purpose of pursuing an economic activity‘, basically a combination of pursuit of an economic activity and the presence of human resources. Per Interedil, this has to be determined in the same way as the location of the centre of main interests, namely on the basis of objective factors which are ascertainable by third parties.

In Olympic Airways, the Court of Appeal combined Interedil and ECJ guidance with respect to COMI, as well as extensive reference to the Virgos Schmit Report, to hold that the Regulation’s definition of “establishment” a meaning which requires more to its “economic activity” than the mere process of winding-up. In the words of Sir Bernard Rix (at 33) ‘The definition is clearly intended to lay down a rule that the mere presence of an office or branch, a “place” at which the debtor is located, is not sufficient. It has to be a place “of operations”: human and physical resources have to be involved in those operations; and there has to be “economic activity” involving those resources. ‘ He later emphasises that this economic activity needs to be ‘external’, ie market oriented.

Of note is also the temporal element: per Office Metro, the possibility to open up secondary proceedings requires there to be such establishment at the time of the request for opening of such proceeding.


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