I discuss the background to Barings (UK) Ltd & Ors v Galapagos SA [2022] EWHC 1633 (Ch) here. At the end of August 2019 an opening of insolvency proceedings was requested by various Barings companies and Goldman Sachs, in respect of the Respondent, Galapagos S.A. – GSA.
While this request was pending before the English courts, a group of high yield noteholders (including Signal, the main opponent in the English proceedings) procured the replacement of GSA’s English directors with a German director, and the new German director and two creditors brought separate ex parte applications before the Düsseldorf Amtsgericht (District Court) for the opening of insolvency proceedings there. Following the opening of insolvency proceedings by the Düsseldorf court, the English proceedings were stayed. The German proceedings then led to a preliminary reference to the CJEU which resulted in a judgment on 24 March 2022, the judgment I discuss in my previous post.
[12] ff Bacon J summarises the procedural tussle (including the, I believe unreported August 2019 Norris J stay: [2019] EWHC 2355 (Ch)). Justice Norris had stayed the English proceedings believing inter alia that the German courts might dismiss the German proceedings once they had been properly told of the English action.
The dictum in C-723/20 was
Article 3(1) of Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings must be interpreted as meaning that the court of a Member State with which a request to open main insolvency proceedings has been lodged retains exclusive jurisdiction to open such proceedings where the centre of the debtor’s main interests is moved to another Member State after that request has been lodged, but before that court has delivered a decision on it. Consequently, in so far as that regulation is still applicable to that request, the court of another Member State with which another request is lodged subsequently for the same purpose cannot, in principle, declare that it has jurisdiction to open main insolvency proceedings until the first court has delivered its decision and declined jurisdiction.
The reference to ‘in so far as that regulation is still applicable’ refers to the Brexit element to the case which surprisingly perhaps was not included in the dictum: COMI presumptions ordinarily serve to protect the first court seized’ privilege to find, or reject, COMI in its jurisdiction however that privilege no longer applies vis-a-vis UK courts post Brexit.
As I note in my earlier review, the CJEU wrongly decided not to answer the German court’s question
Is Article 3(1) of [Regulation 2015/848] to be interpreted as meaning that:
(a) the courts of the Member State within the territory of which the centre of the debtor’s main interests is situated at the time when the debtor lodges the request to have insolvency proceedings opened retain international jurisdiction to open those proceedings if the debtor moves the centre of its main interests to the territory of another Member State after lodging the request but before the decision opening insolvency proceedings is delivered, and
(b) such continuing international jurisdiction of the courts of one Member State excludes the jurisdiction of the courts of another Member State in respect of further requests to have the main insolvency proceedings opened received by a court of that other Member State after the debtor has moved its centre of main interests to that other Member State?’
Neither, possibly because the question was not so asked by the referring court, does it entertain the issue of ‘permanency’ required to move COMI to another state (see my previous post for detail).
Applicants in the current case and Bidco say that the effect of the GalapagosCJEU judgment is that GSA’s winding up can and should now proceed in E&W. Signal, however, contends that the English insolvency proceedings should remain stayed or should be dismissed.
Of relevance in that assessment is Article 67(3) (c) withdrawal agreement, which reads
In the United Kingdom, as well as in the Member States in situations involving the United Kingdom, the following provisions shall apply as follows:…
Regulation (EU) 2015/848 of the European Parliament and of the Council shall apply to insolvency proceedings, and actions referred to in Article 6(1) of that Regulation, provided that the main proceedings were opened before the end of the transition period;
The question in my view is not ‘are the German insolvency proceedings to be regarded as the “main proceedings” within the meaning of Article 3 of the Recast EIR?’ which is the course which the judge seems to follow. Rather, whether either the German or the English insolvency proceedings were to be regarded as main proceedings.
In either case, in my view, main proceedings have been opened and the EU EIR continues to apply as acquired EU law.
[21] Signal’s position is that unless and until the German courts have given effect to CJEU Galapagos by setting aside or otherwise the Düsseldorf insolvency proceedings, the German insolvency proceedings remain the “main proceedings” for the purposes of the Recast EIR. Accordingly, under A67(3) WA the Recast EIR remains applicable and the German proceedings have to be recognised by the English court, precluding the making of a winding up order. If that is wrong, and the Recast EIR does not apply, Signal argue that GSA’s COMI is not in England, such that the UK IR (the retained Insolvency Regulation) does not apply, leaving s. 221 of the relevant UK law as the only jurisdictional basis for a winding up order. In addition, whether under the UK IR or s. 221, Signal contends that the circumstances are such that the court should not exercise its discretion to make the order.
The rather important questions are therefore summarised by Bacon J [23] as
i) The first issue is whether the Recast EIR remains applicable to these proceedings, as Signal contends. That in turn depends on whether the German proceedings are to be characterised as “main proceedings” for the purposes of Article 67(3)(c) of the Withdrawal Agreement. – as I note above, that issue is wrongly formulated.
ii) If the German proceedings are not “main proceedings”, such that the Recast EIR no longer governs the question of jurisdiction of the UK courts in the present case, the next question is whether there is jurisdiction to make a winding up order under the UK IR on the basis that GSA’s COMI is in England. – again see my own caveat above.
iii) The final issue is whether the court should exercise its discretion to make a winding up order under either the UK IR if that is applicable, or alternatively under s. 221 of the Insolvency Act 1986.
[48] the judge has the interim conclusion that up to and until 31 December 2020, the combined effect of the pending application before the High Court and the Recast EIR was to prohibit the German courts from declaring jurisdiction to open main insolvency proceedings. After that date, however, they could quite validly do so, if GSA’s COMI was by then situated in German territory.
I am not convinced that a mere request for opening of proceedings equates opening of these proceedings, and I am not convinced that the fall-back finding of COMI in England [83] ff, applying the Swissport ([2020] EWHC 3556 (Ch), unreported) summary of criteria, is solid: it is exactly on this point that the CJEU’s silence on the issue of ‘permanency’ is frustrating.
The judge concludes that a winding up order in respect of GSA be made however I think her analysis is incorrect and I assume permission to appeal must have been sought.
Geert.
gavc law - geert van calster 
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