A bit of a late follow-up to a 1 November Tweet but hey ho, I have been a tad busy and it is nevertheless good to still have the post up.
East-West Logistics Llp v Melars Group Ltd [2022] EWCA Civ 1419 is a good reminder of the importance of ascertainability by third parties for determination of a corporation’s Centre of Main Interests – COMI. The appeal against Miles J’s finding in [2021] EWHC 1523 (Ch) was rejected and Malta as place of COMI confirmed.
The Company was incorporated in the British Virgin Islands -BVI and entered into a charterparty with the Petitioner in December 2011 for a shipment to Turkmenistan. The address of the Company in the charterparty was stated to be in the BVI. The charterparty contained a clause providing for disputes to be resolved by arbitration in London under English law. Following a disputed shipment, the Petitioner tried to but failed to launch LCIA arbitration (the tribunal holding it did not have jurisdiction), followed by successful proceedings in BVI resulting in a judgment in default against the company, which the latter later managed to have set aside. Without notifying the Petitioner, the Company had in the meantime moved its place of incorporation, and hence its registered office, to Malta.
On 19 July 2016 the Petitioner then presented a winding up petition in London based upon its BVI judgment debt. The Petition alleged that COMI of the Company was in the UK, citing pro UK as COMI [11] (prima facie rather flimsily) that i) the six commercial contracts concluded by the Company of which the Petitioner was aware (including its own charterparty) were in the English language, were governed by English law and had arbitration clauses providing for arbitration in London; and ii) the Company participated in the LCIA arbitration in London and was represented by a London firm (or firms) of solicitors. Against Malta as COMI, it suggested i) the Company did not actually have an office there, its registered office address being that of a Cypriot law firm providing company administration services; ii) the Company did not have any employees or conduct any business in Malta; iii) the Company’s sole director was a nominee who was a Swiss national, resident in South Africa; and iv) the Company’s sole shareholder and principals were Russian.
Baister J made a winding-up order, citing [20] the forum shopping background and the corporation not much being involved in physical, rather virtual trade, deciding ‘ by a narrow margin and with misgivings, that on balance the greater use of English law for contracts, the greater use of London as a seat of arbitration, the actual recourse to or forced involvement in legal proceedings here and the consequential use of English lawyers makes the UK, on the balance of probabilities, the main centre of those interests. The company’s affairs seem to have been conducted in this country more than in Switzerland [SW plays a role because of a Swiss national, GAVC], certainly as far as contractual and litigation interests were concerned, although it is, I accept, hard to be precise.”
That judgment was overruled on appeal, with Miles J concluding ‘that Judge Baister had erred in principle in three ways in his approach to the determination of the Company’s COMI. The first was in relation to the importance of the presumption in Article 3(1), the second was in relation to the concept of ascertainability, and the third was in failing to distinguish between matters of administration of the company’s interests and matters going to the operation of its business.’
Upon further appeal, Lewison LJ agreed with Miles J. [46] ‘lack of evidence that the debtor actually carries out any activities at the place of its registered office does not allow the court to ignore or disregard the legal presumption under Article 3(1).’
He is right! [47] ‘The court must be alert to detect fraudulent or abusive forum shopping by purported changes of COMI by a debtor’ however ‘the question in such cases is whether the move of COMI is real or illusory. It is not whether the move of the debtor’s registered office is real or illusory.’
[63] “the court should not invent a hypothetical “typical” third party creditor with “average” or “normal” characteristics, and form a view on what might (or might not) have been apparent to that creditor in the course of a notional dealing by him with the company. Neither the EU Regulation nor the jurisprudence of the CJEU refer to the concept of a “typical” creditor, but refer instead, and more generically, to “creditors” or “third parties”.”
[80] “none of the factors relied upon by the Petitioner were, individually or collectively, sufficient to establish that the Company actually conducted the administration of its interests on a regular basis in England (or any other particular location) so as to displace the presumption in favour of Malta under Article 3(1).”
One’s intuition in a case like this may be not to have much sympathy for a corporation engaging in COMI /seat forum shopping. However that intuition is not reflected in the Regulation’s presumptive treatment of incorporation as COMI.
Geert.
EU Private International Law, 3rd ed. 2021, Heading 5.6.1.
gavc law - geert van calster 