Tag: COMI

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East-West Logistics v Melars. A good reminder of the strength of a company’s place of incorporation as a presumption of Centre of Main Interests (insolvency).

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.

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Barings et al succeed in first instance winding up order against Galapagos on shaky COMI and Withdrawal Agreement grounds.

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.

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Galapagos Bidco v DE. The CJEU fails to clarify whether move of COMI by mere market notice, may be effective.

Krzysztof Pacula reported end of March on CJEU C-723/20 Galapagos Bidco v DE and justifiably highlighted the Brexit issue. The case concerns a move of COMI – centre of main interest within the context of the Insolvency Regulation 2015/848 and it is on the element of impromptu move that my post will focus.

Galapagos SA is a Luxembourg holding company whose centre of administration (‘effective place of management‘ according to the former directors) was moved in June 2019, at least so contend previous directors, to England. At the end of August 2019, they apply to the High Court in England and Wales to have insolvency proceedings opened.

Echos of the tussle are here and of course also in Galapagos Bidco SARL v Kebekus & ors [2021] EWHC 68 (Ch). The day after the move of centre of administration, the former directors were replaced with one other, who moved centre of administration to Dusseldorf and issued relevant market regulation statements to that effect. This move was subsequently recognised  by the Courts at Dusseldorf as having established COMI there. The High Court action in London was never withdrawn and would seem to have been dormant since.

Applicant in the proceedings is Galapagos BIDCO Sarl, a creditor of Galapagos SA. It is I understand (but I am happy to be corrected by those in the know) Luxembourg based. As Krzysztof reports, it contests that the German move has effected move of COMI which it argues lies in England (although I fail to see how its reasoning should not also apply to the earlier instant move from presumably Luxembourg to England).

The question that arises is whether, in the determination of the centre of a debtor company’s main interests, specific requirements must be imposed to prevent abusive conduct. Specifically, in the light of the Regulation’s stated aim of preventing forum shopping, whether ‘on a regular basis’ in the second sentence of the first subparagraph of Article 3(1) Insolvency Regulation 2015, presupposes an adequate degree of permanence and is not present if the establishment of a centre of administration is pursued at the same time as a request to have insolvency proceedings opened. Respondents in the appeal, which include the insolvency administrator (trustee) contend that the requirement of administration ‘on a regular basis’ is fulfilled if the administration is permanent.

The CJEU unfortunately fails to answer that question, choosing to reply instead with a hierarchical answer which encourages race to court: [36]

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 is lodged, but before that court has delivered a decision on that request, and that, consequently, where a request is lodged subsequently for the same purpose before a court of another Member State, that court cannot, in principle, declare that it has jurisdiction to open such proceedings until the first court has delivered its decision and declined jurisdiction.

However in the case at issue, the Withdrawal Agreement has the effect that if the High Court has not, as it would seem, taken its decision on the opening of proceedings prior to the end of Brexit Implementation Day 1 January 2021 (CET), the German courts need no longer apply that consequence of mutual trust and are at liberty to determine the existence of COMI.

The CJEU ends by suggesting Q1 no longer needs answering. Yet I think it does. Perhaps not so much for the case at issue (which explains why the judicially economical CJEU does not offer a reply). The German courts, as Zacaroli J notes in his decision [14], held in October 2019 that COMI for GAS has successfully moved to Germany as from 25 August 2019, the day the capital market and bondholders were informed that the centre of administration had been moved to Düsseldorf. Yet the file does not suggest that COMI prior to the attempted move, existed in either the UK or Germany: it was allegedly established in Germany following the new director’s decision, which reversed an earlier impromptu decision by the former directors to ostensibly at least move COMI to the UK. In accordance with the Regulation’s presumptions, COMI would have previously existed in Luxembourg. The element of ‘on a regular basis’ therefore still matters. Is the CJEU suggesting that a mere information of the capital markets suffices to move COMI?

Geert.

EU Private International Law, 3rd ed. 2021, Heading 5.6.1.

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COMI for natural persons and the EIR. The High Court unconvincingly in Lin v Gudmondsson.

Lin v Gudmundsson & Ors [2021 EWHC 820 (Ch) is an application to annul the bankruptcy of Mr Gudmundsson by his ex-wife. She argues inter alia that the bankruptcy order should not have been made because England was not Mr Gudmundsson’s COMI.

At 54, Briggs J (presumably so led by counsel) oddly holds that the EU Insolvency Regulation (‘EIR’) 2015/848 only defines COMI in its recital 13. Odd, for that was the case under the previous Regulation, 1346/2000, not the current one which does define COMI in the text of the Regulation proper (Article 3(1) – see Heading 4 of my overview here). However that issue is of minor importance for the real hesitation I have with the judgment is

that the judge despite the EIR’s specific instruction that COMI needs to be determined proprio motu, retreats to the default adversarial nature of common law proceedings and defers to the claimant’s concession ‘that even if the court were to find that Mr Gudmundsson did not have his COMI in England and Wales it should not exercise its discretion to annul the bankruptcy order’ [57]; and

that the judge resorts to section 265(2) of the Insolvency Act 1986’s jurisdictional anchor (“in the period of three years ending with the day on which the petition is presented …a place of residence in England and Wales”) instead of the autonomous concept of ‘habitual residence’ in the Regulation. The meaning of that concept was recently discussed by the CJEU in C-253/19 Novo Banco.

Geert.

EU Private International Law, 3rd ed 2021, Chapter 5, para 5.95.

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East-West logistics: debatable COMI determination in the case of an insolvent virtual trading company, and proprio motu obligations of the judge.

In  East-West Logistics LLP v Melars Group Ltd [2020] EWHC 2090 (Ch), at issue was COMI – Centre of Main Interests determination under Regulation 2015/848 of a  trading company incorporated in BVI, until 10 December 2015. It then moved its registered office to Malta, two months after service of the claim form in BVI proceedings and a month after acknowledging service, with regard to a charterparty gone wrong.

CJEU Interedil including its insistence on third-party observability, is the main authority called upon by parties. Baister DJ adds Northsea Base Investment in particular and notes at 22

Because this company traded virtually rather than physically, much of the case law is of little assistance: it deals largely with companies of substance that have a headquarters, offices, a tangible physical presence or assets or staff who are located and work somewhere or other.

He also notes, at 23 and I agree, that the forum shopping which the company had clearly engaged in, is not of itself of material relevance (despite nota bene the Regulation’s recitals betraying a contempt for forum shopping): ‘a debtor is entitled to move his centre of main interests and to do so for self-serving reasons. The question is whether the move is real or illusory.’ Baister DJ refers to Shierson v Vlieland-Boddy [2005] EWCA Civ 974 which albeit held early in the life of the (previous) EU Insolvency Regulation continues to have relevance.

The judge comments at 22 that ‘there appears to have been no attempt to notify any third party of the move: no evidence is given of the company’s having done so; on the contrary,…, the company continued to use a BVI address after the move’ – which could make one think that in fact BVI should emerge as a strong contender for COMI – even if seemingly neither party suggested it was.

The judge at 27 emphasises the proprio motu instruction of the EIR, i.a. in Article 4: a judge cannot ‘avoid the obligation imposed on it by the Regulation to “examine of its own motion whether the centre of the debtor’s main interests…is actually located within its jurisdiction,..”: the place of registered office is not a fallback in case parties do not provide proper evidence: the judge must examine COMI on the facts himself.

Then follows an admirably serious engagement with the few elements present in the case, leading to Baster J opting for England as COMI: at 54:

I conclude on the basis of the documentary material, the location of the company’s banking facilities from time to time, the location of its legal advisers, the location of at least one judgment creditor to which a debt was to be paid and the place where the company was involved in litigation that at the relevant time the company was administering its interests in both the UK and Switzerland so that both were centres of the company’s interests. I conclude, 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, certainly as far as contractual and litigation interests were concerned, although it is, I accept, hard to be precise.

I tend to disagree and I believe it is at 35 that the mistake is being made:

Locating the company’s centre of main interests in Malta rests on its registered office being there and no more than that. There is unchallenged evidence from the petitioner that there is no operational office and no one conducting the business of the company there. The registered office is a “letter box” and no more. It follows that if the company “conducts the administration of its interests on a regular basis elsewhere” such that that “is ascertainable by third parties,” that “elsewhere” can only be either the UK or Switzerland.

The Registered office presumption despite its rebuttability, remains a presumption. If on the facts, ‘the place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties’ (definition of COMI in A3(1) EIR) does not clearly point to another place than the registered office, the presumption must remain in place. In the case at issue, the starting point seems rather to have been to establish either the UK or Switserland as COMI. In doing so the judge I feel did not give enough weight to the COMI presumption. Even with the proprio motu instruction, the judge must not scavenge for alternative COMI; there must be convincing evidence of the alternative, which I do not think from the judge’s description, is available here.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.6.1.2.Heading 5.6.1.2.4.

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CJEU in Novo Banco: confirms mere presence of a natural person’s core immovable asset (the ‘family home’) does not in itself determine COMI (in insolvency).

When I reviewed Szpunar AG’s opinion, I pointed out that the crux of this case is the determination of ‘centre of main interests’ in the context of natural persons not exercising an independent business or professional activity, who benefit from free movement. The CJEU has now held.

With respect to natural persons outside of a profession, the Insolvency Regulation 2015/848 (‘EIR 2015’) determines ‘(i)n the case of any other individual, the centre of main interests shall be presumed to be the place of the individual’s habitual residence in the absence of proof to the contrary. This presumption shall only apply if the habitual residence has not been moved to another Member State within the 6-month period prior to the request for the opening of insolvency proceedings.’

‘Habitual residence’ is not defined by the EIR 2015. The CJEU runs along the usual themes: need for predictability and autonomous interpretation; emphasis on the Regulation generally defining COMI as ‘the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties’ (at 19 and referring to recital 13 of the previous Regulation); among those third parties, the important position of (potential) creditors and whether they may ascertain said centre (at 21); to agree with the AG at 24 that

relevant criteria for determining the centre of the main interests of individuals not exercising an independent business or professional activity are those connected with their financial and economic situation which corresponds to the place where they conduct the administration of their economic interests or the majority of their revenue is earned and spent, or the place where the greater part of their assets is located.

Like the AG, the CJEU holds that the mere presence of a natural person’s one immovable asset (the ‘family home’, GAVC) in another Member State than that of habitual residence, in and of itself does not suffice to rebut COMI (at 28).

At 30, the Court specifically flags that COMI in effect represents the place of the ’cause’ of the insolvency, i.e. the place from where one’s assets are managed in a way which led the insolvent into the financial pickle: 

In that regard, although the cause of the insolvency is not, as such, a relevant factor for determining the centre of the main interests of an individual not exercising an independent business or professional activity, it nevertheless falls to the referring court to take into consideration all objective factors, ascertainable by third parties, which are connected with that person’s financial and economic situation. In a case such as the one in the main proceedings, as was observed in paragraph 24 above, that insolvency situation is located in the place where the applicants in the main proceedings conduct the administration of their economic interests on a regular basis or the majority of their revenue is earned and spent, or the place where the greater part of their assets is located.

As in all other scenarios of rebuttal, the ascertainability in particular by (potential) creditors is key and is a factual consideration which the national courts have to make.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.6.1.

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Akkurate: Whether English discovery may act extraterritorially under the EU Insolvency Regulation, and a clear difference following Brexit.

Graham Woloff eaor Calzaturificio Zengarini eaor re Akkurate Ltd, [2020] EWHC 1433 (Ch) concerns the question whether the court has the power under section 236(3) of the Insolvency Act 1986 to require persons resident in the EU to produce books and papers and an account of their dealings with a company being compulsorily wound up in England and Wales (it is not disputed that Akkurate’s centre of main interests (“COMI”) was in England and Wales under the European Insolvency Regulation EIR).

EIR 2000 applies to this case, because the winding up of Akkurate was before 26 June 2017, however the issue is not materially different in the new Regulation. There are inconsistent first instance decisions which Vos C reviews ia at 27 ff and at 54 after consideration, he considers s236(3) does not have extraterritorial effect on the basis of what he considers to be the binding authority of Re Tucker (a bankrupt) [1990] Ch. 148. however that following the EIR 2000 (unchanged in EIR 2015) the European regime can and does extend the territoriality of purely domestic insolvency provisions. CJEU authority cited is in particular C-339/07 Seagon v Deko Marty Belgium (at 58 ff) – which I find may be a bit optimistic. Vos C also decides that he can and should apply his discretion to grant orders as formulated at 68.

Clearly, post Brexit, the situation will revert to Tucker. Which would make the English courts less attractive than their continental counterparts – although of course one would have to wait for CJEU authority to confirm the issue less equivocally.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5,

 

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Szpunar AG in Novo Banco: COMI (in insolvency) for natural persons, not self-employed, with assets in former Member State of habitual residence.

I sincerely continue to be humbled when cited by Advocates-General at the CJEU. Even more so therefore when it happens twice (see also Movic) in one week. In his Opinion in C-253/19 Szpunar AG refers to the Handbook’s analysis of C-341/04 Eurofood. The reference to that judgment is part of his assessment of ‘centre of main interests’ in the context of natural persons not exercising an independent business or professional activity, who benefit from free movement. The CJEU has not ruled on the issue before.

The AG points out that the European Insolvency Regulation (EIR) 1346/2000 (‘EIR 2000’), unlike its successor, Regulation 2015/848 (‘EIR 2015’), did not have time limitations under which the presumptions of COMI apply (see here for my paper on the main changes introduced by EIR 2015). However the EIR 2000 did have such presumption without the time limits, for companies and legal persons, and it generally, like the current EIR, requires courts to check whether COMI for natural persons or otherwise is located on their territory. This requires the court to check against the criteria for rebuttal of any presumptions of COMI. That test runs along the criteria that have repeatedly featured on the blog (cue search string ‘COMI’): COMI designates the place where the debtor conducts the administration of its interests on a regular basis and is therefore ascertainable by third parties.

‘Habitual residence’ is not defined by the EIR 2015 and I concur with the AG that references to its application in family European PIL are of limited value. At 45: priority should be given not to factors relating to a debtor’s social or family situation but to those relating to a debtor’s financial position. In the case of natural persons not engaged in a self-employed activity, the line separating their financial situation and their family situation is blurred (at 46). The Virgos Schmitt report already discussed the application of of the insolvency regime to natural persons and advised that COMI as applied to natural persons ought to focus on the economic interests.

At 49 the AG suggests that ‘habitual residence’ no longer reflects a natural person’s COMI if does not fulfil its role as the place where a debtor’s economic decisions are taken, as the place where the majority of its revenue is earned and spent, or as the place where the major part of its assets is located. That entails quite a broad scope for rebuttal of course. The AG refines this in the remainder of the Opinion. He refers to national case-law on the issue, and to the importance of free movement rights. He also suggests an important limitation: namely that in his view, the mere presence of a natural person’s  one immovable asset (the ‘family home’, GAVC) in another Member State than that of habitual residence, in and of itself does not suffice to rebut COMI.

As in all other scenarios of rebuttal, the ascertainability in particular by (potential) creditors is key. That is a factual consideration which the national courts are in prime position to make.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.6.1.

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Forum shopping and personal insolvency. The High Court (briefly) in Wilson and Maloney (in re McNamara). Is this the last UK reference to the CJEU?

Update 6 May 2022 the CJEU handed down judgment on 11 November 2021 (C-168/20) and Nugee LJ’s judgment following that CJEU ruling [Wilson & Anor v McNamara & Ors [2022] EWHC 243 (Ch)] discusses ia the modus operandi for an EU Member  State court (here: an ex-EU MS court instructed by the Withdrawal Agreement to abide by the CJEU view) to address the issues of fact and interpretation left by the CJEU.

[2020] EWHC 98 (Ch) Wilson and Maloney (bankruptcy trustees of Michael McNamara), concerns mostly Article 49 TFEU (freedom of establishment) and Article 24(1) of the Citizens’ Rights Directive 2004/38 (equal treatment). (At 114) the critical question is whether the exclusion of pension rights on bankruptcy is something that can impact on the right of establishment, or is otherwise within the scope of Art 49 TFEU.

The substantive case at issue concerns the inclusion or not of in investment in a certain pension scheme, into the bankruptcy. My interest in the judgment lies in the succinct reference to forum shopping under insolvency regimes.

Mr McNamara was made bankrupt on 2 November 2012 on his own petition, presented that day. Prior to his bankruptcy Mr McNamara had been a high profile property developer operating primarily, if not exclusively, in the Republic of Ireland. But he and his wife had moved to London in July 2011, and the Court accepted that he had moved his centre of main interests (or COMI) from Ireland to England by the date of presentation of the petition.

Nugee J decided to refer to the CJEU for preliminary review (this having happened on 23 January, clearly one of the last if not the last UK reference to go up to the CJEU). Whether COMI was moved for forum shopping purposes is not likely to feature in the eventual judgment – for there does not seem to be any suggestion that the move of COMI to England had not been properly established.

Geert.

 

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Ema Garp Fund v Banro Corp: Chapter 15 and international comity.

Chapter 15 is the typical entry gate for a foreign insolvency practitioner to engage in US bankruptcy proceedings – it is also the general jurisdictional gateway for US courts viz international insolvencies, COMI and insolvency tourism discussions etc. By way of example see Norton Rose’s 2017 overview here.

In Ema Garp Fund v. Banro Corp., Case No. 18-01986 Law360 summarise the outcome as it stands (I understands motion to appeal has been filed) as follows: ‘Canada’s Banro Corp. won’t face a suit in New York federal court alleging the mining company lied to investors about its operations in the Democratic Republic of Congo after a judge ruled (..) that those claims were resolved last year in bankruptcy proceedings in Canada.’

Kelly Porcelli excellently reviews the issues here, with justified emphasis on comity considerations – I am happy to refer.

One for the comparative litigation ledger.

Geert.

(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.5, Heading 5.6.

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