Posts Tagged Interedil
Thank you to both Patrick Wauthelet and Arie van Hoe for forwarding a copy of the judgment of the Brussels commercial court in Parfip. Please pop me an e-mail should you like a copy. The judgment is textbook application of CJEU precedent, including of course Eurofood and Interedil. Fully respecting the presumption of individual COMI in the case of a group of companies, the judgment refers to ia German and French precedent in rebuking the presumption. Not only were the companies effectively run from Brussels, notwithstanding non-Belgian seat for some of them; to third parties it was also clear that this was the case.
The judgment also confirms a narrow interpretation of the exception for ‘credit institutions’.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 184.108.40.206.Heading 220.127.116.11.4.
Not the Muppet show. FREP, FREP, FREP and Frogmore. Determination of COMI for groups and SPVs. The High Court pushes head office approach.
In  EWHC 25 (Ch) the Frogmore Group, there are three relevant companies: FREP (Knowle) Limited. FREP (Ellesmere Port) Limited and FREP (Belle Vale) Limited all of which were incorporated in and have their registered office in Jersey. The Companies form part of Frogmore group (of which the ultimate parent is Frogmore Property Company Limited). The Frogmore group specialises in real estate investment and management in the UK and each of the Companies owns a shopping centre located at Ellesmere Port in Cheshire, Belle Vale in Liverpool and Knowle in Bristol respectively. Each of these shopping centres is managed by Frogmore Real Estate Investment Managers Limited (“FREPIM”), a company formed in England and Wales with its registered office and base for operations at London.
The Nationwide seeking enforcement of security, the group sought a declaration that COMI was at Jersey.
Marshall DJ held with reference to the familiar precedents of Eurofood and Interedil, both featuring heavily in my earlier postings on COMI, but also to Northsea Base Investments in which Birss J paid particular attention to the largest shareholders. Of note is that this reference to the largest shareholders does not entail (and indeed is not so constructed in either Northsea Base or Frogmore) that these get the pick of what COMI might entail. Rather, that the dealings with and experience of one place as being the place where the company’s interest are being managed from, is of particular interest for the Interedil emphasis on ascertainability by third parties. Marshall DJ also rekindles the discussion on whether Interedil’s emphasis is on identifying the ‘Head office’ of the companies: a conclusion which one needs to treat with caution for even in Interedil’s tacit support for the head office approach, the emphasis continues to lie with the combination of factors, all leading to transparency and publicity.
The High Court in the end held with reference to the following: (at 39; all wording as the judgment but with one or two words left out)
(1) Day- to-day conduct of the business and activities of the Companies has been in the hands of an agent appointed in England, namely FREPIM. Under the Advisory Agreement (which was itself governed by English law and had an English exclusive jurisdiction clause) FREPIM was to take on full responsibility for providing a very large range of services to the Companies, including day-to-day management of the Shopping Centres and dealing with their financing, accounting, marketing and formulation of their business strategy. FREPIM itself acknowledged that it worked on investment strategy and business plans for the Companies; instructed lawyers, surveyors and consultants for them; negotiated the purchase and sale of properties on their behalf; dealt with their borrowing requirements; and attended to the provision of accounting systems and the preparation of management and annual accounts. These actions were not just limited commercial activities but included the types of function that one would expect a head office to discharge.
(2) Day-to-day dealings with third parties are carried out from the offices of FREPIM at London. This is confirmed by the evidence of the activity of FREPIM described above but it is also supported by, for example, the Companies’ VAT returns where their business address is stated to be those offices. In their day-to-day dealings with third parties regarding expenditure these offices are given as the address for invoices.
(3) If one has regard to the point of view of the largest creditor, Nationwide, the Facility Agreement and the Nationwide Debentures are governed by English law and have an English jurisdiction clause. Under the Facility Agreement the Shareholder is the service agent for the Companies. In the case of the Nationwide Debentures, they have express reference to the power to appoint administrators under the 1986 Act. FREPIM took over the day-to-day contact with Nationwide as well as providing Nationwide with various pieces of information (such as quarterly compliance packs and accounts for borrowers) and did so from London. FREPIM also accepted that the management of the relationship between the Companies and Nationwide had been carried out by [the group treasurer] and the Chairman of the Frogmore group, who was also based in London.
(4) I also note that under the terms of the debentures securing the advances made by the Shareholder that the governing law is English, there is an English exclusive jurisdiction clause, that FREPIM is appointed the service agent of the Companies and there is express provision for the appointment of administrators under the 1986 Act.
The case is a good reminder that even intricate SPV structures should not detract from COMI finding on well-established principles. And that COMI determination always depends on a basket of criteria.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 18.104.22.168., Heading 22.214.171.124.4.
(Readers may want to search my earlier postings tagged ‘COMI’ for general context to the Insolvency Regulation and Centre of Main Interests).
Northsea Base Investment was first flagged to me early March by Bob Wessels, who expertly summarises facts and finding. Insolvency administrators were appointed out of court, however sought a High Court declaration finding COMI for the eight insolvent companies in England. Such finding assists with the ease of international travel of the administrators’ decisions. With ships sailing all over Europe and further afield, any decisions by the administrators are likely to have to be enforced outside of England. The sole shareholder of the holding company is incorporated in Nevis (the Saint Kitts and Nevis Federation) and in turn is held by three family trusts also based in Nevis. Marine Cross is a shipping agent incorporated in the UK with its registered offices in London. The companies are the only client of Marine Cross. All eight of the applicant companies are incorporated in Cyprus, share the same company registered office in Cyprus and have essentially the same form of Cypriot corporate documents.
Birss J held using the well established criteria in particular of Eurofood (in a group of companies, COMI has to be decided for each of them with individual legal personality) and Interedil (emphasis on third party ascertainability in the case of attempts to rebuke Article 3(1)’s presumption in favour of registered office being COMI) and settled on Marine Cross being the most relevant factor in determining COMI vis-a-vis the shipping companies: COMI being England. For the relevant holding companies (their Nevis-based shareholders were out of the equation), the High Court observed that these do not have operational functions. It held that their relations with London-based banks under financial agreements, all subject to English law and English jurisdiction, determined COMI as being in England, too.
The case is a good reminder that even intricate SPV structures should not detract from COMI finding on well-established principles.
You name it! Dutch court adds to the criteria relevant in (not) rebutting COMI presumption for companies
Thank you Arie van Hoe for alerting me to this in some respect amusing judgment by the court at The Hague. Amusing, in that the court adds a curious consideration to the criteria for third parties’ perception of COMI.
Central Eastern European Real Estate Shareholdings BV is incorporated in The Netherlands. Per Article 3(1) of the Insolvency Regulation, The Netherlands is therefore presumed to be the Centre of Main Interests – COMI of the company. This presumption can be rebutted using the definition of COMI included in recital 13: COMI is the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties. The ECJ has repeatedly emphasised the combination of both: administration of the interests elsewhere, and this as such being recognisable to third parties.
CEE itself suggests Romania as COMI. The court at The Hague correctly emphasises both elements of recital 13, paying particular attention to third party ascertainability. Consultation of the commercial register, the Court flags, reveals clearly to third parties that the company is being managed from the Netherlands, by Dutch directors. It is here that the Court adds the reference to the commercial register revealing the ‘typically Dutch names’ of the directors. That is amusing and was bound to attract attention – although to be fair it is not the core reasoning of the court. Of some relevance was the fact that the directors apparently, as was revealed at the hearing, regularly consult, in The Netherlands, with Netherlands based consultants.
It is of course difficult to read the entire mind of the court just from the succinctly written judgment, however what seemed to be crucial was the lack of convincing elements, provided by the company, that to third parties Romania clearly was the place of administration of the company’s interests. Indeed the judgment reveals no such factors at all. Aforementioned elements therefore acted in support of the presumption.
Reference to the directors’ names opens up an interesting prospect: that of first name shopping (or indeed change of name by deed poll) to impact on COMI. (Please just put that down as a silly suggestion rather than sound advice. For, again, the court itself also just made the comment in support ex multi).
Propertize: Should creditors’ domicile and mutual consent on COMI be relevant for insolvency Regulation?
In Propertize, (held 10 April 2014; delayed reporting for exam reasons) the court at ‘s-Hertogenbosch (Netherlands) held that Propertise BV has COMI in The Netherlands (and the presumption in favour of COMI being the place of corporate domicile therefore not dismissed), paying particular attention to the fact that (1) during argument at court both parties in the meantime had agreed that COMI was in The Netherlands, and (2) that the main creditors were based in The Netherlands.
Prof Wessels was right to be pleased to be quoted in the judgment – even if as he also rightfully points out, the court in fact only refers to his Handbook to cite relevant case-law and not to apply the COMI test properly (as prof Wessels’ book does): recital 13 of the Insolvency Regulation suggests COMI as being the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties. The ECJ has repeatedly emphasised the combination of both: administration of the interests elsewhere, and this as such being recognisable to third parties (e.g. at 49 in Interedil). Neither location of the creditors nor agreement between creditors on the debtors’ COMI have any relevance.
Textbook inadequate application of COMI: hence very appropriate for an exam question. Geert.
The Irish High Court in Harley Medical Group: Textbook application of COMI following PIP implants liability
In Harley Medical Group, the Irish High Court has made a textbook application of the determination of jurisdiction under the EU’s Insolvency Regulation. The Court held in May, the case has only now come to my attention.
Harley Medical Group (Ireland) Ltd has its registered office in the British Virgin Islands. It had registered in the Companies Registration Office (CRO) in Ireland as an external company with a branch established in the State pursuant to the European Communities (Branch Disclosure) Regulations 1993. The sole shareholder sought winding up in Ireland. Liabilities arose from claims against Harley by 158 former patients in respect of cosmetic treatment they received. Many of those claims arise from breast implant operations using breast implants from PIP, a French registered company. The Company was informed by its insurers that its insurance cover does not extend to product liability claims for products sourced from a third party.
The patients opposed jurisdiction, seeking to have the case heard in the UK instead: lex concursus would then have been English law, which allegedly would have been more favourable on account of the Third Parties (Rights against Insurers) Act 2010: this would allegedly give the claimants better rights against the insurer. As the High Court correctly held, however,
‘The perceived advantage to the Opposing Creditors of this Court declining jurisdiction to wind up the Company is articulated as follows in [ ] ’s second affidavit, where it is averred that –
“. . . the creditors believe their rights under UK legislation with regard to any relevant policies of insurance indemnifying or intended to indemnify the Company against claims such as those of the creditors will be stronger than under Irish law.”
The Court was referred to a UK statute entitled Third Parties (Rights against Insurers) Act 2010. That contention is immaterial to the Court’s function on this application and it would be inappropriate for the Court to express any view on it. (at 37)
The High Court swiftly rejected the notion that the Regulation does not apply because of the non-EU incorporation of the company: from the moment the company’s COMI – Centre of Main Interest is in the EU, the Regulation does apply. Neither does it matter that the company is part of a group of undertakings, and that a company within the group with which it was associated had been placed in administration in the UK: COMI, per Eurofood (notably, upon reference by the Irish Supreme Court), needs to be individually determined per corporation.
The Court subsequently reviewed the rebuttable presumption of COMI as being the place of incorporation (here: BVI). Per Interedil, this requires the court seized to review whether the Company’s actual centre of management and supervision and of the management of its interests is located in its territory, ! in a manner that is ascertainable by third parties. Both conditions were fulfilled:
On the condition of ‘actual centre of management and supervision and of the management of its interests’ the High Court accepted the following indices:
- – The Company has never traded in any jurisdiction other than Ireland.
- – all surgical treatments had been carried out in Ireland, the operations having been performed by surgeons registered with the Irish Medical Council;
- – the Company was registered as a branch in Ireland and subsequently filed all of the statutory returns as was required by law.
- – All employees of the Company are located in Ireland.
- – The Company’s only place of business is at Dublin.
- – The Company’s address for correspondence has at all times been located in Ireland.
- – The Company is registered with the Irish Revenue Commissioners for VAT, and relevant national insurance payments.
- – The Company is not tax resident in any other jurisdiction.
- – The Company does not operate any bank account in any other jurisdiction other than Ireland;
- – The Company board meetings typically took place in Guernsey. However, in the last fourteen months, they have taken place either in London or in Dublin.
On the matter of ascertainability by third parties, that all of the Company’s activities have been conducted in Ireland since 1999 and that the administration of its interests has been continuously conducted in Ireland, has been readily ascertainable by third parties by conducting a search in the CRO and an inspection of the documents filed by the Company in the CRO in accordance with the law of Ireland.
Top marks, I’ld say.