Posts Tagged Regulation 2015/848
COMI in Powerstorm and in Bezuijen Holding v X: Dutch Courts warming up to the new Insolvency Regulation.
Thank you Bob Wessels for again alerting us timely to two recent decisions by the Dutch courts, applying the Insolvency Regulation 2015, on the determination of COMI – Centre of Main Interests. Bob’s review is excellent per usual hence I am happy to refer for complete background. In short, the decisions are
- in Powerstorm: textbook applications on the public expression (hence ascertainability by third parties, to use the CJEU’s phrase of words) of COMI, which third parties have to rely on. Here: to displace the presumption of COMI in the United States (place of incorporation; in re Powerstorm) in favour of Amsterdam.
- in Bezuijen BV against X, a natural person: with extensive reference to the recitals of the EIR 2015, that the Dutch courts have to consider jurisdiction proprio motu, evidently, and that they need serious evidence to uphold jurisdiction against a natural person who, both parties agree, no longer has his residence in The Netherlands (where it is, is in dispute but it is probably somewhere in the vicinity of Paris).
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 5, Heading 5.6.1.
Thank you Ben Zielinski for flagging Bank Leumi (UK) Plc v Screw Conveyor Ltd  CSOH 129. I believe Ben is right in writing that this is the first formal acknowledgement that Scottish judicial authorities have no insolvency business in respect of an English registered company, and the same applies to English courts and Scottish companies, in spite of the EU’s Insolvency Regulation.
Even if a company carries out its main activities in Scotland, internal UK jurisdictional rules will assign insolvency jurisdiction to the English judicial authorities. That is a result of, as Lord Doherty writes, the Insolvency Regulations designating the ‘Member State the courts of which may open insolvency proceedings’ however ‘territorial jurisdiction within that Member State is established by the Member State’s national law’ (at 9).
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.6.1.
Vinyls Italia: Szpunar AG on the chemistry between the Insolvency Regulation and Rome I. And again, on the pauliana.
In C-54/16 Vinyls Italia (in full: Vinyls Italia SpA, in liquidation v Mediterranea di Navigazione SpA) Szpunar AG opined last week (the Opinion is not available in English). At the core of the case is the application of Article 13 of the Insolvency Regulation 2000 (Article 16 in the 2015 version; see my general review here), however the case opens an interesting discussion on the meaning of ‘international’ in ‘private international law’.
For the general context of Article 13 (16 new) I should like to refer to my review of Lutz and Nike. At issue in the case at hand are payments made by Vinyls to Mediterranea for the transport of chemicals of the former by the latter. Both are Italian registered companies. Shipment was presumably carried out in Italy (an extra-Italian element in the actual transport does not feature in the factual analysis re ‘international’, which I refer to below). However the contract made choice of law in favour of English law. Mediterranea makes recourse to Article 13 juncto English law as the lex contractus to ward off an attempt by Vinyls to have the payments return to its books.
First up is the question whether courts should apply Article 13 ex officio: for Mediterranea’s claim was made after the procedural deadline foreseen by Italian law. Szpunar AG in my view justifiably suggest it does not: he refers to the Virgos Schmit report [„Article 13 represents a defence against the application of the law of the State of the opening, which must be pursued by the interested party, who must claim it” – § 136 of that report, para 43 of the AG’s Opinion) and to the CJEU’s finding in C-310/14 Nike at 26. The AG does point to the particulars of the case: Mediterranea seemingly had provided proof supporting its view that the substantial conditions of Article 13 had been met (in particular an expert opinion by an English lawyer) but had not expressis verbis requested its application. Szpunar refers the final say to the Italian court, which needs to judge on the basis of Italian civil procedure however does suggest that it seems fairly inconceivable to have provided proof for the fulfillment of a legal proviso, without meaning to request its application.
The question on the applicability of Rome I at all (which is required if Mediterranea want to make recourse to the provisions of English law as lex contractus per Rome I or the Rome convention) may not make it to the CJEU. As Szpunar AG notes, the underlying contract dates prior to 17 December 2009, which is the cut-off date of the Rome I Regulation. The referring court being a court of first instance, it is not in a position to request preliminary review of Rome I’s predecessor, the 1980 Rome Convention. The AG completes the analysis anyway (the Court itself will not, should it find Rome I not to be applicable) and takes in my view the right, expansionist approach (one which I also defend in my handbook): especially given the presence of Article 3(3)’s proviso for ‘purely domestic’ contracts, it is clear that it suffices for Rome I to be applicable that parties make choice of court in favour of a foreign law. Further in the opinion (137 ff) he also suggests that such application is not tantamount to fraude a la loi (fraus legis) and again I agree: the relevance of fraus has been seriously diminished by the provisions on party autonomy in both Rome I and the Rome Convention.
The use of choice of law per Rome I (or the Convention) in turn serves as a jack to trigger the application of the insolvency Regulation. That too is correct in my view, and with undramatic consequences. Choice of law for the underlying contract only identifies its lex causae (where relevant, with an impact on Article 13 of the Insolvency Regulation). It does does not of course in and of itself determine the lex concursus: the latter is determined by the Insolvency Regulation once /if insolvency occurs. Parties have no means to manipulate this at the time of the formation of the contract.
Exciting, conceptual stuff. Most probably the Court itself will not be in a position to assess it all.
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 3, Heading 3.2.1; Heading 22.214.171.124; chapter 5; Heading 5.7.1.
Hooley [Hooley v The Victoria Jute Company Ltd and others  CSOH 14] has been sitting in my in-box for a few months. It concerns the liquidation (particularly: selling of companies’ assets by liquidators under Scots law) of companies incorporated in Scotland but with COMI (centre of main interests) outside the EU. In particular, India.
Given the presence of COMI outside the EU, the Insolvency Regulation does not apply. Indeed the Court of Session (Lord Tyre) does not refer to it at all.Findings would have been very different were the Regulation to apply: place of incorporation has to give way to COMI, where these two do not coincide, in which circumstance the place of incorporation at best may open secondary proceedings.
At issue was among others (and for the first time in a Scots court, I understand) the consideration of ‘modified universalism’: ie what is the practical impact of there being a company incorporated in Scotland, given Scots courts and administrators jurisdiction over the insolvencies, when the companies’ business is mainly carried out abroad and when proceedings are also pending abroad.
Per Rubin v Eurofinance, Universalism” means the “administration of multinational insolvencies by a leading court applying a single bankruptcy law.” The principle of modified universalism was stated by Lord Sumption in Singularis Holdings Ltd v Pricewaterhouse Coopers  AC 1675 (PC) at para 15 as being that “the court has a common law power to assist foreign winding up proceedings so far as it properly can” (see also Lord Collins at paragraph 33 and Lord Clarke of Stone‑cum‑Ebony at paragraph 112).
Essentially Lord Tyre had to decide whether the Scottish administrators’ powers were only exercisable to the extent that their exercise was recognised as legally valid by the law of the relevant non-UK jurisdiction. He held (at 36) that the proceedings taking place in India were ancillary to the administration proceedings in Scotland. The powers of a validly appointed administrator to a Scottish company were therefore not limited by the Indian winding up.
As often of course this judgment is but one side of the coin. Indian courts are at liberty to disregard the Scots findings. Any purchasers of Hooley assets therefore will have a compromised title. One assumes this has an impact on price.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.1, Heading 5.5.
When I reviewed Szpunar AG’s Opinion in C-195/15 Mulhaupt /SCI Senior Home, I predicted (it’s a safe prediction, nothing whiz-bang about it) that the Court would probably come to the same conclusion in less words and with less references to the overall context.
It did. It cherry-picked the AG’s arguments and came to the same conclusion. Of particular note is its insistence, with the AG, that even though a derogation must be interpreted strictly, it is nonetheless appropriate to ensure that the exception is not deprived of its effectiveness.
Please refer to my review of the AG’s Opinion for more detail. Final conclusion: security created by virtue of a provision of national law, such as that at issue in the main proceedings, by which the real property of a person owing real property taxes is, by operation of law, to be subject to a public charge and that property owner must accept enforcement of the decision recording that tax debt against that property, constitutes a ‘right in rem’ for the purposes of that article.
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.7.1 ).
Szpunar AG in Mulhaupt /SCI Senior Home: national law determines what rights in rem are under the Insolvency Regulation. However EU law does constrain national room for manouvre.
In C-195/15 Mulhaupt /SCI Senior Home, the question referred reads
Does the term ‘right in rem’ in Article 5(1) of (…) Regulation (…) 1346/2000 (…) on insolvency proceedings include a national rule such as that contained in Paragraph 12 of the Grundsteuergesetz (Law on real property tax, ‘GrStG’) in conjunction with the first sentence of Paragraph 77(2) of the Abgabenordnung (Tax Code, ‘AO’), pursuant to which real property tax debts are by operation of law a public charge on real property and the property owner must accept enforcement against the property in that respect?
Applicant is the trustee in bankruptcy of Société civile immobilière Senior Home, a French registered company. Gemeinde Wedemark is forcing the sale of real estate belonging to Senior home, linked to arrays in real estate tax. It is suggested by the referring court that the qualification under German law, of real property tax (also known as ‘stamp duties’ or ‘estate taxes’), owed to public authorities, as rights in rem, mean that the forced sale of the site at issue, as a result of Article 5(1) of Regulation 1346/2000, is covered by German law and is therefore not subject to French law, which in the case at issue is the lex concursus of the insolvency proceedings that have been opened. Regulation 1346/2000 in the meantime has been replaced by Regulation 2015/848 however the provisions at issue have not materially changed.
Szpunar AG Opined end May (other than a Tweet I have kept schtum about the Opinion so far, for exam reasons).The Opinion is as yet not available in English.
In terms of applicable law, Article 4 of the Regulation is the general rule: unless otherwise stated by the Regulation, the law of the State of the opening of proceedings is applicable.
The general rule of Article 4 inevitably had to be softened for quite a number of instances. As noted in the introduction, insolvency proceedings involve a wide array of interests. The expediency, efficiency and effectiveness craved inter alia by recital 2 (old; now 3) of the Regulation, has led in particular to the automatic extension of all the effects of the application of the lex concursus by the courts in the State of opening of the proceedings. That could not be done without there being exceptions to the general rule:
In certain cases, the Regulation excludes some rights over assets located abroad from the effects of the insolvency proceedings (as in Articles 5, 6 and 7). In other cases, it ensures that certain effects of the insolvency proceedings are governed not by the law of the State of the opening, but by the law of another State, defined in the abstract by Articles 8, 9, 10, 11, 14 and 15. In such cases, the effects to be given to the proceedings opened in other States are the same effects attributed to a domestic proceedings of equivalent nature (liquidation, composition, or reorganization proceedings) by the law of the State concerned. Of particular note are precisely Article 5 on third parties’ rights in rem, but also Article 10 on employment contracts, and Article 13 on ‘detrimental acts’.
The precise demarcation of rights in rem hovers between the classic interpretative rule of EU private international law, namely the principle of autonomous interpretation, and the lack of a European Ius Commune on what rights in rem are. The Advocate General completes his already extensive analysis in Lutz, with a combined reference to the recitals of the Regulation, and the Virgós/Schmit Report.
In particular, Article 5(2) does serve as something of a straightjacket, leading to the conclusion that rights in rem require restrictive interpretation: once the first hurdle of qualification using national law (of the rei sitae) is passed, the right also needs to meet with the fundamentals of what the Virgos-Schmit report defines as rights in rem (at 41-45 of the Opinion): these are (at 103 of the Report): a right in rem basically has two characteristics
(a) its direct and immediate relationship with the asset it covers, which remains linked to its satisfaction, without depending on the asset belonging to a person’s estate or on the relationship between the holder of the right in rem and another person;
(b) the absolute nature of the allocation of the right to the holder. This means that the person who holds a right in rem can enforce it against anyone who breaches or harms his right without his assent (e.g. such rights are typically protected by actions to recover); that the right can resist the alienation of the asset to a third party (it can be claimed erga omnes, with the restrictions characteristic of the protection of the bona fide purchaser); and that the right can thus resist individual enforcement by third parties and in collective insolvency proceedings (by its separation or individual satisfaction).
The Virgos-Schmit report in this respect cross-refers to the 1968 Brussels Convention however it is noteworthy that the CJEU, in defining rights in rem under the now Brussels I recast Regulation, does not in turn refer to the Virgos-Schmit report.
In conclusion therefore the AG suggests that the right at issue is indeed a right in rem under Article 5. Finally, that it benefits a public authority (the inland revenue) rather than a private individual or legal person, does not impact upon that qualification: Szpunar AG correctly highlights that the public character of the creditor is not a determining criteria in either the recitals of the Regulation or the Virgos-Schmit report.
A prima facie straightforward question met by complete analysis of the AG which in passing solves more issues than those raised by the referring court: this Opinion may well become an important part of authoritative sources in applying the Insolvency Regulation..
(Handbook of) EU private international law, 2nd ed. 2016, Chapter 5, Heading 5.7.1 ).
Not quite HoHoHo (yet): OOO PROMNEFTSTROY v Yukos: Insolvency and conflict of laws in the Dutch Supreme Court.
Granted, the (bad) pun in the title would have worked better around the end of year, which is when I had originally planned this posting, before I got sidetracked. Bob Wessels has excellent overview here (including admirably swift and exact translation of core parts of the judgment). OOO PROMNEFTSTROY v Yukos at the Dutch Supreme Court is but one instalment in running litigation literally taking place across the globe.
Of particular interest to the blog is the court’s finding (at 3.4.2) that the existence of a corporation is subject to the lex incorporationis not, as the Court of Appeal had held, the lex concursus in the event of insolvency. The EU’s Insolvency Regulation does not apply for COMI is not within the EU. The Insolvency Regulation does not in so many words say the same as the Dutch Supreme Court however it is likely that under the EIR, too, this issue falls under lex societatis /lex incorporationis (see e.g. Miguel Virgos & Francisco Garcimartin, The European Insolvency Regulation: Law and Practice, Kluwer, 2004, p.82 (par 123, f: dissolution of the company).
One can imagine of course the one or two complications arising out of the seizure of assets of a company which no longer exists.
European private international law, second ed. 2016, Chapter 5, Heading 5.7