Insolvencies with a foreign element

Posted On: 08 April 2008

Author: Richard Aird

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INSOLVENCIES WITH AN ENGLISH OR
FOREIGN ELEMENT


By Richard Aird, Barrister & Advocate


REGULATION ON INSOLVENCY (1346/2000)

Takes effect as direct and overriding law in all member States (excluding Denmark)
- Watch "UK" – appears to exclude Channel Islands + Isle of Man but to include Gibraltar.

"English Language version bears little relationship to the language spoken in UK and definitions are such that no word really means what it is supposed to say"  (Insolvency Intelligence)

As an EU Regulation the reader must put away all normal rules of interpretation.  The words used must be given an "autonomous" meaning --- not dependent on domestic law --- "a liberal, purposive approach" to interpretation. (The Salvage Association [2003] EWHC 1028)

Since a number of key definitions are missing from the Regulation and for other sources of interpretation recourse should particularly be made to Virgos–Schmit Report.


Summary of Regulation


Jurisdiction
Recital 14

This Regulation applies only to proceedings where the centre of the debtors main interests is located in the Community.

No definition is given in the Regulations

But a definition is contained in Recital 13


Recital 13
The centre of main interests (COMI) corresponds to the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties.

This is amplified by Article 3:

1) The courts of the Member State within the territory of which the centre of a debtor's main interests "COMI" is situated shall have jurisdiction to open insolvency proceedings

In the case of a company or legal person, the place of the registered office shall be presumed to be the centre of its main interests in the absence of proof to the contrary.

2) The courts of another member state shall have jurisdiction to open insolvency proceedings against that debtor only if he possesses an establishment within their territory …
- So the mere presence of assets is insufficient; Place of establishment really means a place of business but is elaborately defined in Article 2(h)

"any place of operations where the debtor carries out a non transitory economic activity with human means and goods"

The effects of those proceedings (known as secondary proceedings or territorial proceedings) is restricted to assets of the debtor situated in the territory of the latter Member State

4) Territorial proceedings may only be opened before the main proceedings:
a) where the main proceedings are held up by legal condition there
or
b) where requested by a creditor who has his domicile, residence, habitual residence or registered office in the Member state in which the allegedly insolvent establishment is situated or [only probably because of the Regulation's poor draftsmanship] is domiciled etc. in the Member State where the claim arises.
-- establishment really means place of business (Art 2 (h))


Conclusion

To determine whether the Regulation applies at all and whether the proposed proceedings can be opened in the Country in question


So first find COMI.........

(Continued.  For full notes please download using link at the top of the page)