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International Jurisdiction to Open Insolvency Proceedings in Europe, in Particular Against (Groups Of) Companies

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International Jurisdiction to Open Insolvency Proceedings in Europe, in Particular Against (Groups Of) Companies INTERNATIONAL JURISDICTION TO OPEN INSOLVENCY PROCEEDINGS IN EUROPE, IN PARTICULAR AGAINST (GROUPS OF) COMPANIES Bob Wessels1 1. The judgment to open insolvency proceedings Art. 3(1) and (2) EU Insolvency Regulation (InsReg) form the basis for a judgment to open insolvency proceedings in the EC.2 Art. 3(1) InsReg provides that the courts of the Member State within the territory of which the centre of a debtor’s main interests is situated shall have jurisdiction to open insolvency proceedings. Aforementioned debtor can be a private person, whatever the nature of his or her dealings are, or a company or legal person.3 In the case of a company or legal person art. 3(1), first sentence InsReg, contains the following presumption: 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. The latter words are clear: this presumption can be rebutted. If all the ingredients of art. 3(1) are fulfilled, the courts of another Member State only have limited jurisdiction: where the centre of a debtor’s main interests is situated within the territory of a Member State, the courts of another Member State shall have jurisdiction to open insolvency proceedings against that same debtor too, but only if he possesses an establishment within the territory of that other Member State, see art. 3(2) InsReg. Art. 2 InsReg provides, for the purposes of the EU Insolvency Regulation, several definitions, one of which is the one under (h), saying that an ‘establishment’ shall mean ‘….. any place of operations where the debtor carries out a non-transitory economic activity with human means and goods’. The latter proceeding, finding its basis in art. 3(2), is commonly referred to as secondary proceeding. The proceedings referred to in art. 3(1) are known as main proceedings or main insolvency proceedings.4 In the following article I will try to analyse the basic notions of the aforementioned terms ‘centre of main interest’ (COMI), and ‘establishment’, and the way courts in several European countries (UK, France, Germany, The Netherlands and Belgium) until now (Mid November 2003) have interpreted the facts to qualify these as ‘COMI’ or as ‘establishment’ in specific cases. To demonstrate the impact of the judgment of opening insolvency proceedings as mentioned, let me briefly outline what the consequences are of this ‘opening’ according to the system of the EU Insolvency Regulation: 1. These insolvency proceedings and their effects will be determined by the law of the Member State within the territory of which such proceedings are opened, see art. 4(1) InsReg, 1 Partner Holland Van Gijzen Attorneys at law, Rotterdam, The Netherlands; Professor Business Law ‘Vrije’ University, Amsterdam; Commerzbank Foundation Visiting Professor Institute for Law and Finance, Johann Wolfgang Goethe University, Frankfurt, Germany. This article is compiled from a public lecture at aforementioned institute, which I gave on this topic in Frankfurt, November 25, 2003. 2 Council regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings, Official Journal L 160, June 30, 2000. It came into effect May, 31, 2002. The Regulation applies to fourteen Member States. Denmark is not bound by it nor subject to its application, which is in accordance with Art. 1 and Art. 2 Protocol on the position of Denmark, annexed to the Treaty on European Union and the Treaty establishing the European Community. 3 Not being a financial institution as meant in art. 1(2), which institutions are excluded from the scope of the Insolvency Regulation, but subjected to separate EU Directives with regard to winding-up or liquidation, see (for insurance undertakings) Directive (EC) no. 2001/17, Official Journal L 110 of April 20, 2001, and (credit institutions) Directive (EC) 2001/24, Official Journal L 125 of May 5, 2001. 4 ‘Secondary insolvency proceedings’ is the heading of Chapter III of the Insolvency Regulation. The words ‘main (insolvency) proceedings’ appear in the Recitals 12, 16 – 20, 22, 23 and 25, and e.g. in art. 3(4), 27, 29(a), 31, 32, 34, 35 and 37 InsReg. 1 and the conditions for the opening of those proceedings, their conduct and their closure shall be determined (too) by this law, see art. 4(2) InsReg, opening words. In legal jargon, the law of the State where the insolvency proceeding is opened is called ‘lex concursus’ or ‘lex forum concursus’; 2. The judgment opening insolvency proceedings handed down by a court of a Member State, which has jurisdiction pursuant to art. 3, shall be recognised in all the other Member States from the time that it becomes effective in the State of the opening of the proceedings, see art. 16 InsReg; 3. The judgment opening main proceedings, as referred to in art. 3(1), shall in principle, without any further formalities, produce the same effects in any other Member State as under this law of the State of the opening of proceedings (art. 17). However (3a) recognition of the main proceedings shall not preclude the opening against the same debtor of secondary insolvency proceedings – based on the presence of an ‘establishment’ – by a court in another Member State (art. 16), the effects of which proceedings however shall be restricted to the assets of the debtor situated in the territory of the latter Member State, see art. 3(2), 2nd sentence. Furthermore (3b) the opening of main insolvency proceedings shall not affect the rights in rem of creditors or third parties in respect of tangible or intangible, moveable or immoveable assets, belonging to the debtor, which are situated within the territory of another Member State at the time of the opening of these proceedings (art. 5), nor will they affect third party’s right to set-off (art. 6) or certain reservations of title (art. 7);5 4. The liquidator who is appointed by the court in the main proceedings may in principle exercise all the powers conferred on him by the lex concursus, as long as no other insolvency proceedings have been opened in the other Member State, nor any preservation measure to the contrary has been taken there further to a request for the opening of insolvency proceedings in that State; the liquidator may remove the debtor’s assets from the territory of the Member State in which they are situated, subject to art. 5 and art. 7 (art. 18); the liquidator may request that notice of the judgment6 opening main insolvency proceedings and, where appropriate, the decision appointing him, be published in any other Member State in accordance with the publication procedures provided for in that State.7 The publication shall specify the liquidator who is appointed and whether the jurisdiction rule applied is that pursuant to art. 3(1) or art. 3(2) (art. 21). He may, likewise, request that the judgment opening the main proceedings be registered in the land or the trade register and any other public register kept in the other Member States (art. 22);8 5. The judgment re opening of insolvency proceedings results in the decisive date to apply the transitional provision of art. 43. The Regulation shall apply only to insolvency proceedings opened after its entry into force, being 31 May 2002. This transitional provision has been subject of interpretation by the Court of Lodi (Italy) 27 September 2002 in a case in which an insolvency proceeding had been started in the Netherlands prior to 31 May 2002 against the Dutch company Borgward Industrials BV . The company owns an establishment (DAM Italia Di Borgward Industrials BV) in S. Giuliano Milanese. According to the Italian court the transitional provision would not exclude the opening of secondary proceedings in Italy: ‘…..indeed, if the regulation is read in its entirety, 5 See: Wessels, The Secured Creditor in Cross-border Finance Transactions Under the EU Insolvency Regulation, in: Journal of International Banking Law and Regulation, Volume 18, Issue 3, 2003, p. 135. 6 The English text of the Regulation seems more broad (‘notice of the judgment’ be published) than the German (‘der Wesentlichen Inhalt’), French (‘le continue essentiel’) or the Dutch (‘de hoofdzaken van’) text, refering to the ‘essential content’ or ‘the main points’ of the judgement opening insolvency proceedings. 7 See for some details re publication: Wessels, Realisation of the EU Insolvency Regulation in Germany, France and the Netherlands, Paper presented to Insol International Academics meeting on ‘Multinational Insolvency Proceedings – Cooperation among Nations’, Las Vegas, Nevada, USA, 20/21 September 2003 (forthcoming in: European Business Law Review). 8 The publication elsewhere of the judgement opening insolvency proceedings is decisive with regard to the question whether a debtor of the insolvent debtor, who honors an obligation towards the latter shall be deemed to have discharged it. After such publication has been effected, the person honouring the obligation shall be presumed, in the absence of proof to the contrary, to have been aware of the opening of proceedings, see art. 24(2) InsReg. 2 including therefore the introduction and the single provisions, there can be no mistake as to the intention of the Community lawmaker: he has indeed thought of the two proceedings, main and secondary, and has treated them as to the extent that he has even addressed the matter of their coordination (reference to recital 8 …. And recital 12…, and, more specifically, also articles 31-35). Therefore, the fact that proceedings have already been opened abroad, proceedings that with the entry into force of the new regulation are defined as ‘main’, does not prohibit the opening of secondary proceedings under art. 3 of the regulation,….9 2. The scope of opening insolvency proceedings It should be noted that art.
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