Vol 1 (2004) - Issue 6

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Judicial Comity and Chauvinism: The Need to Go Forum Shopping in Insolvency Matters

1. Introduction

It was the late Lord Denning who once said that just like a moth is drawn to a light, a litigant is drawn to the United States. For the past century, claimants from all over the world have sought jurisdiction in the United States because of its apparent ‘claimant friendly’ climate: high compensation, the possibility to litigate on a contingency fee basis, absence of costs deterrent, trial by jury, pre-trial discoveries etc.

It is the choice of forum that will decide upon numerous issues of law and therefore possibly upon the very outcome of a case. After all, the harmony of decisions (Entscheidungseinklang), as envisaged by Von Savigny and other 19th-century private international law scholars, has never been reached: neither worldwide, nor on European soil.

The choice of forum is so decisive that after dismissal of a claim for a lack of jurisdiction, claimants will often stop litigating. An American study shows that after the dismissal of a claim on forum non conveniens grounds, the vast majority of claimants chooses not to litigate in the natural forum. We have no reason to believe that the situation would be different in Europe, when the courts of one member state decline jurisdiction for a certain case.
Such differences between courts has created the notion of forum shopping. Forum shopping can be defined as taking full advantage of one’s right to bring a case into the competent court of one’s choice, thereby, however, taking the case away from its natural forum (or at least into a court with little nexus to the case).
In insolvency law, at least in Europe, forum shopping is relatively new. Even though there have been cases about debtors trying to establish jurisdiction in states with little nexus to the debtor before, forum shopping has only really come to the forefront since the European Insolvency Regulation (EIR) came into force on 31 May 2002.

At first sight, the EIR leaves no room for forum shopping. Rationale 4 to the EIR mentions limiting forum shopping as an objective of the EIR. Under the EIR, a debtor can only have one centre of main interests (COMI), so the courts of only one EIR state should have jurisdiction. With no multitude of competent EIR fora being available, forum shopping should be impossible.

Nonetheless, numerous debtors have successfully sought jurisdiction under the EIR for insolvency proceedings in jurisdictions to which their nexus was debatable in the view of many observers. In other words, forum shopping under the EIR has proven to be possible after all, despite its rationale and the single competent court, as stipulated in article 3(1) EIR. This appears to be mainly the result of many debtors having strong ties with more than one EIR state. In such cases, the COMI, as a broad notion, can be construed to be situated in more than one member state. It appears that courts are willing to do this.

In this article, we will focus on forum shopping in insolvency cases, more specifically under the EIR. Firstly, we will name a number of aspects which are specific to forum shopping in insolvency cases. Then we will argue that most choices of forum in insolvency cases, which are being labelled forum shopping, fall outside our definition of forum shopping, since most insolvency proceedings are already being brought in a proper forum.