Vol 14 (2017) - Issue 6

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Coordination or Centralisation? Group Insolvencies and COMIShifting under the Recast EIR

1. Introduction
‘How can we change the old maxim that corporate groups live globally but die nationally?1

This simple question has been keeping insolvency experts busy for over 10 years. At the time of drafting the European Insolvency Regulation (EIR) before its adoption in May 2000, the EU Legislator simply ignored the issue of group insolvencies. The EIR regards every company as a distinct legal entity for which the international jurisdiction to open insolvency proceedings should be determined individually on the basis of the place of its centre of main interests or 'COMI'. In doing so, no consideration whatsoever is given to any connections the company in question might have with other entities. In the following years an enormous discrepancy grew between this legal framework for cross-border insolvencies and the economic reality. Businesses continued to develop and expand to other countries, which resulted in corporate groups popping up like mushrooms all over Europe. Critics argued that the separatist approach of the EIR (i.e. one company, one proceeding, one liquidator) was no longer justifiable.
The persistent rejection of taking a company’s position in a group structure into account resulted in a 'domino effect', meaning that the insolvency of one member often caused the default of another, which would eventually lead to the fall of the entire group. Courts attempted to overcome this problem by determining a single COMI for all the members of a group (i.e. the 'group COMI approach') as to facilitate a centralised group insolvency procedure. This practice has proven to be cost-efficient and rescue-enhancing. However, considering the wide range of different kinds of group structures, the author believes that applying this group COMI approach as a standard for group insolvencies in general would not be realistic and that there is simply no 'one-size-fits-all' solution.